TIDMCAM
RNS Number : 8301V
Camellia PLC
11 April 2019
CAMELLIA PLC
FINAL RESULTS
Camellia Plc (AIM:CAM) Final results for the year ended 31
December 2018.
Malcolm Perkins, Chairman, stated:
"2018 was a very good year for the Group. We made significant
financial and strategic progress as our agricultural crops
benefited from generally good weather conditions and selling
prices. We also continued to develop our business portfolio, with
substantial investment continuing in agriculture whilst disposing
of a number of peripheral businesses.
After the year end we acquired two tea estates in Assam which we
believe now makes us the largest private tea producer in the
world.
Looking at 2019, it is too early to predict outcomes as most of
our trading takes place in the second half of the year. However,
early tea auction prices have been weak, with those in Kenya below
the cost of production and there is a risk that other tea markets
could be impacted as their seasons begin. We continue to monitor
and prepare for Brexit and whilst we expect there to be some impact
on our UK businesses, we are confident that the majority of our
operations will be largely unaffected."
FINANCIAL HIGHLIGHTS
Year ended Year ended
31 December 2018 31 December 2017
GBP'm
GBP'm Restated
Revenue - continuing operations 309.8 298.3
Underlying profit before tax* 38.1 27.6
Significant provision releases 14.4 -
(Loss)/profit from discontinued operation (0.2) 14.8
Profit after tax for the year 32.3 30.2
Earnings per share 912.4 p 861.7 p
Earnings per share - continuing operations 919.6 p 325.9 p
Total dividend for the year 142 p 135 p
* Underlying profit before tax is profit before tax from
continuing operations excluding separately disclosed significant
provision releases
Financial highlights
* Underlying profit before tax from continuing
operations up 38% reflecting the implementation of
our strategy, benign weather and good tea prices
* Significant provision releases contribute an
additional GBP14.4m of profit before tax
* Dividend increased by 5.2%, maintaining over 40 years
of dividend growth
* Net cash resources of GBP109.6m
Strategic highlights
* Continuing investment in agricultural assets
including two new trials for avocados and blueberries
* Significant steps to continue our geographic
diversification
* Now the world's largest private tea grower
* Successful disposals of five small non-agricultural
businesses
This announcement contains inside information for the purpose of
Article 7 of the Market Abuse Regulation (EU) No. 596/2014.
The Annual Report will be available on the investor relations
section of the Company's website www.camellia.plc.uk
ENQUIRIES
Camellia Plc 01622 746655
Tom Franks, Chief Executive
Susan Walker, Chief Financial Officer
Panmure Gordon (UK) Limited 020 7886 2500
Nominated Adviser and Broker
Erik Anderson
Emma Earl
Camellia at a glance
Camellia Plc is an international Group - a global family of
diverse companies with a 131-year history employing approximately
78,000 people worldwide. Our operations are in Agriculture,
Engineering, Food Service and Investments. From the start,
Camellia's ethos has been based on the highest moral and
professional integrity, and a commitment to doing the right thing -
ethically and commercially, globally and locally. Profits are our
lifeblood but not our soul.
Our business is built on two fundamental principles:
-- Long-termism. We see ourselves as custodians, holding our
business in trust for future generations. We believe we have a
responsibility to ensure the stability, security and continuity of
all our businesses, so they can be passed on to the next generation
as enduring operations. We recognise that people and businesses
take time to establish and grow to their full potential and we are
happy to wait for that to happen. We are deeply committed to
improving the long-term stability and well-being of our businesses,
the communities and the environments in which we operate.
-- Sustainability. We are committed not only to the ultimate
welfare of our employees but also to the communities in which they
live. We believe our businesses can and should grow with respect
and care for the environment rather than at the cost of it. We
proactively invest in ensuring that the environments where we do
business are continually protected and improved, and seek to
minimise the impact of our business on the environment.
The profit after tax from continuing operations in the year to
31 December 2018 was GBP32.5 million (2017: profit GBP15.4 million)
and the Segment trading profit and loss information set out below
is extracted from note 1 on page 57 of the Accounts.
Our business is made up as follows:
AGRICULTURE
2018: Revenue - GBP245.3 million, Segment trading profit -
GBP51.0 million
Mature Immature
Area Area
Core crops Locations Ha Ha
India, Bangladesh, Kenya,
Tea Malawi 32,145 2,598
Macadamia Kenya, South Africa, Malawi 2,744 960
Avocados Kenya 415 303
Speciality crops
Arable Brazil 3,477 -
Forestry Kenya, Malawi, Brazil 2,293 3,689
Rubber Bangladesh 1,610 365
Citrus USA 169 8
Pistachios USA 131 -
Wine grapes South Africa 50 23
Almonds USA 56 -
Blueberries Kenya - 10 *
Other
Joint Projects Kenya 1,580
Livestock Kenya 4,436 head
* planted in
2019
----------------------------------------------- ---------- --------
ENGINEERING
2018: Revenue - GBP22.2 million, Segment trading loss - GBP0.6
million(1)
Subsidiary Locations
Abbey Metal Finishing
and Atfin UK, Germany
AJT Engineering UK
(1) Includes the results for GU Cutting & Grinding, BMT (Great
Yarmouth) and XiMo which were sold during 2018
----------------------------------------------------------------
FOOD SERVICE
2018: Revenue - GBP41.5 million, Segment trading profit - GBP1.6
million(1)
Subsidiary Locations
ACS&T UK
Jing Tea UK
(1) Includes the results of Affish and Wylax which were sold
during 2018
-------------------------------------------------------------------------------------
INVESTMENTS
Market value
at
31/12/18
Investment type Locations GBP'm
Investment Portfolio Global 39.6
Investment Property UK, Malawi, Isle of Man, Brazil 23.7
Collections UK, India 9.5*
* Collections are stated
at cost
-------------------------------- ------------ ----------------------- ------------
ASSOCIATES
2018: Share of results after
taxation - GBP7.6 million
Holding
Location Activity %
Life and Non-life
BF&M Bermuda insurance 37.2
United Finance Bangladesh Banking 38.4
United Insurance Bangladesh Non-life insurance 37.0
--------------------------------- ------------ ---------------------- ------------
DIRECTORS AND ADVISERS
Malcolm Perkins,
Directors FCA Chairman (iii)
Deputy Chairman, independent
Chris Relleen, FCA non-executive
Director and senior independent
Director (i) (ii) (iii)
Tom Franks, FCA Chief Executive
Graham Mclean, MSc Director of Agriculture
Susan Walker, FCCA Chief Financial Officer
Independent non-executive Director
William Gibson (i) (ii) (iii)
Frédéric
Vuilleumier Independent non-executive Director
Independent non-executive Director
Gautam Dalal, FCA (i)
(i) Audit committee
(ii) Remuneration
committee
(iii) Nomination
committee
Group General Amarpal Takk, LLB
Counsel & Company
Secretary
Registered office Linton Park
Linton
Maidstone
Kent ME17 4AB
Registered Number 00029559
Nominated adviser Panmure Gordon (UK)
and Limited
broker One New Change
London EC4M 9AF
Registrars Link Asset Services
The Registry
34 Beckenham Road
Kent BR3 4ZF
Independent auditors Deloitte LLP
Statutory Auditors
1 New Street Square
London EC4A 3HQ
Website www.camellia.plc.uk
Chairman's statement
I am pleased to report the results for 2018, which reflects a
profit before tax from continuing operations of GBP52.5 million and
which includes two significant provision releases amounting to
GBP14.4 million (2017: profit before tax from continuing operations
GBP27.6 million).
Trading during 2018 was generally strong and reflected not only
good weather and some firm markets but also the progressive
investment that we have been making in our businesses. Our tea
operations saw exceptional outputs, with record production of
103mkg. Our two other core crops also performed well, and with more
benign weather, the macadamia crop improved in volume and we
achieved a record avocado harvest. Our UK businesses also returned
to a collective profit.
As set out in more detail in the Chief Executive's report, we
made a number of acquisitions and disposals in the year as we
continue to refine and adapt our business portfolio in line with
our strategy. A majority shareholding in Jing Tea was acquired and
we also entered into agreements to purchase two farms in Tanzania.
In an important development after the year-end, we acquired two tea
estates in Assam, which, together with our existing estates, we
believe makes us the largest private tea producer in the world.
These are long-term projects in line with our strategy to diversify
our production footprint and add value to our products.
Whilst the results for the year were encouraging, we remain
alert to global economic uncertainties and the potential challenges
that we may face. Climate change and political instability continue
to be major concerns and the steps that we are undertaking to help
mitigate the effects of these are set out in the Chief Executive's
report.
Overall, 2018 was a very good year for the Group in terms of
both strategic execution and financial performance. With our strong
market positions in our core crops and significant net cash
resources, we are well placed to take advantage of any
opportunities which uncertain markets may present.
Dividend
Your Board is recommending a final dividend of 102p per share
which, together with the interim dividend already paid of 40p per
share, brings the total distribution for the year to 142p per share
compared with 135p per share for 2017.
Outlook
During 2019 we will consolidate the progress made in 2018 as we
continue to invest in our business and integrate the new
acquisitions. Whilst it remains too early to make meaningful
comments about individual crops, tea auction volumes in Kenya have
been very high for some months with average sale prices below the
cost of production since November which is of some concern.
Furthermore, these volumes are impacting the prices in Malawi and
there is a risk that our other tea markets could be adversely
affected as their seasons begin. We continue to monitor and prepare
for Brexit and, whilst we expect there to be some impact on our UK
businesses, we are confident that the majority of our operations
will be largely unaffected.
Staff
As always, my thanks go out to all our staff for their efforts
in 2018.
Malcolm Perkins
Chairman
10 April 2019
Chief Executive's Report
OVERVIEW
2018 saw the continuing development of Camellia whilst staying
true to our roots of building a long-term sustainable business. We
were fortunate in that we experienced broadly benign weather
conditions across most of our agricultural operations, and it is
pleasing to be able to demonstrate that our continued investment in
agriculture is delivering financial returns. One-off weather events
resulting from climate change remain a risk and therefore it
continues to be a priority to invest in climate mitigators such as
dams and irrigation and to increase the diversification of our
production geographies.
Overall, I believe that whilst international trade may become
more difficult in the short-term, demand for our agricultural
produce from an increasingly affluent, urbanising, health conscious
consumer will continue to rise. The potential addition of
blueberries to our speciality crop portfolio (as described below)
reflects our strategy to benefit from these trends.
Whilst the weather has played a key role in the exceptional tea
crop, the investments that we have been making in our estates and
our factories have enabled us to capitalise on that crop. Likewise,
after consecutive drought years, macadamia volumes were up by 45%,
but we have the infrastructure in place to handle these volumes.
2018 also saw a change in the market for tea, whereby almost all
the UK major tea brands are now disclosing the names of the estates
from which they buy. This is a welcome development and I am pleased
to confirm that our estates are on those lists.
During the year we continued to build on our strengths by
investing and diversifying our agricultural base both by geography
and crop. In the other divisions we are investing in areas where we
can add value to our products and divesting where we do not believe
that the business is core to our future.
Acquisitions and Investments
-- During the year we signed contracts to purchase two farms in
Tanzania for development into avocado and macadamia orchards. This
will be the Group's first investment into Tanzania and reflects our
desire to expand our core crop production volumes and diversify our
geographic footprint. Development of these farms, which are
currently green field sites with approximately 1,200Ha of
development potential, will take some years.
-- After the year-end, we purchased two tea estates in Assam;
Bargang and Harchurah. These are both well-known and respected
marks and will help to balance our portfolio of teas from
India.
-- We are investing in two important trials. We planted 23Ha of
avocado near Kitale in Kenya which, if successful, could lead to a
development of 600Ha. We have also planted a trial of 10Ha of
blueberries at Kakuzi in Kenya. This is the first time we have
trialled blueberries and, if successful, we have the opportunity to
expand the trial substantially.
-- Outside of the Agriculture division we made two acquisitions.
We purchased a majority stake in Jing Tea and the whole of Black
Gold Oil Tools. Jing Tea is a UK based branded speciality tea
business which will help us to distribute our high-end teas more
profitably and bring us closer to our consumers. Black Gold Oil
Tools is an oilfield services company based in Aberdeen which
brings an additional line of business to AJT Engineering.
The projects highlighted above, particularly in the Agriculture
division where we already have significant development commitments,
will require substantial further investment. I am therefore pleased
that our balance sheet remains strong and that we have the
resources available to complete these projects.
Divestments
During the year we completed the sales of GU Cutting and
Grinding, BMT (Great Yarmouth) and XiMo, all of which were
referenced in the annual report and accounts for 2017.
We also disposed of our interests in Affish and Wylax, the Dutch
fish trading businesses which no longer fitted with our
strategy.
Financial Performance
The underlying profit before tax from continuing operations
(i.e. before taking account of the two provision releases described
below) amounts to GBP38.1 million, up 38% on the comparable result
for 2017. Whilst we will not always be fortunate enough to
experience the benign weather that we had in 2018, it clearly
demonstrates that as we grow and diversify our agricultural
operations and focus our non-agricultural businesses, we are able
to enhance our profitability and therefore our dividend.
We also recorded the following significant provision
releases:
-- A one-off gain of GBP9.0 million arising from the release
of post-employment benefit provisions which are no longer
required. This reflects a change to the labour laws in Bangladesh.
We continue to provide for and pay pensions and gratuities
in Bangladesh in accordance with local requirements.
-- Progress on wage negotiations for prior years across our
agricultural operations has resulted in a GBP5.4 million
gain arising from the release of provisions no longer required.
BUSINESS STRATEGY
The overall Group strategy, which is set out on page 19, remains
unchanged with each division expected to perform against an agreed
divisional strategy with goals and targets for the short, medium
and long-term. These are summarised below.
Agriculture
Core crops. To focus on our core crops of tea, macadamia and
avocado where we have scale and geographic diversity. Where
appropriate opportunities arise, to add to our production
capability in these three crops, as well as to make aligned
acquisitions and investments to enable us to capture more of the
value chain.
Speciality crops. To maintain our portfolio of speciality crops
in order to retain the diversity of location and crop which has
historically proven so valuable in diversifying the Group's
political and commodity price risk.
Engineering
AJT Engineering. To take advantage of the recovering oil sector
whilst diversifying into adjacent sectors in order to create a
sustainably profitable engineering business focused on the energy
sector.
Abbey Metal Finishing and Atfin. To continue to grow both
businesses as quality suppliers to the aerospace industry.
Food Service
ACS&T. To continue to operate as a niche high quality
business in the storage and distribution of frozen foods, aiming to
achieve critical mass by profitable growth and if appropriate,
acquisition.
Jing Tea. To grow the existing respected small brand into a
larger, more profitable distributor and retailer of speciality teas
internationally.
Investments
Investment Portfolio. The Group has a portfolio, principally of
listed investments, the strategy for which remains to invest in
high quality companies where we believe that there is long-term
value. This portfolio also enables us to balance our geographic
risk exposure.
Investment Property. The strategy is to continue to invest in
quality assets where an appropriate yield may be realised. The
process of developing some of our existing properties to enhance
yield will continue.
Collections. The Group has collections of art, philately and
manuscripts which are regularly reviewed and are added to or sold
as appropriate.
Associates
The Group has three associate companies in the financial
services sector of which BF&M, the listed Bermudian insurance
business is the most significant. With all our associates, we
continually monitor our investment and may increase or decrease our
holding in the future.
PERFORMANCE
Agriculture
Tea Production
2018 saw the Group's highest ever production levels through our
own and managed factories. Total made tea produced was 103mkg
(2017: 95mkg) which was a record for the Group.
Mature Immature 2018 2017
area area Volume Volume
Ha Ha mkg* mkg*
India 14,361 1,435 28.1 27.6
Bangladesh 8,578 543 12.8 13.6
Kenya 4,074 80 14.4 13.5
Malawi 5,132 540 19.1 17.0
------ -------- ------ ------
Total 32,145 2,598 74.4 71.7
------ -------- ------ ------
* Estate volumes only, in addition 24.2mkg of Bought Leaf tea
was produced (2017: 19.3mkg) and a further 4.5mkg was produced for
managed clients (2017: 4.0mkg)
Tea pricing and operations
India
Overall, India produced record volumes of tea in 2018 as a
result of higher Bought Leaf volumes purchased by Jogopur factory
which was expanded last year. Our own estate production was up 3%
on 5 year average volumes and Bought Leaf volumes were at record
levels, up 48% on 2017 at 8.4mkg.
Average tea prices were generally up on last year across all
regions and our average selling price was 7% up on the prior year.
However, this increase was not sufficient to offset multiple
mid-year interim wage increases totalling 33% in West Bengal and
22% in Assam.
It is encouraging that the Darjeeling region has recovered well
from the extended strike in 2017 with good quality teas and strong
prices being achieved throughout the year. As part of our
investment in Darjeeling and our commitment to reducing our carbon
footprint, two factories have been converted from coal to Liquid
Natural Gas as a heat source for drying and a hydro-electric
generation system has been commissioned at Castleton.
The packet tea operation saw consolidation of the Tea City
acquisition made in 2017, a brand development strategy being rolled
out and our sales footprint expanded. Sales volumes grew 14% during
2018 to 10.4mkg.
The replanting programme continued with 227Ha completed and a
further 205Ha uprooted for replanting at a later date.
Bangladesh
The Bangladesh tea crop was down on 2017 by 6% at 12.8mkg, as a
result of a generally drier year.
The market however was very strong with exceptional prices being
attained from August through to November. Our average prices were
up 38% on the prior year.
Operationally, good progress has been made on the replanting and
infilling programme with two 'super-nurseries' being established,
one of which is the largest in Bangladesh. The replanting and
extension programme continued with 161Ha being completed in the
year and an additional two million plants were used for
infilling.
In order to process the anticipated increase in crop, Luskerpore
factory was upgraded in the year.
Kenya
Tea production (including smallholders and managed clients) was
up on 2017 by 10% and was our second highest production year ever.
This trend however was reflected across Kenya resulting in record
national production and as a result prices have been under
pressure. Auction volumes at Mombasa in the year were at a record
high of 458mkg, easily surpassing 2016's record of 408mkg. Our
auction prices peaked in February but have declined since then and
from November have been below our cost of production. Our average
selling price for the year was 6% below that of 2017.
Disappointingly, whilst there has been some progress, the
2014/15, 2016/17 and 2018/19 Collective Bargaining Agreements have
still not been agreed although discussions with the union are
ongoing. As ever, these delays cause uncertainty for us and
frustration for the workforce.
As reported last year, we continue to invest in field and
factory technology and our new mechanical harvester is now being
field trialled. Successful trials have also been conducted on a
continuous withering system leading to plans for further investment
in this technology. We also installed a new fluid bed drier in
Kepchomo factory which has proved successful in reducing energy
requirements whilst improving tea quality.
We replanted a total of 41Ha in 2018 (2017:16Ha) and uprooted a
further 49Ha for replanting in 2019. The replanting program has
been mechanised significantly to improve productivity.
Malawi
As a result of ideal weather conditions with excellent rainfall
and the return of the winter 'chiperoni', Malawi produced a
consecutive record crop (including smallholders) for the year of
22mkg, up 13% on 2017. Encouragingly, our average prices were up 3%
on 2017 and the market showed strong demand for Malawi teas in 2018
despite the oversupply of tea at the Mombasa auction.
Developments included expanding the withering at Ruo factory and
replanting a total of 106Ha in 2018 (2017: 99Ha).
Eastern Produce Malawi now produces about 42% of Malawi's total
tea production and is therefore a key stakeholder in the MOU 2020
process (a coalition of producers, buyers and NGOs seeking to
revitalise the industry and working towards a sustainable wage rate
for employees). Wage negotiations and a collective bargaining
agreement were successfully concluded during 2018, awarding 22%
wage increases during the year. During 2018 we saw continued
progress on women's empowerment programs, farmer field schools, and
the introduction of improved nutrition provision in the daily meal.
These developments are positive for us, the industry in Malawi and
the workforce and their communities. The tea industry in Malawi is
however critically dependent on the continued support of the
international tea buyers at the Malawi auction if it is to continue
these developments.
Macadamia Production
Macadamia production in 2018 increased substantially as weather
conditions improved. With the trees still recovering from two dry
years, yields remain below optimal levels but we are optimistic as
to their eventual recovery with favorable weather conditions.
Mature Immature Volume Volume
area area 2018 2017
Ha Ha Tonnes Tonnes
Malawi 1,296 212 472 329
South Africa 863 301 429 273
Kenya 585 447 229 178
------ -------- ------ ------
Total 2,744 960 1,130 780
------ -------- ------ ------
Macadamia Pricing
Despite the increased volumes from Africa, Macadamia prices in
the year remained firm and for certain grades increased by as much
as 23%. Our average selling price for the year was 18% ahead of
2017.
Macadamia Operations
Malawi
Volumes were 43% up on 2017, a significant improvement although
still 19% below our best year in 2014. Early indications for 2019
volumes are that they will be broadly in line with those of
2018.
South Africa
Production volumes were 57% up on 2017. Developments included
completion of the third phase of the Zetmac cracking facility
renovation and upgrade, and continuing work on the Mambedi dam. In
2018, 80Ha were planted on Mambedi estate.
Regrettably with regard to the Wales estate, which amounts to
191Ha of mature macadamia, we have made no progress towards
renewing the lease for the property. Dialogue continues with the
claimant community, however it is now likely that the 2019 harvest
will be the last from this estate.
Kenya
Production volumes were 29% up on 2017 as a result of improved
weather and maturing orchards. Developments included 6Ha of new
planting.
Avocado Production
Mature Immature Volume Volume
area area 2018 2017
Ha Ha mkg* mkg*
Kenya 415 303 11.0 7.3
* Estate volumes only. In addition, 5mkg of smallholder fruit was received (2017: 0.9mkg)
Avocado Pricing and Operations
2018 was a very good year for avocado production with a record
2.8 million exported cartons. Our own estate Hass avocado
production was 2.1 million cartons and there was also a record
volume of smallholder Hass exported at over 0.5 million cartons,
with other varieties making up the remainder.
However, Kenya was not the only country to see very large
volumes of fruit. From May, unprecedented volumes of avocados
arrived in Europe from Peru and South Africa, and as a result the
prices in the European market came under severe pressure. Over the
year our average estate Hass prices were down about 40% on 2017
with a consequential impact on profitability.
During the year we planted an additional 25Ha of Hass avocados
and 73Ha of Pinkerton avocados which brings the total planted area
to 718Ha. In addition, the planting of a 23Ha trial of avocados
near Kitale in Kenya was completed and, so far, the trees are doing
well. If this trial proves successful there is a total of 600Ha
which may be planted.
Speciality Crops Production Mature Immature Volume Volume
area area 2018 2017
Ha Ha Tonnes Tonnes
Arable (Brazil) 3,477 - 31,445 24,472
Rubber (Bangladesh) 1,610 365 649 640
Citrus (USA) 169 8 3,773 8,851
Pistachio (USA) 131 - 712 30(*)
Wine grapes (South Africa) 50 23 317 444
Almonds (USA) 56 - 111 100
Pineapples (Kenya) ** ** 404 1,414
m(3) (m) (3)
Forestry 2,293 3,689 47,767 (***) 93,758 (***)
N(o) of head N(o) of births N(o) of births
Livestock 4,436 948 912
* 2017 was an 'off' year for Pistachios
** Pineapple production was phased out during 2018
*** Volumes quoted are for conversion to value addition products
rather than fuel wood for our own use
Speciality Crops, Pricing and Operations
Arable
Soya volumes were down about 3% on the record levels of 2017 but
Maruque farm in Brazil managed to produce the highest yields in the
district. Soya prices were slightly down on last year. Maize was
planted on a larger area this year and as a result, volumes were up
by 25%. Average prices were up by 26%.
Rubber
Rubber is grown on areas of the tea estates unsuited for growing
tea. Production in 2018 was slightly ahead of 2017 but prices
remain below the cost of production.
Citrus
Following last year's exceptional crop, volumes of Murcotts were
significantly down this year but this was offset in part by an
excellent Navel orange crop which also fetched good prices.
Pistachio
2018 was an 'on' year for Pistachios and volumes and prices were
in line with expectations.
Wine
2018 started disappointingly as the severe drought in the Cape
region of South Africa reduced bulk wine production by 39%.
However, a new marketing strategy and the appointment of a new
international agent saw sales rise by 25%. During the year 8Ha of
vines were replanted bringing the total planted area to 73Ha.
Almonds
The almond crop was a little behind expectations following a
heavy frost in the middle of flowering in 2018.
Forestry
Production of eucalyptus in Brazil reduced substantially, as did
prices, reflecting muted demand during the year and a one-off large
contract delivered during 2017.
Livestock
Livestock sales remained in line with that of the prior year
with prices increasing marginally.
Blueberries
In a new crop for us, we have established a 10Ha blueberry trial
at Kakuzi in Kenya. These plants are grown in pots in polytunnels
and therefore require extensive infrastructure, however this means
that they can be grown on otherwise unproductive areas of the farm.
Following completion of the infrastructure, planting commenced in
January 2019. If successful, there are substantial additional areas
of Kakuzi which could be developed.
In total, the Agriculture division made a segment trading profit
of GBP51.0 million (2017: GBP35.6 million) on revenue of GBP245.3
million (2017: GBP239.4 million), as set out in note 1 to the
Accounts.
Engineering
AJT Engineering had a slower than anticipated start to 2018 but
improved as the year progressed. Revenue for the year rose by 82%
to GBP13.3 million. During the year AJT Engineering acquired a
small company, Black Gold Oil Tools, which provides an additional
aligned revenue stream as well as an adjacent site which will allow
the separation of machining and fabrication activities.
Abbey Metal Finishing had slightly increased revenue in the year
but with a reduced margin. Atfin's revenues increased 6% in the
year and margins improved reflecting economies of scale.
BMT (Great Yarmouth), GU Cutting and Grinding and XiMo were sold
during the year.
In total, the Engineering division made a segment trading loss
of GBP0.6 million (2017: trading loss GBP2.6 million) on revenue of
GBP22.2 million (2017: GBP20.5 million), as set out in note 1 to
the Accounts.
Food Service
With its estate of cold stores effectively at maximum capacity,
additional transport contracts saw ACS&T revenues increase 7%
on 2017. However, there was a minor reduction in profitability as a
result of changes to the business mix and provisions for
dilapidations.
Jing Tea traded in line with expectations and made a small loss
for the year as it invested in line with its expansion
strategy.
The remaining food service businesses were disposed of during
the year.
In total the Food Service division made a segment trading profit
of GBP1.6 million (2017: GBP1.8 million) on revenue of GBP41.5
million (2017: GBP37.8 million), as set out in note 1 to the
Accounts.
Investments
Investment Portfolio. The gains on sale for the year were GBP0.4
million (2017: GBP0.7 million). Due to the implementation of IFRS
9, GBP0.3 million of this gain was reflected in the Income
Statement and GBP0.1 million in the Statement of Comprehensive
Income. The total value of the portfolio at 31 December 2018 was
GBP39.6 million (2017: GBP47.0 million). The reduction reflects a
number of disposals in the year and the weakening in the equity
markets in the second half of 2018.
Investment Property. We continue to work on our estate of
investment property in order to maximise the value and the yield.
Two properties on the Linton Park Estate were converted to
residential, whilst another property was acquired and is now being
refurbished ready for rental.
Collections. The collections are held at cost. A number of minor
additions and disposals were made during the year.
Associates
BF&M experienced an improvement in its trading performance
mainly as a result of a fall in claims payable in the year, 2017
having been impacted by two category 5 hurricanes in the Caribbean.
As a result, BF&M's profit before tax was Bermudian Dollar 18.7
million (2017: Bermudian Dollar 1.9 million).
Our two associate companies in Bangladesh, United Insurance and
United Finance, produced satisfactory results, broadly in line with
expectations.
In total, our share of the results of associates amounted to
GBP7.6 million (2017: GBP2.0 million).
POLITICAL, LEGISLATIVE AND LEGAL ISSUES
The Group is present in many jurisdictions and is subject to
local legislation. We previously disclosed that at the start of
2016 the Government of Malawi put forward new legislation which
proposed, inter alia, the conversion of all freehold property into
50 year leaseholds. The final legislation has now been published
and I am pleased to say carries no such provisions.
In 2018, the Kenyan National Land Commission was asked by a
small number of claimant groups to investigate historical land
injustice claims concerning lands registered in the name of Kakuzi
and Eastern Produce Kenya. The land claims have been refuted
through the Kenyan legal system. A constitutional petition has been
filed and also a request to stay the proceedings of the National
Land Commission until the legal position has been determined. We
continue to keep the situation under review.
Brexit
Brexit and the potential impact across the Group is something
for which we have been preparing over the last two years. The
significant uncertainty as to the precise structure and timing of
any eventual Brexit continues to pose challenges for these
preparations.
Whilst we expect there to be some impact on our UK operations,
we are confident that the majority of our operations will be
largely unaffected. The direct impact of a no-deal Brexit on our
Group primarily arises from potential import and export tariffs,
changes to the way trade flows between the UK and rest of the world
and, from a financial perspective, the volatility of exchange
rates.
Apart from our operations in Malawi and Kenya, none of our
Agriculture businesses sell directly into the UK. In Malawi and
Kenya, we sell a relatively small proportion of our produce into
the UK. Current UK Government guidance suggests that no tariffs
will be imposed on UK black tea imports, while imports of macadamia
are expected to incur tariffs at 2% and avocados at 4%. Undoubtedly
these additional costs will be shared by the participants in the
supply chain, if they arise. Our Agriculture operations are not
reliant on the UK for supplies of materials or equipment.
Our UK based operations are likely to see higher costs from
import duties. However, in the short term the issue is likely to be
disruption to the supply of raw materials, chemicals and parts. As
a contingency, all the UK operations have increased their stock
holding to provide a buffer. Export activity is limited, except at
Abbey Metal Finishing where a material proportion of sales are to
the EU. A no-deal Brexit could result in delays to sales and an
increase in working capital requirements if there is disruption at
the ports, and margin pressure as a result of import duties
incurred by customers. Jing imports tea from Asia and its green tea
imports to the UK may be subject to tariffs at 3%, however this is
not currently a material element of that business.
Our investment portfolio has minimal direct exposure to UK
markets. However its value may be impacted by the effect of
volatility in exchange rates and in financial markets more
widely.
In addition, there is a potential risk that we could incur
additional tax costs e.g. if we are unable to recover VAT on
purchases from the EU or if there are changes to withholding tax
rates on dividends received from any of our overseas
subsidiaries.
CAPITAL INVESTMENT AND DEVELOPMENT
We continued to invest in our assets during the year and GBP17.4
million was spent on property, plant, equipment and investment
property (2017: GBP15.0 million). Key projects are referred to in
the operational reports above. A further GBP4.3 million (2017:
GBP6.0 million) was invested in bearer crop and forestry
plantings.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE
Sustainability, whether it is environmental or social is
fundamental to the ethos of Camellia. Many of our operations have
histories going back over 100 years and we continue to invest in
them for the long-term. Ensuring, therefore, that the environments
and communities on which we depend are maintained and enhanced is
key to our future.
This year, for the first time we will also be publishing on our
website a separate Environmental, Social and Governance report.
This report will allow us to add more detail as to the breadth and
scale of activities that we undertake in this area and highlight
our commitment to it. Further guidance on our approach to
Governance, Sustainability and CSR is also set out in the Strategic
Report on pages 19 to 24 of this document.
Performance
As part of our environmental impact assessment we measure total
energy consumption, carbon emissions, and water usage as set out
below.
2018 2017 2016
Energy and Carbon
Total Energy consumed (TWh) 1.13 1.25 1.22
Total Carbon emissions (tonnes CO(2) e) 217,320 222,775 224,277
Water
Total water withdrawal (million m(3) ) 40.7 40.9 40.1
These numbers set out actual usage, prior years have not been
adjusted to reflect acquisitions, disposals or other corporate
activity.
One of the largest uses of energy in the Group is the
requirement to process and dry our tea crop. The investments that
we have been making to increase energy efficiency in our tea
factories has enabled us to reduce our energy usage from 1.33kg to
1.25kg of CO2 per kg of made tea, a reduction of 6.4%. Furthermore,
we increased our use of renewable energy by 57% over the year
resulting in a further drop in total carbon emissions.
Total water usage was similar to 2017 reflecting the better
weather conditions offset by the increased crop.
We continue to pursue initiatives to reduce our environmental
impact including:
-- Increasing efficiency by modernising and introducing energy
efficient technology.
-- Changing our types of fuel to those which are more sustainable
or renewable.
-- Adapting our agricultural practices to maximise the efficiency
with which we use water, fertilisers and other resources.
As part of our investment in social sustainability, we continue
our long-term plan of upgrading our housing to ensure that it
complies with the latest SAN standards and work with the local
communities, unions, NGOs and governments to improve the local
infrastructure.
One area that I would like to highlight is the increasing number
of partner projects with which we are involved. These are projects
which we jointly undertake, primarily with our customers but
frequently with the involvement of local government and NGOs. This
co-operation allows us both to accelerate certain social
initiatives on the estates and also to make sure that we have
access to the best solutions available globally.
Some of the key initiatives that took place during 2018
included:
-- Partnership for Community Health Advancement, Darjeeling,
India. This project, which has been carried out at Margaret's Hope
Tea Estate in Darjeeling in conjunction with Twinings and DLR
Prerna (a Darjeeling Development organisation), is aimed at
improving sanitation and hygiene practices. Running over four
years, it involves both educational elements and significant
upgrades to the sanitation infrastructure.
-- ETP - UNICEF Programme, Assam, India. This programme, of
which we are only a part, is being implemented by UNICEF,
co-ordinated by the Ethical Tea Partnership and supported by their
members. The programme goals are to realise the rights of children,
adolescents and women across the tea estates of Assam. By
participating in this programme, we believe that we can demonstrate
the ability of properly managed tea estates to be a force for good
in a region which has a long history of deprivation.
-- Baby Nursing Unit, Nandi Hills, Kenya. This project which was
built with support from Taylors of Harrogate provides facilities
for breast-feeding mothers at the Chemomi Estate. The unit is used
by over 300 women, thereby allowing them to remain a part of the
economic process.
-- Farmer Field Schools, Malawi. In order to promote
biodiversity, maintain the local landscape and prevent soil
erosion, we have been working with the Ethical Tea Partnership and
the local community to establish tree nurseries and plant
indigenous species on Mulanje mountain.
SUMMARY
2018 was an important year for the Group in which we made
tangible progress on our long-term strategy. In particular, we have
now divested those businesses which we felt to be unsuitable for
further investment and have invested in a number of strategically
aligned projects which will help us to meet our goals and secure
the future for all our stakeholders.
Tom Franks
Chief Executive
10 April 2019
Chief Financial Officer's report
Overview of Results
The profit after tax for the year ended 31 December 2018 was
GBP32.3 million which includes two large provision releases (2017:
GBP30.2 million, including GBP14.8 million of profit from
discontinued operations).
Profit before tax from our continuing operations in 2018 was
GBP52.5 million (2017: GBP27.6 million). This improvement reflects,
inter alia, a significant increase in profits as a result of
continued strong average selling prices for tea, improved volumes
and strong prices for our macadamia crop, improved trading at
BF&M, and two significant items:
-- A GBP5.4 million gain from the release of provisions for
wage increases relating to prior years in our Agriculture
operations following progress on wage negotiations.
-- The release of a GBP9.0 million provision in Bangladesh
for post-employment benefit obligations from which the
tea industry has been exempted.
Excluding these items, the underlying profit before tax from
continuing operations was GBP38.1 million (2017: GBP27.6
million).
Equity attributable to the owners of Camellia was GBP395.5
million (2017: GBP368.4 million) with net cash and cash equivalents
of GBP109.6 million (2017: GBP106.8 million).
Effect of Disposals
As a consequence of the decision to sell GU Cutting and Grinding
and BMT (Great Yarmouth), these businesses were reclassified as
held for sale at the end of 2017 and an impairment charge of GBP1.8
million was recognised in 2017.
During 2018, GU Cutting and Grinding, BMT (Great Yarmouth) and
XiMo were sold. The 2018 trading loss for these businesses was
GBP0.2 million (2017: loss GBP0.8 million) and is reported within
Engineering.
Affish and Wylax were sold in December 2018 and the 2018 trading
loss for these businesses GBP0.2 million (2017: loss GBP0.4
million) is reported within Food Service.
Discontinued Operation
As previously disclosed, during 2017, the Group completed the
sale of Duncan Lawrie's UK asset management business as well as the
disposals of various businesses operated by Duncan Lawrie's Isle of
Man subsidiaries. Duncan Lawrie's banking licences were surrendered
in 2017 and the business is now closed.
The loss from the discontinued operation in 2018 was GBP0.2
million (2017: profit GBP14.8 million).
Currencies
Over the course of the year, Sterling weakened against all our
key operating currencies, except against the Bangladesh Taka and
South African Rand where there was a marginal strengthening. This
has resulted in a gain on foreign exchange translation of GBP11.6
million (2017: loss GBP28.4 million) which is reflected in the
Statement of Comprehensive Income. Had we translated our profit
before tax for the year using the same average rates as last year,
our results for 2018 would have been GBP0.7 million higher. Our
profit before tax from continuing operations includes an exchange
gain of GBP0.2 million on transactions during the year (2017: loss
GBP0.1 million).
Cash
The Group's net cash position increased to GBP109.6 million for
the year (2017: GBP106.8 million) reflecting, inter alia, strong
net cash inflows from continuing operating activities of GBP24.5
million (2017: inflow GBP30.9 million) and significant continued
investment in our businesses. The Group has loans outstanding
amounting to GBP3.9 million.
A number of the Group's key trading subsidiaries have minority
shareholders such that when cash is repatriated to the UK by way of
dividends, those minorities are entitled to their share of the
relevant dividend. In a number of cases, withholding taxes are also
payable from our share of those dividends.
Funds are reserved within our subsidiary companies for:
-- Long-term development projects related to our core crop
portfolio.
-- Ongoing wage negotiations, the largest of which is the multi-year
Kenyan Collective Bargaining Agreement (referred to below)
which has been ongoing for 5 years, on which some limited
progress has been made.
-- Disputed taxation assessments (see below).
These will reduce the net cash available to the Group in future
years as they are spent, resolved, or (in the case of the disputed
taxation assessments) if they are not settled in the way we
expect.
Dividends
Camellia has a long track record of steady dividend growth. The
Board is recommending an increase in the final dividend for 2018 to
102p per share, giving an aggregate increase for the year of 5.2%
and a total dividend of 142p per share.
Taxation
The Group's effective tax rate of 38.2% (2017: 28.8%) reflects
the increase in the proportion of profits earned in higher rate
overseas jurisdictions. 2017's effective tax rate reflects the fact
that the gains on disposal of Duncan Lawrie Asset Management are
expected to be exempt from tax.
Tax and Other Provisions
Certain of the wage negotiations in Kenya remain unresolved for
the Collective Bargaining Agreement years of 2014/15, 2016/17 and
2018/19 which creates significant uncertainty as to the cost base
of our businesses in Kenya. We also have ongoing wage negotiations
in Bangladesh and India. We consider we have made adequate
provision for the likely outcome of these negotiations.
In addition, as previously disclosed:
-- We are carrying provisions for taxation arising from assessments
raised by the Malawi Revenue Authority for unpaid taxes
from prior years. The amount of this provision is GBP2.3
million at 31 December 2018.
-- In India assessments have been received for GBP4.1 million
of excise duties and GBP1.3 million of income taxes. These
are being contested and no provisions have been made.
-- In India, a long running dispute between our local subsidiaries
and the Government of West Bengal over the payment of a
land tax, locally called 'Salami', remains unresolved. Lawyers
acting for the Group have advised that payment of Salami
does not apply, accordingly no provisions have been made.
The sums contested amount to GBP1.4 million excluding penalties.
-- We have been advised that the gain on sale of Duncan Lawrie's
asset management business should be exempt from tax because
of the nature of the assets sold. Accordingly, no provision
has been made for tax on this gain.
In some of our jurisdictions, the tax authorities have levied
assessments in respect of prior years. In a number of situations,
the liability position under statute and case law is clear and
provision has been made in line with those. Unfortunately, in other
situations the law is either unclear or underdeveloped and in these
instances, we make provisions on a best estimate basis for the
liabilities likely to arise, having taken appropriate advice.
Pensions and Post-Employment Benefits
The Group operates a number of defined benefit pension schemes,
the largest of which is in the UK. Our 2017 triennial valuation for
the UK scheme, which was closed to future accrual during 2016,
showed a funding surplus of GBP7.1 million. We continue to keep the
scheme under close review in light of the volatility in bond and
equity markets.
The overseas defined benefit schemes are located in Bangladesh
and India. Our businesses in Kenya, India and Bangladesh also have
obligations to pay terminal gratuities based on years of service
and, in some cases, based on salaries.
In aggregate, our employee benefit schemes currently show
deficits on an IAS 19 basis of GBP24.7 million (2017: GBP30.9
million deficit).
Accounting for defined benefit schemes is prescribed by IAS 19
and the quantum of the deficit continues to be highly sensitive to
small changes in assumptions as regards inflation and gilt yields
in the relevant jurisdictions. This year a net actuarial loss of
GBP0.7 million (2017: net actuarial gain of GBP34.3 million) is
reflected in the Statement of Comprehensive Income. The net loss
this year reflects:
-- For the UK scheme higher discount rates and shorter life
expectancies offset by higher expected inflation rates.
-- For the overseas schemes higher discount rates offset in
part by higher expected salary increases.
A GBP9.0 million non-recurring gain has arisen from the
government of Bangladesh deeming the tea industry to be exempt from
previously enacted legislation which required companies to make a
payment on retirement to all employees, based upon compensation and
length of service. The consequence is that this provision for post
employment benefits is no longer required. The gain which has been
reflected in the Income Statement reflects the accrued liability
immediately prior to the date of change in legislation.
Our Income Statement also reflects current and past service
costs of GBP3.1 million, which includes GBP0.9 million for the
expected cost of equalising guaranteed minimum pension benefits for
certain members of the UK scheme.
In addition, GBP1.5 million (2017: GBP2.7 million) has been
charged to our Income Statement in respect of employee benefit
expenses.
Shareholders' Funds
Equity attributable to Camellia's shareholders at the 2018 year
end was GBP395.5 million (2017: GBP368.4 million). A reconciliation
is set out in the Group statement of changes in equity on page
41.
Susan Walker
Chief Financial Officer
10 April 2019
Strategic report
Business Review
The Company is required to set out in this report a fair review
of the business of the Group during the year ended 31 December 2018
and a description of the principal risks and uncertainties facing
the Group. A fair review of the business of the Group is
incorporated within the Chairman's Statement and the
Chief Executive's report on pages 6 to 15. The Chairman's
statement and the Chief Executive's report, together with
information contained within the report of the Directors, highlight
the key factors affecting the Group's development and performance.
Further details of the financial performance and position of the
Group are set out in the Chief Financial Officer's report on pages
16 to 18. Other matters are dealt with below.
Group Strategy
The Board has adopted the following strategy for the Group:
-- To develop a worldwide group of businesses requiring management
to take a long-term view.
-- The achievement of long-term shareholder returns through
sustained and targeted investment.
-- Investing in the environment and sustainability of the
communities in which we do business.
-- Ensuring that the quality and safety of our products and
services meet the highest international standards.
-- The continuous refinement and improvement of the Group's
existing businesses using our internal expertise and financial
strength.
The progress against this strategy during the year is set out in
further detail in the Chief Executive's report shown on pages 6 to
15 and within the Report of the Directors.
Business Model
The Group consists of operations engaged in Agriculture,
Engineering and Food Service. The Group also holds a range of
Investments. Operations are managed on a divisional basis with
regular reports made to the Board on performance against the annual
budget.
Principal Risks and Uncertainties
There are a number of possible risks and uncertainties that
could impact the Group's operations. The Group regularly monitors
the risks at operational and Group level. Information on the
Group's financial risks is disclosed in note 42 of the Accounts.
The following material risks relating to the Group's principal
operations have been identified:
Agriculture
Risk Potential Impact Mitigation
---------------- ----------------------------------------------- -----------------------------------------------
Climate change Current agricultural patterns and practices Geographical spread of operations to lessen the
become unsustainable. impact of extreme weather on the Group as
Land values and local communities are impacted. a whole.
---------------- ----------------------------------------------- -----------------------------------------------
Drought Level of rainfall affecting crop yields. Investment in irrigation, water storage and
drought resistant crop varieties.
---------------- ----------------------------------------------- -----------------------------------------------
Price volatility Fluctuations in commodity prices impact Use of forward contracts, product and crop
profitability each season. In the event of a diversification and building long-term
prolonged strategic
depression in the world tea market the impact relationships with key customers.
on the Group would be material.
---------------- ----------------------------------------------- -----------------------------------------------
Currency fluctuation Profit volatility arising from sales Monitoring of foreign exchange rates
in US Dollars and Euros where there and cash management.
is no natural hedge
against the cost of production in
local currency.
------------------------------------- ------------------------------------- ------------------------------------
Cost of labour Increased cost of production and Introduction of more efficient
lower profitability. labour and field practices and the
increased use of mechanisation
and automation.
------------------------------------- ------------------------------------- ------------------------------------
Long-term political issues over land Paying more for existing property Monitoring local land issues with
ownership in Kenya, Malawi, South (for example if freeholds become the assistance of lawyers and local
Africa and Tanzania leaseholds) or potentially trade associations.
losing access to farms and estates. Maintaining collaborative
relationships with governments at
local and national levels.
------------------------------------- ------------------------------------- ------------------------------------
Civil unrest and political Periodic interruptions to the Increasing security for our workers
instability operation of the businesses at a and operations during times of civil
local level. unrest.
------------------------------------- ------------------------------------- ------------------------------------
Corruption Inability to carry on business in a Strict adherence to anti-bribery
manner which is legal and ethical. legislation and the implementation
of the Group Principal
Polices.
------------------------------------- ------------------------------------- ------------------------------------
Engineering
Risk Potential Impact Mitigation
------------------------------------- ------------------------------------ -------------------------------------
Key customer dependence Losing a major customer. Diversification of the customer base
and careful customer relationship
management.
------------------------------------- ------------------------------------ -------------------------------------
Dependence on the oil and gas and Changes in market conditions leading Diversification into other sectors.
aerospace sectors to lower demand for services. Close monitoring of the current
sectors.
------------------------------------- ------------------------------------ -------------------------------------
Health and safety Vulnerability of the employees to Strict compliance with legislation
injury at work due to the use of and training employees to adopt safe
machinery and chemicals. working practices.
Payment of fines and claims and Regular external compliance reviews.
reputational damage.
------------------------------------- ------------------------------------ -------------------------------------
Environmental Contamination of the local and wider Strict compliance with legislation,
environment due to the use of training employees to adopt safe
machinery and chemicals. working practices and
Payment of fines and claims and lessen the impact on the environment.
reputational damage. Regular external compliance reviews.
------------------------------------- ------------------------------------ -------------------------------------
Food Service
Risk Potential Impact Mitigation
------------------------------------- ------------------------------------- ------------------------------------
Key customer dependence Losing a major customer. Diversification of the customer base
and careful customer relationship
management.
------------------------------------- ------------------------------------- ------------------------------------
Health and safety Vulnerability of the employees to Strict compliance with legislation
injury at work due to the use of and training employees to adopt safe
machinery and chemicals. working practices.
Payment of fines and claims, criminal Regular external compliance reviews.
prosecutions and reputational damage.
------------------------------------- ------------------------------------- ------------------------------------
Environmental Contamination of local and wider Strict compliance with legislation,
environment due to the use of training employees to adopt safe
machinery and chemicals. Payment working practices and
of fines and claims, criminal lessen the impact on the
prosecutions and reputational damage. environment.
------------------------------------- ------------------------------------- ------------------------------------
IT systems Interruption to services for Implementation of a disaster
customers and the business. recovery plan.
------------------------------------- ------------------------------------- ------------------------------------
Investments
Risk Potential Impact Mitigation
------------------------------------- ------------------------------------- ------------------------------------
Market Decline in the value of investments Portfolio diversification, careful
and property. stock selection, the regular
monitoring of individual company
stock performance and a diversified
property portfolio.
------------------------------------- ------------------------------------- ------------------------------------
Group
Risk Potential Impact Mitigation
------------------------------------- ------------------------------------- ------------------------------------
UK and Overseas Pensions Increases in Increase in the pension schemes' Regular monitoring of the investment
inflation and/or reductions in deficits with a resultant increase in strategy, the funding position of
long-term government the funding requirement. the pension schemes
bond yields. and investment performance.
Changes in local laws restricting the
investment choices for the schemes'
assets.
------------------------------------- ------------------------------------- ------------------------------------
Taxation Future adjustments to taxable income Tax exposures are considered
Uncertainties in relation to the and expenses already recorded or individually, and judgements made
interpretation of complex tax increases to the cash with support from experienced
legislation tax costs incurred by the Group in tax professionals and external
future. advisors.
Risk that the Group's judgements are
challenged by tax authorities
Uncertainties arising from changes in
tax legislation, eg the OECD's Base
Erosion and Profit
Shifting project
------------------------------------- ------------------------------------- ------------------------------------
Group Principal Policies
There are a range of issues that are important to the Group and
to all of our operations, whatever sector they operate in. These
are set out in the Group Principal Policies which are cascaded
across the Group. Each operation is required to prescribe its own
local policies based upon the Group Principal Policies. On an
annual basis, each operation will confirm to Group compliance with
the Group Principal Policies. Ultimately, our individual operations
have experts who are best placed to identify how each policy can be
implemented and applied which in turn enables them to operate
responsibly and ethically over the long-term.
A summary of each principal policy is set out below and they are
set out in full on our website.
Anti-Bribery and Corruption
The Company has adopted an anti-bribery policy which complies
primarily with the requirements of the UK Bribery Act 2010 although
the Board also requires compliance with the laws of all countries
in which the Group operates.
All Group employees, officers and executives, and all those
acting for or on the Group's behalf are strictly prohibited from
offering, paying, soliciting or accepting bribes or kickbacks,
including facilitation payments.
Compliance with the anti-bribery policy is monitored by the
individual operations and incidents are reported to the
anti-bribery officer for such operation.
In addition, the Board has adopted an anti-facilitation of tax
evasion policy which complies with the requirements of the UK
Criminal Finances Act 2017. The policy has been introduced across
the Group and its compliance will be monitored at both Group and by
individual operations.
Certification and Traceability
As part of our end to end supply chain, our operations are
required to meet the requirements of our customers and suppliers in
terms of certifications and traceability. The vast majority of our
tea gardens are RFA certified and all our macadamia, avocado and
winery processing facilities are FSSC 22000 certified. Across the
Group, operations have also obtained ISO14001, ISO9001 and ISO45001
and many other appropriate accreditations.
Employee Welfare
Our employees are at the heart of what we do, and their welfare
is paramount. Operations are required to have policies and
procedures in place which cover equality, health, personal
development, training, diversity, and (where appropriate)
education, housing and sanitation.
We consciously and continuously work towards encouraging
equality in management positions across our operations. The Group
complies with local regulations to encourage employees with
disabilities to work in our operations and where necessary, makes
appropriate adjustments to working practices.
All our tea estates have a hospital, clinic or dispensary. In
addition, in India and Bangladesh employees have access to central
Group operated hospitals to which more serious cases can be
referred. We provide medical services, including where appropriate
antiretroviral drugs, in those communities where HIV/AIDS is
prevalent. We also give medical support to schools that are either
run locally or by our operations.
We are committed to providing development opportunities for all.
We provide education opportunities in areas where we operate,
either by building and running schools or by supporting state
educational projects in our communities. We also provide programmes
for skills development and adult education.
Environmental
We are mindful of the environment in which we operate,
recognising that our operations require natural resources and that
our operations generate emissions and waste. We understand and
comply with current applicable legislation in the jurisdictions in
which we operate. Our operations are each required to commit to
policies which reduce their environmental footprint and which
include (where appropriate), carbon, recycling, waste and
water.
As part of our wider drive towards greater sustainability, we
have developed a range of mid to long-term targets to reduce, in
some cases substantially, the environmental impact of our
operations. As an example, strategic improvements in our usage and
sourcing of energy supports our ambition to align with
Science-Based Targets. Targets adopted by the operations to reduce
greenhouse gas emissions are considered 'Science-Based' if they are
in line with the level of de-carbonisation required to keep global
temperature increase below 2 C compared to pre-industrial
temperatures.
Health and Safety
We take responsibility for our people by promoting good health
and providing a safe and healthy workplace to protect all
employees, contractors, visitors and the public from foreseeable
work hazards. All operations are required to comply with local
health and safety legislation, regulations and to obtain
certifications from external authorities.
Modern Slavery
The Group continues to comply with the requirements of the
Modern Slavery Act 2015, to ensure that modern slavery and human
trafficking are not taking place either within the Group or in the
supply chains of our operations. A copy of the statement for the
year ended 31 December 2018 is available on the Company's website.
In some countries, it is both the cultural norm and permissible for
parents to involve their children in the productive process, we do
not subscribe to this approach and the use of child labour is
prohibited across the Group. Group operations are required to
confirm this statement and adopt local policies and procedures to
ensure continued compliance. This includes setting out codes of
conduct when working alongside customers and suppliers.
Tax
The Group's tax principles include: compliance with applicable
tax laws; payment of the correct tax amounts; interpretation of tax
law; undertaking tax planning based on commercial rationale; and
transparency with tax authorities.
Whistleblowing
Our whistleblowing policy provides guidelines for people who
feel they need to raise certain issues in confidence. It is
designed to protect those raising a genuine concern, in line with
the Public Interest Disclosure Act 1998 or other jurisdictional
legislation. Each operation is required to have a designated local
whistleblowing officer. Group employees have access to the
whistleblowing officer for the individual operation, as well as the
Group Whistleblowing Officer or the chairman of the Audit
committee.
Key Financial Performance Indicators
The nature of the Group's principal activities is such that the
Board takes a long-term view of its operations, particularly in
Agriculture.
The Board reviews monthly reports with a range of financial and
other indicators to monitor the performance of each division
depending on the nature of its operations.
For the Agriculture division, the Board receives monthly data on
sales prices and volumes, cost of production and crop volumes
against budget and on a per unit basis. Rainfall and other climate
data are also considered.
For the Engineering division and Food Service division, the
Board receives monthly profit and operating performance
information.
For Investments, the value and performance of the share
portfolio is reviewed quarterly.
Certain of the key financial performance indicators are included
in the Chief Executives report on pages 6 to 15.
Non-Financial Performance Indicators
Each operation has developed non-financial KPIs that are
relevant to it, these include:
-- Market trends
-- Health & Safety
-- Industrial disputes
-- Land and politics
-- Movements in key personnel
-- Weather and climate
These are regularly monitored and used by local management.
Where applicable, the Board considers such KPIs by exception.
Employees
The Group keeps employees informed through internal
publications, the website and social media on the performance of
the Group and on matters affecting them as employees and
arrangements to that end are made by the local management.
It is also the Group's policy that due consideration be given to
employment applications received from disabled persons and to give
employees who become disabled every opportunity to continue their
employment.
The table below provides a breakdown of the gender of the
Directors and employees at 31 December 2018.
Men Women
Company Directors(1) 7 1
All employees 38,636 32,970
1 'Company Directors' consists of the company's Board as detailed on page 4
By order of the Board
Amarpal Takk
Company Secretary
10 April 2019
Report of the directors
The Directors present their report together with the audited
consolidated accounts for the year ended 31 December 2018.
Principal Activities
The Company is a public limited company, which is quoted on the
AIM Market of the London Stock Exchange and incorporated and
domiciled in England and Wales. The principal activities of its
subsidiary undertakings comprise:
Agriculture
Engineering
Food Service
Investments
Further details of the Group's activities are included in the
Chief Executive's report on pages 6 to 15.
Results and Dividends
The profit after tax for the year amounted to GBP32.3 million
(2017: GBP30.2 million). The Board has proposed a final dividend
for the year of 102p per share payable on 12 July 2019 to holders
of the ordinary shares registered at the close of business on 14
June 2019. The total dividend payable for 2018 is 142p per share
(2017: 135p per share). Details are shown in note 11 to the
Accounts.
Directors
The Directors are listed on page 4. The following Directors had
beneficial interests in the shares of the Company.
Camellia Plc ordinary shares of 10p each: 31 December 1 January
2018 2018
Malcolm Perkins 1,673 1,673
Tom Franks 100 100
Susan Walker 100 100
Under the Company's articles of association all the Directors
are required to retire annually. Accordingly, Malcolm Perkins, Tom
Franks, Susan Walker, Graham Mclean, Chris Relleen, Frédéric
Vuilleumier, William Gibson and Gautam Dalal will retire and, being
eligible, will seek re-election at the AGM on 6 June 2019.
None of the Directors or their families had a material interest
in any contract of significance with the Company or any subsidiary
during, or at the end of, the financial year.
Executive Directors
Malcolm Perkins was appointed a Director in 1999 and Chairman in
2001 having joined Eastern Produce (Holdings) Limited now Linton
Park Plc in 1972. He is a chartered accountant and Chairman of the
Nomination committee.
Tom Franks was appointed as Chief Executive with effect from 1
September 2015. He joined Camellia as Deputy Chief Executive in
October 2014. He is a chartered accountant and a Fellow of the
Chartered Institute of Securities and Investment.
Graham Mclean, a qualified agriculturalist, was appointed as
Director of Agriculture in October 2014. He was previously regional
director of the Group's operations in Africa and has worked for the
Group for more than 25 years. He is Chairman and a non-executive
director of Kakuzi Plc.
Susan Walker was appointed Chief Financial Officer for the Group
on 4 June 2015. She joined Camellia as Finance Director Designate
on 1 July 2014. She is a chartered certified accountant and a
non-executive director of Goodricke Group Limited and United
Finance Limited.
Non-Executive Directors
Chris Relleen was formerly a partner at PricewaterhouseCoopers.
He was appointed as an independent non-executive Director and
Deputy Chairman in January 2006 having previously been a
non-executive Director of Linton Park Plc. He is senior independent
Director, chairman of the Audit committee and a member of the
Nomination and Remuneration committees.
William Gibson was appointed as an independent non-executive
Director in September 2014. He was previously chairman and managing
director of Westminster Press and an executive director of the
Financial Times Group. He is chairman of the Remuneration committee
and a member of the Audit and Nomination committees.
Frédéric Vuilleumier was appointed as an independent
non-executive Director in March 2013. He is a partner of Oberson
Abels SA, a law office based in Geneva, Switzerland. He was a
member of the Audit committee during 2018.
Gautam Dalal was appointed as an independent non-executive
Director in March 2018. He was previously a partner at KPMG and a
founder-director of the UK India Business Council, a member of the
Asian Business Association and a director of AMREF Health Africa's
International Board. He was appointed a member of the Audit
committee in 2019.
Amarpal Takk was appointed as Group General Counsel and Company
Secretary in April 2018. He is a qualified solicitor of England and
Wales.
Substantial Shareholdings
As at 10 April 2019 the Company has been advised of the
following interests in its share capital:
% of total
Beneficial shareholder Shareholder No. of Shares voting rights
Camellia Private Trust
Company Limited Camellia Holding AG 1,427,000 51.67
Lynchwood Nominees
Fide Holding NV* Limited 360,500 13.05
Quaero Capital SA HSBC Global Custody
Nominee (UK) Limited 144,217 5.22
* Controlled by Nokia Pensioenfonds VZW
Share Capital and Purchase of Own Shares
The Company's share capital comprises one class of ordinary
shares of 10p per share which carry no restrictions on the transfer
of shares or on voting rights (other than as set out in the
Company's articles of association). There are no agreements known
to the Company between shareholders in the Company which may result
in restrictions on the transfer of shares or on voting rights in
relation to the Company. Details of the issued share capital are
contained in note 36 to the Accounts.
At the AGM in 2018, shareholders gave authority for the Company
to purchase up to 276,200 of its own shares. This authority expires
at the conclusion of this year's AGM at which a resolution
proposing renewal of the authority will be submitted to
shareholders.
Auditors
A resolution proposing the reappointment of Deloitte LLP will be
put to the AGM on 6 June 2019.
Each of the persons who were Directors at the time when this
Directors' report was approved has confirmed that:
-- So far as each Director is aware, there is no relevant audit
information of which the Company's auditors are unaware.
-- Each Director has taken all the steps that ought to have been
taken as a Director, including making appropriate enquiries of
fellow Directors and of the Company's auditors for that purpose, in
order to be aware of any information needed by the Company's
auditors in connection with preparing their report and to establish
that the Company's auditors are aware of that information.
Employees
Details in relation to employees are set out on page 24.
R&D
The Group undertakes some R&D projects within its operations
in order to improve efficiency and grow revenues.
Future Development
Details of future developments are set out in the Chief
Executive's report.
Going Concern
Taking account of the Group's cash and cash equivalents
balances, after reviewing the Group's budget for 2019 and cash
forecasts for the next 15 months, the Directors have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future. Therefore, they
continue to adopt the going concern basis in preparing the
Accounts.
Corporate Governance
The Company's statement on corporate governance can be found in
the Corporate Governance report on pages 28 to 31.
Political Donations
The Group has no political affiliations and we do not make
political donations. We work with governments and other parties
around the world on issues that are important to our customers, and
stakeholders, communities and to the interests of the business.
By order of the Board
Amarpal Takk
Company Secretary
10 April 2019
Corporate governance
Statement of Compliance
The Company fully complies with the Quoted Companies Alliance's
Corporate Governance Code for Small and Mid-size Quoted Companies
("QCA Code"). The Chairman considers the application of standards
of corporate governance that are appropriate for the Group's
nature, status, profile, size and circumstances to be important in
ensuring the Group is managed for the long-term benefit of all
stakeholders. There are ten principles of the QCA Code which the
Company complies with in full. The table on our website sets out
how we comply.
The Group consists of a portfolio of businesses which are
grouped into independently managed divisions. These divisions
report into the Board by function against a variety of metrics
including budgets and business plans.
The Board
The Board currently comprises eight Directors, four of whom are
independent non-executive Directors. The remaining Directors are
executive Directors, including the executive Chairman. Chris
Relleen, the Deputy Chairman, has been designated as the senior
independent Director. The names and brief biographical details of
each Director appear on pages 25 and 26.
There is on-going dialogue between the Chairman and the Chief
Executive with the majority shareholder whose views are reported to
the Board. The Company is also in contact with other significant
shareholders.
The Board has established Remuneration, Audit and Nomination
committees. Terms of reference of each of the committees can be
viewed on the Company's website.
The Board is responsible for managing the Group's business and
has adopted a schedule of matters reserved for its approval. The
schedule is reviewed periodically and covers, inter alia, the
following areas:
-- Strategy
-- Acquisitions and disposals
-- Financial reporting and control
-- Internal controls
-- Approval of expenditure above specified limits
-- Approval of transactions and contracts above specified
limits
-- Responsibilities for corporate governance
-- Board membership and committees
-- Approval of changes to capital structure
A full copy of the schedule is available on the Company's
website.
A report summarising the Group's financial and operational
performance is provided to Directors each month. Each Director has
sufficient information in advance of Board meetings to enable the
Directors to make informed judgements on matters referred to the
Board. The Board met nine times in 2018.
Attendance by Directors at Board and committee meetings held
during the year was as follows:
Director Board Audit Remuneration Nomination
Malcolm Perkins 9/9 - - 1/1
Chris Relleen 9/9 3/3 1/1 1/1
Tom Franks 9/9 - - -
Graham Mclean 9/9 - - -
Susan Walker 8/9 - - -
William Gibson 9/9 3/3 1/1 1/1
Frédéric Vuilleumier 9/9 3/3 - -
Gautam Dalal 9/9 - - -
Board Evaluation
An internal review, led by the Company Secretary, was undertaken
this year. This was based upon a series of questions. The review
confirmed that the Board is strong and collegiate with all members
demonstrating behaviours that support our strategic direction,
vision and culture. Each Director has the opportunity to contribute
and challenge, which enables a constructive and quality debate
during Board meetings.
Executive Committees
The Board has established the Strategy Group, consisting of the
Chairman and the executive Directors of the Board, and also two
Executive Committees. The Agriculture Executive Committee is
chaired by the Director of Agriculture and includes the Chief
Executive, Chief Financial Officer, the Group General Counsel and
heads of all the key agricultural operations. The Engineering and
Food Service Executive Committee is chaired by the Chief Executive
and includes the Chief Financial Officer, the divisional heads of
Engineering North, Engineering South and Food Service, the Managing
Director of Jing Tea, the Group General Counsel and the UK Head of
HR.
Investments and Associates report directly to the Chief
Executive.
Nomination Committee
The committee is chaired by Malcolm Perkins. Its other members
are William Gibson and Chris Relleen.
The principal responsibilities of the committee are set out
below:
-- Review the balance and composition (including gender and
diversity) of the Board, ensuring that they remain appropriate.
-- Be responsible for overseeing the Board's succession planning
requirements including the identification and assessment
of potential Board candidates and making recommendations
to the Board for its approval.
-- Keep under review the leadership needs of, and succession
planning for, the Group in relation to both its executive
and non-executive Directors and other senior executives.
The committee met once during the year to consider the
composition of the Audit committee.
Audit Committee
The committee is chaired by Chris Relleen. The other members of
the committee during the year were Frédéric Vuilleumier and William
Gibson. Gautam Dalal replaced Frédéric Vuilleumier as a member of
the committee from April 2019. During 2018, the committee met on
three occasions.
The principal responsibilities of the committee are set out
below and were undertaken during the year:
-- Monitor the effectiveness of the Group's risk management
practices.
-- Review the effectiveness of the Group's internal control
system. The committee regularly reviews the effectiveness
of internal audit activities carried out by the Group's
accounting function and senior management.
-- Review and monitor the financial statements of the Company
and the audit of those statements and to monitor compliance
with relevant financial reporting requirements and legislation.
-- Monitor the effectiveness and independence of the external
auditors.
-- Review non-audit services provided by the external auditors.
Significant issues considered by the Audit Committee
The Audit committee assesses whether suitable accounting
policies have been adopted and whether management has made
appropriate estimates and judgements. In the year under review, the
Audit committee considered the following matters in relation to the
financial statements:
Biological assets
One of the key areas of judgement that the committee considered
in reviewing the financial statements was the valuation of
biological assets in accordance with IAS 41. Valuations are based
on discounted cash flows or are carried out by external
professional valuers. These were considered for consistency of
approach and assumptions agreed as reasonable. For more details see
note 18 to the Accounts.
Pensions
A key area of judgement is in relation to the valuation of the
pension scheme obligations. Whilst this is conducted by independent
actuaries, the size of the obligation means that a relatively minor
difference in the assumptions could result in a material change in
the obligation. The committee considered the competence of the
actuaries and the key assumptions adopted and concluded that the
work performed is sufficient to support the valuation.
Carrying value of BF&M
The Group's carrying value of BF&M is higher than the share
price for BF&M. The committee considered the fair value of the
Group's holding and whether any impairment in the carrying value
had occurred and in view of the control premium associated with our
holding concluded that no impairment is required.
Tax and other uncertain provisions
The basis of provisions for material uncertain tax situations
were considered by the committee as were the provision in respect
of the ongoing Collective Bargaining Agreement negotiations for
2014/15, 2016/17 and 2018/19 in Kenya, and for wage increases in
India and in Bangladesh. The committee is satisfied that the
provisions represent best estimates of the likely liabilities.
Adoption of IFRS 9 and IFRS 15
The committee reviewed the accounting policies of the Group in
light of the requirement to adopt IFRS 9 and 15 from 1 January
2018. The adoption of IFRS 9 and IFRS 15 has not had a material
impact on the financial statements of the Group. IFRS 9 was adopted
without restating comparative information and its adoption has
resulted in the reclassification of the Group's financial assets.
In relation to IFRS 15, it was concluded that the Group's revenue
recognition practices were in line with IFRS 15 in all material
respects. For more details see pages 53 and 54 to the Accounts.
Adoption of IFRS 16
The committee reviewed and approved the accounting policy for
leasing arrangements. The Group's leasing arrangements have been
reviewed in light of the new lease accounting rules in IFRS 16. The
standard will affect primarily the accounting for the Group's
operating leases and details of the impact on the 2019 financial
statements are included on page 54 to the Accounts. The Group will
apply the standard from its mandatory adoption date of 1 January
2019.
External auditors
To assess the effectiveness of the external audit process, the
external auditor is required to report to the Audit committee and
confirm their independence in accordance with ethical standards and
that they had maintained appropriate internal safeguards to ensure
their independence and objectivity. In addition to the steps taken
by the Board to safeguard auditor objectivity, Deloitte operates a
five-year rotation policy for audit partners for a listed
entity.
The committee reviewed those non-audit services provided by the
external auditor and satisfied itself that the scale and nature of
those services were such that the external auditors objectivity and
independence were safeguarded.
The committee confirms that the Annual Report and Accounts,
taken as a whole, is fair, balanced and understandable and provides
the information necessary for shareholders to assess the Company's
performance, business model and strategy.
Remuneration Committee
The committee is chaired by William Gibson and the other member
is Chris Relleen.
The responsibilities of the committee include:
-- The review of the Group's policy relating to remuneration
of the Chairman, executive Directors and the Company Secretary.
-- To determine the terms of employment and remuneration of
the Chairman, executive Directors and Company Secretary
with a view to ensuring that those individuals are fairly
and responsibly rewarded.
-- To approve compensation packages or arrangements following
the severance of any executive Director's service contract.
The Remuneration report appears on pages 33 to 34.
Insurance
The Company purchases insurance to cover its Directors in
respect of legal actions against them in their capacity as
Directors of the Company. All Directors have access to independent
professional advice at the Company's expense.
Share Capital Structure
The share capital of the Company is set out in note 36.
Internal Control and Risk Management Systems
The Directors acknowledge that they are responsible for
maintaining a sound system of internal control. During the year,
the Audit committee, on behalf of the Board, reviewed the
effectiveness of the framework of the Group's system of internal
control, the principal features of which are described below.
De-centralisation is a key management philosophy with
responsibility for efficient day to day operations delegated to
local management. Accountability and delegation of authority are
clearly defined with regular communication between Group head
office and the management of the individual operations. Our key
operations have internal audit functions reporting to local audit
committees. The performance of each operation is continually
monitored centrally including a critical review of annual budgets,
forecasts and monthly sales, profits and cash reports. Financial
results and key operational statistics and variances from approved
plans are carefully monitored. Group senior management regularly
visit and review Group operations. However, any system of internal
control can provide only reasonable, and not absolute, assurance
against material mis--statement or loss.
By order of the Board
Amarpal Takk
Company Secretary
10 April 2019
Statement of directors' responsibilities
The Directors are responsible for preparing the Annual Report
and Accounts in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
are required to prepare the Group financial statements in
accordance with International Financial Reporting Standards (IFRSs)
as adopted by the EU and Article 4 of the IAS Regulation and have
also chosen to prepare the parent company financial statements
under IFRSs as adopted by the EU. Under Company law the Directors
must not approve the accounts unless they are satisfied that they
give a true and fair view of the state of affairs of the company
and of the profit or loss of the Company for that period. In
preparing these financial statements, International Accounting
Standard 1 requires that Directors:
-- Properly select and apply accounting policies.
-- Present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and understandable
information.
-- Provide additional disclosures when compliance with the specific
requirements in IFRSs are insufficient to enable users to
understand the impact of particular transactions, other events
and conditions on the entity's financial position and financial
performance.
-- Make an assessment of the Company's ability to continue as
a going concern.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the financial statements comply with the Companies Act 2006. They
are also responsible for safeguarding the assets of the Company and
hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
company's website. Legislation in the UK governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
Responsibility Statement
We confirm that to the best of our knowledge:
-- The Financial Statements, prepared in accordance with
International Financial Reporting Standards as adopted by the EU,
give a true and fair view of the assets, liabilities, financial
position and profit or loss of the Company and the undertakings
included in the consolidation taken as a whole.
-- The Strategic Report includes a fair review of the
development and performance of the business and the position of the
Company and the undertakings included in the consolidation taken as
a whole, together with a description of the principal risks and
uncertainties that they face.
-- The Annual Report and financial statements, taken as a whole,
are fair, balanced and understandable and provide the information
necessary for shareholders to assess the Company's position and
performance, business model and strategy.
On behalf of the Board
Malcolm Perkins
Chairman
10 April 2019
Remuneration report
This report is drawn up in accordance with the Companies Act
2006 and the AIM Rules for Companies.
Remuneration Committee
Details of the Remuneration committee are set out on page
31.
Policy on Directors' Remuneration
The policy agreed by the committee is as follows;
-- To seek to provide remuneration packages that will attract,
retain and motivate the right people for the roles.
-- So far as is practicable to align the interests of the executives
with those of shareholders.
-- To reflect the overriding remuneration philosophy and the
principles of the wider Group.
In implementing the second point, the Company does not operate
profit related bonus, share option or share incentive schemes for
Directors as the Group's activities are based largely on
agriculture, which is highly dependent on factors outside
management control such as the weather and market prices.
The policy is designed to ensure that the Directors manage the
Group's businesses for the long-term in line with the strategy of
the Group.
In determining this remuneration policy and the remuneration of
Directors, consideration has been given to the relevant provisions
of the QCA Guidelines.
The remuneration policy was approved by shareholders at the 2017
AGM. The committee considers any views of the shareholders
expressed on Directors' remuneration.
At the AGM on 7 June 2018, the Remuneration Report for the year
to 31 December 2017 was approved by shareholders with 99.99% of the
votes cast in favour, 0.01% of the votes cast against and 576 votes
withheld.
Service Contracts
Malcolm Perkins, Tom Franks, Graham Mclean and Susan Walker are
each employed on rolling service contracts.
Date of Service
Director Contract
Malcolm Perkins 25 April 2002
Tom Franks 8 April 2015
Graham Mclean 10 April 2015
Susan Walker 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 following sections on Directors' remuneration and pensions
have been audited.
Directors' Remuneration
Employer
Remuneration Benefits in Kind Pension Contribution Total
2018 2017 2018 2017 2018 2017 2018 2017
GBP GBP GBP GBP GBP GBP GBP GBP
Executive
Malcolm Perkins 442,344 442,344 30,819 76,630 - - 473,163 518,974
Tom Franks 550,000 522,500 65,993 55,887 - - 615,993 578,387
Susan Walker 330,000 295,625 43,211 24,695 - 5,500 373,211 325,820
Graham Mclean 363,000 322,500 29,865 26,770 - 4,475 392,865 353,745
Non-executive
William Gibson 45,991 44,651 - - - - 45,991 44,651
Chris Relleen 48,696 68,077 - - - - 48,696 68,077
Frédéric
Vuilleumier 43,285 42,024 - - - - 43,285 42,024
Gautam Dalal 36,071 - - - - - 36,071 -
--------- --------- ------- -------- ------- ----------- --------- ---------
Total 1,859,387 1,737,721 169,888 183,982 - 9,975 2,029,275 1,931,678
--------- --------- ------- -------- ------- ----------- --------- ---------
Notes
(i) The executive Directors' benefits in kind include the value
attributed to medical insurance, permanent health insurance,
spouse/partner travel and cash alternatives to company
cars.
(ii) Chris Relleen received an additional annual fee for his
Chairmanship of the Audit committee.
(iii) William Gibson received an additional annual fee for his
Chairmanship of the Remuneration committee.
Directors' Pensions
Malcolm Perkins received no payment for pensionable service
during 2018. Tom Franks, Graham Mclean and Susan Walker receive an
excess non-pensionable salary supplement equivalent to 10% of base
salary. As a result of the change to the taxation rules on pension
annual allowances, the Company ceased contributions to the Linton
Park Group Personal Pension Scheme on 6 April 2017 for Graham
Mclean and Susan Walker. These payments are included in
'Remuneration' in the table above.
In addition to the above, an unfunded pension of US$200,000 per
annum is paid to Gordon Fox, a former Director of the Company.
By order of the Board
Amarpal Takk
Company Secretary
10 April 2019
Consolidated income statement
for the year ended 31 December 2018
2018 2017
Separately Separately
Underlying disclosed Underlying disclosed
profit items profit items
(note (note (note
4 ) 4 ) 4 )
Notes GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
Restated
Continuing operations
Revenue 2 309.8 - 309.8 298.3 - 298.3
Cost of sales (223.6) 14.4 (209.2) (219.3) - (219.3)
---------- ---------- ------ ---------- ---------- ---------
Gross profit 86.2 14.4 100.6 79.0 - 79.0
Other operating
income 4.0 - 4.0 2.4 - 2.4
Distribution costs (17.2) - (17.2) (13.9) - (13.9)
Administrative
expenses 3 (45.1) - (45.1) (41.1) - (41.1)
---------- ---------- ------ ---------- ---------- ---------
Trading profit 1,3 27.9 14.4 42.3 26.4 - 26.4
Share of associates'
results 5 7.6 - 7.6 2.0 - 2.0
Provisions and
impairment of
property, plant
and equipment (0.2) - (0.2) (1.8) - (1.8)
Loss on disposal
of subsidiaries 6 (0.4) - (0.4) - - -
Profit on disposal
of financial assets 0.3 - 0.3 0.7 - 0.7
---------- ---------- ------ ---------- ---------- ---------
Operating profit
- continuing
operations 35.2 14.4 49.6 27.3 - 27.3
Investment income 0.8 - 0.8 0.6 - 0.6
---------- ---------- ------ ---------- ---------- ---------
Finance income 7 4.0 - 4.0 3.0 - 3.0
Finance costs 7 (0.6) - (0.6) (0.5) - (0.5)
Net exchange
gain/(loss) 7 0.2 - 0.2 (0.1) - (0.1)
Employee benefit
expense 7 (1.5) - (1.5) (2.7) - (2.7)
---------- ---------- ------ ---------- ---------
Net finance
income/(cost) 7 2.1 - 2.1 (0.3) - (0.3)
---------- ---------- ------ ---------- ---------- ---------
Profit before
tax from continuing
operations 38.1 14.4 52.5 27.6 - 27.6
Taxation 8 (20.0) (12.2)
------ ------
Profit after tax
from continuing
operations 32.5 15.4
(Loss)/profit
from discontinued
operation 9 (0.2) 14.8
------ ------
Profit for the
year 32.3 30.2
------ ------
Profit attributable
to:
Owners of Camellia
Plc 25.2 23.8
Non-controlling
interests 7.1 6.4
------ ------
32.3 30.2
------ ------
Earnings per share
- basic and diluted 12 912.4p 861.7p
Earnings per share
- continuing operations 12 919.6p 325.9p
Earnings/(loss)
per share - discontinued
operation 12 (7.2)p 535.8p
Statement of comprehensive income
for the year ended 31 December 2018
2018 2017
Notes GBP'm GBP'm
Restated
Group
Profit for the year 32.3 30.2
----- --------
Other comprehensive income/(expense):
Items that will not be reclassified subsequently to profit or loss:
Financial assets at fair value through other comprehensive income:
Fair value adjustment released on disposal 22 (3.8) -
Profit on disposal 3.9 -
----- --------
0.1 -
----- --------
Changes in the fair value of financial assets 22 (5.6) -
Deferred tax movement in relation to fair value adjustments 1.5 -
Remeasurements of post employment benefit obligations 35 (0.7) 34.3
Deferred tax movement in relation to post employment benefit obligations 34 (0.3) (1.0)
----- --------
(5.0) 33.3
----- --------
Items that may be reclassified subsequently to profit or loss:
Foreign exchange translation differences 11.6 (28.4)
Available-for-sale investments:
Valuation gains taken to equity 25 - 10.9
Transferred to income statement on sale 25 - (0.3)
Deferred tax movement in relation to valuation gains - (1.6)
Share of other comprehensive income of associates 0.8 -
12.4 (19.4)
----- --------
Other comprehensive income for the year, net of tax 7.4 13.9
----- --------
Total comprehensive income for the year 39.7 44.1
----- --------
Total comprehensive income attributable to:
Owners of Camellia Plc 30.7 41.1
Non-controlling interests 9.0 3.0
----- --------
39.7 44.1
----- --------
Company
Profit for the year 3.9 3.9
----- --------
Total comprehensive income for the year 3.9 3.9
----- --------
Consolidated balance sheet
at 31 December 2018
2018 2017
Notes GBP'm GBP'm
ASSETS
Non-current assets
Intangible assets 15 9.5 3.2
Property, plant and equipment 16 226.3 216.3
Investment properties 17 18.0 17.6
Biological assets 18 14.5 12.8
Prepaid operating leases 19 1.0 0.9
Investments in associates 21 65.7 55.4
Deferred tax assets 34 - 0.2
Financial assets at fair value through other comprehensive income 22 32.7 -
Financial asset at fair value through profit or loss 23 3.7 -
Financial assets at amortised cost 24 3.0 -
Available-for-sale financial assets 25 - 47.0
Other investments - heritage assets 26 9.5 9.4
Retirement benefit surplus 35 0.3 0.3
Trade and other receivables 28 2.7 1.9
Total non-current assets 386.9 365.0
----- -----
Current assets
Inventories 27 52.7 47.4
Biological assets 18 8.8 6.6
Trade and other receivables 28 48.5 43.7
Financial assets at amortised cost 24 0.2 -
Current income tax assets 0.7 0.9
Cash and cash equivalents (excluding bank overdrafts) 29 112.4 108.0
----- -----
223.3 206.6
Assets classified as held for sale 30 0.2 4.9
Total current assets 223.5 211.5
----- -----
LIABILITIES
Current liabilities
Financial liabilities - borrowings 32 (3.4) (1.8)
Trade and other payables 31 (53.5) (52.0)
Current income tax liabilities (8.0) (7.9)
Employee benefit obligations 35 (1.0) (0.7)
Provisions 33 (18.5) (19.7)
----- -----
(84.4) (82.1)
Liabilities directly associated with assets classified as held for sale 30 - (1.8)
Total current liabilities (84.4) (83.9)
----- -----
Net current assets 139.1 127.6
----- -----
Total assets less current liabilities 526.0 492.6
----- -----
Non-current liabilities
Financial liabilities - borrowings 32 (3.4) (4.0)
Deferred tax liabilities 34 (46.3) (40.2)
Employee benefit obligations 35 (24.0) (30.5)
Total non-current liabilities (73.7) (74.7)
----- -----
Net assets 452.3 417.9
----- -----
EQUITY
Share capital 36 0.3 0.3
Share premium 15.3 15.3
Reserves 379.9 352.8
----- -----
Equity attributable to owners of Camellia Plc 395.5 368.4
Non-controlling interests 56.8 49.5
----- -----
Total equity 452.3 417.9
----- -----
Company balance sheet
at 31 December 2018
2018 2017
Notes GBP'm GBP'm
ASSETS
Non-current assets
Investments in subsidiaries 20 73.5 73.5
Other investments - heritage assets 26 10.7 10.6
----- -----
Total non-current assets 84.2 84.1
----- -----
Current assets
Amounts due from group undertakings - 3.5
Current income tax asset 0.1 0.1
Cash and cash equivalents 29 0.1 0.1
----- -----
Total current assets 0.2 3.7
----- -----
LIABILITIES
Current liabilities
Trade and other payables 31 (0.6) (0.2)
Amounts due to group undertakings (16.9) (20.7)
----- -----
Total current liabilities (17.5) (20.9)
----- -----
Net current liabilities (17.3) (17.2)
----- -----
Total assets less current liabilities 66.9 66.9
----- -----
Non-current liabilities
Deferred tax liabilities 34 (0.2) (0.2)
----- -----
Total non-current liabilities (0.2) (0.2)
----- -----
Net assets 66.7 66.7
----- -----
EQUITY
Share capital 36 0.3 0.3
Share premium 15.3 15.3
Reserves 51.1 51.1
----- -----
Total equity 66.7 66.7
----- -----
The profit for the company is shown in note 10.
The notes on pages 42 to 105 form part of the financial
statements.
The financial statements on pages 35 to 105 were approved on 10
April 2019 by the board of Directors and signed on their behalf
by:
M C Perkins
Chairman
Registered Number 00029559
Consolidated cash flow statement
for the year ended 31 December 2018
2018 2017
Notes GBP'm GBP'm
Cash generated from operations
Cash flows from operating activities 37 35.3 40.7
Interest received 3.9 3.0
Interest paid (0.5) (0.5)
Income taxes paid (14.2) (12.3)
----- -----
Net cash flow from operating activities 24.5 30.9
----- -----
Cash flows from investing activities
Purchase of intangible assets - (2.5)
Purchase of property, plant and equipment (20.5) (20.6)
Proceeds from sale of non-current assets 0.7 1.3
Additions to investment property (0.9) (0.2)
Biological assets: non-current - additions (0.9) (0.2)
Part disposal of subsidiaries - 0.2
Payment for acquisition of a subsidiary net of cash acquired (6.4) -
Proceeds from sale of subsidiaries net of cash disposed 3.6 -
Proceeds from sale of assets held for sale - investment property 0.7 -
Cash balances transferred to assets held for sale - (0.3)
Investment in associates (1.0) (1.0)
Dividends received from associates 2.8 2.8
Purchase of investments (7.2) (4.0)
Proceeds from sale of investments 11.4 1.8
Income from investments 0.8 0.6
Purchase of other investments - heritage assets (0.1) (0.2)
----- -----
Net cash flow from investing activities (17.2) (22.3)
----- -----
Cash flows from financing activities
Equity dividends paid (3.8) (3.6)
Dividends paid to non-controlling interests (3.1) (2.5)
New loans 38 - 0.1
Loans repaid 38 (0.6) (0.6)
----- -----
Net cash flow from financing activities (7.5) (6.6)
----- -----
Net (decrease)/increase in cash and cash equivalents from
continuing operations (0.2) 2.0
Net cash inflow/(outflow) from discontinued operation - 38.2
Cash and cash equivalents at beginning of year 29 106.8 71.8
Exchange gains/(losses) on cash 3.0 (5.2)
----- -----
Cash and cash equivalents at end of year 29 109.6 106.8
----- -----
For the purposes of the cash flow statement, cash and cash equivalents are included net of
overdrafts repayable on demand.
Company cash flow statement
for the year ended 31 December 2018
2018 2017
Notes GBP'm GBP'm
Cash generated from operations
Profit before tax 3.9 3.9
Adjustments for:
Impairment of available-for-sale financial assets - 0.2
Interest income (0.2) (0.2)
Dividends from group companies (5.0) (5.2)
Increase in trade and other payables 0.4 0.1
Net movement in intra-group balances (0.3) (0.2)
----- -----
Cash used in operations (1.2) (1.4)
Interest received 0.2 0.2
----- -----
Net cash flow from operating activities (1.0) (1.2)
----- -----
Cash flows from investing activities
Purchase of other investments - heritage assets (0.1) (0.2)
Dividends received 5.0 5.2
----- -----
Net cash flow from investing activities 4.9 5.0
----- -----
Cash flows from financing activities
Equity dividends paid (3.9) (3.7)
----- -----
Net cash flow from financing activities (3.9) (3.7)
----- -----
Net movement in cash and cash equivalents - 0.1
Cash and cash equivalents at beginning of year 29 0.1 -
----- -----
Cash and cash equivalents at end of year 29 0.1 0.1
----- -----
Statement of changes in equity
for the year ended 31 December 2018
Non-
Share Share Treasury Retained Other controlling Total
capital premium shares earnings reserves Total interests equity
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
Group
At 1 January 2017 0.3 15.3 (0.4) 272.1 43.5 330.8 48.8 379.6
Total comprehensive
(expense)/income
for the year - - - 55.2 (14.1) 41.1 3.0 44.1
Dividends - - - (3.6) - (3.6) (2.5) (6.1)
Non-controlling
interest
subscription - - - - - - 0.2 0.2
Share of associate's
other
equity movements - - - 0.1 - 0.1 - 0.1
------- ------- -------- -------- -------- ----- ----------- ------
At 31 December 2017 0.3 15.3 (0.4) 323.8 29.4 368.4 49.5 417.9
Total comprehensive
income/(expense)
for the year - - - 30.5 0.2 30.7 9.0 39.7
Dividends - - - (3.8) - (3.8) (3.1) (6.9)
Companies joining
the
Group - - - - - - 1.4 1.4
Share of associate's
other
equity movements - - - 0.2 - 0.2 - 0.2
------- ------- -------- -------- -------- ----- ----------- ------
At 31 December 2018 0.3 15.3 (0.4) 350.7 29.6 395.5 56.8 452.3
------- ------- -------- -------- -------- ----- ----------- ------
Company
At 1 January 2017 0.3 15.3 - 38.8 12.1 66.5 - 66.5
Total comprehensive
income for the year - - - 3.9 - 3.9 - 3.9
Dividends - - - (3.7) - (3.7) - (3.7)
------- ------- -------- -------- -------- ----- ----------- ------
At 31 December 2017 0.3 15.3 - 39.0 12.1 66.7 - 66.7
Total comprehensive
income for the year - - - 3.9 - 3.9 - 3.9
Dividends - - - (3.9) - (3.9) - (3.9)
------- ------- -------- -------- -------- ----- ----------- ------
At 31 December 2018 0.3 15.3 - 39.0 12.1 66.7 - 66.7
------- ------- -------- -------- -------- ----- ----------- ------
Other reserves of the group include net exchange differences of
GBP16.5 million deficit (2017: GBP26.1 million deficit).
Group retained earnings includes GBP180.7 million (2017:
GBP157.4 million) which would require exchange control permission
for remittance as dividends.
Accounting policies
The principal accounting policies applied in the preparation of
these financial statements are set out below. These policies have
been consistently applied to all years presented, unless otherwise
stated.
Basis of preparation
The consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards (IFRS)
as adopted by the EU, IFRS IC interpretations and the Companies Act
2006 applicable to companies reporting under IFRS.
The consolidated financial statements have been prepared on the
historical cost basis as modified by the revaluation of biological
assets, financial assets and financial liabilities and assets held
for sale.
Where necessary, comparative figures have been adjusted to
conform with changes in presentation in the current year. During
the year, GBP4.5 million of comparative amounts previously
classified as trade and other payables have been reclassified into
provisions.
Going concern
The Directors have, at the time of approving the financial
statements, 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.
Basis of consolidation
Subsidiaries
The consolidated financial statements incorporate the financial
statements of the Company and entities controlled by the Company
(its subsidiaries) made up to 31 December each year.
On acquisition, the assets and liabilities of a subsidiary are
measured at their fair values at the date of acquisition. Any
excess of the cost of acquisition over the fair values of the
identifiable net assets acquired is recognised as goodwill. Any
deficiency of the cost of acquisition below the fair values of the
identifiable net assets acquired (i.e. discount on acquisition) is
credited to the income statement in the period of acquisition. The
Group recognises any non-controlling interest in the acquiree on an
acquisition-by-acquisition basis, at the non-controlling interest's
proportionate share of the recognised amounts of acquiree's
identifiable net assets.
The results of subsidiaries acquired or disposed of during the
year are included in the consolidated Income Statement from the
effective date of acquisition or disposal, as appropriate.
Where necessary, adjustments are made to the financial
statements of subsidiaries to bring the accounting policies used
into line with those used by the Group.
All Intra-Group transactions, balances, income and expenses are
eliminated on consolidation.
Associates
An associate is an entity over which the Group is in a position
to exercise significant influence, but not control or joint
control, through participation in the financial and operating
policy decisions of that entity.
Investments in associates are accounted for by the equity method
of accounting. Under this method the Group's share of the
post-acquisition profits or losses of associates is recognised in
the Income Statement and its share of post-acquisition movements in
reserves is recognised in reserves.
Foreign currency translation
Transactions in currencies other than pounds sterling are
recorded at the rates of exchange prevailing on the dates of the
transactions. At each balance sheet date, monetary assets and
liabilities that are denominated in foreign currencies are
retranslated at the rates prevailing on the balance sheet date.
Translation differences on non-monetary items carried at fair value
are reported as part of the fair value gain or loss. Gains and
losses arising on retranslation are included in the income
statement, except for exchange differences arising on non-monetary
items where the changes in fair value are recognised directly in
equity.
The consolidated financial statements are presented in sterling
which is the Company's functional and presentation currency. On
consolidation, income statements and cash flows of foreign entities
are translated into pounds sterling at average exchange rates for
the year and their balance sheets are translated at the exchange
rates ruling at the balance sheet date. Exchange differences
arising from the translation of the net investment in foreign
entities and of borrowings designated as hedges of such
investments, are taken to equity. When a foreign entity is sold
such exchange differences arising since 1 January 2004 are
recognised in the Income Statement as part of the gain or loss on
disposal.
Goodwill and fair value adjustments arising on the acquisition
of a foreign entity are treated as assets and liabilities of the
foreign entity and translated at the exchange rate ruling on the
date of acquisition.
The Group has elected to treat goodwill and fair value
adjustments arising on acquisitions prior to 1 January 2004, the
date of the Group's transition from UK GAAP to IFRS, as sterling
denominated assets and liabilities.
Revenue recognition
Revenue is measured at the fair value of the consideration
received or receivable and represents amounts receivable for goods
and services provided in the normal course of business, net of
discounts, value added tax and other sales related taxes and after
eliminating intra-group sales.
Revenue from the sale of goods is recognised when all the
following conditions are satisfied:
-- identify contracts with customers
-- identify the separate performance obligation
-- determine the transaction price of the contract, and
-- allocate the transaction price to each of the separate performance
obligations
In respect of agricultural produce, revenue is recognised at the
point in time that control of goods is transferred to the
customer.
In respect of food storage and distribution services, revenue
for handling is recognised at the point that the goods are actually
handled.
In respect of engineering services, revenue is recognised based
upon the stage of completion and includes costs incurred to date,
plus accrued profits.
Investment income
Investment income is recognised when the right to receive
payment of a dividend is established.
Segmental reporting
The adoption of IFRS 8 requires operating segments to be
identified on the basis of internal reports used to assess
performance and allocate resources by the chief operating decision
maker. The chief operating decision maker has been identified as
the Group Strategy Committee led by the CEO. Inter segment sales
are not significant.
Exceptional items
Exceptional items are those significant items which are
separately disclosed by virtue of their size or incidence to enable
a full understanding of the Group's financial performance.
Intangible assets
(i) Goodwill
Goodwill arising on consolidation represents the excess of the
cost of acquisition over the Group's interest in the fair value of
the identifiable assets, liabilities and contingent liabilities of
a subsidiary or associate at the date of acquisition.
Goodwill is recognised as an asset and reviewed for impairment
at least annually or more frequently if events or changes in
circumstances indicate a potential impairment. Any impairment is
recognised immediately in the income statement and is not
subsequently reversed.
On disposal of a subsidiary or associate, the attributable
amount of goodwill is included in the determination of the profit
or loss on disposal.
(ii) Identifiable intangible assets
Indefinite life identifiable intangible assets include certain
brands acquired. They are not amortised but tested for impairment
annually or more frequently if an impairment indicator is
triggered, any impairment is charged to the income statement as it
arises. The assessment of the classification of intangible assets
as indefinite is reviewed annually.
Finite life identifiable intangible assets include certain
brands, customer relationships and other intangible assets acquired
on the acquisition of subsidiaries. Acquired intangible assets with
finite lives are initially recognised at cost and amortised on a
straight-line basis over their estimated useful lives, not
exceeding 20 years. Intangible assets' estimated lives are
re-evaluated annually and an impairment test is carried out if
certain indicators of impairment exist.
Expenditure on research activities is recognised as an expense
in the period in which it is incurred.
(iii) Computer software
Acquired computer software licences are capitalised on the basis
of the costs incurred to acquire and bring to use the specific
software. Computer software licences are held at cost and are
amortised on a straight-line basis over 3 to 7 years.
Costs associated with developing or maintaining computer
software programmes are recognised as an expense as incurred. Costs
that are directly associated with identifiable and unique software
products controlled by the Group and which are expected to generate
economic benefits exceeding costs beyond one year, are recognised
as an intangible asset and amortised over their estimated useful
lives.
Property, plant and equipment
Property, plant and equipment now includes biological assets
(bearer plants) which are accounted for under IAS 16.
Land and buildings comprises mainly factories and offices. All
property, plant and equipment is shown at cost less subsequent
depreciation and impairment, except for land, which is shown at
cost less impairment. Cost includes expenditure that is directly
attributable to the acquisition of these assets.
On transition to IFRS, the Group followed the transitional
provisions and elected that previous UK GAAP revaluations be
treated as deemed cost.
Subsequent costs are included in the assets' carrying amount,
only when it is probable that future economic benefits associated
with the item will flow to the Group and the cost of the item can
be measured reliably. Repairs and maintenance are charged to the
income statement during the financial period in which they are
incurred.
No depreciation is provided on freehold land. Depreciation of
other property, plant and equipment is calculated to write off
their cost less residual value over their expected useful
lives.
The rates of depreciation used for the other assets are as
follows:-
Biological assets (Bearer plants) 20 to 50 years
Freehold and long leasehold buildings nil to 50 years
Other short leasehold land and buildings unexpired term of the lease
Plant, machinery, fixtures, fittings 3 to 25 years
and equipment
No depreciation is provided on bearer plants until maturity when
commercial levels of production have been reached.
Assets held under finance leases are depreciated over their
expected useful lives on the same basis as owned assets, or, where
shorter, over the term of the relevant lease.
The assets' residual values and useful lives are reviewed, and
adjusted if appropriate, at each balance sheet date.
The gain or loss arising on the disposal or retirement of an
asset is determined as the difference between the sales proceeds
and the carrying amount of the asset and is included in the Income
Statement.
Investment properties
Properties held to earn rental income rather than for the
purpose of the Group's principal activities are classified as
Investment properties. Investment properties are recorded at cost
less accumulated depreciation and any recognised impairment loss.
The depreciation policy is consistent with those described for
other Group properties.
Income from Investment properties is disclosed in 'Revenue'. The
related operating costs are immaterial and are included within
administrative expenses.
Biological assets: non-current
Biological assets are measured at each balance sheet date at
fair value and are generally valued at each year end by independent
professional valuers. Any changes in fair value are recognised in
the Income Statement in the year in which they arise. Costs of new
areas planted are included as "new planting additions" in the
biological assets note. As timber is harvested the value
accumulated to the date of harvest is treated as "decrease due to
harvesting" and charged to cost of sales in the Income
Statement.
Biological assets: current
Produce is valued on the basis of net present values of expected
future cash flows and include certain assumptions about yields,
selling prices, costs and discount rates. As the crop is harvested
it is transferred to inventory at fair value.
Financial assets
All regular way purchases or sales of financial assets are
recognised and derecognised on a trade date basis. Regular way
purchases or sales are purchases or sales of financial assets that
require delivery of assets within the time frame established by
regulation or convention in the marketplace.
All recognised financial assets are measured subsequently in
their entirety at either amortised cost or fair value, depending on
the classification of the financial assets.
Classification of financial assets
(i) Equity instruments designated as fair value through other
comprehensive income ('FVTOCI')
On initial recognition, the Group has made an irrevocable
election (on an instrument-by-instrument basis) to designate
investments in equity instruments as at FVTOCI.
Investments in equity instruments designated as FVTOCI are
initially measured at fair value plus transaction costs.
Subsequently, they are measured at fair value with gains and losses
arising from changes in fair value recognised in other
comprehensive income and accumulated in the investments revaluation
reserve. The cumulative gain or loss is not reclassified to profit
or loss on disposal of the equity investments, instead, it is
transferred to retained earnings.
Dividends on these investments in equity instruments are
recognised in profit or loss in accordance with IFRS 9, unless the
dividends clearly represent a recovery of part of the cost of the
investment. Dividends are included as investment income in the
consolidated income statement.
The Group has designated all investments in equity instruments
that are not held for trading purposes as FVTOCI on initial
application of IFRS 9 (see notes 22 to 25).
(ii) Financial assets at fair value through profit or loss
('FVTPL')
Financial assets that do not meet the criteria for being
measured FVTOCI or at amortised cost (see (i) above and (iii)
below) are measured at FVTPL.
Financial assets at FVTPL are measured at fair value at the end
of each reporting period, with any fair value gains or losses
recognised in profit or loss to the extent they are not part of a
designated hedging relationship.
(iii) Amortised cost and effective interest method
The amortised cost of a financial asset is the amount at which
the financial asset is measured at initial recognition minus the
principal repayments, plus the cumulative amortisation using the
effective interest method of any difference between that initial
amount and the maturity amount, adjusted for any loss allowance.
The gross carrying amount of a financial asset is the amortised
cost of a financial asset before adjusting for any loss
allowance.
The effective interest method is a method of calculating the
amortised cost and of allocating interest income over the relevant
period. Interest income is recognised in profit or loss and is
included in the "finance income - interest income" line item (note
7).
Impairment of financial assets
The Group recognises a loss allowance for expected credit losses
('ECL') on investments in debt instruments that are measured at
amortised cost, lease receivables, trade receivables and contract
assets. The amount of expected credit losses is updated at each
reporting date to reflect changes in credit risk since initial
recognition of the respective financial instrument.
Lifetime ECL represents the expected credit losses that will
result from all possible default events over the expected life of a
financial instrument. In contrast, 12-month ECL represents the
portion of lifetime ECL that is expected to result from default
events on a financial instrument that are possible within 12 months
after the reporting date.
The Group always recognises lifetime ECL for trade receivables,
contract assets and lease receivables. The expected credit losses
on these financial assets are estimated using a provision matrix
based on the Group's historical credit loss experience, adjusted
for factors that are specific to the debtors, general economic
conditions and an assessment of both the current as well as the
forecast direction of conditions at the reporting date, including
time value of money where appropriate.
For all other financial instruments, the Group recognises
lifetime ECL when there has been a significant increase in credit
risk since initial recognition. However, if the credit risk on the
financial instrument has not increased significantly since initial
recognition, the Group measures the loss allowance for that
financial instrument at an amount equal to 12-month ECL.
(i) Significant increase in credit risk
In assessing whether the credit risk on a financial instrument
has increased significantly since initial recognition, the Group
compares the risk of a default occurring on the financial
instrument at the reporting date with the risk of a default
occurring on the financial instrument at the date of initial
recognition. In making this assessment, the Group considers both
quantitative and qualitative information that is reasonable and
supportable, including historical experience and forward-looking
information that is available without undue cost or effort.
Forward-looking information considered includes the future
prospects of the industries in which the Group's debtors operate,
obtained from economic expert reports, financial analysts,
governmental bodies, relevant think-tanks and other similar
organisations, as well as consideration of various external sources
of actual and forecast economic information that relate to the
Group's core operations.
In particular, the following information is taken into account
when assessing whether credit risk has increased:
-- an actual or expected significant deterioration in the financial
instrument's external (if available) or internal credit
rating
-- significant deterioration in external market indicators
of credit risk for a particular financial instrument
-- existing or forecast adverse changes in business, financial
or economic conditions that are expected to cause a significant
decrease in the debtor's ability to meet its debt obligations
-- an actual or expected significant deterioration in the operating
results of the debtor
-- significant increases in credit risk on other financial
instruments of the same debtor
-- an actual or expected significant adverse change in the
regulatory, economic, or technological environment of the
debtor that results in a significant decrease in the debtor's
ability to meet its debt obligations
Irrespective of the outcome of the above assessment, the Group
presumes that the credit risk on a financial asset has increased
significantly since initial recognition when contractual payments
are more than 30 days past due, unless the Group has reasonable and
supportable information that demonstrates otherwise.
Despite the foregoing, the Group assumes that the credit risk on
a financial instrument has not increased significantly since
initial recognition if the financial instrument is determined to
have low credit risk at the reporting date. A financial instrument
is determined to have low credit risk if:
(i) The financial instrument has a low risk of default,
(ii) The debtor has a strong capacity to meet its contractual
cash flow obligations in the near term, and
(iii) Adverse changes in economic and business conditions in
the longer term may, but will not necessarily reduce the
ability of the borrower to fulfil its contractual cash
flow obligations.
The Group considers a financial asset to have low credit risk
when the asset has external credit rating of 'investment grade' in
accordance with the globally understood definition or if an
external rating is not available, the asset has an internal rating
of 'performing'. Performing means that the counterparty has a
strong financial position and there is no past due amounts.
The Group regularly monitors the effectiveness of the criteria
used to identify whether there has been a significant increase in
credit risk and revises them as appropriate to ensure that the
criteria are capable of identifying any significant increase in
credit risk before the amount becomes past due.
(ii) Definition of default
The Group considers the following as constituting an event of
default for internal credit risk management purposes as historical
experience indicates that financial assets that meet either of the
following criteria are generally not recoverable:
-- when there is a breach of financial covenants by the debtor;
or
-- information developed internally or obtained from external
sources indicates that the debtor is unlikely to pay its
creditors, including the Group, in full (without taking
into account any collateral held by the Group).
Irrespective of the above analysis, the Group considers that
default has occurred when a financial asset is more than 90 days
past due unless the Group has reasonable and supportable
information to demonstrate that a different default criterion is
more appropriate.
(iii) Credit-impaired financial assets
A financial asset is credit-impaired when one or more events
that have a detrimental impact on the estimated future cash flows
of that financial asset have occurred. Evidence that a financial
asset is credit-impaired includes observable data about the
following events:
(a) significant financial diffculty of the issuer or the borrower;
(b) a breach of contract, such as a default or past due event
(see (ii) above);
(c) the lender(s) of the borrower, for economic or contractual
reasons relating to the borrower's financial difficulty,
having granted to the borrower a concession(s) that the
lender(s) would not otherwise consider;
(d) it is becoming probable that the borrower will enter bankruptcy
or other financial reorganisation; or
(e) a disappearance of an active market for that financial asset
because of financial difficulties.
(iv) Write-off policy
The Group writes off a financial asset when there is information
indicating that the debtor is in severe financial difficulty and
there is no realistic prospect of recovery, e.g. when the debtor
has been placed under liquidation or has entered into bankruptcy
proceedings, or in the case of trade receivables, when the amounts
are over two years past due, whichever occurs sooner. Financial
assets written off may still be subject to enforcement activities
under the Group's recovery procedures, taking into account legal
advice where appropriate. Any recoveries made are recognised in
profit or loss.
(v) Measurement and recognition of expected credit losses
The measurement of expected credit losses is a function of the
probability of default, loss given default (i.e. the magnitude of
the loss if there is a default) and the exposure at default. The
assessment of the probability of default and loss given default is
based on historical data adjusted by forward-looking information as
described above.
As for the exposure at default, for financial assets, this is
represented by the assets' gross carrying amount at the reporting
date; for financial guarantee contracts, the exposure includes the
amount drawn down as at the reporting date, together with any
additional amounts expected to be drawn down in the future by
default date determined based on historical trend, the Group's
understanding of the specific future financing needs of the
debtors, and other relevant forward-looking information.
For financial assets, the expected credit loss is estimated as
the difference between all contractual cash flows that are due to
the Group in accordance with the contract and all the cash flows
that the Group expects to receive, discounted at the original
effective interest rate. For a lease receivable, the cash flows
used for determining the expected credit losses is consistent with
the cash flows used in measuring the lease receivable in accordance
with IAS 17 Leases.
The Group recognises an impairment gain or loss in profit or
loss for all financial instruments with a corresponding adjustment
to their carrying amount through a loss allowance account, except
for investments in debt instruments that are measured at FVTOCI,
for which the loss allowance is recognised in other comprehensive
income and accumulated in reserves, and does not reduce the
carrying amount of the financial asset in the balance sheet.
Derecognition of financial assets
The Group derecognises a financial asset only when the
contractual rights to the cash flows from the asset expire, or when
it transfers the financial asset and substantially all the risks
and rewards of ownership of the asset to another entity. If the
Group neither transfers nor retains substantially all the risks and
rewards of ownership and continues to control the transferred
asset, the Group recognises its retained interest in the asset and
an associated liability for amounts it may have to pay. If the
Group retains substantially all the risks and rewards of ownership
of a transferred financial asset, the Group continues to recognise
the financial asset and also recognises a collateralised borrowing
for the proceeds received.
On derecognition of a financial asset measured at amortised
cost, the difference between the asset's carrying amount and the
sum of the consideration received and receivable is recognised in
profit or loss. In addition, on derecognition of an investment in a
debt instrument classified as at FVTOCI, the cumulative gain or
loss previously accumulated in the investments revaluation reserve
is reclassified to profit or loss. In contrast, on derecognition of
an investment in equity instrument which the Group has elected on
initial recognition to measure at FVTOCI, the cumulative gain or
loss previously accumulated in the investments revaluation reserve
is not reclassified to profit or loss, but is transferred to
retained earnings.
Impairment of non-financial assets
Assets that have an indefinite useful life are not subject to
amortisation and are tested annually for impairment and whenever
events or changes in circumstance indicate that the carrying amount
may not be recoverable. Assets that are subject to amortisation are
tested for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. An
impairment loss is recognised for the amount by which the assets'
carrying amount exceeds its recoverable amount. The recoverable
amount is the higher of an assets' fair value less costs to sell
and value in use. For the purposes of assessing impairment, assets
are grouped at the lowest levels for which there are separately
identifiable cash flows (cash-generating units).
Leases
Leases of property, plant and equipment where the Group has
substantially all the risks and rewards of ownership are classified
as finance leases. Finance leases are capitalised at the inception
of the lease at the lower of fair value and the estimated present
value of the underlying lease payments. Each lease payment is
allocated between the liability and finance charges so as to
achieve a constant rate of interest on the finance balance
outstanding. The corresponding rental obligations, net of finance
charges, are included in liabilities. The interest element of the
finance cost is charged to the Income Statement over the lease
period. Property, plant and equipment acquired under finance leases
is depreciated over the shorter of the asset's useful life and the
lease term.
Leases where a significant portion of the risks and rewards of
ownership are retained by the lessor are classified as operating
leases. Payments made under operating leases are charged to the
Income Statement on a straight-line basis over the period of the
lease.
Inventories
Agricultural produce included within inventory largely comprises
stock of 'black' tea. In accordance with IAS 41, on initial
recognition, agricultural produce is required to be measured at
fair value less estimated point of sale costs.
Other inventories are stated at the lower of cost and net
realisable value. Cost comprises direct materials and, where
applicable, direct labour costs and those overheads that have been
incurred in bringing the inventories to their present location and
condition. Cost is calculated using the weighted average method.
Net realisable value represents the estimated selling price less
all estimated costs of completion and selling expenses.
Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at
call with banks, other short-term highly liquid investments with
original maturities of three months or less, and bank overdrafts.
Bank overdrafts are shown within borrowings in current liabilities
on the balance sheet.
Discontinued operations and non-current assets held for sale
A discontinued operation is a separate major line of business or
geographic area of operation that has either been disposed of,
abandoned or is part of a plan to dispose of a major line of
business or geographic area. An operation is classified as a
discontinued operation in the year that the above criteria are met.
In the consolidated Income Statement, profit/loss from discontinued
operations is reported separately from the results from continuing
operations. Prior periods Income Statement and cash flow are
presented on a comparable basis.
Non-current assets classified as held for sale are measured at
the lower of the carrying amount and fair value less costs to
sell.
Non-current assets are classified as held for sale if their
carrying amount will be recovered through a sale transaction rather
than through continuing use. This condition is regarded as met only
when the sale is highly probable and the asset is available for
immediate sale in its present condition. Management must be
committed to the sale which should be expected to qualify for
recognition as a completed sale within one year from the date of
classification.
Trade payables
Trade payables are obligations to pay for goods or services that
have been acquired in the ordinary course of business from
suppliers. Accounts payable are classified as current liabilities
if payment is due within one year or less. If not, they are
presented as non-current liabilities.
Trade payables are recognised initially at fair value and
subsequently measured at amortised cost using the effective
interest method.
Borrowings
Interest-bearing bank loans and overdrafts are initially
recorded at the proceeds received, net of direct issue costs.
Finance charges, including premiums payable on settlement or
redemption and direct issue costs, are accounted for on an accrual
basis to the Income Statement using the effective interest method
and are added to the carrying amount of the instrument to the
extent that they are not settled in the period in which they
arise.
Taxation
The tax expense represents the sum of the tax currently payable
and deferred tax.
The tax currently payable is based on taxable profit for the
year. Taxable profit differs from net profit as reported in the
income statement because it excludes items of income or expense
that are taxable or deductible in other years and it further
excludes items that are never taxable or deductible. The Group
liability for current tax is calculated using tax rates that have
been enacted or substantively enacted by the balance sheet
date.
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amount of assets and liabilities
in the financial statements and the corresponding tax bases used in
the computation of taxable profit, and is accounted for using the
liability method. Deferred tax is not accounted for if it arises
from initial recognition of an asset or liability in a transaction,
other than in a business combination, that at the time of the
transaction affects neither accounting nor taxable profit or loss.
Deferred tax is determined using tax rates and laws that have been
enacted or substantively enacted by the balance sheet date and are
expected to apply when the related tax asset is realised or the tax
liability is settled.
Deferred tax assets are recognised to the extent that it is
probable that future taxable profit will be available against which
the temporary differences can be utilised. Deferred income tax
assets and liabilities are offset when there is a legally
enforceable right to offset current tax assets against current tax
liabilities and when the deferred income taxes assets and
liabilities relate to income taxes levied by the same taxation
authority on either the same taxable entity or different taxable
entities where there is an intention to settle the balances on a
net basis.
Deferred tax is provided on temporary differences arising on
investments in subsidiaries and associates, except where the timing
of the reversal of the temporary difference is controlled by the
Group and it is probable that the temporary difference will not
reverse in the foreseeable future.
Employee benefits
(i) Pension obligations
Group companies operate various pension schemes. The schemes are
funded through payments to insurance companies or
trustee-administered funds. The Group has both defined benefit and
defined contribution plans.
A defined contribution plan is a pension plan under which the
Group pays fixed contributions into a separate fund. The Group has
no legal or constructive obligations to pay further contributions
to the fund. Contributions are recognised as an expense in the
Income Statement when they are due.
A defined benefit plan is a pension plan that defines an amount
of pension benefit that an employee will receive on retirement,
usually dependent on one or more factors such as age, years of
service and compensation. The pension cost for defined benefit
schemes is assessed in accordance with the advice of qualified
independent actuaries using the "projected unit" funding
method.
The liability recognised in the Balance Sheet in respect of
defined benefit pension plans is the present value of the defined
benefit obligation at the balance sheet date less the fair value of
plan assets. Independent actuaries calculate the obligation
annually using the "projected unit" funding method. Actuarial gains
and losses arising from experience adjustments and changes in
actuarial adjustments are recognised in full in the period in which
they occur, they are not recognised in the Income Statement and are
presented in the Statement of Comprehensive Income.
Past service costs are recognised directly in the Income
Statement.
(ii) Other post-employment benefit obligations
Some Group companies have unfunded obligations to pay terminal
gratuities to employees. Provisions are made for the estimated
liability for gratuities as a result of services rendered by
employees up to the balance sheet date and any movement in the
provision is recognised in the Income Statement.
The estimated monetary liability for employees' accrued annual
leave entitlement at the balance sheet date is recognised as an
accrual.
Provisions
Provisions are recognised when the Group has a present
obligation (legal or constructive) as a result of a past event, it
is probable that an outflow of resources will be required to settle
the obligation and the amount has been reliably estimated.
Share capital
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of new shares or options are
shown in equity as a deduction, net of tax, from the proceeds.
Where any Group company purchases the Company's equity share
capital (treasury shares), the consideration paid, including any
directly attributable incremental costs (net of income taxes) is
deducted from equity attributable to the Company's equity holders
until the shares are cancelled or reissued. Where such shares are
subsequently reissued, any consideration received, net of any
directly attributable incremental transaction costs and the related
income tax effects, is included in equity attributable to the
Company's equity holders.
Dividend distribution
Dividend distribution to the Company's shareholders is
recognised as a liability in the Group's financial statements in
the period in which the dividends are approved by the Company's
shareholders. Interim dividends are recognised when paid.
Critical judgement and key sources of estimation uncertainty
In the view of the Directors, apart from those involving
estimations (which are presented separately below), no critical
judgements have been made in the process of applying the Group's
accounting policies which have a significant effect on the amounts
recognised in financial statements.
Estimates are continually evaluated and are based on historical
experience and other factors, including expectations of future
events that are believed to be reasonable under the
circumstances.
The Group makes estimates and assumptions concerning the future.
The resulting accounting will, by definition, seldom equal the
actual results. The estimates and assumptions that have a risk of
causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year are set out below.
(i) Impairment of assets
The Group has significant investments in intangible assets,
property, plant and equipment, investment properties, biological
assets, associated companies, financial assets and other
investments. These assets are tested for impairment when
circumstances indicate there may be a potential impairment. Factors
considered which could trigger an impairment review include a
significant fall in market values, significant underperformance
relative to historical or projected future operating results, a
major change in market conditions or negative cash flows.
The sensitivity of carrying amounts of biological and financial
assets is diclosed in notes 18 and 42 respectively.
(ii) Depreciation and amortisation
Depreciation and amortisation is based on management's estimates
of the future useful life of bearer plants, property, plant and
equipment and intangible assets. Estimates may change due to
climate change, technological developments, competition, changes in
market conditions and other factors and may result in changes in
the estimated useful life and in the depreciation and amortisation
charges.
(iii) Biological assets
Biological assets are carried at fair value less estimated
point-of-sale costs. Where meaningful market-determined prices do
not exist to assess the fair value of biological assets, the fair
value has been determined based on the net present value of
expected future cash flows from those assets, discounted at
appropriate pre-tax rates. In determining the fair value of
biological assets where the discounting of expected future cash
flows has been used, the Directors have made certain assumptions
about expected life-span of the plantings, yields, selling prices,
costs and discount rates. Details of assumptions made and
sensitivity analysis are given in note 18.
(iv) Retirement benefit obligations
Pension accounting requires certain assumptions to be made in
order to value obligations and to determine the impact on the
Income Statement. These figures are particularly sensitive to
assumptions for discount rates, mortality, inflation rates and
expected long-term rates of return on assets. Details of
assumptions made and sensitivity analysis are given in note 35.
(v) Taxation
Income tax liabilities include a number of provisions based on
management's interpretation of country specific tax law and the
likelihood of settlement. This can involve a significant amount of
judgement as tax legislation can be complex and open to different
interpretation. Management uses professional firms and previous
experience when assessing tax risks. Where actual tax liabilities
differ from the provisions, adjustments are made which can have a
material impact on the Group's profits for the year. It is not
practicable to quantify the range of outcomes with the application
of sensitivity analyses. Unprovided contingent tax liabilities are
disclosed in note 41.
Changes in accounting policy and disclosures
(i) New and amended standards adopted by the Group
The Group has adopted the following new and amended IFRSs as of
1 January 2018:
The adoption of IFRS 9 and IFRS 15 has not had a material impact
on the financial statements of the Group. The impact of the
adoption of IFRS 9 Financial Instruments on the Group's financial
statements is set out below. There was no impact on the Group's
financial statements following the adoption of IFRS 15 Revenue from
contracts with customers.
IFRS 9 Financial Instruments
IFRS 9 was adopted without restating comparative information and
its adoption has reclassified the Group's financial assets. At the
date of initial application of IFRS 9, the Group has elected to
apply the fair value through other comprehensive income option for
all of its non-controlling equity interests that were previously
classified as Available for sale financial assets ("AFS") under IAS
39. This election results in all gains and losses being presented
in Other comprehensive income except dividend income which is
recognised in profit or loss. This differs from the treatment of
AFS instruments under IAS 39 where gains and losses recognised in
Other comprehensive income are reclassified to profit and loss on
derecognition or impairment. The Group's money market funds have
been reclassified as financial assets at fair value through profit
or loss and the Group's infrastructure bonds and debentures have
been reclassified as financial assets at amortised cost. The
following table shows the adjustments recognised for each
individual line item. Line items that were not affected by the
changes have not been included.
Balance sheet (extract)
Reclassified
31 December 2017 IFRS 9 1 January 2018
GBP'm GBP'm GBP'm
Non-current assets
Available-for-sale financial assets 47.0 (47.0) -
Financial assets at fair value through other
comprehensive income - 41.2 41.2
Financial asset at fair value through profit or loss - 2.5 2.5
Financial assets at amortised cost - 3.3 3.3
---------------- ------ --------------
47.0 - 47.0
---------------- ------ --------------
IFRS 15 Revenue from contracts with customers
The IASB has issued a new standard for the recognition of
revenue. This replaces IAS 18 which covers contracts for goods and
services and IAS 11 which covers construction contracts.
The standard is based on the principle that revenue is
recognised when control of a good or service transfers to a
customer - so the notion of control replaces the existing notion of
risks and rewards.
A new five-step process is applied when recognising revenue:
-- identify contracts with customers
-- identify the separate performance obligation
-- determine the transaction price of the contract
-- allocate the transaction price to each of the separate
performance obligations, and
-- recognise the revenue
The adoption of IFRS 15 has not had a material impact on the
financial statements of the Group.
IAS 40 (amendments) Transfers of investment property
The Group has adopted the amendments to IAS 40 Investment
Property for the first time in the current year. The amendments
clarify that a transfer to, or from, investment property
necessitates an assessment of whether a property meets, or has
ceased to meet, the definition of investment property, supported by
observable evidence that a change in use has occurred. The
amendments further clarify that the situations listed in IAS 40 are
not exhaustive and that a change in use is possible for properties
under construction (i.e. a change in use is not limited to
completed properties).
(ii) Standards, amendments and interpretations to existing standards
that are not yet effective and have not been adopted early
by the Group
Certain new accounting standards and interpretations have been
published that are not mandatory for 31 December 2018 reporting
periods and have not been early adopted by the Group. The Group's
assessment of the impact of these new standards and interpretations
is set out below.
IFRS 16 Leases
IFRS 16 was issued in January 2016 and will be effective from 1
January 2019. It will result in almost all leases being recognised
on the balance sheet by lessees, as the distinction between
operating and finance leases is removed. Under the new standard, an
asset (the right to use the leased item) and a financial liability
to pay rentals are recognised. The only exceptions are short-term
and low-value leases.
The Group has reviewed all of the Group's leasing arrangements
in light of the new lease accounting rules in IFRS 16. The standard
will affect primarily the accounting for the Group's operating
leases. Of the Group's non-cancellable operating lease commitments,
approximately GBP0.1 million relate to short-term leases and less
than GBP0.1 million to low value leases which will both be
recognised on a straight-line basis as expense in profit or loss.
For the remaining lease commitments the Group expects to recognise
right-of-use assets and liabilities of approximately GBP10.0
million on 1 January 2019.
The Group expects that profit before tax from continuing
operations will decrease by approximately GBP0.2 million for 2019
as a result of adopting the new rules. Trading Profit used to
measure segment results is expected to increase by approximately
GBP0.4 million, as the operating lease payments were included in
Trading Profit, but the interest on the lease liability is excluded
from this measure.
Operating cash flows will increase and financing cash flows
decrease by approximately GBP1.2 million as repayment of the
principal portion of the lease liabilities will be classified as
cash flows from financing activities.
The Group's activities as a lessor are not material and hence
the Group does not expect any significant impact on the financial
statements. However, some additional disclosures may be required
from next year.
The Group intends to apply the simplified transition approach
and will not restate comparative amounts for the year prior to
first adoption. Right-of-use assets will be measured at the amount
of the lease liability on adoption (adjusted for any prepaid or
accrued lease expenses).
Amendments to IAS 19 Employee Benefits Plan Amendment,
Curtailment or Settlement
The amendments clarify that the past service cost (or the gain
or loss on settlement) is calculated by measuring the defined
benefit liability (asset) using updated assumptions and comparing
benefits offered and plan assets before and after the plan
amendment (or curtailment or settlement) but ignoring the effect of
the asset ceiling (that may arise when the defined benefit plan is
in a surplus position). IAS 19 is now clear that the change in the
effect of the asset ceiling that may result from the plan amendment
(or curtailment or settlement) is determined in a second step and
is recognised in the normal manner in other comprehensive
income.
The paragraphs that relate to measuring the current service cost
and the net interest on the net defined benefit liability (asset)
have also been amended. An entity will now be required to use the
updated assumptions from this remeasurement to determine current
service cost and net interest for the remainder of the reporting
period after the change to the plan. In the case of the net
interest, the amendments make it clear that for the period post
plan amendment, the net interest is calculated by multiplying the
net defined benefit liability (asset) as remeasured under IAS 19 by
the discount rate used in the remeasurement (also taking into
account the effect of contributions and benefit payments on the net
defined benefit liability (asset)).
The amendments are applied prospectively. They apply only to
plan amendments, curtailments or settlements that occur on or after
the beginning of the annual period in which the amendments to IAS
19 are first applied.
The amendments to IAS 19 must be applied to annual periods
beginning on or after 1 January 2019, but they can be applied
earlier if an entity elects to do so.
The Group does not expect that the application of these
amendments in the future will have a material impact on the
consolidated financial statements.
Amendments to IAS 28 Long-term Interests in Associates and Joint
Ventures
The amendment clarifies that IFRS 9, including its impairment
requirements, applies to long-term interests. Furthermore, in
applying IFRS 9 to long-term interests, an entity does not take
into account adjustments to their carrying amount required by IAS
28 (i.e. adjustments to the carrying amount of long-term interests
arising from the allocation of losses of the investee or assessment
of impairment in accordance with IAS 28).
The amendments apply retrospectively to annual reporting periods
beginning on or after 1 January 2019.
Earlier application is permitted. Specific transition provisions
apply depending on whether the first-time application of the
amendments coincides with that of IFRS 9.
The Group does not expect that the application of these
amendments in the future will have a material impact on the
consolidated financial statements.
IFRIC 23 Uncertainty over Income Tax Treatments
IFRIC 23 sets out how to determine the accounting tax position
when there is uncertainty over income tax treatments. The
Interpretation requires an entity to:
-- determine whether uncertain tax positions are assessed separately
or as a group; and
-- assess whether it is probable that a tax authority will accept
an uncertain tax treatment used, or proposed to be used,
by an entity in its income tax filings:
- If yes, the entity should determine its accounting tax
position consistently with the tax treatment used or
planned to be used in its income tax filings.
- If no, the entity should reflect the effect of uncertainty
in determining its accounting tax position. The Interpretation
is effective for annual periods beginning on or after
1 January 2019. Entities can apply the Interpretation
with either full retrospective application or modified
retrospective application without restatement of comparatives
retrospectively or prospectively.
The Group does not expect that the application of IFRIC 23 will
have a material impact on the consolidated financial
statements.
Annual Improvements to IFRS Standards 2015-2017 Cycle
Amendments to IFRS 3 Business Combinations, IFRS 11 Joint
Arrangements, IAS 12 Income Taxes and IAS 23 Borrowing Costs
The Annual Improvements includes amendments to:
(i) IAS 12 Income Taxes
The amendments clarify that an entity should recognise the
income tax consequences of dividends in profit or loss, other
comprehensive income or equity according to where the entity
originally recognised the transactions that generated the
distributable profits. This is the case irrespective of whether
different tax rates apply to distributed and undistributed
profits.
(ii) IAS 23 Borrowing Costs
The amendments clarify that if any specific borrowing remains
outstanding after the related asset is ready for its intended use
or sale, that borrowing becomes part of the funds that an entity
borrows generally when calculating the capitalisation rate on
general borrowings.
Notes to the accounts
1 Business and geographical segments
The principal activities of the Group are as follows:
Agriculture
Engineering
Food Service
For management reporting purposes these activities form the
basis on which the Group reports its primary divisions.
Segment information about these businesses is presented
below:
Other
Agriculture Engineering Food Service operations Consolidated
2018 2017 2018 2017 2018 2017 2018 2017 2018 2017
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
Restated
Revenue
External sales 245.3 239.4 22.2 20.5 41.5 37.8 0.8 0.6 309.8 298.3
----- ----- ----- ----- ----- ----- ----- ------- ------
Segment
trading
profit/(loss) 51.0 35.6 (0.6) (2.6) 1.6 1.8 0.1 - 52.1 34.8
----- ----- ----- ----- ----- ----- ----- -------
Unallocated
corporate
expenses (9.8) (8.4)
Trading profit 42.3 26.4
Share of
associates'
results 7.6 2.0
Provisions and
impairment of
property,
plant and
equipment (0.2) (1.8)
Loss on
disposal of
subsidiaries (0.4) -
Profit on
disposal of
financial
assets 0.3 0.7
Investment
income 0.8 0.6
Net finance
income/(cost) 2.1 (0.3)
------ --------
Profit before
tax from
continuing
operations 52.5 27.6
Taxation (20.0) (12.2)
------ --------
Profit after
tax from
continuing
operations 32.5 15.4
------ --------
Other
information
Segment assets 378.9 344.2 14.1 18.1 31.3 26.2 19.6 20.0 443.9 408.5
Investments in
associates 65.7 55.4
Unallocated
assets 100.8 112.6
Consolidated
total assets 610.4 576.5
------ --------
Segment
liabilities (61.5) (56.6) (6.0) (7.9) (6.2) (6.5) - - (73.7) (71.0)
Unallocated
liabilities (84.4) (87.6)
Consolidated
total
liabilities (158.1) (158.6)
------ --------
Capital
expenditure 16.4 17.2 0.4 0.3 3.2 2.3 1.4 1.0 21.4 20.8
Depreciation (11.8) (11.4) (1.4) (1.8) (1.9) (1.7) (0.2) (0.3) (15.3) (15.2)
Amortisation - - - - (0.4) (0.3) - - (0.4) (0.3)
Impairments - - - (0.9) - - - (0.2) - (1.1)
Segment assets consist primarily of intangible assets, property,
plant and equipment, investment properties, biological assets,
prepaid operating leases, inventories, trade and other receivables
and cash and cash equivalents. Receivables for tax have been
excluded. Investments in associates, valued using the equity
method, have been shown separately in the segment information.
Segment liabilities are primarily those relating to the operating
activities and generally exclude liabilities for taxes, short-term
loans, finance leases and non-current liabilities.
Geographical segments
The Group operations are based in nine main geographical areas.
The United Kingdom is the home country of the parent. The principal
geographical areas in which the Group operates are as follows:
United Kingdom
Continental Europe
Bangladesh
India
Kenya
Malawi
North America and Bermuda
South Africa
South America
The Group derives revenue from the transfer of goods and
services over time and at a point in time in the following major
geographical regions:
At a point in time Over time Total
2018 2017 2018 2017 2018 2017
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
United Kingdom 58.7 53.4 0.7 0.5 59.4 53.9
Continental Europe 36.0 34.1 - - 36.0 34.1
Bangladesh 31.7 28.1 - - 31.7 28.1
India 79.2 85.6 - - 79.2 85.6
Kenya 40.7 42.3 - - 40.7 42.3
Malawi 14.0 10.9 0.1 0.1 14.1 11.0
North America and Bermuda 11.8 9.9 - - 11.8 9.9
South Africa 2.2 2.9 - - 2.2 2.9
South America 6.1 6.5 - - 6.1 6.5
Other 28.6 24.0 - - 28.6 24.0
------------ ----------- ------- ------- ----- -----
309.0 297.7 0.8 0.6 309.8 298.3
------------ ----------- ------- ------- ----- -----
The following is an analysis of the carrying amount of segment
assets and additions to property, plant and equipment and
investment properties, analysed by the geographical area in which
the assets are located:
Carrying amount of Additions to property, Additions to
segment assets plant and equipment investment properties
2018 2017 2018 2017 2018 2017
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
United Kingdom 60.9 58.0 4.0 3.2 0.9 0.2
Continental Europe 1.4 6.3 0.1 0.1 - -
Bangladesh 72.0 63.1 2.5 2.5 - -
India 101.4 103.4 4.0 5.2 - -
Kenya 107.0 89.8 5.3 4.0 - -
Malawi 58.6 51.4 2.0 2.9 - -
North America and Bermuda 13.3 12.2 - 0.2 - -
South Africa 16.4 13.4 2.3 2.0 - -
South America 11.6 10.9 0.3 0.5 - -
--------- --------- ----------- ----------- ----------- -----------
442.6 408.5 20.5 20.6 0.9 0.2
--------- --------- ----------- ----------- ----------- -----------
2 Revenue
An analysis of the Group's revenue is as follows:
2018 2017
GBP'm GBP'm
Sale of goods 248.5 238.8
Distribution and warehousing revenue 38.2 37.8
Engineering services revenue 22.2 20.5
Agency commission revenue 0.1 0.6
Property rental revenue 0.8 0.6
----- -----
Total Group revenue 309.8 298.3
Other operating income 4.0 2.4
Investment income 0.8 0.6
Interest income 4.0 3.0
----- -----
Total Group income 318.6 304.3
----- -----
Disaggregation of revenue from contracts with customers:
At a point in time Over time
2018 2017 2018 2017
GBP'm GBP'm GBP'm GBP'm
Sale of goods 248.5 238.8 - -
Distribution and warehousing revenue 38.2 37.8 - -
Engineering services revenue 22.2 20.5 - -
Agency commission revenue 0.1 0.6 - -
Property rental revenue - - 0.8 0.6
--------- --------- ----- -----
Total Group revenue 309.0 297.7 0.8 0.6
--------- --------- ----- -----
3 Trading profit
2018 2017
GBP'm GBP'm
The following items have been included in arriving at trading profit:
Employment costs (note 13) 98.5 101.5
Inventories:
Cost of inventories recognised as an expense (included in cost of sales) 162.1 162.8
Cost of inventories provision recognised as an expense
(included in cost of sales) - 0.1
Fair value gain included in Made Tea 0.2 1.2
Depreciation of property, plant and equipment:
Owned assets 15.1 15.0
Under finance leases 0.1 0.1
Amortisation of intangibles (included in administrative expenses) 0.4 0.3
Gain from change in fair value of non-current biological assets 1.5 1.1
Impairment of available-for-sale financial assets
(included in administrative expenses) - 0.2
Profit on disposal of property, plant and equipment 0.1 0.1
Operating leases - lease payments:
Plant and machinery 0.1 0.3
Property 0.7 0.6
Repairs and maintenance expenditure on property, plant and equipment 5.6 5.5
------ -----
Currency exchange (gains)/losses (credited)/charged to income include:
Revenue (0.1) -
Cost of sales (0.1) -
Administrative expenses (0.2) (0.2)
Finance income (0.2) 0.1
------ -----
(0.6) (0.1)
------ -----
During the year the Group (including its overseas subsidiaries) obtained the following services
from the Company's auditor and its associates:
Audit services:
Statutory audit:
Parent company and consolidated financial statements 0.2 0.2
Subsidiary companies 0.5 0.5
------ -----
0.7 0.7
Audit - related regulatory reporting 0.1 0.1
Other services not covered above - 0.2
------ -----
0.8 1.0
------ -----
4 Underlying profit
The Group seeks to present an indication of the underlying
performance which is not impacted by exceptional items or items
considered non-operational in nature. This measure of profit is
described as 'underlying' and is used by management to measure and
monitor performance.
The following items have been excluded from the underlying
measure and have been separately disclosed:
-- A GBP5.4 million gain from the release of provisions
for wage increases relating to prior years in our Agriculture
operations following progress on negotiations.
-- The release of a GBP9.0 million provision in Bangladesh
for post-employment benefit obligations from which the
tea industry has been exempted.
5 Share of associates' results
The Group's share of the results of associates is analysed
below:
2018 2017
GBP'm GBP'm
Profit before tax 8.4 2.0
Taxation (0.8) -
----- -----
Profit after tax 7.6 2.0
----- -----
6 Loss on disposal of subsidiaries
During 2018, the Group disposed of its interests in GU Cutting
and Grinding Limited, British Metal Treatments Limited, XiMo AG and
A sh BV. No material loss was recognised in relation to any of
these disposals and the total combined loss was GBP0.4 million.
Proceeds received in relation to these disposals amounted to GBP3.8
million. Further details of the disposals are included in note
39.
7 Finance income and costs
2018 2017
GBP'm GBP'm
Interest payable on loans and bank overdrafts (0.6) (0.5)
----- -----
Finance costs (0.6) (0.5)
Finance income - interest income on short-term bank deposits 4.0 3.0
Net exchange gain/(loss) on foreign cash balances 0.2 (0.1)
Employee benefit expense (note 35) (1.5) (2.7)
----- -----
Net finance income/(cost) 2.1 (0.3)
----- -----
8 Taxation
Analysis of charge in the year 2018 2017
GBP'm GBP'm GBP'm
Restated
Current tax
UK corporation tax
UK corporation tax at 19.00 per cent. (2017: 19.25 per cent.) 2.8 1.8
Double tax relief (2.8) (1.8)
-------- --------
- -
Foreign tax
Corporation tax 14.0 14.0
Adjustment in respect of prior years 0.1 0.3
-------- --------
14.1 14.3
------- --------
Total current tax 14.1 14.3
Deferred tax
Origination and reversal of timing differences
United Kingdom 1.5 (1.6)
Overseas 4.4 (0.5)
-------- --------
5.9 (2.1)
------- --------
Tax on profit on ordinary activities 20.0 12.2
------- --------
Factors affecting tax charge for the year
Profit on ordinary activities before tax 52.3 42.4
Share of associated undertakings profit (7.6) (2.0)
------- --------
Group profit on ordinary activities before tax 44.7 40.4
------- --------
Tax on ordinary activities at the standard rate of corporation tax
in the UK of 19.00 per cent. (2017: 19.25 per cent.) 8.5 7.8
Effects of:
Adjustment to tax in respect of prior years 0.1 0.3
Expenses not deductible for tax purposes 1.3 2.6
Adjustment in respect of foreign tax rates 7.2 4.6
Additional tax arising on dividends from overseas companies 0.7 1.1
Other income not charged to tax (1.0) (2.2)
Profit on disposal of discontinued operation not charged to tax - (3.9)
Increase in tax losses carried forward 2.8 0.3
Movement in other timing differences 0.4 1.6
------- --------
Total tax charge for the year 20.0 12.2
------- --------
The deferred tax charge for 2017 has been restated to reflect
the movement in capital losses arising from the recognition of
capital gains through other comprehensive income against which
these losses can be o set, amounting to a credit of GBP1.6
million.
9 Discontinued operation
The loss of GBP0.2 million (2017: GBP14.8 million profit)
relates to the banking and financial services businesses operated
by Duncan Lawrie. For further information about the discontinued
operation please refer to note 10 in the Group's annual financial
statements for the year ended 31 December 2017.
10 Profit for the year
2018 2017
GBP'm GBP'm
The profit of the Company was: 3.9 3.9
----- -----
The Company has taken advantage of the exemption under Section
408 of the Companies Act 2006 not to disclose its income
statement.
11 Equity dividends
2018 2017
GBP'm GBP'm
Amounts recognised as distributions to equity holders in the period:
Final dividend for the year ended 31 December 2017 of 98p
(2016: 95p) per share 2.7 2.6
Interim dividend for the year ended 31 December 2018 of 40p
(2017: 37p) per share 1.1 1.0
3.8 3.6
----- -----
Dividends amounting to GBP0.1 million (2017: GBP0.1 million)
have not been included as group companies hold 62,500 issued shares
in the Company. These are classified as treasury shares.
Proposed final dividend for the year ended 31 December 2018 of 102p
(2017: 98p) per share 2.9 2.8
--- ---
The proposed final dividend is subject to approval by the
shareholders at the AGM and has not been included as a liability in
these financial statements.
12 Earnings/(loss) per share (EPS)
2018 2017
Weighted Weighted
average average
Earnings/ number of number of
(loss) shares EPS Earnings shares EPS
GBP'm Number Pence GBP'm Number Pence
Attributable to ordinary shareholders 25.2 2,762,000 912.4 23.8 2,762,000 861.7
--------- --------- ----- -------- --------- -----
Attributable to ordinary shareholders
- continuing operations 25.4 2,762,000 919.6 9.0 2,762,000 325.9
--------- --------- ----- -------- --------- -----
Attributable to ordinary shareholders
- discontinued operation (0.2) 2,762,000 (7.2) 14.8 2,762,000 535.8
--------- --------- ----- -------- --------- -----
Basic and diluted earnings per share are calculated by dividing
the earnings attributable to ordinary shareholders by the weighted
average number of ordinary shares in issue during the period,
excluding those held by the Group as treasury shares (note 36).
13 Employees
2018 2017
Number Number
Average number of employees by activity:
Agriculture 77,182 79,665
Engineering 225 250
Food Service 357 334
Central Management 28 26
------ ------
77,792 80,275
------ ------
2018 2017
GBP'm GBP'm
Employment costs:
Wages and salaries 96.2 91.3
Social security costs 2.7 2.5
Employee benefit obligations (see note 35) - UK 2.3 1.4
- Overseas 6.3 6.3
- Overseas curtailment gain (9.0) -
------ ------
98.5 101.5
------ ------
Total remuneration paid to key employees who are members of the
Executive Committees, excluding Directors of Camellia Plc, amounted
to GBP2.9 million (2017: GBP2.1 million).
14 Emoluments of the directors
2018 2017
GBP'm GBP'm
Aggregate emoluments excluding pension contributions 2.0 1.9
----- -----
Emoluments of the highest paid director excluding pension
contributions were GBP0.6 million
(2017: GBP0.6 million).
Further details of directors' emoluments are set out on pages 33
to 34.
15 Intangible assets
Computer
Brands software Total
Group GBP'm GBP'm GBP'm
Cost
At 1 January 2017 - 2.4 2.4
Exchange differences (0.1) - (0.1)
Additions 2.4 0.1 2.5
Disposals - (0.1) (0.1)
------ -------- -----
At 1 January 2018 2.3 2.4 4.7
Additions - 0.1 0.1
Disposals - (0.3) (0.3)
Subsidiary joining the group 6.6 - 6.6
------ -------- -----
At 31 December 2018 8.9 2.2 11.1
------ -------- -----
Amortisation
At 1 January 2017 - 1.3 1.3
Charge for the year - 0.3 0.3
Disposals - (0.1) (0.1)
------ -------- -----
At 1 January 2018 - 1.5 1.5
Charge for the year - 0.4 0.4
Disposals - (0.3) (0.3)
------ -------- -----
At 31 December 2018 - 1.6 1.6
------ -------- -----
Net book value at 31 December 2018 8.9 0.6 9.5
------ -------- -----
Net book value at 31 December 2017 2.3 0.9 3.2
------ -------- -----
Impairment testing
Timing of impairment testing
The Group's impairment test in respect of brands allocated to
each component of the cash-generating unit ('CGU') is performed as
at 31 December each year. In line with the accounting policy,
impairment testing is also performed whenever there is an
indication that the assets may be impaired. There was no indication
of impairment in the year to 31 December 2018. For the purpose of
this impairment testing, the Group's CGU components represent the
brands owned by Jing Tea Limited and Goodricke Group Limited.
16 Property, plant and equipment
Fixtures,
Bearer Land and Plant and fittings and
plants buildings machinery equipment Total
Group GBP'm GBP'm GBP'm GBP'm GBP'm
Deemed cost
At 1 January 2017 141.8 95.7 119.7 17.1 374.3
Exchange differences (12.7) (4.0) (4.9) (0.7) (22.3)
Additions 5.8 5.3 8.5 1.0 20.6
Disposals (1.3) (0.2) (2.5) (0.3) (4.3)
Transfer between categories - 10.7 (10.7) - -
Reclassification to investment properties - (2.3) - - (2.3)
Reclassification to assets held for sale - (3.1) (3.9) - (7.0)
------ --------- --------- ------------ -----
At 1 January 2018 133.6 102.1 106.2 17.1 359.0
Exchange differences 4.9 1.0 0.4 0.3 6.6
Additions 4.0 6.3 8.5 1.7 20.5
Disposals (0.4) (0.4) (1.8) (0.8) (3.4)
Subsidiaries joining the group - 0.4 0.1 - 0.5
Subsidiaries leaving the group - (1.8) (0.8) (0.6) (3.2)
Reclassification from investment properties - 0.2 - - 0.2
------ --------- --------- ------------ -----
At 31 December 2018 142.1 107.8 112.6 17.7 380.2
------ --------- --------- ------------ -----
Depreciation
At 1 January 2017 12.4 43.6 77.8 8.3 142.1
Exchange differences (1.3) (1.4) (2.7) (0.6) (6.0)
Charge for the year 6.0 1.5 6.6 1.0 15.1
Disposals (0.3) (0.1) (2.4) (0.3) (3.1)
Transfer between categories - 9.2 (9.2) - (0.0)
Impairment provision - 0.1 0.2 - 0.3
Reclassification to investment properties - (1.1) - - (1.1)
Reclassification to assets held for sale - (0.9) (3.7) - (4.6)
------ --------- --------- ------------ -----
At 1 January 2018 16.8 50.9 66.6 8.4 142.7
Exchange differences 0.8 0.3 0.2 0.2 1.5
Charge for the year 5.6 2.3 6.3 1.0 15.2
Disposals (0.2) (0.3) (1.6) (0.8) (2.9)
Subsidiaries leaving the group - (1.5) (0.6) (0.5) (2.6)
------ --------- --------- ------------ -----
At 31 December 2018 23.0 51.7 70.9 8.3 153.9
------ --------- --------- ------------ -----
Net book value at 31 December 2018 119.1 56.1 41.7 9.4 226.3
------ --------- --------- ------------ -----
Net book value at 31 December 2017 116.8 51.2 39.6 8.7 216.3
------ --------- --------- ------------ -----
Land and buildings at net book value comprise:
2018 2017
GBP'm GBP'm
Freehold 28.3 26.6
Long leasehold 27.5 24.3
Short leasehold 0.3 0.3
----- -----
56.1 51.2
----- -----
The amount of expenditure for property, plant and equipment in
the course of construction (including immature bearer plants)
amounted to GBP4.2 million (2017: GBP3.3 million).
17 Investment properties
GBP'm
Group
Cost
At 1 January 2017 17.7
Additions 0.2
Transfers from property, plant and equipment 2.3
Reclassification to assets held for sale (0.7)
-----
At 1 January 2018 19.5
Additions 0.9
Reclassification to property, plant and equipment (0.2)
Reclassification to assets held for sale (0.4)
-----
At 31 December 2018 19.8
-----
Depreciation
At 1 January 2017 0.7
Transfers from property, plant and equipment 1.1
Charge for the year 0.1
-----
At 1 January 2018 1.9
Reclassification to assets held for sale (0.2)
Charge for the year 0.1
-----
At 31 December 2018 1.8
-----
Net book value at 31 December 2018 18.0
-----
Net book value at 31 December 2017 17.6
-----
Included in revenue is GBP0.8 million (2017: GBP0.6 million) of
rental income generated from investment properties. Direct
operating expenses arising on the investment property, the majority
of which generated rental income in the period, amounted to GBP0.1
million (2017: GBP0.2 million).
At the end of the year the fair value of Investment properties
was GBP23.7 million (2017: GBP23.4 million). Investment properties
were valued by the Directors (fair value hierarchy Level 2).
18 Biological assets
Non-current: Forestry Livestock Total
GBP'm GBP'm GBP'm
Group
At 1 January 2017 12.9 1.0 13.9
Exchange differences (1.2) (0.1) (1.3)
Additions 0.2 - 0.2
Gains arising from changes in fair value less estimated point-of-sale costs 0.8 0.3 1.1
Decreases due to harvesting (0.8) (0.3) (1.1)
-------- --------- -----
At 1 January 2018 11.9 0.9 12.8
Exchange differences 0.7 0.1 0.8
Additions 0.3 0.1 0.4
Gains arising from changes in fair value less estimated point-of-sale costs 1.2 0.3 1.5
Decreases due to harvesting (0.6) (0.4) (1.0)
-------- --------- -----
At 31 December 2018 13.5 1.0 14.5
-------- --------- -----
Current: 2018 2017
GBP'm GBP'm
Group
Tea 0.3 0.2
Edible nuts 2.8 1.9
Citrus 1.6 1.0
Soya 3.0 2.3
Avocado 1.0 1.1
Other 0.1 0.1
----- -----
8.8 6.6
----- -----
Biological assets are carried at fair value. Where meaningful
market-determined prices do not exist to assess the fair value of
biological assets, the fair value has been determined based on the
net present value of expected future cash flows from those assets,
discounted at appropriate pre-tax rates. In determining the fair
value of biological assets where the discounting of expected future
cash flows has been used, the Directors have made certain
assumptions about the expected life-span of the plantings, yields,
selling prices and costs. There are no individually significant
unobservable inputs. The fair value of livestock is based on market
prices of livestock of similar age and sex.
New planting additions represent new areas planted to the
particular crop at cost.
As at 31 December 2018 the area planted to Forestry amounted to
5,982 Hectares (2017: 5,866) from which 156,112 cubic metres (2017:
196,121) were harvested during the year.
Livestock numbers were 4,436 head (2017: 4,502) at 31 December
2018.
Fair value measurement
All of the biological assets fall under level 3 of the hierarchy
defined in IFRS 13.
The basis upon which the valuations are determined is set out in
accounting policies on page 44.
Valuations by external professional valuers and those derived
from discounted cash flows both make assumptions based on
unobservable inputs of: yields, an increase in which will raise the
value; costs, an increase in which will decrease the value; market
prices, an increase in which will raise the value; life span of the
plantings, an increase in which will raise the value; discount
rates, an increase in which will decrease the value. These
assumptions vary significantly across different countries, crops
and varieties. In preparing these valuations a long term view is
taken on the yields and prices achievable.
The fair value of biological assets is sensitive to these
assumptions, the more significant of which are as follows:
Non-current:
- Forestry - a 10% movement in the market price for trees
or volume of trees assumed would result in a GBP1.4 million
(2017: GBP1.2 million) increase/decrease in the fair
value of forestry.
Current:
- Macadamia - a 10% increase/decrease in the volumes assumed
would result in a GBP0.6 million (2017: GBP0.2 million)
increase/decrease in the fair value of macadamia growing
crop. A 10% increase/decrease in selling price assumed
for macadamia would result in a GBP0.8 million (2017:
GBP1.0 million) increase/decrease in the fair value.
- Avocados - a 10% increase/decrease in the volume or the
price assumed would result in a GBP0.1 million (2017:
GBP0.1 million) increase/decrease in the fair value of
Hass avocados growing crop.
- Soya - a 10% increase/decrease in the volume or the price
assumed would result in a GBP0.3 million (2017: GBP0.2
million) increase/decrease in the fair value of soya
growing crop.
Financial risk management strategies
The Group is exposed to financial risks arising from changes in
the prices of the agricultural products it produces. There are no
futures markets available for the majority of crops grown by the
Group. The Group's exposure to this risk is mitigated by the
geographical spread of its operations, selective forward selling in
certain instances when considered appropriate, and regular reviews
of available market data on sales and production. The Group
monitors closely the returns it achieves from its crops and
considers replacing its biological assets when yields decline with
age or markets change.
Further financial risk arises from changes in market prices of
key cost components. Such costs are closely monitored.
19 Prepaid operating leases
GBP'm
Group
Cost
At 1 January 2017 1.0
Exchange differences (0.1)
-----
At 1 January 2018 0.9
Exchange differences 0.1
-----
At 31 December 2018 1.0
-----
Net book value at 31 December 2018 1.0
-----
Net book value at 31 December 2017 0.9
-----
20 Investments in subsidiaries
2018 2017
GBP'm GBP'm
Company
Cost
At 1 January and 31 December 73.5 73.5
----- -----
21 Investments in associates
2018 2017
GBP'm GBP'm
Group
At 1 January 81.7 89.8
Exchange differences 5.1 (8.4)
Share of profit (note 5) 7.6 2.0
Dividends (2.8) (2.8)
Additions 1.0 1.0
Other equity movements 1.0 0.1
----- -----
At 31 December 93.6 81.7
----- -----
Provision for diminution in value
At 1 January 26.3 28.8
Exchange differences 1.6 (2.5)
----- -----
At 31 December 27.9 26.3
----- -----
Net book value at 31 December 65.7 55.4
----- -----
Details of the Group's associates are shown in note 43.
The Group's share of the results of its principal associates and
its share of the assets (including goodwill) and liabilities are as
follows:
Country of Interest Market
incorporation Assets Liabilities Revenues Profit held value
GBP'm GBP'm GBP'm GBP'm % GBP'm
2018
Listed
BF&M Bermuda 589.5 (508.8) 64.5 6.5 37.2 41.8
United Finance Limited Bangladesh 85.7 (75.3) 3.5 0.9 38.4 12.0
United Insurance
Company Limited Bangladesh 3.4 (0.9) 0.3 0.2 37.0 3.6
------ ----------- -------- ------ ------
678.6 (585.0) 68.3 7.6 57.4
------ ----------- -------- ------ ------
2017
Listed
BF&M Bermuda 702.4 (632.4) 69.9 0.9 36.3 40.9
United Finance Limited Bangladesh 81.0 (71.5) 3.1 0.9 38.4 13.8
United Insurance
Company Limited Bangladesh 3.0 (0.8) 0.3 0.2 37.0 4.1
------ ----------- -------- ------ ------
786.4 (704.7) 73.3 2.0 58.8
------ ----------- -------- ------ ------
22 Financial assets at fair value through other comprehensive
income
Group Company
2018 2017 2018 2017
GBP'm GBP'm GBP'm GBP'm
Cost or fair value
At 31 December - - - -
Adjustment upon application of IFRS 9 43.6 - 0.2 -
------- ------ ------- -------
At 1 January 43.6 - 0.2 -
Exchange differences 2.1 - - -
Fair value adjustment (5.6) - - -
Disposals (1.1) - - -
Fair value adjustment for disposal (3.8) - - -
------- ------ ------- -------
At 31 December 35.2 - 0.2 -
------- ------ ------- -------
Provision for diminution in value
At 31 December - - - -
Adjustment upon application of IFRS 9 2.4 - 0.2 -
------- ------ ------- -------
At 1 January 2.4 - 0.2 -
Exchange differences 0.1 - - -
------- ------ ------- -------
At 31 December 2.5 - 0.2 -
------- ------ ------- -------
Net book value at 31 December 32.7 - - -
------- ------ ------- -------
Financial assets at fair value through other comprehensive
income include the following:
Group
2018 2017
GBP'm GBP'm
Listed securities:
Equity securities - Bermuda 2.6 -
Equity securities - Japan 17.1 -
Equity securities - Switzerland 8.1 -
Equity securities - US 3.6 -
Equity securities - India 0.6 -
Equity securities - Europe 0.4 -
Equity securities - Other 0.3 -
----- -----
32.7 -
----- -----
Financial assets at fair value through other comprehensive
income are denominated in the following currencies:
Group
2018 2017
GBP'm GBP'm
US Dollar 3.6 -
Euro 0.4 -
Swiss Franc 8.1 -
Indian Rupee 0.6 -
Bermudian Dollar 2.6 -
Japanese Yen 17.1 -
Other 0.3 -
----- -----
32.7 -
----- -----
23 Financial assets at fair value through profit or loss
Group
2018 2017
GBP'm GBP'm
At 31 December - -
Adjustment upon application of IFRS 9 2.5 -
----- -----
At 1 January 2.5 -
Fair value adjustment 0.1 -
Additions 7.2 -
Disposals (6.1) -
----- -----
At 31 December 3.7 -
----- -----
Financial assets at fair value through profit or loss comprise
money market funds held in India.
24 Financial assets at amortised cost
Group
2018 2017
GBP'm GBP'm
At 31 December - -
Adjustment upon application of IFRS 9 3.3 -
----- -----
At 1 January 3.3 -
Exchange differences 0.1 -
Disposals (0.2) -
----- -----
At 31 December 3.2 -
----- -----
Financial assets at amortised cost comprises:
2018 2017
GBP'm GBP'm
Treasury infrastructure bonds - 12.0% to 12.2% interest payable twice yearly and redeemable
in November 2022 - Kenya 1.5 -
Treasury infrastructure bonds - 12.0% to 12.2% interest payable twice yearly and redeemable
in November 2024 - Kenya 1.5 -
Debentures with fixed interest of 12.5% and repayable twice yearly until
31 October 2019 - Kenya 0.2 -
----- -----
3.2 -
----- -----
Current 0.2 -
Non-Current 3.0 -
----- -----
3.2 -
----- -----
25 Available-for-sale financial assets
Group Company
2018 2017 2018 2017
GBP'm GBP'm GBP'm GBP'm
Cost or fair value
At 31 December 49.4 39.6 0.2 0.2
Adjustment upon application of IFRS 9 (49.4) - (0.2) -
------- ------ ------- ------
At 1 January - 39.6 - 0.2
Exchange differences - (3.7) - -
Fair value adjustment - 10.9 - -
Additions - 4.0 - -
Disposals - (1.1) - -
Fair value adjustment for disposal - (0.3) - -
------- ------ ------- ------
At 31 December - 49.4 - 0.2
------- ------ ------- ------
Group Company
2018 2017 2018 2017
GBP'm GBP'm GBP'm GBP'm
Provision for diminution in value
At 31 December 2.4 2.4 0.2 -
Adjustment upon application of IFRS 9 (2.4) - (0.2) -
------ ----- ------- ------
At 1 January - 2.4 - -
Exchange differences - (0.2) - 0.2
Provided during year - 0.2 - -
------ ----- ------- ------
At 31 December - 2.4 - 0.2
------ ----- ------- ------
Net book value at 31 December - 47.0 - -
------ ----- ------- ------
Available-for-sale financial assets include the following:
Group Company
2018 2017 2018 2017
GBP'm GBP'm GBP'm GBP'm
Listed securities:
Equity securities - Bermuda - 5.2 - -
Equity securities - Japan - 20.3 - -
Equity securities - Switzerland - 9.5 - -
Equity securities - US - 4.1 - -
Equity securities - India - 3.8 - -
Equity securities - Europe - 0.5 - -
Equity securities - Other - 0.3 - -
Treasury infrastructure bonds - 12.0% to
12.2% interest payable twice yearly and redeemable in November 2022 - Kenya - 1.5 - -
Treasury infrastructure bonds - 12.0% to
12.2% interest payable twice yearly and redeemable in November 2024 - Kenya - 1.5 - -
Debentures with fixed interest of 12.5% and
repayable twice yearly until 31 October 2019 - Kenya - 0.3 - -
----- ----- ----- -----
- 47.0 - -
----- ----- ----- -----
Available-for-sale financial assets are denominated in the
following currencies:
Group Company
2018 2017 2018 2017
GBP'm GBP'm GBP'm GBP'm
US Dollar - 4.1 - -
Euro - 0.5 - -
Swiss Franc - 9.5 - -
Indian Rupee - 3.8 - -
Bermudian Dollar - 5.2 - -
Japanese Yen - 20.3 - -
Kenyan Shilling - 3.3 - -
Other - 0.3 - -
----- ----- ----- -----
- 47.0 - -
----- ----- ----- -----
26 Other investments - heritage assets
Group Company
2018 2017 2018 2017
GBP'm GBP'm GBP'm GBP'm
Cost
At 1 January 9.4 9.2 10.6 10.4
Additions 0.1 0.2 0.1 0.2
----- ----- ----- -----
At 31 December 9.5 9.4 10.7 10.6
----- ----- ----- -----
Heritage assets comprise the Group's and Company's investment in
fine art, philately, documents and manuscripts. The market value of
these collections is expected to be in excess of book value.
27 Inventories
2018 2017
GBP'm GBP'm
Group
Made Tea 34.6 31.3
Other agricultural produce 2.6 1.9
Work in progress 0.1 0.2
Trading stocks 1.6 2.5
Raw materials and consumables 13.8 11.5
----- -----
52.7 47.4
----- -----
Made tea inventories include the fair value of green leaf which
includes a fair value uplift of 0.2 million (2017: GBP1.2
million).
28 Trade and other receivables
Group
2018 2017
GBP'm GBP'm
Group
Current:
Trade receivables 34.5 30.3
Amounts owed by associated undertakings 0.1 0.1
Other receivables 6.0 7.4
Prepayments and accrued income 7.9 5.9
----- -----
48.5 43.7
----- -----
Non-current:
Other receivables 2.7 1.9
----- -----
2.7 1.9
----- -----
The carrying amounts of the Group's trade and other receivables
are denominated in the following currencies:
2018 2017
GBP'm GBP'm
Current:
Sterling 13.0 11.7
US Dollar 6.2 3.5
Euro 0.1 1.3
Kenyan Shilling 3.4 2.5
Indian Rupee 20.0 19.5
Malawian Kwacha 1.7 0.9
Bangladesh Taka 2.2 2.3
South African Rand 0.2 0.2
Brazilian Real 1.1 0.9
Other 0.6 0.9
----- -----
48.5 43.7
----- -----
Non-current:
Kenyan Shilling 0.5 0.5
Indian Rupee 1.5 0.8
Malawian Kwacha 0.4 0.3
Bangladesh Taka 0.3 0.3
----- -----
2.7 1.9
----- -----
Included within trade receivables is a provision for doubtful
debts of GBP0.4 million (2017: GBP0.3 million). All other trade
receivables are with normal trading partners and there is no
history of defaults.
Trade receivables include receivables of GBP5.9 million (2017:
GBP6.0 million) which are past due at the reporting date against
which the Group has not provided, as there has not been a
significant change in credit quality and the amounts are still
considered recoverable. Ageing of past due but not provided for
receivables is as follows:
2018 2017
GBP'm GBP'm
Up to 30 days 2.5 4.0
30-60 days 1.4 0.8
60-90 days 0.3 0.3
Over 90 days 1.7 0.9
----- -----
5.9 6.0
----- -----
29 Cash and cash equivalents (excluding bank overdrafts)
Group Company
2018 2017 2018 2017
GBP'm GBP'm GBP'm GBP'm
Cash at bank and in hand 41.3 42.8 0.1 0.1
Short-term bank deposits 67.5 61.1 - -
Short-term liquid investments 3.6 4.1 - -
------ ----- ------- -------
112.4 108.0 0.1 0.1
------ ----- ------- -------
Cash, cash equivalents and bank overdrafts include the following
for the purposes of the cash flow statement:
2018 2017 2018 2017
GBP'm GBP'm GBP'm GBP'm
Cash and cash equivalents 112.4 108.0 0.1 0.1
Bank overdrafts (note 32) (2.8) (1.2) - -
------------- ------------- ----- -----
109.6 106.8 0.1 0.1
------------- ------------- ----- -----
2018 2017 2018 2017
Effective interest rate:
Short-term deposits 0.82 - 12.00% 0.57 - 12.00% - -
Short-term liquid investments 7.04% 5.08 - 9.75% - -
Average maturity period:
Short-term deposits 59 days 58 days - -
Short-term liquid investments 37 days 64 days - -
30 Assets classified as held for sale
Assets classified as held for sale relates to a property
previously occupied by Duncan Lawrie in the Isle of Man which the
Group is selling. The sale is expected to be completed during 2019.
GBP0.2 million has been reclassified from investment property.
In 2017, assets classified as held for sale related to British
Metal Treatments Limited, GU Cutting and Grinding Services Limited
and the property previously occupied by Loddon Engineering all of
which were sold during 2018.
31 Trade and other payables
Group Company
2018 2017 2018 2017
GBP'm GBP'm GBP'm GBP'm
Current:
Trade payables 24.8 24.6 0.1 -
Other taxation and social security 1.9 1.6 - -
Other payables 17.9 16.9 0.1 0.2
Accruals and deferred income 8.9 8.9 0.4 -
------ ------ -------- -------
53.5 52.0 0.6 0.2
------ ------ -------- -------
32 Financial liabilities - borrowings
2018 2017
GBP'm GBP'm
Group
Current:
Bank overdrafts 2.8 1.2
Bank loans 0.6 0.6
----- -----
3.4 1.8
----- -----
Current borrowings include the following amounts secured on property, plant and equipment
and investment properties:
Bank overdrafts 2.8 0.8
Bank loans 0.6 0.6
----- -----
3.4 1.4
----- -----
Non-current:
Bank loans 3.3 3.9
Finance leases 0.1 0.1
----- -----
3.4 4.0
----- -----
Non-current borrowings include the following amounts secured on plant and equipment and investment
properties:
Bank loans 3.3 3.9
Finance leases 0.1 0.1
----- -----
3.4 4.0
----- -----
The repayment of bank loans and overdrafts fall due as follows:
Within one year or on demand (included in current liabilities) 3.4 1.8
Between 1 - 2 years 3.3 0.6
Between 2 - 5 years - 3.3
----- -----
6.7 5.7
----- -----
2018 2017
GBP'm GBP'm
Minimum finance lease payments fall due as follows:
Between 2 - 5 years 0.1 0.1
------------ ------------
0.1 0.1
Future finance charges on finance leases - -
------------ -----------
Present value of finance lease liabilities 0.1 0.1
------------ ------------
The rates of interest payable by the Group ranged between:
2018 2017
% %
Bank overdrafts 2.50 - 21.00 2.25 - 21.50
Bank loans 3.03 3.03
Finance leases 6.80 - 10.00 6.80 - 9.50
33 Provisions
Wages and salaries Others Total
GBP'm GBP'm GBP'm
Group
At 1 January 2017 12.3 0.9 13.2
Exchange differences (1.1) - (1.1)
Utilised in the period (4.8) - (4.8)
Provided in the period 12.1 0.7 12.8
Unused amounts reversed in period - (0.4) (0.4)
------------------ ------ -----
At 1 January 2018 18.5 1.2 19.7
Exchange differences 0.6 - 0.6
Utilised in the period (4.9) (0.6) (5.5)
Provided in the period 8.6 0.6 9.2
Unused amounts reversed in period (5.4) (0.1) (5.5)
------------------ ------ -----
At 31 December 2018 17.4 1.1 18.5
------------------ ------ -----
Current:
At 31 December 2018 17.4 1.1 18.5
------------------ ------ -----
At 31 December 2017 18.5 1.2 19.7
------------------ ------ -----
The wages and salaries provisions are in respect of unresolved
wage negotiations in Kenya for the Collective Bargaining Agreement
years of 2014/15, 2016/17 and 2018/19, and ongoing wage and bonus
negotiations in India and Bangladesh.
GBP5.4 million was reversed in 2018 from the wages and salaries
provision following progress on negotiations.
Others relate to provisions for claims and dilapidations.
34 Deferred tax
The net movement on the deferred tax account is set out
below:
Group Company
2018 2017 2018 2017
GBP'm GBP'm GBP'm GBP'm
At 1 January 40.0 43.1 0.2 0.2
Exchange differences 1.5 (3.7) - -
Charged/(credited) to the income statement 5.9 (2.1) - -
(Credited)/charged to other comprehensive income (1.1) 2.7 - -
----- ----- ----- -----
At 31 December 46.3 40.0 0.2 0.2
----- ----- ----- -----
The movement in deferred tax assets and liabilities is set out
below:
Deferred tax liabilities
Accelerated
tax
depreciation Other Total
GBP'm GBP'm GBP'm
At 1 January 2017 as previously reported 49.0 3.1 52.1
Restated for unrealised gains in financial assets - 2.7 2.7
------------ ----- -----
At 1 January 2017 restated 49.0 5.8 54.8
Exchange differences (4.4) (0.5) (4.9)
Charged/(credited) to the income statement 3.5 (2.0) 1.5
Charged to other comprehensive income - 1.6 1.6
------------ ----- -----
At 1 January 2018 48.1 4.9 53.0
Exchange differences 1.8 0.3 2.1
Charged to the income statement 1.1 0.1 1.2
Credited to other comprehensive income - (1.5) (1.5)
------------ ----- -----
At 31 December 2018 51.0 5.3 54.8
------------ ----- -----
Deferred tax assets offset (8.5)
-----
Net deferred tax liability after offset 46.3
-----
Deferred tax assets
Pension
scheme
Tax losses asset Other Total
GBP'm GBP'm GBP'm GBP'm
At 1 January 2017 as previously reported 0.3 0.8 7.9 9.0
Restated for tax loss recognition 2.7 - - 2.7
---------- ------- ----- -----
At 1 January 2017 restated 3.0 0.8 7.9 11.7
Exchange differences (0.3) (0.5) (0.4) (1.2)
Credited to the income statement 2.0 0.1 1.5 3.6
Charged to other comprehensive income - (1.0) (0.1) (1.1)
Recategorisation - 3.8 (3.8) -
---------- ------- ----- -----
At 1 January 2018 4.7 3.2 5.1 13.0
Exchange differences 0.2 0.1 0.3 0.6
Charged to the income statement (1.9) (2.7) (0.1) (4.7)
Charged to other comprehensive income (0.3) (0.1) (0.4)
---------- ------- ----- -----
At 31 December 2018 3.0 0.3 5.2 8.5
---------- ------- ----- -----
Offset against deferred tax liabilities (8.5)
-----
Net deferred tax asset after offset -
-----
Figures have been restated to reflect deferred tax liabilities
on financial assets underlying capital gains arising from market
value recognition through other comprehensive income. The
recognition of this gain is matched by recognising tax losses in
deferred tax assets against which such gains can be offset.
Deferred tax liabilities of GBP26.9 million (2017: GBP23.8
million) have not been recognised for the withholding tax and other
taxes that would be payable on the unremitted earnings of certain
subsidiaries. Such amounts are permanently reinvested.
Deferred tax assets are recognised for tax losses carried
forward only to the extent that the realisation of the related tax
benefit through future taxable profits is probable. The Group has
not recognised deferred tax assets of GBP6.1 million (2017: GBP6.9
million) in respect of losses that can be carried forward against
future taxable income.
35 Employee benefit obligations
(i) Pensions
Certain Group subsidiaries operate defined contribution and
funded defined benefit pension schemes. The most significant is the
UK funded, defined benefit scheme. The assets of this scheme are
administered by trustees and are kept separate from those of the
Group. The performance of the assets is monitored on a regular
basis by the trustees and their investment advisors. A full
actuarial valuation was undertaken as at 1 July 2017 and updated to
31 December 2018 by a qualified independent actuary. The UK defined
benefit pension scheme is closed to new entrants and with effect
from 1 November 2016, the scheme was closed to future accruals.
Since that date members have participated in a defined contribution
scheme.
The overseas schemes are operated in Group subsidiaries located
in Bangladesh and India. Actuarial valuations have been updated to
31 December 2018 by qualified actuaries for these schemes.
Assumptions
The major assumptions used in the valuation to determine the
present value of the schemes' defined benefit obligations were as
follows:
2018 2017
% per annum % per annum
UK schemes
Rate of increase in salaries N/a N/a
Rate of increase to LPI (Limited Price Indexation)
pensions in payment 2.30 - 5.00 2.20 - 5.00
Discount rate applied to scheme liabilities 2.75 2.45
Inflation assumption (CPI/RPI) 2.30/3.30 2.20/3.20
Assumptions regarding future mortality experience are based on
advice received from independent actuaries. The current mortality
tables used are SAPS 2, males 105% and females 104%, on a year of
birth basis, with CMI_2017 future improvement factors and subject
to a long term annual rate of future improvement of 1.25% per
annum. This results in males and females aged 65 having life
expectancies of 21.6 years (2017: 21.7 years) and 22.9 years
respectively (2017: 23.0 years).
2018 2017
Overseas schemes % per annum % per annum
Rate of increase in salaries 6.00 - 7.00 1.50 - 7.00
Rate of increase to LPI (Limited Price Indexation)
pensions in payment 0.00 - 3.00 0.00 - 3.00
Discount rate applied to scheme liabilities 7.50 2.00 - 7.50
Inflation assumption 6.00 - 7.00 0.00 - 7.00
(ii) Post-employment benefits
Certain Group subsidiaries located in Kenya, India and
Bangladesh have an obligation to pay terminal gratuities, based on
years of service. These obligations are estimated annually using
the projected unit method by qualified independent actuaries.
Schemes operated in India are funded but the schemes operated in
Kenya and Bangladesh are unfunded. Operations in India and
Bangladesh also have an obligation to pay medical benefits upon
retirement. These schemes are unfunded.
Assumptions
The major assumptions used in the valuation to determine the
present value of the post-employment benefit obligations were as
follows:
2018 2017
% per annum % per annum
Rate of increase in salaries 6.00 - 10.00 6.00 - 10.00
Discount rate applied to scheme liabilities 7.50 - 13.00 7.00 - 13.50
Inflation assumptions 0.00 - 10.00 0.00 - 10.00
(iii) Leave obligations
Certain Group subsidiaries located in India have an obligation
to pay leave benefit, based on years of service. These obligations
are estimated annually using the projected unit method by qualified
independent actuaries. These schemes are unfunded.
Sensitivity analysis
The sensitivity of the UK defined benefit obligation to changes
in the weighted principal assumptions is:
Impact
on defined
Change benefit
in assumption obligation
Discount rate 0.5% higher 7.2% decrease
Discount rate 0.5% lower 8.1% increase
Rate of RPI inflation 0.25% higher 1.8% increase
Rate of RPI inflation 0.25% lower 1.7% decrease
Life expectancy +1 year 4.5% increase
Life expectancy * 1 year 4.5% decrease
The above changes in assumptions may have an impact on the value
of the scheme's investment holdings. For example, the scheme holds
a proportion of its assets in corporate bonds. A fall in the
discount rate as a result of lower UK corporate bond yields would
lead to an increase in the value of these assets, thus mitigating
the increase in the defined benefit obligation to some extent. The
sensitivities have been calculated by changing the key assumption
only and leaving all others fixed.
Duration of the scheme liabilities
The weighted average duration of the UK scheme's liabilities is
15 years.
Analysis of scheme liabilities
The liabilities of the UK scheme are split as follows:
%
Deferred pensioners 41
Current pensioners 59
---
Total membership 100
---
(iv) Actuarial valuations
2018 2017
UK Overseas Total UK Overseas Total
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
Equities and property 77.5 0.9 78.4 108.6 0.7 109.3
Bonds 47.4 18.6 66.0 48.2 19.5 67.7
Diversified growth 36.4 - 36.4 16.9 - 16.9
Cash 0.8 9.0 9.8 0.6 7.2 7.8
Other - - - - 4.9 4.9
------ -------- ------ ------ -------- ------
Total fair value of plan assets 162.1 28.5 190.6 174.3 32.3 206.6
Present value of defined benefit obligations (178.6) (36.7) (215.3) (188.6) (48.9) (237.5)
------ -------- ------ ------ -------- ------
Total deficit in the schemes (16.5) (8.2) (24.7) (14.3) (16.6) (30.9)
------ -------- ------ ------ -------- ------
Amount recognised as asset in the balance sheet - 0.3 0.3 - 0.3 0.3
Amount recognised as current liability in the
balance sheet - (1.0) (1.0) - (0.7) (0.7)
Amount recognised as non-current liability in
the balance sheet (16.5) (7.5) (24.0) (14.3) (16.2) (30.5)
------ -------- ------ ------ -------- ------
(16.5) (8.2) (24.7) (14.3) (16.6) (30.9)
Related deferred tax asset (note 34) - 0.3 - - 3.2 3.2
------ -------- ------ ------ -------- ------
Net deficit (16.5) (7.9) (24.7) (14.3) (13.4) (27.7)
------ -------- ------ ------ -------- ------
Movements in the fair value of scheme assets were as
follows:
2018 2017
UK Overseas Total UK Overseas Total
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
At 1 January 174.3 32.3 206.6 164.1 30.0 194.1
Expected return on plan assets 4.1 2.0 6.1 4.1 1.8 5.9
Employer contributions 0.2 2.4 2.6 0.9 3.8 4.7
Benefit payments (8.1) (2.9) (11.0) (9.6) (2.1) (11.7)
Company leaving the group - (5.0) (5.0) - - -
Actuarial (losses)/gains (8.4) - (8.4) 14.8 0.1 14.9
Exchange differences - (0.3) (0.3) - (1.3) (1.3)
----- -------- ----- ----- -------- -----
At 31 December 162.1 28.5 190.6 174.3 32.3 206.6
----- -------- ----- ----- --------
Movements in the present value of defined benefit obligations
were as follows:
2018 2017
UK Overseas Total UK Overseas Total
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
At 1 January (188.6) (48.9) (237.5) (208.7) (52.1) (260.8)
Current service cost - (2.0) (2.0) - (2.5) (2.5)
Past service cost (0.9) (0.2) (1.1) - - -
Interest cost (4.5) (3.1) (7.6) (5.3) (3.3) (8.6)
Curtailment gain - 9.0 9.0 - - -
Benefit payments 8.1 2.9 11.0 9.6 2.1 11.7
Company leaving the group - 5.3 5.3 - - -
Actuarial gains 7.3 0.4 7.7 15.8 3.6 19.4
Exchange differences - (0.1) (0.1) - 3.3 3.3
-------- ------ ------ -------- ------
At 31 December (178.6) (36.7) (215.3) (188.6) (48.9) (237.5)
-------- ------ ------ -------- ------
In 2016, the total fair value of plan assets was GBP194.1
million, present value of defined benefit obligations was GBP260.8
million and the deficit was GBP66.7 million. In 2015, the total
fair value of plan assets was GBP172.0 million, present value of
defined benefit obligations was GBP210.6 million and the deficit
was GBP38.6 million and in 2014, the total fair value of plan
assets was GBP169.6 million, present value of defined benefit
obligations was GBP211.2 million and the deficit was GBP41.6
million.
Income Statement
The amounts recognised in the Income Statement are as
follows:
2018 2017
UK Overseas Total UK Overseas Total
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
Amounts (charged)/credited to operating profit:
Current service cost - (2.0) (2.0) - (2.5) (2.5)
Past service cost (0.9) (0.2) (1.1) - - -
Curtailment gain - 9.0 9.0 - - -
----- --------
Total operating (charge)/credit (0.9) 6.8 5.9 - (2.5) (2.5)
Amounts charged to other finance costs:
Interest expense (0.4) (1.1) (1.5) (1.2) (1.5) (2.7)
----- --------
Total (charged)/credited to income statement (1.3) 5.7 4.4 (1.2) (4.0) (5.2)
The curtailment gain of GBP9.0 million reflects a change to the
labour laws in Bangladesh which has exempted the tea industry from
the requirement to pay certain post-employments benefits.
Employer contributions to defined contribution schemes are
charged to profit when payable and the costs charged were GBP5.5
million (2017: GBP5.2 million).
Actuarial gains and losses recognised in the Statement of
Comprehensive Income
The amounts included in the Statement of Comprehensive
Income:
2018 2017
UK Overseas Total UK Overseas Total
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
Remeasurements:
Return on plan assets, excluding amount included in
interest (8.4) - (8.4) 14.8 0.1 14.9
Gain from changes in demographic assumptions 1.0 - 1.0 14.7 - 14.7
Gain/(loss) from changes in financial assumptions 6.9 1.4 8.3 (4.8) 4.8 -
Experience (losses)/gains (0.6) (1.0) (1.6) 5.9 (1.2) 4.7
Actuarial (loss)/gain (1.1) 0.4 (0.7) 30.6 3.7 34.3
Cumulative actuarial losses recognised in the Statement of
Comprehensive Income are GBP25.7 million (2017: GBP25.0
million).
As the UK defined benefit pension scheme is closed to future
accrual and active members were transferred to a defined
contribution scheme, no employer contributions will be paid for the
year commencing 1 January 2019. No additional funding contributions
will be made, as the latest actuarial valuation shows a funding
surplus of GBP7.1 million.
36 Share capital
2018 2017
GBP'm GBP'm
Authorised: 2,842,000 (2017: 2,842,000) ordinary shares of 10p each 0.3 0.3
Allotted, called up and fully paid: ordinary shares of 10p each:
At 1 January and 31 December - 2,824,500 (2017: 2,824,500) shares 0.3 0.3
Group companies hold 62,500 issued shares in the Company. These
are classified as treasury shares.
37 Reconciliation of profit from operations to cash flow
2018 2017
GBP'm GBP'm
Group
Profit from continuing operations 49.6 27.3
Share of associates' results (7.6) (2.0)
Depreciation and amortisation 15.5 15.4
Impairment of assets and provisions 0.2 1.8
Profit on disposal of non-current assets (0.1) (0.1)
Loss on disposal of subsidiaries 0.4 -
Profit on disposal of financial assets (0.3) (0.7)
(Increase)/decrease in working capital (14.1) 1.2
Difference between employee benefit obligations funding contributions and cost charged (8.3) (2.2)
-----
Cash generated from continuing operations 35.3 40.7
38 Changes in liabilities arising from financing activities
The table below details changes in the Group's liabilities
arising from financing activities, including both cash and non-cash
changes. Liabilities arising from financing activities are those
for which cash flows were, or future cash flows will be, classified
in the Group's consolidated cash flow statement as cash flows from
financing activities.
Bank Finance
Bank loans loans leases
Current Non-current Non-current Total
GBP'm GBP'm GBP'm GBP'm
At 1 January 2017 0.6 4.5 - 5.1
New loans - - 0.1 0.1
Loans repaid (0.6) - - (0.6)
Transfers 0.6 (0.6) - -
At 1 January 2018 0.6 3.9 0.1 4.6
Loans repaid (0.6) - - (0.6)
Transfers 0.6 (0.6) - -
At 31 December 2018 0.6 3.3 0.1 4.0
The cash flows from bank loans, loans from related parties and
other borrowings make up the net amount of proceeds from borrowings
and repayments of borrowings in the cash flow statement. Other
changes include interest accruals and prepayments.
39 Acquisition and disposal of businesses
Acquisitions Disposals
2018 2018
GBP'm GBP'm
Fair value Net book
value
Property, plant and equipment 0.5 0.6
Deferred tax asset 1.1 0.1
Inventories 0.8 1.6
Trade and other receivables 1.5 0.9
Current income tax assets - 0.2
Cash and cash equivalents 0.4 0.2
Assets classified as held for sale - 2.4
Trade and other payables (1.6) (1.3)
Employee benefit obligations - (0.3)
Deferred tax liability (1.1) -
------------ ---------
1.6 4.4
Identifiable intangible assets - Brands 6.6 -
Non-controlling interest (1.4) (0.1)
Loss on disposal - (0.5)
------------ ---------
6.8 3.8
------------ ---------
Satisfied by:
Cash consideration and costs 6.8 3.8
------------ ---------
Net cash outflow arising on acquisitions/disposals:
Cash consideration (6.8) 3.8
Less: cash and cash equivalent balances acquired/disposed 0.4 (0.2)
------------ ---------
(6.4) 3.6
------------ ---------
The acquisitions in 2018 related to the following:
On 8 February 2018 the Group obtained control of Jing Tea
Limited after acquiring 80 per cent. of its share capital for
consideration of GBP5.7 million. Jing Tea Limited is a UK based
branded speciality teas business selling to the retail and food
services sectors internationally.
On 6 June 2018 the Group obtained control of Black Gold Oil
Tools Limited after acquiring 100 per cent of its share capital for
consideration of GBP1.1 million. Black Gold Oils Limited is a UK
based Engineering company specialising in the oil services
sector.
The amounts recognised in respect of the identifiable assets
acquired and liabilities assumed are as set out in the table
above.
Acquisition-related costs (included in administrative expenses)
amount to GBP0.4 million.
Jing Tea Limited contributed GBP3.3 million revenue and loss of
GBP0.3 million to the Group's profit for the period between the
date of acquisition and the reporting date.
Black Gold Oil Tools Limited contributed GBP0.7 million revenue
and loss of GBP0.3 million to the Group's profit for the period
between the date of acquisition and the reporting date.
The disposals in 2018 related to the following:
In August 2018, the Group sold its 100 per cent. interest in GU
Cutting and Grinding Limited.
In October 2018, the Group sold its 100 per cent. interest in
British Metal Treatments Limited.
In December 2018, the Group sold its 100 per cent. interest in
Affsh BV.
In November 2018, the Group sold its 51 per cent. interest in
XiMo AG.
40 Commitments
Capital commitments
Capital expenditure contracted for at the balance sheet date but
not yet incurred is as follows:
2018 2017
GBP'm GBP'm
Group
Property, plant and equipment 1.3 2.5
Operating leasing commitments - minimum lease payments
The Group leases land and buildings, plant and machinery under
non-cancellable operating lease arrangements, which have various
terms and renewal rights.
The future aggregate minimum lease payments under
non-cancellable operating leases are as follows:
2018 2017
GBP'm GBP'm
Group
Land and buildings:
Within 1 year 1.0 1.0
Between 1 - 5 years 3.3 3.0
After 5 years 21.6 17.1
25.9 21.1
Plant and machinery:
Within 1 year 0.2 0.2
Between 1 - 5 years 0.1 0.2
0.3 0.4
The Group's most significant operating lease commitments are
long term property leases with renewal terms in excess of 60
years.
41 Contingencies
In India, assessments have been received for excise duties of
GBP4.1 million and of GBP1.3 million for income tax matters. These
are being contested on the basis that they are without technical
merit.
In India, a long running dispute between our local subsidiaries
and the Government of West Bengal over the payment of a land tax,
locally called, "Salami", remains unresolved. Lawyers acting for
the Group have advised that payment of Salami does not apply,
accordingly no provisions have been made. The sum in dispute,
excluding fines and penalties, amounts to GBP1.4 million.
The Group operates in certain countries where its operations are
potentially subject to a number of legal claims. When required,
appropriate provisions are made for the expected cost of such
claims.
42 Financial instruments
Capital risk management
The Group manages its capital to ensure that it will be able to
continue as a going concern, while maximising the return to
stakeholders through the optimisation of its debt and equity
balance. The capital structure of the Group consists of debt, which
includes the borrowings disclosed in note 32, cash and cash
equivalents and equity attributable to equity holders of the
parent, comprising issued capital, reserves and retained
earnings.
The Board reviews the capital structure, with an objective to
ensure that gross borrowings as a percentage of tangible net assets
does not exceed 50 per cent.
The ratio at the year end is as follows:
2018 2017
GBP'm GBP'm
Borrowings 6.8 5.8
Tangible net assets 386.0 365.2
----- -----
Ratio 1.76% 1.59%
----- -----
Borrowings are defined as current and non-current borrowings, as
detailed in note 32.
Tangible net assets includes all capital and reserves of the
Group attributable to equity holders of the parent less intangible
assets.
Financial instruments by category
At 31 December 2018
Loans and Financial
receivables assets Total
GBP'm GBP'm GBP'm
Group
Assets as per Balance Sheet
Financial assets at fair value through
other comprehensive income - 32.7 32.7
Financial asset at fair value through
profit or loss - 3.7 3.7
Financial assets at amortised cost -
non-current - 3.0 3.0
Trade and other receivables excluding
prepayments 43.3 - 43.3
Financial assets at amortised cost -
current - 0.2 0.2
Cash and cash equivalents 112.4 - 112.4
155.7 39.6 195.3
Other financial
liabilities at
amortised cost Total
GBP'm GBP'm
Group
Liabilities as per Balance Sheet
Borrowings 6.8 6.8
Trade and other payables 53.5 53.5
60.3 60.3
Company
Trade and other payables 0.6 0.6
At 31 December 2017
Loans and Available
for
receivables sale Total
GBP'm GBP'm GBP'm
Group
Assets as per Balance Sheet
Available-for-sale financial assets - 47.0 47.0
Trade and other receivables excluding
prepayments 39.7 - 39.7
Cash and cash equivalents (excluding
bank subsidiaries) 108.0 - 108.0
147.7 47.0 194.7
Other financial
liabilities
at
amortised
cost Total
Group GBP'm GBP'm
Liabilities as per Balance Sheet
Borrowings 5.8 5.8
Trade and other payables 52.0 52.0
57.8 57.8
Company
Trade and other payables 0.2 0.2
Fair value estimation
The table below analyses financial instruments carried at fair
value, by valuation method. The different levels have been defined
as follows:
-- Quoted prices (unadjusted) in active markets for identical
assets or liabilities (Level 1).
-- Inputs other than quoted prices included within Level
1 that are observable for the asset or liability, either
directly (that is, as prices) or indirectly (that is,
derived from prices) (Level 2).
-- Inputs for the asset or liability that are not based
on observable market data (that is, unobservable inputs)
(Level 3).
The following table presents the Group's financial assets and
liabilities that are measured at fair value. See note 18 for
disclosures of biological assets that are measured at fair
value.
At 31 December 2018
Level Level Level
1 2 3 Total
GBP'm GBP'm GBP'm GBP'm
Assets
Financial assets at fair value
through
other comprehensive income 32.7 - - 32.7
Financial asset at fair value through
profit or loss 3.7 - - 3.7
Financial assets at amortised cost 3.2 - - 3.2
39.6 - - 39.6
At 31 December 2017
Level Level Level
1 2 3 Total
GBP'm GBP'm GBP'm GBP'm
Assets
Available-for sale financial assets:
- Equity securities 43.7 - 43.7
Debt investments: -
- Debentures 3.3 - 3.3
47.0 - - 47.0
Financial risk management objectives
The Group finances its operations by a mixture of retained
profits, bank borrowings, long-term loans and leases. The objective
is to maintain a balance between continuity of funding and
flexibility through the use of borrowings with a range of
maturities. To achieve this, the maturity profile of borrowings and
facilities are regularly reviewed. The Group also seeks to maintain
suffcient undrawn committed borrowing facilities to provide
flexibility in the management of the Group's liquidity.
Given the nature and diversity of the Group's operations, the
board does not believe a highly complex use of financial
instruments would be of significant benefit to the Group. However,
where appropriate, the Board does authorise the use of certain
financial instruments to mitigate financial risks that face the
Group, where it is effective to do so.
Various financial instruments arise directly from the Group's
operations, for example cash and cash equivalents, trade
receivables and trade payables. In addition, the Group uses
financial instruments for two main reasons, namely:
-- To finance its operations (to mitigate liquidity risk);
-- To manage currency risks arising from its operations and
arising from its sources of finance (to mitigate foreign
exchange risk).
The Group did not, in accordance with Group policy, trade in
financial instruments throughout the period under review.
(A) Market risk
(i) Foreign exchange risk
The Group has no material exposure to foreign currency exchange
risk on currencies other than the functional currencies of the
operating entities, with the exception of significant Japanese
financial assets. A movement by 5 per cent. in the exchange rate of
the Japanese Yen with Sterling, the Group's carrying value would
increase/decrease by GBP0.9 million (2017: GBP1.0 million).
Currency risks are primarily managed through the use of natural
hedging and regularly reviewing when cash should be exchanged into
either sterling or another functional currency.
(ii) Price risk
The Group is exposed to equity securities price risk because of
investments held by the Group and classified on the consolidated
balance sheet as financial assets. To manage its price risk arising
from investments in equity securities, the Group diversifies its
portfolio.
The majority of the Group's equity investments are publicly
traded and are quoted on stock exchanges located in Bermuda, Japan,
Switzerland, UK and US. Should these equity indexes increase or
decrease by 5 per cent. with all other variables held constant and
all the Group's equity instruments move accordingly, the Group's
carrying value would increase/decrease by GBP1.6 million (2017:
GBP2.2 million).
The Group's exposure to commodity price risk is not
significant.
(iii) Cash flow and interest rate risk
The Group's interest rate risk arises from interest-bearing
assets and short and long-term borrowings. Borrowings issued at
variable rates expose the Group to cash flow interest rate risk.
The Group's UK borrowings of GBP3.9 million are at fixed rates.
At 31 December 2018, if interest rates on non-sterling
denominated interest-bearing assets and borrowings had been 50
basis points higher/lower with all other variables held constant,
post-tax profit for the year would have been GBP0.4 million (2017:
GBP0.3 million) higher/lower.
The interest rate exposure of the Group's interest bearing
assets and liabilities by currency, at 31 December was:
Assets Liabilities
2018 2017 2018 2017
GBP'm GBP'm GBP'm GBP'm
Sterling 28.6 40.9 3.9 4.6
US Dollar 21.7 13.1 - -
Euro 0.6 0.9 - 0.1
Swiss Franc - 0.6 - -
Kenyan Shilling 24.9 26.8 - -
Indian Rupee 6.0 9.4 2.7 0.6
Malawian Kwacha 1.3 0.1 - 0.3
Bangladesh Taka 17.7 10.9 0.1 0.1
South African Rand 1.5 0.6 0.1 0.1
Brazilian Real 3.0 2.7 - -
Bermudian Dollar 7.1 2.0 - -
112.4 108.0 6.8 5.8
(B) Credit risk
The Group has policies in place to limit its exposure to credit
risk. Credit risk arises from cash and cash equivalents, deposits
with banks and financial institutions, as well as credit exposures
to customers, including outstanding receivables and committed
transactions. If customers are independently rated, these ratings
are used. Otherwise if there is no independent rating, management
assesses the credit quality of the customer taking into account its
financial position, past experience and other factors and if
appropriate holding liens over stock and receiving payments in
advance of services or goods as required. Management monitors the
utilisation of credit limits regularly.
The Group has a large number of trade receivables, the largest
five receivables at the year end comprise 17 per cent. (2017: 27
per cent.) of total trade receivables.
(C) Liquidity risk
Ultimate responsibility for liquidity risk management rests with
the board of Directors. The Group manages liquidity risk by
maintaining adequate reserves and banking facilities by
continuously monitoring forecast and actual cash flows and managing
the maturity profiles of financial assets and liabilities.
At 31 December 2018, the Group had undrawn committed facilities
of GBP23.5 million (2017: GBP25.8 million), all of which are due to
be reviewed within one year.
The table below analyses the Group's financial assets and
liabilities which will be settled on a net basis into relevant
maturity groupings based on the remaining period at the balance
sheet date to the contractual maturity date. The amounts disclosed
are the contractual undiscounted cash flows.
Less Between Between
than 1 and 2 and Over
1 year 2 years 5 years 5 years Undated Total
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
At 31 December 2018
Assets
Financial assets at fair
value through other comprehensive
income - - - - 32.7 32.7
Financial asset at fair
value through profit or
loss 3.7 - - - - 3.7
Financial assets at amortised
cost 0.2 - 1.5 1.5 - 3.2
Trade and other receivables
excluding prepayments 40.6 2.7 - - - 43.3
Cash and cash equivalents 112.4 - - - - 112.4
156.9 2.7 1.5 1.5 32.7 195.3
Liabilities
Borrowings 3.4 3.3 0.1 - - 6.8
Trade and other payables
excluding taxation 51.6 - - - - 51.6
55.0 3.3 0.1 - - 58.4
At 31 December 2017
Assets
Available-for-sale financial
assets 0.1 0.2 1.5 1.5 43.7 47.0
Trade and other receivables 37.8 1.9 - - - 39.7
Cash and cash equivalents 108.0 - - - - 108.0
145.9 2.1 1.5 1.5 43.7 194.7
Liabilities
Borrowings 1.8 0.6 3.4 - - 5.8
Trade and other payables 54.9 - - - - 54.9
56.7 0.6 3.4 - - 60.7
Included in borrowings due in less than 1 year is GBP2.8 million
(2017: GBP1.2 million) repayable on demand.
43 Subsidiary and associated undertakings
Subsidiary undertakings
The subsidiary undertakings of the Group at 31 December 2018,
which are wholly owned and incorporated in Great Britain unless
otherwise stated, were:
Principal
country
of Registered
operation Office
Agriculture
Amgoorie India Limited (Incorporated in India
- 99.8 per cent. holding) India (ii)
Amo Tea Company Limited Bangladesh (i)
C.C. Lawrie Comércio e Participacões
Ltda. (Incorporated in Brazil) Brazil (vi)
Chittagong Warehouse Limited (Incorporated in
Bangladesh - 93.3 per cent. holding) Bangladesh (vii)
Duncan Brothers Limited (Incorporated in Bangladesh) Bangladesh (vii)
Eastern Produce Cape (Pty) Limited (Incorporated
in South Africa) South Africa (viii)
Eastern Produce Estates South Africa (Pty) Limited
(Incorporated in
South Africa - held by Eastern Produce South
Africa (Pty) Limited) South Africa (ix)
Eastern Produce Kenya Limited (Incorporated
in Kenya - 70.0 per cent. holding) Kenya (x)
Eastern Produce Malawi Limited (Incorporated
in Malawi - 73.2 per cent. holding) Malawi (xii)
Eastern Produce South Africa (Pty) Limited (Incorporated
in South Africa -
73.2 per cent. holding) South Africa (ix)
Eastland Camellia Limited (Incorporated in Bangladesh
- 93.8 per cent. holding) Bangladesh (vii)
EP(T) East Africa Limited (Incorporated in Tanzania) Tanzania (xviii)
Goodricke Group Limited (Incorporated in India
- 74.0 per cent. holding) India (iii)
Goodricke Tech Limited (Incorporated in India
- 99.8 per cent. holding) India (iii)
Horizon Farms (An United States of America general
partnership - 80 per cent. holding) USA (xiii)
Kakuzi Plc (Incorporated in Kenya - 50.7 per
cent. holding) Kenya (xi)
Koomber Tea Company Limited (Incorporated in
India) India (iv)
Octavius Steel & Company of Bangladesh Limited
(Incorporated in Bangladesh) Bangladesh (vii)
Robertson Bois Dickson Anderson Limited UK (i)
Stewart Holl (India) Limited (Incorporated in
India - 92.0 per cent. holding) India (v)
Surmah Valley Tea Company Limited Bangladesh (i)
The Allynugger Tea Company Limited Bangladesh (i)
The Chandpore Tea Company Limited Bangladesh (i)
The Lungla (Sylhet) Tea Company Limited Bangladesh (i)
The Mazdehee Tea Company Limited Bangladesh (i)
Victoria Investments Limited (Incorporated in
Malawi - 73.2 per cent. holding) Malawi (xii)
Zetmac (Pty) Limited (Incorporated in South
Africa - 55.8 per cent. held by Eastern Produce
Estates South Africa (Pty) Limited) South Africa (ix)
Engineering
Abbey Metal Finishing Company Limited UK (i)
AJT Engineering Limited UK (xiv)
Atfin GmbH (Incorporated in Germany - 51.0 per
cent. holding) Germany (xv)
Black Gold Oil Tools Limited UK (xiv)
Food Service
Associated Cold Stores & Transport Limited UK (i)
Duncan Products Limited (Incorporated in Bangladesh) Bangladesh (vii)
Jing Tea Limited (80.0 per cent. holding) UK (i)
Banking and Financial Services
Duncan Lawrie Limited UK (i)
Duncan Lawrie Holdings Limited UK (i)
Duncan Lawrie International Holdings Limited Isle of
(Incorporated in Isle of Man) Man (xvi)
Duncan Lawrie (IOM) Limited (Incorporated in Isle of
Isle of Man) Man (xvi)
Duncan Lawrie Offshore Services Limited (Incorporated Isle of
in Isle of Man) Man (xvi)
Dunman Nominees Limited (Incorporated in Isle Isle of
of Man) Man (xvi)
Havelock Nominees Limited (Incorporated in Isle Isle of
of Man) Man (xvi)
Hobart Place Nominees Limited UK (i)
Mount Havelock Directors Limited (Incorporated Isle of
in Isle of Man) Man (xvi)
Mount Havelock Investments Limited (Incorporated Isle of
in Isle of Man) Man (xvi)
Mount Havelock Secretaries Limited (Incorporated Isle of
in Isle of Man) Man (xvi)
Investment Holding
Associated Fisheries (Europe) Limited UK (i)
Assam Dooars Investments Limited UK (i)
Associated Fisheries Limited UK (i)
Borbam Limited (Incorporated in India - 99.8
per cent. holding) India (iii)
Bordure Limited UK (i)
Duncan Properties Limited (Incorporated in Bangladesh) Bangladesh (vii)
Eastern Produce Investments Limited UK (i)
Elgin Investments Limited (Incorporated in India
- 99.8 per cent. holding) India (iii)
Endogram Limited India (iii)
EP USA Inc. (Incorporated in the United States
of America) USA (xiii)
EP California Inc. (Incorporated in the United
States of America) USA (xiii)
John Ingham & Sons Limited UK (i)
Koomber Properties Limited (Incorporated in
India - 94.0 per cent. holding) India (iii)
Lawrie (Bermuda) Limited (Incorporated in Bermuda) Bermuda (xx)
Lawrie Group Plc (Owned directly by the Company) UK (i)
Lawrie International Limited (Incorporated in
Bermuda) Bermuda (xx)
Lebong Investments Limited (Incorporated in
India - 94.0 per cent. holding) India (iii)
Linton Park Plc (Owned directly by the Company) UK (i)
Lintak Investments Limited (Incorporated in
Kenya) Kenya (x)
Longbourne Holdings Limited Bangladesh (i)
Plantation House Investments Limited Malawi (xii)
(Incorporated in Malawi - 50.2 per cent. held
by subsidiaries)
Isle of
Shula Limited (Incorporated in Isle of Man) Man (xix)
Unochrome Industries Limited UK (i)
Western Dooars Investments Limited UK (i)
Other
Linton Park Services Limited UK (i)
Dormant companies
ACS&T Gloucester Limited UK (i)
ACS&T Grimsby Limited UK (i)
ACS&T Humberside Limited UK (i)
ACS&T Seamer Limited UK (i)
ACS&T Tewkesbury Limited UK (i)
ACS&T Wolverhampton Limited UK (i)
AKD Engineering Limited UK (i)
Alex Lawrie & Company Limited UK (i)
Amgoorie Investments Limited UK (i)
Assam-Dooars Holdings Limited UK (i)
Associated Fisheries (Scotland) Limited UK (xiv)
Banbury Tea Warehouses Limited UK (i)
Blantyre & East Africa Limited UK (xiv)
Blantyre Insurance & General Agencies Limited
(Incorporated in Malawi - Eastern Produce Malawi
Limited) Malawi (xii)
Bonathaba Farms (Pty) Limited (Incorporated
in South Africa) South Africa (viii)
British African Tea Estates (Holdings) Limited UK (i)
British African Tea Estates Limited UK (i)
British Heat Treatments Limited UK (i)
British Indian Tea Company Limited UK (i)
British United Trawlers Limited UK (i)
BTS Chemicals Limited UK (i)
BUT Engineers (Fleetwood) Limited UK (i)
BUT Engineers (Grimsby) Limited UK (i)
Camellia Investments Limited UK (i)
Chisambo Holdings Limited UK (i)
Chisambo Tea Estate Limited UK (i)
Cholo Holdings Limited UK (i)
Craighead Investments Limited UK (i)
David Field Limited UK (i)
East African Tea Plantations Limited (Incorporated
in Kenya - held by Eastern Produce Kenya Limited) Kenya (x)
Eastern Produce Africa Limited UK (i)
Eastern Produce Kakuzi Services Limited (Incorporated
in Kenya - held by Kakuzi Limited) Kenya (x)
EP (RBDA) Limited (Incorporated in Malawi -
Eastern Produce Malawi Limited) Malawi (xii)
Estate Services Limited (Incorporated in Kenya
- held by Kakuzi Limited) Kenya (xi)
Feltham 1 Limited UK (i)
Feltham 2 Limited UK (i)
Fescol Limited UK (i)
G. F. Sleight & Sons Limited UK (i)
Goodricke Lawrie Consultants Limited UK (i)
Gotha Tea Estates Limited UK (i)
Granton Transport Limited UK (xiv)
Hamstead Village Investments Limited UK (i)
Hellyer Brothers Limited UK (i)
Horace Hickling & Company Limited UK (i)
Hudson Brothers Trawlers Limited UK (i)
Humber Commercials Limited UK (i)
Humber St. Andrew's Engineering Company Limited UK (i)
Isa Bheel Tea Company Limited UK (i)
Jatel Plc UK (i)
Jetinga Holdings Limited UK (i)
Jetinga Valley Tea Company Limited UK (i)
Kaguru EPZ Limited (Incorporated in Kenya -
held by Kakuzi Limited) Kenya (xi)
Kapsumbeiwa Factory Company Limited UK (i)
Kip Koimet Limited (Incorporated in Kenya -
held by Eastern Produce Kenya Limited) Kenya (x)
Kumadzi Tea Estates Limited UK (i)
Lankapara Tea Company Limited UK (i)
Lawrie Bhutan Limited UK (i)
Lawrie Plantation Services Limited UK (i)
Leasing Investments Limited UK (i)
Nasonia Tea Company Limited (Incorporated in
Malawi) Malawi (xii)
North West Profiles Limited UK (i)
Octavius Steel & Company (London) Limited UK (i)
Robert Hudson Holdings Limited UK (i)
Rosehaugh (Africa) Limited UK (i)
Ruo Estates Limited UK (i)
Ruo Estates Holdings Limited UK (i)
Sandbach Export Limited UK (i)
Sapekoe Pusela (Pty) Limited (Incorporated in
South Africa - held by Eastern Produce South
Africa (Pty) Limited) South Africa (ix)
Silverthorne-Gillott Limited UK (i)
SIS Securities Limited UK (i)
Sterling Industrial Securities Limited UK (i)
Stewart Holl Investments Limited UK (i)
The Amgoorie Tea Estates Limited UK (i)
The Bagracote Tea Company, Limited UK (i)
The Ceylon Upcountry Tea Estates Limited UK (i)
The Dejoo Tea Company Limited UK (i)
The Dhoolie Tea Company Limited UK (i)
The Doolahat Tea Company Limited UK (i)
The Eastern Produce & Estates Company Limited UK (i)
The Endogram Tea Company Limited UK (i)
The Jhanzie Tea Association Ltd UK (i)
The Harmutty Tea Company Limited UK (i)
The Kapsumbeiwa Tea Company Limited UK (i)
The Longai Valley Tea Company Limited UK (i)
The Tyspane Tea Company Limited UK (i)
Thyolo Highlands Tea Estates Limited UK (i)
Vaghamon (Travancore) Tea Company Limited UK (i)
Walter Duncan & Goodricke Limited UK (i)
WDG Properties Limited UK (i)
Western Dooars Tea Holdings Limited UK (i)
Summarised financial information on subsidiaries with material
non-controlling interests
Summarised balance sheet
Eastern Produce Eastern Produce
Kenya Limited Malawi Limited
as at 31 December as at 31 December
2018 2017 2018 2017
GBP'm GBP'm GBP'm GBP'm
Current
Assets 33.2 29.0 17.3 11.9
Liabilities (25.6) (25.1) (10.5) (9.5)
Total current net assets 7.6 3.9 6.8 2.4
Non-current
Assets 28.7 26.5 41.4 39.3
Liabilities (4.3) (4.1) (12.9) (12.0)
Total non-current net assets 24.4 22.4 28.5 27.3
Net assets 32.0 26.3 35.3 29.7
Eastern Produce
South Africa Goodricke Group
Limited Limited
as at 31 December as at 31 December
2018 2017 2018 2017
GBP'm GBP'm GBP'm GBP'm
Current
Assets 6.1 3.9 38.3 36.9
Liabilities (3.2) (1.2) (24.5) (22.0)
Total current net assets 2.9 2.7 13.8 14.9
Non-current
Assets 6.8 6.2 34.6 34.8
Liabilities (1.5) (1.1) (10.4) (10.3)
Total non-current net assets 5.3 5.1 24.2 24.5
Net assets 8.2 7.8 38.0 39.4
Horizon Farms Kakuzi Plc
as at 31 December as at 31 December
2018 2017 2018 2017
GBP'm GBP'm GBP'm GBP'm
Current
Assets 5.4 4.3 17.2 17.1
Liabilities (0.8) (0.5) (2.4) (4.4)
Total current net assets 4.6 3.8 14.8 12.7
Non-current
Assets 7.9 7.9 28.0 24.0
Liabilities (0.8) (0.7) (6.8) (5.8)
Total non-current net assets 7.1 7.2 21.2 18.2
Net assets 11.7 11.0 36.0 30.9
Summarised income statement
Eastern Produce Eastern Produce
Kenya Limited Malawi Limited
for year for year ended
ended 31 December 31 December
2018 2017 2018 2017
GBP'm GBP'm GBP'm GBP'm
Revenue 40.4 44.0 29.1 26.0
Profit before tax 10.9 9.0 8.4 5.2
Taxation (3.3) (3.0) (2.4) (1.8)
Other comprehensive income/(expense) 2.3 (2.1) 1.9 (2.7)
Total comprehensive income 9.9 3.9 7.9 0.7
Total comprehensive income allocated
to non-controlling interests 3.0 1.2 2.1 0.2
Dividends paid to non-controlling
interests 1.3 0.8 0.6 0.5
Eastern Produce
South Africa Goodricke Group
Limited Limited for
for year year
ended 31 December ended 31 December
2018 2017 2018 2017
GBP'm GBP'm GBP'm GBP'm
Revenue 6.4 3.7 83.6 84.0
Profit/(loss) before tax 1.7 (1.3) 2.7 5.4
Taxation (0.5) 0.4 (1.1) (2.1)
Other comprehensive expense (0.8) - (1.9) (0.7)
Total comprehensive income/(expense) 0.4 (0.9) (0.3) 2.6
Total comprehensive income/(expense)
allocated to
non-controlling interests 0.1 (0.2) (0.1) 0.8
Dividends paid to non-controlling
interests - - 0.3 0.3
Horizon Farms Kakuzi Plc for
for year year ended 31
ended 31 December December
2018 2017 2018 2017
GBP'm GBP'm GBP'm GBP'm
Revenue 5.2 6.6 21.7 19.2
Profit before tax 2.4 3.8 5.1 6.3
Taxation (0.8) (1.4) (1.5) (1.9)
Other comprehensive income/(expense) 0.7 (0.8) 2.5 (2.9)
Total comprehensive income 2.3 1.6 6.1 1.5
Total comprehensive income allocated
to
non-controlling interests 0.5 0.3 3.0 0.7
Dividends paid to non-controlling
interests 0.3 0.4 0.5 0.4
Summarised cash flows
Eastern Produce Eastern Produce
Kenya Limited for year Malawi Limited for year
ended 31 December ended 31 December
2018 2017 2018 2017
GBP'm GBP'm GBP'm GBP'm
Cash flows from operating activities
Cash generated from operations 9.1 17.3 6.2 6.0
Net interest received 1.6 1.1 0.2 0.1
Income tax paid (3.8) (3.4) (1.6) (1.0)
Net cash generated from operating activities 6.9 15.0 4.8 5.1
Net cash used in investing activities (1.7) (3.4) (1.9) (2.9)
Net cash used in financing activities (4.2) (2.8) (2.3) (1.2)
Net increase in cash and cash equivalents
and bank overdrafts 1.0 8.8 0.6 1.0
Cash, cash equivalents and bank overdrafts
at beginning of year 20.4 13.0 0.5 (0.4)
Exchange gains/(losses) on cash and
cash equivalents 1.4 (1.4) 0.1 (0.1)
Cash, cash equivalents and bank overdrafts
at end of year 22.8 20.4 1.2 0.5
Goodricke Group
Eastern Produce Limited for year
South Africa Limited for year ended 31 December ended 31 December
2018 2017 2018 2017
GBP'm GBP'm GBP'm GBP'm
Cash flows from operating
activities
Cash generated from operations 2.1 0.1 1.3 8.2
Net interest received - 0.1 - -
Income tax paid - - (1.0) (1.6)
Net cash generated from operating
activities 2.1 0.2 0.3 6.6
Net cash used in investing
activities (1.9) (1.5) (1.8) (6.3)
Net cash generated from/(used in)
financing
activities - 0.1 (1.6) (1.4)
Net increase/(decrease) in cash
and cash
equivalents and bank overdrafts 0.2 (1.2) (3.1) (1.1)
Cash, cash equivalents and bank
overdrafts
at beginning of year 2.5 3.9 1.6 2.5
Exchange (losses)/gains on cash
and cash
equivalents (0.2) (0.2) - 0.2
Cash, cash equivalents and bank
overdrafts
at end of year 2.5 2.5 (1.5) 1.6
Horizon Farms Kakuzi Plc for
for year year ended 31
ended 31 December December
2018 2017 2018 2017
GBP'm GBP'm GBP'm GBP'm
Cash flows from operating activities
Cash generated from operations 1.8 5.0 7.4 9.8
Net interest received - - 0.9 0.7
Income tax paid (0.7) (1.0) (2.6) (0.9)
Net cash generated from operating
activities 1.1 4.0 5.7 9.6
Net cash used in investing activities - (0.2) (5.8) (6.2)
Net cash used in financing activities (1.6) (1.9) (1.0) (0.9)
Net (decrease)/increase in cash
and cash equivalents and bank
overdrafts (0.5) 1.9 (1.1) 2.5
Cash, cash equivalents and bank
overdrafts at beginning of year 2.5 0.7 12.6 11.3
Exchange gains/(losses) on cash
and cash equivalents 0.1 (0.1) 0.1 (1.2)
Cash, cash equivalents and bank
overdrafts
at end of year 2.1 2.5 11.6 12.6
Associated undertakings
The principal associated undertakings of the Group at 31
December 2018 were:
Group
Principal interest
country Accounting in equity
of Registered date capital
operation Office 2018 per cent.
Insurance and banking
BF&M Limited (Incorporated
in Bermuda -common stock) Bermuda (xvii) 31 December 37.2
United Finance Limited (Incorporated
in Bangladesh - ordinary shares) Bangladesh (vii) 31 December 38.4
United Insurance Company Limited
(Incorporated in Bangladesh
- ordinary shares) Bangladesh (vii) 31 December 37.0
Registered O ces:
(i) Linton Park (viii) Slangrivier Road (xv) Robert-Drosten-Platz
Linton Slangrivier 1
Maidstone Plaas D-82380
Kent Wellington Peissenberg
ME17 4AB 7655 Germany
England South Africa
(ii) Amgoorie Tea Garden (ix) 7 Windsor Street (xvi) First Names House
PO: Amguri Tzaneen Victoria Road
Haloating - 785 850 Douglas
681 Limpopo Province Isle of Man
Dist: Sibsagar South Africa IM2 4DF
Assam
India
(iii) Camellia House (x) New Rehema House (xvii) 112 Pitts Bay
14 Gurusaday Road Rhapta Road Road
Kolkata - 700019 Westlands Pembroke
West Bengal P O Box 45560 Bermuda
India GPO 00100 HM08
Nairobi
Kenya
(iv) Koomber Tea Garden (xi) Main O ce (xviii) 3rd Floor
PO: Kumbhir Punda Milia 180 Msasani Bay
Cachar - 788 108 Road Msasani
Assam Makuyu Dar Es Salaam
India P O Box 24 Tanzania
01000 Thika
Kenya
(v) Sessa Tea Garden (xii) PO Box 53
PO: Dibrugarh - Mulanje
786001 Malawi.
Dist: Dibrugarh
Assam
India
(vi) Fazenda Maruque (xiii) 2520 West Shaw
s/n Lane
sala 03 Suite 101
Bairro Maruque Fresno
Itaberá California
São Paulo USA
Brazil
(vii) Camellia House (xiv) Craigshaw Crescent
22 Kazi Nazrul West Tullos
Islam Aberdeen
Avenue AB12 3TB
Dhaka 1000 Scotland
Bangladesh
44 Control of Camellia Plc
Camellia Holding AG continues to hold 1,427,000 ordinary shares
of Camellia Plc (representing 51.67 per cent. of the total voting
rights). Camellia Holding AG is owned by The Camellia Private Trust
Company Limited, a private trust company incorporated under the
laws of Bermuda as trustee of The Camellia Foundation ("the
Foundation"). The Foundation is a Bermudian trust, the income of
which is utilised for charitable, educational and humanitarian
causes at the discretion of the trustees.
The activities of Camellia Plc and its group (the "Camellia
Group") are conducted independently of the Foundation and none of
the directors of Camellia Plc are connected with The Camellia
Private Trust Company Limited or the Foundation. While The Camellia
Private Trust Company Limited as a Trustee of the Foundation
maintains its rights as a shareholder, it has not participated in,
and has confirmed to the board of Camellia Plc that it has no
intention of participating in, the day to day running of the
business of the Camellia Group. The Camellia Private Trust Company
Limited has also confirmed its agreement that where any director of
Camellia Plc is for the time being connected with the Foundation,
he should not exercise any voting rights as a director of Camellia
Plc in relation to any matter concerning the Camellia Group's
interest in any assets in which the Foundation also has a material
interest otherwise than through Camellia Plc.
45 Related party transactions
During the year the Group received rental income from the
Foundation of GBP22,804 (2017: GBP8,910).
46 Subsequent events
Subsequent to the year end, the Group has agreed to acquire the
business and assets of two tea estates in Assam, India for an
aggregate consideration of approximately GBP10.2 million. The
estates are being operated under a power of attorney and the Group
is entitled to the income and responsible for the costs from 1
February 2019. However, the transfer of the leases is subject to
the approval of the government of Assam.
Report of the independent auditors
INDEPENT AUDITOR'S REPORT TO THE MEMBERS OF CAMELLIA PLC
Report on the audit of the financial statements
Opinion
In our opinion:
-- the financial statements of Camellia Plc (the 'parent company')
and its subsidiaries (the 'Group')
give a true and fair view of the state of the Group's and
of the parent company's a airs as at 31 December 2018 and
of the Group's profit for the year then ended;
-- the Group financial statements have been properly prepared
in accordance with International Financial Reporting Standards
('IFRSs') as adopted by the European Union;
-- the parent company financial statements have been properly
prepared in accordance with IFRSs as adopted by the European
Union and as applied in accordance with the provisions of
the Companies Act 2006; and
-- the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
We have audited the financial statements which comprise:
-- the consolidated income statement;
-- the consolidated statement of comprehensive income;
-- the consolidated and parent company balance sheets;
-- the consolidated and parent company statements of changes
in equity;
-- the consolidated and parent company cash flow statements;
and
-- the related notes 1 to 46.
The financial reporting framework that has been applied in their
preparation is applicable law and IFRSs as adopted by the European
Union and, as regards the parent company financial statements, as
applied in accordance with the provisions of the Companies Act
2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) ('ISAs (UK)') and applicable law. Our
responsibilities under those standards are further described in the
auditor's responsibilities for the audit of the financial
statements section of our report.
We are independent of the Group and the parent company in
accordance with the ethical requirements that are relevant to our
audit of the financial statements in the UK, including the
Financial Reporting Council's (the 'FRC's') Ethical Standard as
applied to listed entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We believe
that the audit evidence we have obtained is su cient and
appropriate to provide a basis for our opinion.
Summary of our audit approach
Key audit The key audit matters that we identified in the
matters current year were:
* Revenue recognition
* Fair value of biological assets under IAS 41
'Agriculture'
* Impairment of factories and bearer plants
Materiality The materiality that we used for the Group financial
statements was GBP1.3m which was determined on
the basis of 5% of profit before tax from continuing
operations.
Scoping Our scoping provides full scope audit coverage
of 87% of the Group's revenue, 96% of the Group's
profit before tax and 86% of the Group's net assets.
Conclusions relating to going concern
We are required by ISAs (UK) to report in respect of the following
matters where:
We have nothing to report in
* the Directors' use of the going concern basis of respect of these matters.
accounting in preparation of the financial statements
is not appropriate; or
* the Directors have not disclosed in the financial
statements any identified material uncertainties that
may cast significant doubt about the Group's or the
parent company's ability to continue to adopt the
going concern basis of accounting for a period of at
least twelve months from the date when the financial
statements are authorised for issue.
Key audit matters
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) that we identified. These matters included those which had
the greatest e ect on: the overall audit strategy, the allocation
of resources in the audit; and directing the e orts of the
engagement team.
These matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these
matters.
Revenue recognition
Key audit matter The Group's agricultural operations involve
description a wide range of customer delivery models, including
auction and retail sales. Per IFRS 15, revenue
is recognised when the performance obligation
has been satisfied. Given the complexity of
the Group's operations and the terms of business
with buyers, there is a risk of inappropriate
cut-o of revenue recognition around the balance
sheet date.
The Group's agricultural revenue is included
within Sale of Goods of GBP248.5m, disclosed
in note 2 to the financial statements. Further
information regarding the agricultural revenue
recognition policy is in the principal accounting
policies disclosed in the financial statements.
How our scope We have performed the following procedures in
of work responded order to address the risk:
to the key
audit matter - We gained an understanding of the key processes
used to record revenue transactions and assessed
the design and implementation of controls.
- We performed detailed cut-o testing of revenue
transactions during the period either side
of the balance sheet date with reference to
the relevant terms of business, dispatch or
delivery documentation as appropriate.
- We examined material journal entries that
were posted to revenue accounts and obtained
supporting evidence to test the appropriateness
of revenue recognition.
Key observations We have concluded that revenue is appropriately
recognised in the correct accounting period
in accordance with IFRS 15.
Fair value of biological assets under IAS 41 'Agriculture'
Key audit matter The Group holds GBP8.8m (2017: GBP6.6m) of
description biological assets as current assets. As required
by IAS 41 'Agriculture', management estimates
the fair value of these assets through the
use of valuation models and recent transaction
prices. Significant judgement is required
for key assumptions for each model, including
the life-span of the plantings, yields, selling
prices, costs and discount rates. The valuation
is sensitive to some of the underlying assumptions.
Biological assets are disclosed in note 18
to the financial statements, the valuation
is discussed as a key source of estimation
uncertainty and the valuation policy is disclosed
in the principal accounting policies.
How our scope of We have performed the following procedures
work responded to in order to address the risk:
the key audit matter * We gained an understanding of key controls around the
valuation of biological assets and assessed the
design and implementation of controls.
* For a sample of fair value models,
* we assessed the inputs by assessing the historical
accuracy of management's forecasts and utilising
third-party and market data;
* we tested the mechanical integrity of the model.
Key observations From the work performed, we are satisfied
that the key assumptions applied in respect
of the valuation of biological assets are
appropriate.
Impairment of factories and bearer plants
Key audit matter The Group holds GBP226.3m (2017: GBP216.3m)
description of property, plant and equipment (PP&E),
which includes factories and bearer plants.
Management identified gardens as cash generating
units (CGUs) and performed an annual review
for indicators of impairment. This considered
indicators such as underutilisation, adverse
weather conditions and land use rights. There
is, therefore, a risk that an impairment
is required but not recognised.
PP&E is disclosed in note 16 to the financial
statements, the valuation is discussed as
source of estimation uncertainty, and the
valuation policy is disclosed in the principal
accounting policies.
How our scope of We gained an understanding of key controls
work responded to around the valuation of biological assets
the key audit matter and assessed the design and implementation
of controls.
We challenged management's assessment as
to whether indicators of impairment exist
for factories and bearer plants with reference
to disease or crop damage, sustained generation
of operating losses, long term commodity
price reductions, underutilised plant or
warehousing, loss of key customers, long
term failure of water or power supply, variation
in rights to land use, significant changes
in tax or foreign exchange rates.
We also challenged management's allocation
of assets to individual cash generating units.
Key observations We concur with management that no impairment
of factories and bearer plants is required.
Our application of materiality
We define materiality as the magnitude of misstatement in the
financial statements that makes it probable that the economic
decisions of a reasonably knowledgeable person would be changed or
influenced. We use materiality both in planning the scope of our
audit work and in evaluating the results of our work.
Based on our professional judgement, we determined materiality
for the financial statements as a whole as follows:
Group financial statements Parent company financial
statements
Materiality GBP1.3m GBP0.5m
Basis for determining 5% of adjusted profit before 2% of net assets, capped
materiality tax at
from continuing operations. 40% of group materiality.
Rationale for We have used a profit based We have used net assets
the benchmark measure given the Group measure given that entity
applied is listed and therefore is a holding company,
shareholders focus on profitability. generating no revenue.
The profit is adjusted
to avoid distortion that
could otherwise arise due
to non-recurring items.
We agreed with the Audit Committee that we would report to the
Committee all audit di erences in excess of GBP0.07m (2017:
GBP0.07m), as well as di erences below that threshold that, in our
view, warranted reporting on qualitative grounds. We also report to
the Audit Committee on disclosure matters that we identified when
assessing the overall presentation of the financial statements.
An overview of the scope of our audit
The Group holds agricultural operations in countries across
Africa, North and South America, and Asia, with its principal crops
grown in Bangladesh, India, Kenya, Malawi and South Africa. The
Group's engineering and food service operations are located in
Europe, principally in the UK. Our Group audit was scoped by
obtaining an understanding of the Group and its environment,
including Group-wide controls, and assessing the risks of material
misstatement at the Group level. Of the Group's 81 principal
components, 23 were subject to a full audit and 3 were subject to
specified audit procedures where the extent of our testing was
based on our assessment of the risks of material misstatement and
of the materiality of the Group's operations at those
locations.
These 26 components represent the principal business units and
account for 87% of the Group's revenue and 96% of the Group's
profit before tax and 86% of the Group's net assets.
The group engagement team worked from the group's London o ce,
directing and supervising the work of component auditors. Senior
members of the group audit team visited the Bangladesh and India
components during the current year to discuss the component
auditors' risk assessment, and review documentation of the findings
from their work.
Scope Revenue % Profit before Net assets
tax % %
Full scope 85 89 66
Specified audit procedures 2 7 20
Review at group level 13 4 14
Other information
The Directors are responsible for the We have nothing to report
other information. The other information in respect of these matters.
comprises the information included
in the annual report, other than the
financial statements and our auditor's
report thereon.
Our opinion on the financial statements
does not cover the other information
and, except to the extent otherwise
explicitly stated in our report, we
do not express any form of assurance
conclusion thereon.
In connection with our audit of the
financial statements, our responsibility
is to read the other information and,
in doing so, consider whether the other
information is materially inconsistent
with the financial statements or our
knowledge obtained in the audit or
otherwise appears to be materially
misstated.
If we identify such material inconsistencies
or apparent material misstatements,
we are required to determine whether
there is a material misstatement in
the financial statements or a material
misstatement of the other information.
If, based on the work we have performed,
we conclude that there is a material
misstatement of this other information,
we are required to report that fact.
Responsibilities of directors
As explained more fully in the Directors' responsibilities
statement, the Directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true
and fair view, and for such internal control as the directors
determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to
fraud or error.
In preparing the financial statements, the Directors are
responsible for assessing the Group's and the parent company's
ability to continue as a going concern, disclosing as applicable,
matters related to going concern and using the going concern basis
of accounting unless the directors either intend to liquidate the
Group or the parent company or to cease operations, or have no
realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor's report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial
statements.
A further description of our responsibilities for the audit of
the financial statements is located on the Financial Reporting
Council's website at: www.frc.org.uk/auditorsresponsibilities. This
description forms part of our auditor's report.
Report on other legal and regulatory requirements
Opinions on other matters prescribed by the Companies Act
2006
In our opinion, based on the work undertaken in the course of
the audit:
-- the information given in the strategic report and the Directors'
report for the financial year for which the financial statements
are prepared is consistent with the financial statements;
and
-- the strategic report and the Directors' report have been
prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Group and
or the parent company and their environment obtained in the course
of the audit, we have not identified any material misstatements in
the strategic report or the Directors' report.
Matters on which we are required to report by exception
Adequacy of explanations received and accounting records
Under the Companies Act 2006 We have nothing to report in
we are required to report to respect of these matters.
you if, in our opinion:
* we have not received all the information and
explanations we require for our audit; or
* adequate accounting records have not been kept by the
parent company, or returns adequate for our audit
have not been received from branches not visited by
us; or
* the parent company financial statements are not in
agreement with the accounting records and returns.
Directors' remuneration
Under the Companies Act 2006 We have nothing to report in
we are also required to report respect of this matter.
if in our opinion certain disclosures
of directors' remuneration have
not been made.
Use of our report
This report is made solely to the company's members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
company's members those matters we are required to state to them in
an auditor's report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the company and the company's members as a body,
for our audit work, for this report, or for the opinions we have
formed.
Michael Williams, FCA (Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
London, United Kingdom
10 April 2019
Five year record
2018 2017 2016 2015 2014
GBP'm GBP'm GBP'm GBP'm GBP'm
Restated Restated
Revenue - continuing operations 309.8 298.3 257.9 244.7 238.9
Profit before tax 52.5 27.6 26.5 24.0 22.0
Taxation (20.0) (12.2) (12.4) (13.2) (13.7)
Profit from continuing operations 32.5 15.4 14.1 10.8 8.3
(Loss)/profit from
discontinued operation (0.2) 14.8 (20.0) (3.6) -
Profit/(loss) attributable to owners
of the parent 25.2 23.8 (10.7) 1.4 2.8
Equity dividends paid 3.8 3.6 3.6 3.5 3.5
Equity
Called up share capital 0.3 0.3 0.3 0.3 0.3
Reserves 395.2 368.1 330.5 320.6 321.4
Total shareholders' funds 395.5 368.4 330.8 320.9 321.7
Earnings/(loss) per share 912.4 p 861.7 p (387.4) p 50.7 p 102.7 p
Earnings per share
- continuing operations 919.6 p 325.9 p 336.7 p 181.0 p 102.7 p
Dividend paid per share 138 p 132 p 130 p 126 p 125 p
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR DBLFFKZFZBBE
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