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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Camellia Plc | LSE:CAM | London | Ordinary Share | GB0001667087 | ORD 10P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 4,510.00 | 4,480.00 | 4,540.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Offices-holdng Companies,nec | 320.9M | -13M | -4.7067 | -9.58 | 124.57M |
From Apr 2019 to Apr 2024
TIDMCAM
RNS Number : 4705D
Camellia PLC
27 April 2017
Camellia Plc
Final results
Camellia Plc (AIM:CAM) Final results for the year ended 31 December 2016.
Malcolm Perkins, Chairman of Camellia Plc, stated:
"2016 saw improved performance from all three of our trading divisions reflecting the increased focus arising from the managerial changes announced last year. It also saw the decision to withdraw from our investment in Duncan Lawrie and the resultant disposals of the operating units of that business, the full financial impact of which will be recorded over two financial years, with the anticipated profit on the disposal of Duncan Lawrie Asset Management of GBP19.2 million being reflected in the 2017 results."
"The outlook for 2017 is uncertain. Climate change, in the form of erratic rainfall patterns, heat waves and storms makes predicting crop volumes difficult. For example, the start of 2017 has seen droughts continuing in parts of South Africa and significantly reduced rainfall in Kenya and parts of the tea growing areas in India. The impact of this on production volumes and prices has yet to be established. The continuing low oil price provides a challenge to our oil service based engineering businesses, however the resilience of the UK economy has seen the other UK based businesses busier than they have been for some time."
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Financial highlights
Year ended Year ended
31 December 2016 31 December 2015
Restated(1)
GBP'm GBP'm
Revenue - continuing operations 257.9 244.7
Headline profit before tax - continuing operations 26.5 26.4
Loss from discontinued operation (20.0)(2) (3.6)
(Loss)/Profit for the year (5.9) 7.2
Earnings per share (387.4) p 50.7 p
Proposed final dividend 95 p 95 p
Total dividend for the year 130 p 129 p
1 Restated to include bearer crops as property, plant and equipment: to include growing crop
of green leaf tea at fair value and to include the green leaf element of made tea inventories
at fair value in accordance with IAS 16 and IAS41 (amended). The effect of the inclusion of
fair values for green leaf growing crop and for green leaf in inventory as required by IAS41
is to accelerate the recognition of an element of profit which would historically have been
recognised in future periods
2 Excludes the gain on sale of Duncan Lawrie Asset Management of GBP19.2 million which will
be reflected in 2017 results
* Headline profit is a measure of the underlying performance of the group which is not impacted
by exceptional items or items considered non-operational in nature. It excludes the results
of Duncan Lawrie which was discontinued during the year
Highlights
-- Agriculture benefited from record tea production
up 14.8% to 99.1 million kg and record Hass avocado
prices up 28.8% on prior year. Macadamia production
was down 31.6% due to dry weather.
-- In December, the discontinuation of Duncan Lawrie's
operations was announced. The UK loan book was sold
to Arbuthnot Latham at that time and the sale of
the UK asset management division to Brewin Dolphin,
subject to regulatory approval, was also announced.
Regulatory approval for the change of control has
now been received and the sale is expected to complete
in May 2017.
-- Abbey Metal Finishing returned to profitability in
2016 and is experiencing increased demand for its
services. Its subsidiary Atfin also moved into profit
in the last quarter of 2016.
-- AJT Engineering continues to be adversely impacted
by conditions in the oil and gas market although
it is hoped that the investment made in diversifying
into other sectors will start to show results in
2017.
-- BF&M, an associate, experienced strong underlying
trading, however significant claims arising from
two major hurricanes and a significant fire substantially
reduced its profits for the year.
-- Continued investment in the development of our assets
with GBP10.2 million spent on property, plant and
equipment and investment property.
-- Cash and cash equivalents increased to GBP71.8 million
reflecting, inter alia, strong cash inflows from
continuing operations of GBP35.3 million.
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 to download from the investor relations section on the Company's website www.camellia.plc.uk
Enquiries
Camellia Plc 01622 746655 Tom Franks, Chief Executive Officer Susan Walker, Chief Financial Officer Panmure Gordon (UK) Limited 020 7886 2500 Nominated Adviser and Broker Andrew Godber Erik Anderson
Camellia at a glance
Camellia Plc is an international Group - a global family of diverse companies with a 129-year history employing approximately 80,000 people worldwide. Our operations are in Agriculture, Engineering, Food Service and the holding of 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 businesses 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 are involved.
-- 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 any damage our activities may
cause.
Our continuing business is made up as follows:
AGRICULTURE
2016: Turnover - GBP207.1 million, Trading profit - GBP29.9 million, Return on capital - 10.0%*
Mature Immature
area area
Core crops Locations Ha. Ha.
Tea India, Bangladesh, Kenya, Malawi 32,445 2,390
Macadamia Kenya, South Africa, Malawi 2,356 1,126
Avocados Kenya 415 100
Speciality crops
Arable Brazil 3,374 -
Forestry Kenya, Malawi, Brazil 2,956 2,541
Rubber Bangladesh 1,610 365
Citrus USA 169 8
Pistachios USA 131 -
Wine grapes South Africa 63 11
Almonds USA 56 -
Pineapples Kenya 52 -
Other
Joint Projects Kenya 1,851 -
Cattle Kenya 4,540 head
================= ================================= ========== ========
* Return on capital = segment trading profit ÷ (segment assets less segment liabilities)
ENGINEERING
2016: Turnover - GBP18.8 million, Trading loss - GBP2.6 million
Subsidiary Locations Abbey Metal Finishing UK, Germany AJT Engineering UK British Metal Treatments UK GU Cutting and Grinding UK XiMo Switzerland, Hungary =============== ====================
FOOD SERVICE
2016: Turnover - GBP31.6 million, Trading profit - GBP0.8 million, Return on capital - 4.3%
Subsidiary Locations
ACS&T UK
Affish The Netherlands
Wylax The Netherlands
===================== ================ =================== ============
INVESTMENTS
Market value
at
31/12/16
Investment type Locations GBP'm
Investment Portfolio Global 37.2
Investment Property UK, Malawi, Isle of Man, Brazil 22.8
Collections UK, India 9.2*
* Collections are stated
at cost
======================================= =================== ============
ASSOCIATES
2016: Share of results after
taxation - GBP5.1 million
Holding
Location Activity %
Life and Non-life
BF&M Bermuda insurance 35.8
United Finance Bangladesh Banking 38.4
United Insurance Bangladesh Non-life insurance 37.0
===================== ================ =================== ============
DISCONTINUED OPERATIONS
As announced on 19 December 2016, the Group is in the process of disposing of its interest in the Duncan Lawrie Private Banking Group.
Chairman's statement
I am pleased to report the results for 2016, which reflect a slightly increased headline profit from continuing operations of GBP26.5 million (2015: GBP26.4 million). Overall, a loss of GBP5.9 million was recorded for the year (2015: profit GBP7.2 million) due to the inclusion of a charge of GBP20.0 million in respect of the expected costs of closure and wind down of Duncan Lawrie. However, the expected future gain on sale of Duncan Lawrie's UK asset management business of GBP19.2 million is not included in the 2016 results. The timing of the various sales and closure of Duncan Lawrie means that the financial impact has to be recorded over two separate years and I urge shareholders to read the Chief Financial Officer's report on pages 15 to 17 where the full financial impact of the closure is described.
The attached Report and Accounts retain the format adopted last year of giving additional detail as to our individual operations, and this year we have also included significant information on our approach to both environmental and social sustainability and what that means for the Group. It has always been part of the Group's ethos to support the communities in which we operate, and I hope that this new disclosure will assist shareholders in understanding the full impact of that support.
As previously announced to the market and, as I refer to above, the fall in interest rates and the continuing uncertainty in the UK property market in the second half of 2016 led to the Board taking the decision to discontinue the operations of our private banking and wealth management business, Duncan Lawrie. The loan book was sold to Arbuthnot Latham on 19 December 2016 and at the same time we announced the sale of the UK asset management division to Brewin Dolphin subject only to approval from the Financial Conduct Authority ('FCA'). The FCA approval for the change of control has since been received and this transaction is expected to complete in May. There were no other significant changes to the Group structure in the year.
2016 was a notable year in many respects, not least of which was the Group's record production of 99.1 million kg of tea, an increase of 14.8% over 2015. At the same time macadamia production fell significantly in the year. This illustrates the impact of weather on our operations and the importance of our geographic and crop diversity.
The global political environment remains uncertain. The implications of Brexit will only be fully understood some years hence, but are unlikely to have a major effect on our businesses other than the implications from exchange rates. Of more concern are the pronouncements by politicians, particularly in Africa, regarding land security and the widespread corruption evident in so many of the countries in which we operate.
PricewaterhouseCoopers and its predecessor firms have been auditor to various companies in the Group since the 1960's, and more recently to Camellia. However, following corporate governance changes we are proposing the appointment of Deloitte as auditor to the Group. I would like to take this opportunity to thank PricewaterhouseCoopers for their help and contribution to the development of Camellia over their tenure.
Dividend
Your Board is recommending a final dividend of 95p per share which, together with the interim dividend already paid of 35p per share, brings the total distribution for the year to 130p per share compared with 129p per share for 2015.
Outlook
As ever, the outlook for 2017 is uncertain. Climate change, in the form of erratic rainfall patterns, heat waves and storms makes predicting crop volumes difficult; for example the start of 2017 has seen droughts continuing in parts of South Africa and significantly curtailed rainfall in Kenya and parts of the tea growing areas of India.
The impact of this on production volumes and prices has yet to be established. The continuing low oil price provides a challenge to our oil service based engineering businesses, however the resilience of the UK economy has seen the other UK based businesses busier than they have been for some time.
Staff
As always, my thanks go out to all our staff for their efforts in 2016.
Malcolm Perkins
Chairman
26 April 2017
Chief Executive's report
I am pleased to present my second report as Chief Executive.
As set out in the Chairman's statement, the only major structural change to the Group this year was the decision to withdraw from our investment in Duncan Lawrie. A combination of lower interest rates, a weaker housing market and the consequent need to inject significantly more capital than we had anticipated led to the decision to dispose of this operation.
Now that the sale of the asset management division of Duncan Lawrie has received the relevant regulatory approvals for the change of control, the transaction is expected to complete in May 2017 and we will then be able to finalise the process of formally winding down the bank and extract the capital that the Group has invested. This capital will then be available for investment in the Group's remaining operations, subject to ensuring that we are able to meet our obligations as regards the pension fund deficit described more fully in the Chief Financial Officer's report on page 16.
I am pleased to report improved performance from all three remaining divisions, reflecting the increased focus on these businesses arising from the managerial changes announced last year.
As a result of the decision to withdraw from Duncan Lawrie, the Group's remaining assets in Banking and Financial Services consist only of associate companies and therefore this is no longer reported as a separate division.
BUSINESS STRATEGY
The overall Group strategy, which is set out on page 18, remains unchanged with each division expected to perform against an agreed divisional strategy which sets out the goals and targets for the short and medium term and are set out below.
Agriculture
The Agriculture division strategy remains the same with the focus on our core crops of tea, macadamia and avocado where we have scale and geographic spread and therefore the opportunity to build a significant market presence.
Agriculture is the largest division, accounting for c80% of Group turnover and is the area where we have the greatest critical mass and see the best opportunities for the Group at the current time. It is therefore likely that this will be a focus for future investment.
Engineering
Engineering North. AJT Engineering continues to be impacted by the low oil price and the sharply reduced investment from the oil industry in the North Sea. Significant steps have been taken to reduce the size of the workforce, cut costs and diversify the business into other industries. Good progress has been made in this direction in both the rail and hydroelectric sectors, but the future for AJT Engineering will depend on a recovery of the oil sector in the North Sea.
Engineering South. The principal driver of growth in Engineering South continues to be Abbey Metal Finishing and its joint venture in Germany, Atfin which returned to profitability last year. Neither is yet at full capacity and both companies will continue to grow their customer base in the aerospace industry.
We intend for the remaining businesses in Engineering South to continue to grow organically over the coming years.
Food Service
UK. ACS&T operates as a niche high quality operator in the storage and distribution of frozen foods together with some ambient food service provision as demand and space allows. The business will expand and invest where appropriate to serve the needs of its customers.
Netherlands. Affish and Wylax, our fish trading and distribution businesses in the Netherlands, returned to profitability last year following the change in management early in 2016. They continue to work on their medium term strategy.
Investments
Investment Portfolio. The Group has a portfolio, principally of listed investments, the strategy for which remains to invest for the long term 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 in order to enhance the collections.
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, our shares in this company having a market value of GBP52.2 million at 31 December 2016. With all our associates, we continually monitor our investment and may increase or decrease our holding in the future.
PERFORMANCE
Agriculture
Tea Production
2016 was a record year for global tea production and within the Group we achieved record production levels in India, Bangladesh and Kenya. However, whilst global consumption continues to rise, it is not at the rate of the production increases experienced last year and therefore 2016 saw price pressure in all the major tea producing countries. This, combined with an increasing production cost base, primarily through wage inflation, eroded margins.
Mature Immature 2016 2015
area area Volume Volume
Ha. Ha. mkg* mkg*
India 14,328 1,475 28.6 25.8
Bangladesh 8,488 689 14.1 10.3
Kenya 4,157 - 15.1 13.1
Malawi 5,478 221 15.6 14.4
------ -------- ------ ------
Total 32,451 2,385 73.4 63.6
------ -------- ------ ------
* Estate volumes only, in addition 20.3 million kg of tea was produced for smallholders (2015:
17.8 million kg) and a further 5.4 million kg for managed clients (2015: 4.7 million kg).
Tea pricing and operations
India
Our Indian tea operations saw a record production of 28.6 million kg, 10.9% higher than 2015 as a result of excellent growing conditions, particularly in Assam. Average tea prices in 2016 were up 1.7% in Rupee terms against 2015 levels. However, we believe that prices would have been higher had it not been for the problems with the implementation of the Pan India Tea Auction and the well-publicised impact of Indian demonetisation. Costs of labour continue to rise at a higher rate than prices and therefore we are investing in the mechanisation of field operations and the automation of our factory processes to improve productivity and reduce costs. In 2016, all spraying activities were mechanised along with some pruning and plucking.
Packet tea volumes were maintained at similar levels to last year and average selling prices were 3.1% higher than those of 2015.
All Assam and Darjeeling estates are Rainforest Alliance certified and all factories are FSSC 22000 (Food Safety System Certification) certified.
Bangladesh
Production on our Bangladesh estates was also at record levels, being 36.9% higher than in 2015 due to benign weather conditions and the significant investments made over the last few years to improve yields. Average prices achieved were up 11.8% on 2015 reflecting the continuation of high duty tariffs on imported tea and strong local demand. However, there was a notable decline in prices towards the end of the year as the Chittagong auction became over supplied and this has continued during the first quarter of 2017.
During 2016 infilling was completed on the previous four years' replanting. A multiyear project to develop reservoir capacity for irrigation is underway.
Kenya
Kenya also achieved record production in 2016, but as a result of excellent growing conditions across Kenya (total country production was 19% up on 2015), the average tea price was 21.4% lower than in 2015. 95% of Kenyan teas are exported and prices are subject to significant volatility linked to production volumes. Fluctuations in the Kenyan tea price have a major impact on Group profitability. During the year, the Labour Court awarded an increase of 32% in wage rates spread over 2014 and 2015, but this remains subject to appeal and further negotiations with the trade unions.
During 2016 we increased the area of production under mechanical harvesting as well as increasing the level of automation in some of our factories. All factories are FSSC 22000 certified and all estates and outgrowers are Rainforest Alliance certified.
To date in 2017 there has been a drought across the entire tea producing area of Kenya, resulting in reduced volumes of crop and an increase in prices. 2017 will see a general election and continued discussions with trade unions and the Labour Court to resolve the ongoing impasse on wages.
Malawi
Production in Malawi also increased in 2016 and consequently pricing was down 6.4% on 2015. Production costs per kg were higher than those of 2015 despite the higher crop, reflecting inflationary pressure through substantial currency devaluation and significant wage increases. With our backing and support, the tea industry in Malawi has engaged in an industry revitalisation programme which looks to achieve, inter alia, a rise in wages and improvement in production levels as well raising the quality and price of Malawi's tea. To date there has been good progress in engaging with the trade union resulting in the signing of the first ever collective bargaining agreement in the industry's history in Malawi.
All estates and outgrowers are Rainforest Alliance certified, two factories have UTZ certification and three factories have FSSC 22000 certification.
2017 started with good growing conditions due to a normal wet season and prices have remained reasonably firm on the back of reduced volumes from Kenya. In 2016 we started producing a green tea which has been well received by the market, and we will be looking to increase volumes in 2017.
Macadamia Production
Mature Immature Volume Volume
area area 2016 2015
Ha. Ha. Tonnes Tonnes
Malawi 1,249 200 388 530
South Africa 804 276 265 574
Kenya 303 650 138 52
------ -------- ------ ------
Total 2,356 1,126 791 1,156
------ -------- ------ ------
Macadamia production in 2016 was significantly reduced in Malawi and South Africa due to the drought that affected both regions and the consequential reduction in nut size. In Kenya the estates are still predominantly immature and production is increasing in line with the maturity of the trees.
Macadamia Pricing
Average prices for macadamia in 2016 were up 2.1% on 2015 levels, which reflected the reduced volumes across the industry brought on by the droughts in South Africa and Malawi. The Group has created a brand 'Maclands', to promote and market our macadamia nuts to wholesalers and food manufacturers.
Macadamia Operations
Malawi
Production of macadamia nuts was down 26.8% on the previous year due to the impact of dry weather conditions. This has also impacted 2017 volumes which are significantly lower than those of 2016. The processing factory has been FSSC 22000 certified.
South Africa
Volumes in 2016 were 53.8% below those of 2015, again reflecting the drought during 2015. Despite more normal rainfall in the last few months, the drought conditions experienced in 2016 are also likely to have an adverse effect on the crop for 2017. The ongoing development of the Mambedi Estate to macadamia orchards was delayed due to the drought but is expected to resume in 2017. The processing factory successfully completed the second phase of upgrading and has been FSSC 22000 certified.
Kenya
New plantings continued with 97 Ha being planted in the year. Construction of a macadamia processing factory, which began in April 2015, was completed in time to process the 2016 harvest and has operated ahead of expectations. The facility has been FSSC 22000 certified.
As with Malawi and South Africa 2017 yields are expected to suffer from the dry weather experienced in 2016 such that overall volumes in Kenya are expected to be similar to that of 2016.
Avocado Production
Mature Immature Volume Volume
area area 2016* 2015*
Ha. Ha. mkg mkg
Kenya 415 100 7.1 7.1
* Estate volumes only. In addition 1.8 million kg of smallholder fruit was packed (2015: 2.3 million kg)
Avocado Pricing and Operations
Good rainfall supported a satisfactory crop for the year, being 2% down on 2015 volumes (including smallholders). Average prices for Hass avocados in 2016 were at record levels (up 28.8% on 2015) as a result of demand from the European market. New plantings totalling 39 Ha of orchard were established and this development will continue in 2017. The avocado operations are FSSC 22000, Tesco's Natures Choice and GLOBAL G.A.P. certified and Rainforest Alliance will be added to this list in 2017. The smallholder initiative is gaining momentum with the number of registered growers increasing each year.
Speciality Crops Production
Mature Immature Volume Volume
area area 2016 2015
Ha. Ha. Tonnes Tonnes
Arable (Brazil) 3,374 - 24,078 25,888
Rubber (Bangladesh) 1,610 365 638 629
Citrus (USA) 169 8 4,293 4,844
Pistachio (USA) 131 - 678 31*
Wine grapes (South Africa) 63 11 437 625
Almonds (USA) 56 - 206 47
Pineapples (Kenya) 52 - 1,656 1,752
m3 m3
Forestry 2,956 2,541 22,397 ** 17,042 **
* 2015 was an 'off year' for Pistachios
** Volumes quoted are for conversion to value addition products rather than own use as fuel wood
Speciality Crops Pricing and Operations
Record soya production levels were recorded and the maize and soya crops in Brazil sold at significantly higher average prices than in 2015.
Sales volumes for rubber were 20% below those of 2015, however prices in 2016 were 6.8% higher reflecting increasing demand for natural latex.
Prices for California citrus were down 9.2% in the year and in common with other California based growers, our volumes were also lower.
Average prices for pistachios in 2016 were 50% lower than 2015 levels due to record crops in California. 2017 is an 'off' year.
Wine grape production in South Africa was down 30% on last year due to the dry weather conditions and bottled wine sale volumes were also lower. Results were in line with expectations although slightly down on the previous year.
Almond prices were reasonable despite the large crops in California and profits have been included in Group profit in 2016 for the first time.
Prices for fresh pineapple production in Kenya were marginally up on 2015.
Forestry operations continued to produce satisfactory volumes for fuel wood and value addition products.
We continue to raise cattle on those areas of the Kakuzi estate in Kenya unsuitable for crop development.
In total, the Agriculture division made a trading profit of GBP29.9 million (2015: GBP26.7 million) on turnover of GBP207.1 million (2015: GBP186.5 million).
Engineering
Engineering North
Engineering North had a difficult year with the low oil price continuing to affect North Sea investment and impacting the order book for AJT Engineering in Aberdeen. Turnover at AJT Engineering fell from GBP9.6 million in 2015 to GBP6.9 million in 2016. With the oil price remaining low, the company is braced for another difficult year although it is to be hoped that the investment made in diversification into other sectors referenced above will start to show results this year. AJT Engineering achieved ISO 14001:2015 certification.
Engineering South
Abbey Metal Finishing returned to an operating profit in 2016 for the first time since the move to its new facility in 2010. Demand for its services in the aerospace sector shows no sign of slowing down and the company is now working on projects for Airbus, Rolls-Royce and SAFRAN. Its subsidiary, Atfin in Germany, has also now been approved by a number of key customers including Rolls-Royce, MTU and Aubert & Duval, and moved into profit in the last quarter of 2016.
XiMo
XiMo, our industrial catalyst research and development business, continues to develop products with the objective of commercial use. In common with other research based businesses, it is expected to lose money pending the outcome of commercial trials.
In total, the Engineering division made a trading loss of GBP2.6 million (2015: trading loss GBP5.5 million) on turnover of GBP18.8 million (2015: GBP25.8 million).
Food Service
ACS&T saw turnover fall by 8.7% following a withdrawal from unprofitable business and as a result profits were in line with those of 2015. Capacity utilisation to date in 2017 has been significantly higher than normal for the time of year. ACS&T achieved ISO 14001:2015 certification.
In the Netherlands, both Affish and Wylax experienced challenging trading conditions, particularly as a result of currency movements, the impact of which had to be partially absorbed, but they have both returned to profitability.
In total the Food Service division made a trading profit of GBP0.8 million (2015: GBP0.7 million) on turnover of GBP31.6 million (2015: GBP31.9 million).
Investments
Investment Portfolio. Despite the significant fluctuations in both global equity and currency markets the value of the portfolio increased, assisted by the relative weakness of sterling. During the year we divested our long term holding in Ascendant Group and a number of additions and disposals were made across the portfolio. The gains on sale for the year were GBP1.5 million (2015: GBP0.4 million). The total value of the portfolio at 31 December 2016 was GBP37.2 million (2015: GBP30.6 million).
Investment Property. The site previously occupied by Loddon Engineering was transferred to investment property and has been let this year. Improvements were also carried out on certain properties. Following refurbishment, 6 Hobart Place, London is now available for rent.
Collections. The collections are held at cost. A number of minor additions and disposals were made during the year.
Associates
BF&M experienced strong underlying trading in 2016. However, claims arising from the damage caused by hurricanes Matthew in the Bahamas and Nicole in Bermuda reduced profits for the year by Bermudian Dollar 10.1 million and together with claims arising from a significant fire in Bermuda led BF&M to report a profit before tax of Bermudian Dollar 17.9 million (2015: Bermudian Dollar 30.1 million). BF&M has been accounted for as an associate since 1 July 2015.
Our two associate companies in Bangladesh, United Insurance and United Finance, saw profits lower than 2015 reflecting increased competition in the insurance industry and lower interest rates respectively.
In total, the share of the results of associates amounted to GBP5.1 million (2015: GBP4.2 million).
Discontinued Operation - Duncan Lawrie
During the year, the Board announced the discontinuation of Duncan Lawrie's operations. The UK loan book has been sold to Arbuthnot Latham and we also announced the sale of the UK asset management division to Brewin Dolphin, subject to regulatory approval. Regulatory approval for the change of control has since been received.
In the Isle of Man, agreement has been reached with First Names Group to manage the trust business for a period of 6 months. During this time, the clients will be asked to transfer their business to First Names Group. An agreement has also been signed with Canaccord Genuity for the sale of the Isle of Man asset management business.
An orderly wind down of Duncan Lawrie's deposit taking and other banking operations in the UK and Isle of Man is underway. Duncan Lawrie is fully funded to return all cash balances to clients.
POLITICAL, LEGISLATIVE and LEGAL ISSUES
The Group is present in many jurisdictions, and is subject to local legislation. The following issues either have had, or may have, a material impact on the Group:
-- As stated last year, 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.
There has been no update on this proposed legislation and therefore the impact on the Group
is hard to assess.
-- The Board continues to monitor and assess the impact of the UK's exit from the EU. To date
the impact of the decision has been broadly confined to currency movements but we remain concerned
about the costs of imports, particularly tea, on demand and the prices paid to producers.
-- 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 general election in Kenya is due to take place on 8 August 2017. Historically these have
been occasions of significant and sometimes violent unrest and we continue to monitor the
situation carefully.
DEVELOPMENT
We continued to invest in our assets during the year and GBP10.2 million was spent on property, plant and equipment and investment property (2015: GBP19.4 million) including the following key projects:
-- Completion of the macadamia cracking facility in Kenya
-- Phase 2 of the upgrade to the macadamia cracking facility in South Africa
-- Significant upgrades to the winery in South Africa
-- Improvements at nine tea factories
-- Additional irrigation facilities in India, Bangladesh, Kenya, Malawi and South Africa including
the creation of three new reservoirs in Bangladesh
-- Improvements to our investment property portfolio.
In addition to our continuous programme of replanting our tea areas, a programme to extend our planted areas in macadamia and avocado has been underway for a number of years and in 2016:
-- 65 Ha (2015: 36 Ha) of new avocado plantings were completed in Kenya
-- 97 Ha (2015: 158 Ha) of new macadamia plantings were carried out in Kenya, 47 Ha (2015: 81
Ha) in South Africa and 12 Ha (2015: 5 Ha) in Malawi.
SUSTAINABILITY AND CSR
Responsibility
The Group's businesses are fundamentally connected to the welfare of our communities and the environments in which we operate. We proactively invest to ensure that the environments where we do business are continually protected and improved. Our focus is on the long-term stability, security and continuity of our businesses and those communities.
In order to achieve this, we invest in, monitor and report on both Environmental and Social sustainability initiatives across all our divisions. In 2016, for the first time the Group compiled its global environmental footprint beyond CO(2) emissions. We measured and reviewed our impact in Greenhouse Gas emissions (GHG), Water and Waste, the results of which are summarised below. The Group is currently developing a range of long-term reduction targets on which we will report in due course.
Whilst monitoring and reducing our environmental footprint is critical, so too is ensuring the well-being of the communities in which we operate and on which we depend. We refer to this as 'social sustainability'. The level of health and educational facilities available from state governments varies widely across our operations, and consequently so does the focus and scale of our social sustainability projects. The level of support provided to many of these communities by the Group is substantial and is summarised below.
We also need to ensure that all our operations can demonstrate that they meet the requirements of our customers in terms of traceability and accreditation. 63% of our tea gardens are RFA certified and all our macadamia and avocado operations are FSSC 22000 certified. Further details of these are included in the operational reports above.
Environmental Sustainability
The key metrics for the Group include Greenhouse Gas emissions, water usage and waste produced. The table below sets out those metrics and also how they have developed since 2013.
2016 2015 2014 2013
Energy & Carbon
Total Energy Consumed (TWh) 1.22 1.15 1.24 1.27
Total Carbon Emissions (tonnes CO(2) e)(1) 224,277 211,603 212,821 213,631
Scope 1 (tonnes CO(2) e) 161,620 151,315 149,539 152,561
Scope 2 (tonnes CO(2) e) 62,657 60,288 63,281 61,070
Water
Total water withdrawal (million m3)(2) 40.1 34.9 37.6 31.8
Waste
Total waste (tonnes)(3) 27,908 27,053 24,425 24,304
1. The significant increase in tea production in 2016 coupled with a lack of availability of
other sources of power has led to an increase in Greenhouse Gas emissions in 2016 of 6.0%.
Power shortages and the reliance on fossil fuels is a feature of developing countries and
we are working to develop alternative, cleaner sources of energy.
2. The continued drought in Malawi and South Africa has increased the irrigation requirements
of our Agricultural businesses.
3. Compost from agriculture accounts for over 80% of our waste impact. We are working to reduce
waste and improve our recycling rates across all business units.
Some of the initiatives we are undertaking include:
-- Pursuing operational efficiency, we are sharing energy management knowledge and expertise
across our operations.
-- Investment in renewable energy via solar projects in India and Africa, and environmental management
systems adopted by all EU businesses.
-- Developing modern water management solutions in many of our operations, such as micro-sprinklers
in Africa and Regulated Deficit Irrigation. We build damns to collect water and support local
wildlife and create wetlands to improve waste water quality before release into the waterways.
Our work in this area is recognized by GLOBAL G.A.P. who awarded their International Award
for Sustainable Water Use to our 'Stretching the Rains' project at Kakuzi, Kenya.
Social Sustainability
The key areas of social sustainability that we consider important are access for our employees to a fair wage and for them and their families to education, healthcare and housing. The table below shows the provision of schools and healthcare by the Group in 2016. In addition, we provide housing for over 200,000 people.
2016
Schools* 279
School children educated annually 31,942
Hospitals/dispensaries/clinics* 113
Patients treated annually 559,000
* The funding and operation of schools and hospitals, provided for our workers and their communities, varies by location in accordance with local culture, practice and requirement. Some facilities are owned and operated by us directly, whilst others are fully or partly funded by us whilst being state and/or NGO managed and owned.
Through a broad range of initiatives in Corporate Social Responsibility (CSR) across the group, we contribute to improved health and nutrition, hygiene and sanitation of our communities. We seek to optimise local infrastructure by supporting roads, access to water, local healthcare initiatives and education projects. This year, we have actively supported Forum for the Future's Tea 2030 and Ethical Tea Partnership's Malawi 2020 tea revitalisation projects. Our continued focus on developing sustainable housing for our working communities is reflected in major housing renewal projects in Malawi, Kenya and India.
Health
On an ongoing basis, the majority of our tea estates in India and Bangladesh have a hospital or a clinic and in India and Bangladesh we have 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 companies.
Pursuing our vision to contribute to greater health, every year we engage in projects which contribute to the health of the local community. For example this year we helped fund a new paediatric wing in a local hospital in Malawi and over 300 special needs children were educated at the Goodricke School for Special Education and Interlink Calcutta (of which we fund 50% of the running costs).
Education
Central to our social initiatives is the ability to provide the opportunity for development for all. We provide schools and crèches in areas where we operate, either by building and running the schools or by supporting state educational projects in our communities. We support almost 32,000 children each year through education initiatives.
Smallholders
Demonstrating our commitment to responsible sourcing, we developed the first, fully commercialised, smallholder empowerment scheme in East Africa, SIREET. This and other smallholder programmes form an integral part of our businesses in Kenya, Malawi and India.
Amongst other initiatives, we processed 86.3 million kg of green leaf tea and 1.6 million kg of avocados were packed and exported for smallholders during the year, we also ran agricultural practice training days. These initiatives enabled over 20,000 local farmers to improve their earnings by benefiting from our agricultural expertise, infrastructure and access to market.
Wages
The remuneration of workers in the tea industry remains a serious challenge. Resolving the issue of low pay in this industry is a complex task which has to involve growers, buyers, retailers, NGOs and governments but ultimately will not be addressed until the price of a cup of tea adequately reflects the resources required to produce it. We believe in taking an active role in this process and will continue to back up our principles with action.
As a Group we are committed to paying fair wages, benefits and allowances in accordance with local legislation and trade union agreements and have received certifications from UTZ, Fairtrade and the Rainforest Alliance, which require an audit of the Group's employment practices as part of maintaining the accreditations. We are also a key part of a number of other initiatives to address the issue of low pay in developing countries. All our UK companies are Living Wage accredited employers.
SUMMARY
In summary, I am pleased with the performance of the Group this year, albeit there remains much to do. Clearly the disposal of our interest in Duncan Lawrie was disappointing but the improved performance in all the continuing divisions is encouraging. Furthermore the cash that will become available from the closure of Duncan Lawrie, together with the substantial cash balances available elsewhere in the Group, will allow us to take advantage of the opportunities that will come. Inevitably many of the markets that we are in will continue to face challenges but I believe that we are well placed to face these and confident in our ability to continue to grow the business.
Tom Franks
Chief Executive
26 April 2017
Chief Financial Officer's report
Overview of results
The loss for the year ending 31 December 2016 was GBP5.9 million (2015: profit GBP7.2 million) primarily as a consequence of the decision to discontinue the operations of Duncan Lawrie, our private banking and wealth management business. The profit after tax for the year for continuing operations increased to GBP14.1 million (2015: GBP10.8 million) reflecting improved profits in all our remaining segments.
The Group had net assets of GBP379.6 million (2015: GBP360.4 million) and net cash and cash equivalents of GBP71.8 million (2015: GBP65.6 million), excluding balances relating to our banking operations.
Headline profit
The headline profit before tax for continuing operations for the year ending 31 December 2016 was slightly higher than the previous year at GBP26.5 million (2015: GBP26.4 million). Headline profit is a measure of underlying performance which is not impacted by exceptional and other items considered non-operational in nature and is designed to make clear the underlying trading performance of the Group. Profits or losses from disposal or impairments of assets held as investments (eg from the investment portfolio, investment property) are considered to be operational in nature. It excludes the results of Duncan Lawrie which was discontinued during 2016.
The reconciliation of statutory profit to headline profit is as follows:
2016 2015
GBP'm GBP'm
Profit before tax from continuing operations 26.5 24.0
Bangladesh post employment benefits - past service cost - 6.1
Profit on disposal of non-current assets - previous operating sites - (3.7)
----- -----
Headline profit before tax from continuing operations 26.5 26.4
----- -----
Discontinued operation
As a consequence of the decision to exit from Duncan Lawrie, the results of Duncan Lawrie have been reclassified as a discontinued operation with a corresponding reclassification in 2015. The loss from the discontinued operation was GBP20.0 million (2015: GBP3.6 million) comprising the following:
2016 2015
GBP'm GBP'm
Duncan Lawrie's operating loss (7.5) (3.5)
Costs associated with the closure of the operations (including staff termination,
contract termination and advisors fees) (10.3) -
Impairment of property, plant, equipment, intangibles, loans and advances to customers (1.2) (0.1)
Loss on sale of UK loan book and provision for loss on sale of Isle of Man loan book (2.8) -
Profit on sale of available for sale financial assets 1.2 -
Profit on sale of held to maturity financial assets 0.6 -
----- -----
Loss from discontinued operation (20.0) (3.6)
----- -----
Impact on 2017 results
In December 2016 we announced the sale of the UK loan book the losses relating to which are reflected in 2016. At the same time we announced the sale of Duncan Lawrie's UK asset management business, subject to regulatory approval. Subsequent to the year end approval for the change of control, has been received and the sale is expected to complete in May 2017. This disposal is expected to generate a gain on sale of GBP19.2 million which will be reflected in the results for 2017, as will a small profit on the sale of the Isle of Man asset management business and trust operations. Duncan Lawrie will continue to trade during 2017 and will incur substantial operating losses as it winds down the residual operation.
There are three properties which are currently occupied by Duncan Lawrie which are expected to be retained by the Group for refurbishment or development in advance of tenants being sought. These properties will be reclassified as investment properties during 2017.
Accounting policies and practices
This is the first year in which our permanent plantings have been classified under IAS 16 as property, plant and equipment to be depreciated over their expected useful life. Our 2015 results have been restated so as to be comparable with the current year results.
Currencies
Over the course of the year ending 31 December 2016, Sterling weakened substantially against all our key operating currencies - 16.2% against the US Dollar, 14.1% against the Indian Rupee, 16.1% against the Bangladesh Taka, 8.7% against the Malawi Kwacha, 16.2% against the Kenya Shilling, 26.2% against the South African Rand and 31.4% against the Brazilian Real. This has resulted in a gain on foreign exchange translation of GBP52.0 million (2015: loss GBP13.4 million) which is reflected in the Statement of comprehensive income. Despite the significant movement in exchange rates against sterling between the beginning and end of the year, had we translated our profit before tax for the year using the same average rates as last year, our results for 2016 would have been GBP0.4 million lower, partly reflecting the devaluation of the Malawi kwacha. Our profit before tax from continuing operations includes exchange gains of GBP0.7 million on transactions during the year and GBP0.4 million net exchange gain on translation of foreign cash balances.
Cashflow
The Group's net cash position increased to GBP71.8 million at 31 December 2016 (2015: GBP65.6 million) (excluding net cash balances held within Duncan Lawrie) reflecting, inter alia, strong net cash inflows from continuing operating activities of GBP23.8 million (2015: inflow GBP37.4 million).
The net proceeds from the discontinuation of Duncan Lawrie of approximately GBP32 million will become available to the Group during 2017 and will be reflected in the Group's net cash position once no longer ringfenced as regulatory capital.
As explained below, contributions towards the deficit on the UK defined benefit pension scheme may increase once the triennial valuation has been completed.
Dividends
In line with the Group's long term horizons, the key use of cash is reinvestment in the business. Despite this, Camellia has a long track record of steady dividend growth and it is the intention that this historic trend is maintained. Given the substantial cash resources currently available to the Group, we see no reason why this should not continue.
Taxation
The Group's effective tax rate of 190.8% (2015: 64.7%) reflects the geographic mix of profits in higher tax rate jurisdictions and, in particular, the loss from the discontinued operation and the continuing losses incurred in the UK which we are currently unable to relieve against profits elsewhere in the Group.
The 2015 tax charge reflects a provision for taxation in Malawi arising from assessments raised by the Malawi Revenue Authority for unpaid taxes from prior years. We continue to be of the view that the claim is without technical merit.
Pensions and post-employment benefits
The Group operates a number of defined benefit pension schemes, the largest of which is in the UK. The overseas defined benefit schemes are located in Bangladesh, India and the Netherlands. The UK scheme has been closed to new entrants for a number of years and during 2016 was closed to future accrual. 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 of GBP66.7 million (2015: GBP38.6 million deficit).
Accounting for defined benefit schemes is prescribed by IAS 19 and the quantum of the deficit continues to be volatile and sensitive to small changes in assumptions as regards inflation and gilt yields in the relevant jurisdictions. This year a net actuarial loss of GBP24.3 million (2015: net actuarial gain of GBP9.1 million) is reflected in the Statement of comprehensive income.
In addition, GBP2.2 million (2015: GBP8.4 million) has been charged to our income statement in respect of employee benefit obligations. GBP6.1 million of the cost in 2015 relates to obligations for prior years post-employment benefits arising from legislation in Bangladesh.
Contributions to the externally funded defined benefit schemes are determined after consultation with the respective trustees and actuaries. In the UK, additional annual contributions of GBP0.9 million are being made to reduce the scheme's funding deficit. Our next triennial valuation will take place as at 1 July 2017 and it is possible that we will have to increase the contributions being made towards the funding deficit in future years.
Shareholders' funds
Equity attributable to Camellia's shareholders at the 2016 year end was GBP330.8 million (2015: GBP320.9 million). A reconciliation is set out in the Group statement of changes in equity.
Susan Walker
Chief Financial Officer
26 April 2017
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 2016 and a description of principal risks and uncertainties facing the Group. A fair review of the business of the Group is incorporated within the Chairman's statement and the Chief Executive's report on pages 5 to 14. 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 15 to 17. 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 14 and within the report of the directors.
Business model
The Group consists of businesses engaged in Agriculture, Engineering and Food Service. The Group also holds a range of Investments. Businesses are managed on a divisional basis with regular reports made to the Board on performance against the annual budget.
A decision was made to exit from Duncan Lawrie Private Bank during 2016.
Principal risks and uncertainties
There are a number of possible risks and uncertainties that could impact the Group's operations. As the Group's businesses are widely spread both in terms of activity and location, it is unlikely that any one single factor could have a material impact on the Group's long-term performance. The Group regularly monitors the risks at a local and central level. Information on the Group's financial risks is disclosed in note 39 of the accounts. The following risks relating to the Group's principal operations have been identified:
Agriculture
Risk Potential Impact Mitigation
Climate change Level of rainfall affecting crop Investment in irrigation and drought
yields and in extreme cases crop resistant crop varieties.
viability. Geographical spread of operations
to lessen the impact of extreme
weather on the Group as a whole.
Price volatility Changes in prices at auction impact Use of forward contracts, product
profitability each season. and crop diversification and
strategic relationships with
key customers.
Currency fluctuation Profit volatility arising from sales Monitoring of foreign exchange rates
in and cash management.
US dollars and Euros.
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 in processing.
Long term political issues over land Paying more for existing property Monitoring local land issues with
ownership in Kenya, Malawi and South (for example if freeholds become the assistance of lawyers and local
Africa 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 Anti-Bribery
Policy.
===================================== ===================================== ====================================
Engineering
Risk Potential Impact Mitigation
Dependence on the oil and gas and Changes in market conditions leading Efforts to diversify into other
aerospace sectors to lower demand for services. sectors. 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 audits.
reputational damage.
Environmental Vulnerability 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
reputational damage. environment. Regular external
audits.
Key customer dependence Losing a major customer. Diversification of the customer base
and careful customer relationship
management.
===================================== ===================================== ====================================
Food Service
Risk Potential Impact Mitigation
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 audits.
reputational damage.
Environmental Vulnerability 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 and reputational lessen the impact on the
damage. environment. Regular external
audits.
IT systems Interruption to services for the Implementation of a disaster
customers. recovery plan.
Key customer dependence Losing a major customer. Diversification of the customer base
and careful customer relationship
management.
===================================== ===================================== ====================================
Investments
Risk Potential Impact Mitigation
Market fluctuations Decline in the value of investments. Portfolio diversification and the
regular monitoring of individual
stock performance.
===================================== ===================================== ====================================
Group
Risk Potential Impact Mitigation
Increases in inflation and/or Increase in pension scheme deficits The final salary section of the UK
reductions in long term government with a resultant increase in the pension scheme is closed to new
bond yields in the UK and funding requirement. entrants and to future
overseas accrual. The Board monitors the
funding position of the pension
schemes and makes payments
in accordance with a deficit
reduction programme agreed with the
trustees of the UK scheme.
Regular monitoring of the funding
position and performance of the
assets.
===================================== ===================================== ====================================
Taxation risk
The Group operates in a large number of countries around the world. Uncertainties exist in relation to the interpretation of complex tax legislation, changes in tax laws, and the amount and timing of future taxable income. In some jurisdictions agreeing tax liabilities with local tax authorities can take several years. This could necessitate future adjustments to taxable income and expense already recorded.
At the year end date, tax liabilities and assets are based on management's best judgements around the application of the tax regulations and an estimate of the future amounts that will be settled. Management considers tax exposures individually, and arrives at judgements with support from experienced tax professionals and external advisors. There is, however, a risk that the Group's judgements are challenged by the tax authorities, resulting in a different tax payable or tax recoverable from the amounts that have been provided.
The key uncertainties impacting taxation also arise from potential changes to legislation. The OECD's Base Erosion and Profit Shifting (BEPS) project is one of the most significant multilateral initiatives in recent years modifying international tax rules. As these recommendations are introduced into local tax legislation over the coming years, this may impact the Group's effective tax rate.
Social and environmental policies
Further information on the Group's activities and policies on corporate and social responsibility is set out in the Chief Executive's report on page 6 to 14.
Equality
We have consciously and continuously worked towards encouraging equality in management positions across our operations. All our social projects are available to the local communities without reference to gender or religion.
Child Labour
The use of child labour is prohibited by all of our businesses. The minimum legal working age varies around the world and in some countries it is both the cultural norm and permissible for parents to involve their children in the productive process. We do not subscribe to this approach.
Modern Slavery
This year, the Group adopted new policies and practices to comply with the requirements of the Modern Slavery Act 2015, to ensure that modern slavery and human trafficking is not taking place either within the wider group or in the supply chains of our businesses. A copy of the statement of compliance for the year to 31 December 2016 is available on the Company's website.
Anti-Bribery
The Board has adopted an anti-bribery policy which complies with the requirements of the UK Bribery Act 2010. The policy has been introduced across the Group and its compliance is monitored at both Group and local level. The Board does not permit bribery as part of its business practices.
Performance against our policies
There are no current employment or environmental issues that prejudice the continuing development of the Group. None of the Group's businesses were prosecuted for any significant breach of employment legislation during the year. The Board has established a process for ensuring that the corporate social responsibility policy is enforced across the Group.
Key financial performance indicators
The nature of the Group's principal activities is such that the Board takes a long-term view on its operations, particularly in Agriculture. It is also concerned to improve the quality of the Group's assets over the long-term and monitors that annually by reference to return on net assets achieved in the main segments of the business.
The Board reviews monthly reports with a range of financial indicators to monitor the performance of each division depending on the nature of its operations.
In Agriculture, the Board receives monthly data on sales price, cost of production and crop yields against budget. Rainfall patterns are also reviewed.
In the Engineering division, the Board receives monthly data on revenue, profit and margins. In addition, the value of the outstanding order book is reviewed.
In Food Service, the Board receives monthly data on revenue, profit and margins. In addition, cold store utilisation is monitored.
For investments, the value of the share portfolio is reviewed each month and the collections are periodically valued against market price.
Key non-financial performance indicators
The following information has been compiled based on data provided by the Group's subsidiary undertakings. The Board considers that this information demonstrates the level of compliance with important elements of the Group's principles. The Board will regularly review which key non-financial performance indicators are most appropriate.
1 Compliance 2016 2015 2014
a) Prosecutions The number of prosecutions brought in the financial year by the
official regulatory bodies
responsible for enforcing regulations in the areas of:
- Employment - - -
- Worker health and safety - - -
- Environmental protection - - -
b) Formal The number of written warnings during the financial year by the
warnings official regulatory bodies
responsible for enforcing regulations in the areas of:
- Employment - - -
- Worker health and safety 1 3 -
- Environmental protection - - -
2 Child Labour
a) Minimum age The number of employees who were less than 15 years old during the
financial year - - -
b) Access to education The number of employees who were younger than the age for completing
compulsory education
in their country during the financial year - - -
3 Accidents 2016 2015 2014
The number of injuries received at work resulting in either
absence from work for more than
three days, or the injured person being unable to do the full
range of their normal duties
a) Injury for more than three days 287 317 308
4 Health
The number of employee days absence as a result of sickness
a) Sickness absence during the financial year(i) 237,527 238,160 243,095
The number of claims for compensation arising from occupational
Sickness health issues received during
b) claims the financial year in respect of continuing operations 10 20 167
(i) This excludes tea garden workers in India who have a contractual entitlement to fourteen days sickness absence. In Malawi there is high level of sickness due to HIV/AIDS related conditions and malaria.
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 management of individual subsidiary undertakings.
It is also Group 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 2016:
Men Women
Company directors (i) 6 1
Other senior managers (ii) 7 2
All employees 45,177 35,721
(i) Company directors consists of the company's Board as detailed on page 4.
(ii) "Other senior managers" is as defined in The Companies Act 2006 (Strategic report and directors'
report) Regulations 2013, and includes persons responsible for planning, directing or controlling
the activities of the company, or a strategically significant part of the company, other than
company directors.
By order of the Board
Julia Morton
Secretary
26 April 2017
Report of the directors
The directors present their report together with the audited consolidated accounts for the year ended 31 December 2016.
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 and associated 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 14.
Results and dividends
The loss after taxation for the year amounted to GBP5.9 million (2015: profit GBP7.2 million). The Board has proposed a final dividend for the year of 95p per share payable on 7 July 2017 to holders of the ordinary shares registered at the close of business on 9 June 2017. The total dividend payable for 2016 is therefore 130p per share (2015: 129p per share). Details are shown in note 12.
Directors and Secretary
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
2016 2016
Malcolm Perkins 1,673 1,673
Tom Franks 100 -
Susan Walker 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 and William Gibson will retire and, being eligible, will seek re-election at the AGM on 1 June 2017.
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 & Investment.
Graham Mclean, a qualified agriculturalist, was appointed as Managing Director of Agriculture in October 2014. He was previously regional director of the Group's operations in Africa and has worked for the Group for 24 years. He is Chairman and non-executive director of Kakuzi Limited.
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 in PricewaterhouseCoopers. He was appointed as 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 partner of Oberson Abels SA, a law office based in Geneva, Switzerland. He is a member of the audit committee.
Secretary
Julia Morton has been company secretary since September 2011.
Substantial shareholdings
As at 26 April 2017 the company has been advised of the following interests in the share capital of the company:
% of total
Beneficial shareholder Shareholder No of Shares voting rights
Camellia Private Trust Company Limited Camellia Holding AG 1,427,000 51.67
Fide Holding NV* Lynchwood Nominees Limited 240,000 8.69
Alcatel Bell Pensioenfonds VZW Lynchwood Nominees Limited 115,469 4.18
Quaero Capital SA HSBC Global Custody Nominee (UK) Limited 111,417 4.03
* controlled by Alcatel Bell Pensioenfonds VZW
Share capital and purchase of own shares
The company's share capital comprises one class of ordinary shares of 10 pence each which carry no restrictions on the transfer of shares or on voting rights (other than as set out in the company's articles of association). There are no agreements known to the company between shareholders in the company which may result in restrictions on the transfer of shares or on voting rights in relation to the company. Details of the issued share capital are contained in note 34 to the accounts.
At the annual general meeting in 2016, 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 annual general meeting at which a resolution proposing renewal of the authority will be submitted to shareholders.
Disclosure of information to auditors
PricewaterhouseCoopers LLP will be retiring as auditors of the company at the AGM on 1 June 2017. A resolution proposing the appointment of Deloitte LLP will be put to the annual general meeting.
Each of the persons who were directors at the time when this directors' report was approved has confirmed that:
(a) so far as each director is aware, there is no relevant audit information of which the company's
auditors are unaware; and
(b) 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 22.
Financial risk management
Details in relation to financial risk management are set out on pages 18 to 20.
Future development
Details of future development are set out in the Chief Executive's report.
Going concern
After reviewing the Group's budget for 2017 and other forecasts, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Therefore they continue to adopt the going concern basis in preparing the accounts.
Corporate governance
The company's statement on corporate governance can be found in the corporate governance report on pages 26 to 29.
By order of the Board
Julia Morton
Secretary
26 April 2017
Corporate governance
Statement of compliance
This statement on pages 26 to 29 describes how the company applies the principles of the Quoted Companies Alliance's Corporate Governance Code for Small and Mid-size Quoted Companies ("QCA guidelines"). At the time of the company's delisting from the Main Market of the London Stock Exchange and admission to trading on AIM in September 2014, it was stated that the Board did not envisage any significant alteration to the standards of reporting and governance which the company maintained at that time and this continues to be the case. The application of standards of corporate governance that are appropriate for the Group's nature, status, profile, size and circumstances plays an important part in ensuring the Group is managed for the long-term benefit of all stakeholders.
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 seven directors, three 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 23 and 24.
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 a remuneration committee, audit committee and nomination committee. Terms of reference of each of the committees can be viewed on the company's website.
The Board has agreed to undertake a performance evaluation by way of an internal review every three years. The last evaluation was conducted in 2015. Details of the evaluation procedures will be disclosed when the next review is completed.
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 including detailed information on each of its businesses is sent to directors each month. Each director is provided with sufficient information in advance of Board meetings to enable the directors to make informed judgments on matters referred to the Board. The Board met ten times in 2016.
Attendance by directors at Board and committee meetings held during the year was as follows:
Director Board Audit Remuneration Malcolm Perkins 10/10 - - Chris Relleen 10/10 3/3 1/1 Tom Franks 10/10 - - Graham Mclean 10/10 - - Susan Walker 10/10 - - William Gibson 10/10 3/3 1/1 Frédéric Vuillieumer 10/10 3/3 -
Executive committees
The Board has established the Strategy Group, consisting of the Chairman and the executive directors of the Board, and two Executive Committees. The Agriculture Executive Committee is chaired by the Managing Director of Agriculture and includes the Chief Executive, Chief Financial Officer 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 Company Secretary and the Group Head of HR.
Investments and Associates report directly to the Chief Executive.
Nomination committee
The nomination committee is chaired by Malcolm Perkins. Its other members are William Gibson and Chris Relleen.
The principal responsibilities of the nomination 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 did not meet during the year.
Audit committee
The audit committee is chaired by Chris Relleen. The other members of the committee are Frédéric Vuilleumier and William Gibson. During 2016, the committee met on three occasions.
Principal responsibilities
The principal responsibilities of the audit committee are set out below and were undertaken during the year:
-- to 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
-- to monitor the effectiveness and independence of the external auditor
-- to review effectiveness of the Group's internal control system. The committee regularly reviews
the effectiveness of internal audit activities carried out by the company's Group accounting
function and senior management
-- to review non-audit services provided by the external auditors
-- to carry out a review of the external auditors.
Significant issues in relation to financial statements
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 significant matters in relation to the financial statements:
Bearer plants - IAS 41 was amended effective from 1 January 2016 to reclassify bearer plants as property, plant and equipment rather than biological assets. The accounting policies for bearer plants and judgements made by management in implementing the amended standard in 2016 and in restating the results for 2015 were considered by the committee.
Biological assets - One of the key areas of judgment that the committee considered in reviewing the financial statements was the valuation of the remaining biological assets in accordance with IAS 41. Valuations are carried out by external professional valuers or are based on discounted cash flows. These were agreed for consistency of approach and assumptions agreed as reasonable. For more details see note 19 to the accounts.
Pensions - A key area of judgment is in relation to the value of the pension scheme obligation. Whilst this is conducted by independent expert actuaries, the 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 assumptions adopted and concluded that the work performed is sufficient to support the value.
Goodwill and intangibles - The value of goodwill and intangibles is inherently complex and relies on judgment and estimation. The committee consider the performance of the underlying assets and their ability to continue to support the carrying value. As a result, the committee is satisfied that the carrying value is supported.
Discontinued operation - The committee considered the reclassification of Duncan Lawrie's results for 2015 and 2016 as a discontinued operation including reviewing the provisions made in respect of closure costs.
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, PricewaterhouseCoopers 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 audit committee undertook a review of the Group's external audit requirements following a change in the rules on audit rotation in India and agreed to appoint Deloitte LLP as the external auditor for the Group.
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 remuneration 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 but responsibly
rewarded
-- to approve compensation packages or arrangements following the severance of any executive
director's service contract.
The remuneration report appears on pages 31 to 33.
Insurance
The company purchases insurance to cover its directors in respect of legal actions against them in their capacity as directors of the company. The level of cover is currently GBP20 million. All directors have access to independent professional advice at the company's expense.
Share capital structure
The share capital of the Group is set out in note 34.
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.
Decentralisation is a key management philosophy with responsibility for efficient day to day operations delegated to local management. Accountability and delegation of authority are clearly defined with regular communication between Group head office and local management. Our key operating businesses have internal audit functions reporting to local audit committees. The performance of each company is continually monitored centrally including a critical review of annual budgets, forecasts and monthly sales, profits and cash reports. Financial results and key business statistics and variances from approved plans are carefully monitored. Senior management regularly visit and review the Group's operating units. However, any system of internal control can provide only reasonable, and not absolute, assurance against material mis-statement or loss.
By order of the Board
Julia Morton
Secretary
26 April 2017
Statement of directors' responsibilities
The directors are responsible for preparing the annual report, the directors' remuneration report and the financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare Group and parent company financial statements for each financial year. Under that law the directors have prepared the Group and parent company financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union.
Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of both the Group and the parent company and of the profit or loss of the Group and company for that period.
In preparing these financial statements, the directors are required to:
-- select suitable accounting policies and apply them consistently
-- make judgements and accounting estimates that are reasonable and prudent
-- state whether applicable IFRSs as adopted by the European Union have been followed, subject
to any material departures disclosed and explained in the financial statements
-- prepare the financial statements on the going concern basis unless it is inappropriate to
presume that the company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company's transactions and disclose with reasonable accuracy at any time the financial position of the company and the Group and enable them to ensure that the financial statements and the directors' remuneration report comply with the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
In addition, each of the directors considers that the annual report, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the company's performance, business model and strategy.
The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company's website.
On behalf of the Board
Malcolm Perkins
Chairman
26 April 2017
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 ("the committee") are set out on page 29.
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.
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 will be submitted to shareholders at the forthcoming AGM. It was last approved by shareholders at the AGM held on 5 June 2014. The committee considers any views of the shareholders expressed on directors' remuneration.
At the AGM on 2 June 2016, the remuneration report for the year to 31 December 2015 was approved by shareholders with 99.71% of the votes cast in favour, 0.29% of the votes cast against and nil votes withheld.
Service contracts
Malcolm Perkins, Tom Franks, Graham Mclean and Susan Walker are each employed on rolling service contracts.
Director Date of Service 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 remuneration committee reviews salaries annually and will seek independent professional advice when appropriate.
The following sections on directors' remuneration and pensions have been audited.
Directors' remuneration
Employer
Loss of Pension
Basic Remuneration Benefits in Kind Office Contribution Total
2016 2015 2016 2015 2016 2015 2016 2015 2016 2015
GBP GBP GBP GBP GBP GBP GBP GBP GBP GBP
Executive
Malcolm
Perkins 442,344 442,344 33,212 32,680 - - - - 475,556 475,024
Tom Franks 495,000 426,800 68,095 49,112 - - - - 563,095 475,912
Susan Walker 250,000 175,963 30,676 80,153 - - 20,000 14,077 300,676 270,193
Graham Mclean 275,000 255,000 37,209 26,074 - - 22,000 20,400 334,209 301,474
Chris Ames - 161,890 - 13,962 - 368,896 - - - 544,748
Peter Field - 271,006 - 26,231 - - - - - 297,237
Anil Mathur - 109,671 - 26,285 - - - - - 135,956
Non-executive
William Gibson 43,350 42,500 - - - - - - 43,350 42,500
Chris Relleen 87,500 62,500 - - - - - - 87,500 62,500
Frederic
Vuilleumier 40,800 40,000 - - - - - - 40,800 40,000
Totals 1,633,994 1,987,674 169,192 254,497 - 368,896 42,000 34,477 1,845,186 2,645,544
--------- --------- ------- -------- ---- ------- ------ ----------- --------- ---------
Notes
1. 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.
2. Susan Walker received a payment for relocation expenses following her move from Edinburgh
to Kent, UK in 2015.
3. Anil Mathur retired as a director on 4 June 2015 and Peter Field retired on 31 December 2015.
4. Chris Ames resigned from the board on 10 July 2015 and received a payment of GBP368,896 for
loss of office. This included a payment in lieu of notice equivalent to 12 months of base
salary and benefits in kind.
5. Chris Relleen receives an additional annual fee for his chairmanship of the audit committee
and for his non-executive directorship of Duncan Lawrie Limited.
6. William Gibson receives an additional annual fee for his chairmanship of the remuneration
committee.
Directors' pensions
Malcolm Perkins received no payment for pensionable service during 2016.
Tom Franks receives an excess non-pensionable salary supplement equivalent to 10% of base salary. Graham Mclean and Susan Walker are members of the Linton Park Group Personal Pension Scheme which is a defined contribution based scheme.
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.
Consolidated income statement
for the year ended 31 December 2016
2016 2015
GBP'm GBP'm
Notes Restated
Continuing operations
Revenue 2 257.9 244.7
Cost of sales (188.5 ) (179.2)
------ --------
Gross profit 69.4 65.5
Other operating income 2.3 1.8
Distribution costs (14.7 ) (13.0)
Administrative expenses 3 (38.0 ) (41.2)
------ --------
Trading profit 3 19.0 13.1
Share of associates' results 5 5.1 4.2
Impairment of available-for-sale financial assets - (0.5)
Impairment of property, plant and equipment and provisions - 0.2
Profit on disposal of non-current assets 6 - 3.7
Profit on disposal of available-for-sale investments 7 1.5 0.4
------ --------
25.6 21.1
Investment income 0.6 1.4
------ --------
Finance income 8 2.7 3.1
Finance costs 8 (0.6) (0.7)
Net exchange gain 8 0.4 0.8
Employee benefit expense 8 (2.2) (1.7)
------ --------
Net finance income 8 0.3 1.5
------ --------
Profit before tax from continuing operations 26.5 24.0
Comprising
- headline profit before tax from continuing operations 426.5 26.4
- exceptional items 4 - (2.4)
---- ----
26.5 24.0
-------------------------------------------------------- ---- ----
Taxation 9 (12.4) (13.2)
------- -----
Profit from continuing operations 14.1 10.8
Loss from discontinued operation 10 (20.0) (3.6)
------- -----
(Loss)/profit for the year (5.9) 7.2
------- -----
(Loss)/profit attributable to:
Owners of the parent (10.7) 1.4
Non-controlling interests 4.8 5.8
------- -----
(5.9) 7.2
------- -----
(Loss)/earnings per share - basic and diluted 13 (387.4)p 50.7p
Statement of comprehensive income
for the year ended 31 December 2016
2016 2015
GBP'm GBP'm
Notes Restated
Group
(Loss)/profit for the year (5.9) 7.2
----- --------
Other comprehensive income/(expense):
Items that will not be reclassified subsequently to profit or loss:
Remeasurements of post employment benefit obligations 33 (24.3) 9.1
Deferred tax movement in relation to post employment benefit obligations 32 1.2 0.6
----- --------
(23.1) 9.7
----- --------
Items that may be reclassified subsequently to profit or loss:
Foreign exchange translation differences 52.0 (13.4)
Available-for-sale investments:
Valuation gains taken to equity 23 3.5 0.2
Transferred to income statement on sale 23 (1.2) (0.2)
Share of other comprehensive income of associates 0.2 (0.1)
54.5 (13.5)
----- --------
Other comprehensive income/(expense) for the year, net of tax 31.4 (3.8)
----- --------
Total comprehensive income for the year 25.5 3.4
----- --------
Total comprehensive income attributable to:
Owners of the parent 13.8 2.5
Non-controlling interests 11.7 0.9
----- --------
25.5 3.4
----- --------
Company
Profit for the year 4.0 4.1
----- --------
Total comprehensive income for the year 4.0 4.1
----- --------
Consolidated balance sheet
at 31 December 2016
2016 2015
GBP'm GBP'm
Notes Restated
Non-current assets
Intangible assets 16 1.1 7.9
Property, plant and equipment 17 232.2 205.1
Investment properties 18 17.0 15.8
Biological assets 19 13.9 11.1
Prepaid operating leases 20 1.0 0.8
Investments in associates 22 61.0 48.9
Deferred tax assets 32 0.2 2.5
Available-for-sale financial assets 23 37.2 30.6
Held-to-maturity financial assets 24 - 27.7
Other investments - heritage assets 25 9.2 9.0
Retirement benefit surplus 33 0.1 0.2
Trade and other receivables 27 1.8 22.7
------- --------
Total non-current assets 374.7 382.3
------- --------
Current assets
Inventories 26 50.6 37.8
Biological assets 19 7.2 6.2
Trade and other receivables 27 40.6 55.6
Held-to-maturity financial assets 24 - 1.8
Current income tax assets 1.0 0.8
Cash and cash equivalents 28 72.9 237.8
------- --------
172.3 340.0
Assets classified as held for sale 10 266.9 -
Total current assets 439.2 340.0
------- --------
Current liabilities
Borrowings 30 (1.7) (5.4)
Trade and other payables 29 (66.9) (258.9)
Current income tax liabilities (6.5) (9.3)
Employee benefit obligations 33 (0.9) (1.0)
Provisions 31 (0.4) (0.3)
------- --------
(76.4) (274.9)
Liabilities directly associated with assets classified as held for sale 10 (244.2) -
------- --------
Total current liabilities (320.6) (274.9)
------- --------
Net current assets 118.6 65.1
------- --------
Total assets less current liabilities 493.3 447.4
------- --------
Non-current liabilities
Borrowings 30 (4.5) (5.1)
Trade and other payables 29 - (4.4)
Deferred tax liabilities 32 (43.3) (39.7)
Employee benefit obligations 33 (65.9) (37.8)
Total non-current liabilities (113.7) (87.0)
------- --------
Net assets 379.6 360.4
------- --------
Equity
Called up share capital 34 0.3 0.3
Share premium 15.3 15.3
Reserves 315.2 305.3
------- --------
Equity attributable to owners of the parent 330.8 320.9
Non-controlling interests 48.8 39.5
------- --------
Total equity 379.6 360.4
------- --------
Company balance sheet
at 31 December 2016
2016 2015
Notes GBP'm GBP'm
Non-current assets
Investments in subsidiaries 21 73.5 73.5
Available-for-sale financial assets 23 0.2 0.2
Other investments - heritage assets 25 10.4 10.2
----- -----
Total non-current assets 84.1 83.9
----- -----
Current assets
Amounts due from group undertakings 18.3 10.5
Current income tax asset 0.1 0.1
Cash and cash equivalents 28 - 2.2
----- -----
Total current assets 18.4 12.8
----- -----
Current liabilities
Trade and other payables 29 (0.1) (0.1)
Amounts due to group undertakings (35.7) (30.2)
----- -----
Total current liabilities (35.8) (30.3)
----- -----
Net current liabilities (17.4) (17.5)
----- -----
Total assets less current liabilities 66.7 66.4
----- -----
Non-current liabilities
Deferred tax liabilities 32 (0.2) (0.2)
----- -----
Total non-current liabilities (0.2) (0.2)
----- -----
Net assets 66.5 66.2
----- -----
Equity
Called up share capital 34 0.3 0.3
Share premium 15.3 15.3
Reserves 50.9 50.6
----- -----
Total equity 66.5 66.2
----- -----
The notes on pages 41 to 99 form part of the financial statements.
The financial statements on pages 34 to 99 were approved on 26 April 2017 by the board of directors and signed on their behalf by:
M C Perkins
Chairman
Consolidated cash flow statement
for the year ended 31 December 2016
2016 2015
GBP'm GBP'm
Notes Restated
Cash generated from operations
Cash flows from operating activities 35 35.3 43.1
Interest paid (0.7) (0.6)
Income taxes paid (15.8) (9.4)
Interest received 2.7 3.1
Dividends received from associates 2.3 1.2
----- --------
Net cash flow from operating activities 23.8 37.4
----- --------
Cash flows from investing activities
Purchase of intangible assets (0.2) (1.3)
Purchase of property, plant and equipment (14.2) (15.6)
Proceeds from sale of non-current assets 0.3 6.5
Purchase of investment property (0.5) (8.7)
Biological assets: non-current - additions (0.3) (0.5)
Part disposal of subsidiaries 1.2 0.3
Purchase of investments (2.4) (2.3)
Proceeds from sale of investments 5.6 1.7
Income from investments 0.6 1.4
Purchase of other investments - heritage assets (0.2) (0.2)
----- --------
Net cash flow from investing activities (10.1) (18.7)
----- --------
Cash flows from financing activities
Equity dividends paid (3.6) (3.5)
Dividends paid to non-controlling interests (3.3) (4.5)
New loans 0.1 6.0
Loans repaid (0.6) (0.4)
----- --------
Net cash flow from financing activities (7.4) (2.4)
----- --------
Net increase in cash and cash equivalents from continued operations 6.3 16.3
Net cash outflow from discontinued operation 10 (10.5) (3.8)
Cash and cash equivalents at beginning of year 28 65.6 54.1
Exchange gains/(losses) on cash 10.4 (1.0)
----- --------
Cash and cash equivalents at end of year 28 71.8 65.6
----- --------
For the purposes of the cash flow statement, cash and cash equivalents are included net of overdrafts repayable on demand. These overdrafts are excluded from the definition of cash and cash equivalents disclosed on the balance sheet.
Cash and cash equivalents held by the group's banking subsidiaries are excluded.
Company cash flow statement
for the year ended 31 December 2016
2016 2015
Notes GBP'm GBP'm
Cash generated from operations
Profit before tax 4.0 4.1
Adjustments for:
Interest income (0.3) (0.3)
Dividends from group companies (4.8) (5.5)
Net movement in intra-group balances (2.3) 3.1
----- -----
Cash used in operations (3.4) 1.4
Interest received 0.3 0.3
----- -----
Net cash flow from operating activities (3.1) 1.7
----- -----
Cash flows from investing activities
Purchase of other investments - heritage assets (0.2) (1.4)
Dividends received 4.8 5.5
----- -----
Net cash flow from investing activities 4.6 4.1
----- -----
Cash flows from financing activities
Equity dividends paid (3.7) (3.6)
----- -----
Net cash flow from financing activities (3.7) (3.6)
----- -----
Net movement in cash and cash equivalents (2.2) 2.2
Cash and cash equivalents at beginning of year 28 2.2 -
Exchange gain on cash - -
----- -----
Cash and cash equivalents at end of year 28 - 2.2
----- -----
Statement of changes in equity
for the year ended 31 December 2016
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
Restated Restated Restated Restated Restated
Group
At 1 January 2015 0.3 15.3 (0.4) 303.2 3.3 321.7 42.7 364.4
Restatement* - - - 0.2 - 0.2 0.1 0.3
-------- -------- -------- --------- --------- -------- ----------- --------
At 1 January 2015
restated 0.3 15.3 (0.4) 303.4 3.3 321.9 42.8 364.7
Total
comprehensive
income/(expense)
for the year - - - 9.7 (7.2) 2.5 0.9 3.4
Dividends - - - (3.5) - (3.5) (4.5) (8.0)
Non-controlling
interest
subscription - - - (0.1) - (0.1) 0.3 0.2
Share of
associate's
other equity
movements - - - 0.1 - 0.1 - 0.1
-------- -------- -------- --------- --------- -------- ----------- --------
At 31 December
2015 0.3 15.3 (0.4) 309.6 (3.9) 320.9 39.5 360.4
Total
comprehensive
(expense)/income
for the year - - - (33.6) 47.4 13.8 11.7 25.5
Dividends - - - (3.6) - (3.6) (3.3) (6.9)
Non-controlling
interest
subscription - - - 0.3 - 0.3 0.9 1.2
Share of
associate's
other equity
movements - - - (0.1) - (0.1) - (0.1)
Loss on dilution
of interest in
associate - - - (0.5) - (0.5) - (0.5)
-------- -------- -------- --------- --------- -------- ----------- --------
At 31 December
2016 0.3 15.3 (0.4) 272.1 43.5 330.8 48.8 379.6
-------- -------- -------- --------- --------- -------- ----------- --------
Company
At 1 January 2015 0.3 15.3 - 38.0 12.1 65.7 - 65.7
Total
comprehensive
income for the
year - - - 4.1 - 4.1 - 4.1
Dividends - - - (3.6) - (3.6) - (3.6)
-------- -------- -------- --------- --------- -------- ----------- --------
At 31 December
2015 0.3 15.3 - 38.5 12.1 66.2 - 66.2
Total
comprehensive
income for the
year - - - 4.0 - 4.0 - 4.0
Dividends - - - (3.7) - (3.7) - (3.7)
-------- -------- -------- --------- --------- -------- ----------- --------
At 31 December
2016 0.3 15.3 - 38.8 12.1 66.5 - 66.5
-------- -------- -------- --------- --------- -------- ----------- --------
Other reserves of the group include net exchange differences of GBP1.3 million deficit (2015: GBP46.7 million deficit).
Group retained earnings includes GBP159.0 million (2015: GBP131.1 million) which would require exchange control permission for remittance as dividends.
*Previously made tea was included in inventory at cost as no reliable fair value was available to reflect the uplift in value arising at the point of harvest of green leaf. Following a reassessment, the fair value for green leaf at the point of harvest can now be more reliably calculated. Made tea inventories now include the fair value of green leaf and the impact of this change is a GBP0.2 million uplift in opening reserves and GBP0.1 million increase in non-controlling interests, at 1 January 2015.
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, available-for-sale investments, financial assets and financial liabilities.
Where necessary, comparative figures have been adjusted to conform with changes in presentation in the current year.
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/excluded from 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:
(i) the group has transferred to the buyer the significant risks and rewards of ownership of the
goods:
(ii) the group retains neither continuing managerial involvement to the degree usually associated
with ownership nor effective control over the goods sold;
(iii) the amount of revenue can be measured reliably;
(iv) it is probable that the economic benefits associated with the transaction will flow to the
entity; and
(v) the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Invoices are raised when goods are despatched or when the risks and rewards of ownership otherwise irrevocably pass 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.
In respect of banking and financial services, fees and commissions are generally recognised on an accrual basis when the service has been provided.
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. Full disclosure of exceptional items are set out in note 4.
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
Identifiable intangible assets include 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.
(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 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 and equipment 3 to 25 years
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 'Other operating income'. 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 either using market based approaches or 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
The group classifies its financial assets in the following categories: loans and receivables, available-for-sale and held-to-maturity. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period. These are classified as non-current assets. The group's loans and receivables comprise 'trade and other receivables' and 'cash and cash equivalents' in the balance sheet.
Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless the investment matures or management intends to dispose of it within 12 months of the end of the reporting period.
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the group's management has the positive intention and ability to hold to maturity. Were the group to sell other than an insignificant amount of held-to-maturity assets, the entire category would be tainted and reclassified as available-for-sale.
Regular purchases and sales of financial assets are recognised on the trade-date, the date on which the group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the group has transferred substantially all risks and rewards of ownership.
Available-for-sale financial assets are subsequently carried at fair value. Available-for-sale financial assets include shares of listed and unlisted companies. The fair values of listed shares are based on current bid values. Shares in unlisted companies are measured at cost as fair value cannot be reliably measured.
Changes in the fair value of monetary and non-monetary securities classified as available-for-sale are recognised in other comprehensive income. When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments recognised in equity are included in the income statement as 'Profit/(loss) on disposal of available-for-sale investments'.
Dividends on available-for-sale equity instruments are recognised in the income statement as part of investment income when the group's right to receive payments is established.
Loans and receivables and held to maturity investments are subsequently carried at amortised cost using the effective interest method.
Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.
Other investments - heritage assets
Other investments comprise documents, manuscripts and philately which are measured at cost as fair value cannot be reliably measured.
Investments in subsidiary companies
Investments in subsidiary companies are included at cost plus incidental expenses less any provision for impairment. Impairment reviews are performed by the directors when there has been an indication of potential impairment.
Impairment of financial assets
(i) Assets carried at amortised cost
The group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a 'loss event') and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.
For the loans and receivables category, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset's original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the consolidated income statement.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor's credit rating), the reversal of the previously recognised impairment loss is recognised in the consolidated income statement.
(ii) Assets classified as available-for-sale
In the case of equity investments classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is also evidence that the assets are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss is removed from equity and recognised in profit or loss. Impairment losses recognised in the consolidated income statement on equity instruments are not reversed through the consolidated income statement. If, in a subsequent period, the fair value of a debt instrument classified as available-for-sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed through the consolidated income statement.
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. Following a reassessment, the fair value for green leaf at the point of harvest can now be more reliably calculated. Made tea inventories now include the fair value of green leaf and the impact of this change is a GBP0.2 million uplift in opening reserves and GBP0.1 million uplift in non-controlling interests at 1 January 2015.
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.
Trade and other receivables
Trade receivables are carried at original invoice amount less provision made for impairment of these receivables. A provision for impairment of trade receivables is established when there is objective evidence that the group will not be able to collect all amounts due according to the original terms. The amount of the provision is recognised in the income statement.
Amounts due from customers of banking subsidiaries consist of loans and receivables which are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the bank provides money, goods or services directly to a customer with no intention of trading the receivable and are carried at amortised cost using the effective interest method.
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. In respect of the group's banking operation, cash and cash equivalents include cash and non-restricted balances with central banks, treasury bills and other eligible bills, loans and advances to banks, amounts due from other banks and short-term government securities.
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.
A current tax provision is recognised when the group has a present obligation as a result of a past event, it is probable that the group will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation. The provision is the best estimate of the consideration required to settle the present obligation at the balance sheet date taking into account risks and uncertainties surrounding the obligation.
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.
The provision for onerous lease commitments is based on the expected vacancy period.
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 accounting estimates and judgements
Estimates and judgements 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, biological assets, associated companies 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 the 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.
(ii) Depreciation and amortisation
Depreciation and amortisation is based on management estimates of the future useful life of property, plant and equipment and intangible assets. Estimates may change due to 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.
(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 are given in note 33.
(v) Taxation
Tax provisions are based on management's interpretation of country specific tax law and the likelihood of settlement. This involves 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.
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 2016:
IAS 16 and IAS 41 (amendments) Reporting for bearer plants - effective from 1 January 2016
IAS 16 and IAS 41 (amendments) amends the reporting for bearer plants. The
group has applied
the amendments retrospectively in accordance with the transition provisions of
the standard
and the comparative figures have been restated. The impact on the group has
been in the following
areas:
As bearer plants are now accounted for under IAS 16 rather than IAS 41 in the
same way as
property, plant and equipment, fair value adjustments are no longer required
and instead the
assets will be depreciated. The produce on bearer plants will remain in the
scope of IAS 41
and require a fair value adjustment. The effect has been that the profit for
the year to 31
December 2015 has decreased by GBP20.1 million.
The effect of these amendments is to decrease earnings per share from a profit
of 450.7p per
share to a profit of 50.7p per share for the year to 31 December 2015, the
effect on the cash
flow statement is immaterial.
IAS 27 (amendment) Equity method in separate financial statements - effective from 1 January 2016
The IASB has made amendments to IAS 27 Separate Financial Statements which will
allow entities
to use the equity method in their separate financial statements to measure
investments in
subsidiaries, joint ventures and associates.
IAS 27 currently allows entities to measure their investments in subsidiaries,
joint ventures
and associates either at cost or as a financial asset in their separate
financial statements.
The amendments introduce the equity method as a third option. The election can
be made independently
for each category of investment (subsidiaries, joint ventures and associates).
Entities wishing
to change to the equity method must do so retrospectively.
Annual improvements 2012-2014 cycle The latest annual improvements clarify - effective from 1 January 2016
IAS 19 - that when determining the discount rate for post- employment benefit
obligations,
it is the currency that the liabilities are denominated in that is important
and not the country
where they arise.
Neither the amendment to IAS 27 or the annual improvements have had a material impact on the financial statements of the group.
(ii) Standards, amendments and interpretations to existing standards that are not yet effective
and have not been adopted early by the group
A number of new standards and amendments to standards and interpretations are effective for annual periods beginning on or after 1 January 2016, and have not been applied in preparing these consolidated financial statement. None of these is expected to have an effect on the consolidated financial statements of the group, except the following set out below:
IFRS 15 Revenue from contracts with customers - effective from 1 January 2018
The IASB has issued a new standard for the recognition of revenue. This will replace IAS 18
which covers contracts for goods and services and IAS 11 which covers construction contracts.
The new 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 must be applied before revenue can be recognised:
* 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.
IFRS 16 Leases - effective from 1 January 2019
IFRS 16 will affect primarily the accounting by lessees and will result in the recognition
of almost all leases on balance sheet. The standard removes the current distinction between
operating and financing leases and requires recognition of an asset (the right to use the
leased item) and a financial liability to pay rentals for virtually all lease contracts. An
optional exemption exists for short-term and low-value leases.
The income statement will also be affected because the total expense is typically higher in
the earlier years of a lease and lower in later years.
Additionally, operating expense will be replaced with interest and depreciation.
Operating cash flows will be higher as cash payments for the principal portion of the lease
liability are classified within financing activities. Only the part of the payments that
reflects
interest can continue to be presented as operating cash flows.
IAS 12 (amendment) Recognition of deferred tax - effective from 1 January 2017
Amendments made to IAS 12 in January 2016 clarify the accounting for deferred tax where an
asset is measured at fair value and that fair value is below the asset's tax base. Specifically,
the amendments confirm that:
* A temporary difference exists whenever the carrying
amount of an asset is less than its tax base at the
end of the reporting period.
* An entity can assume that it will recover an amount
higher than the carrying amount of an asset to
estimate its future taxable profit.
* Where the tax law restricts the source of taxable
profits against which particular types of deferred
tax assets can be recovered, the recoverability of
the deferred tax assets can only be assessed in
combination with other deferred tax assets of the
same type.
* Tax deductions resulting from the reversal of
deferred tax assets are excluded from the estimated
future taxable profit that is used to evaluate the
recoverability of those assets.
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
2016 2015 2016 2015 2016 2015 2016 2015 2016 2015
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
Restated Restated
Revenue
External sales 207.1 186.5 18.8 25.8 31.6 31.9 0.4 0.5 257.9 244.7
----- -------- ----- ----- ----- ----- ----- ------- ------ --------
Trading profit
Segment
profit/(loss) 29.9 26.7 (2.6) (5.5) 0.8 0.7 0.1 - 28.2 21.9
----- -------- ----- ----- ----- ----- ----- -------
Unallocated
corporate expenses (9.2) (8.8)
------ --------
Trading profit 19.0 13.1
Share of
associates'
results 5.1 4.2
Impairment of
available-for-sale
financial assets - (0.5)
Impairment of
property, plant
and equipment and
provisions - 0.2
Profit on disposal
of non-current
assets - 3.7
Profit on disposal
of
available-for-sale
investments 1.5 0.4
Investment income 0.6 1.4
Net finance income 0.3 1.5
------ --------
Profit before tax 26.5 24.0
Taxation (12.4) (13.2)
------ --------
Profit from
continuing
operations 14.1 10.8
------ --------
Other information
Segment assets 354.8 296.2 19.1 21.6 24.0 22.8 18.5 17.4 416.4 358.0
Investments in
associates 61.0 48.9
Discontinued
operation 266.9 247.2
Unallocated assets 69.6 68.2
------ --------
Consolidated total
assets 813.9 722.3
------ --------
Segment liabilities (55.4) (45.4) (4.6) (4.9) (5.4) (4.5) - - (65.4) (54.8)
Discontinued
operation (244.2) (211.1)
Unallocated
liabilities (124.7) (96.0)
------ --------
Consolidated total
liabilities (434.3) (361.9)
------ --------
Capital expenditure 13.0 12.7 0.4 0.9 0.6 1.6 0.7 9.1 14.7 24.3
Depreciation (11.0) (11.4) (1.9) (2.0) (1.7) (2.0) (0.2) (0.2) (14.8) (15.6)
Amortisation - (0.3) (0.1) (0.3) (0.1)
Impairments (0.1) (0.6) (0.1) (0.6)
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 following table provides an analysis of the group's sales by geographical market, irrespective of the origin of the goods/services:
2016 2015
GBP'000 GBP'000
United Kingdom 41.4 48.9
Continental Europe 35.6 30.5
Bangladesh 24.2 17.9
India 67.2 63.5
Kenya 35.6 34.6
Malawi 8.6 5.9
North America and Bermuda 10.1 9.0
South Africa 1.5 1.4
South America 5.3 3.7
Other 28.4 29.3
------- -------
257.9 244.7
------- -------
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
2016 2015 2016 2015 2016 2015
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
Restated Restated
United Kingdom 60.4 61.2 1.1 2.7 0.5 8.7
Continental Europe 6.1 4.9 0.1 0.1 - -
Bangladesh 69.6 58.1 1.1 1.3 - -
India 104.8 86.1 4.6 4.3 - -
Kenya 84.6 73.0 3.5 4.8 - -
Malawi 52.7 44.3 2.0 1.0 - -
North America and Bermuda 12.5 11.8 0.2 0.7 - -
South Africa 13.0 9.9 1.2 0.5 - -
South America 12.7 8.7 0.4 0.2 - -
--------- ------------ ---------- --------------- ------------ ------------
416.4 358.0 14.2 15.6 0.5 8.7
--------- ------------ ---------- --------------- ------------ ------------
2 Revenue
An analysis of the group's revenue is as follows:
2016 2015
GBP'm GBP'm
Sale of goods 206.5 186.0
Distribution and warehousing revenue 31.6 31.9
Engineering services revenue 18.8 25.8
Agency commission revenue 0.6 0.5
Property rental revenue 0.4 0.5
----- -----
Total group revenue 257.9 244.7
Other operating income 2.3 1.8
Investment income 0.6 1.4
Interest income 2.7 3.1
----- -----
Total group income 263.5 251.0
----- -----
3 Trading profit
2016 2015
GBP'm GBP'm
The following items have been included in arriving at trading profit: Restated
Employment costs (note 14)* 92.0 91.9
Inventories:
Cost of inventories recognised as an expense (included in cost of sales) 137.6 124.0
Cost of inventories provision recognised as an expense (included in cost of sales) 0.3 0.5
Fair value gain included in made tea 0.8 0.5
Depreciation of property, plant and equipment:
Owned assets 14.6 15.5
Under finance leases - 0.1
Amortisation of intangibles (included in administrative expenses) 0.3 0.1
Gain from change in fair value of non-current biological assets 1.1 2.0
Impairment of available-for-sale financial assets (included in administrative expenses) 0.1 -
Profit on disposal of property, plant and equipment 0.2 3.8
Operating leases - lease payments:
Plant and machinery 0.4 0.5
Property 0.6 0.4
Repairs and maintenance expenditure on property, plant and equipment 4.6 4.5
----- --------
* Includes a charge of GBPnil (2015: GBP6.1 million) in cost of sales for past service relating to legislation enacted in Bangladesh which requires companies to make a payment on retirement or other events terminating employment to all employees, based upon compensation and length of service.
Currency exchange (gains)/losses (credited)/charged to income include:
Revenue (0.3) (1.7)
Cost of sales 0.1 0.1
Distribution costs 0.1 -
Administrative expenses (0.2) (0.1)
Finance income (0.4) (0.8)
----- -----
(0.7) (2.5)
----- -----
Included in the amounts above is an exchange gain of GBP0.6 million (2015: GBP1.8 million gain) relating to the Malawian Kwacha.
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 0.8 0.7
--- ---
1.0 0.9
Audit - related regulatory reporting 0.1 0.1
Tax services:
Advisory services - 0.1
Other services not covered above - 0.3
--- ---
1.1 1.4
--- ---
4 Headline profit
The group seeks to present an indication of the underlying performance for the continuing operations which is not impacted by exceptional items. This measure of profit is described as 'headline' and is used by management to measure and monitor performance.
The following items have been excluded from the headline measure:
- A charge of GBP6.1 million included in cost of
sales for the year ended 31 December 2015 for
past service relating to legislation enacted
in Bangladesh which required companies to make
a payment on retirement or other events terminating
employment to all employees, based upon compensation
and length of service.
- A profit of GBP3.7 million on disposal of non-current
assets for the year ended 31 December 2015 (note
6) which is considered non operational in nature.
5 Share of associates' results
The group's share of the results of associates is analysed below:
2016 2015
GBP'm GBP'm
Profit before tax 6.0 5.2
Taxation (0.9) (1.0)
----- -----
Profit after tax 5.1 4.2
----- -----
From 1 July 2015, following a re-evaluation of the group's relationship with BF&M Limited (note 22), six months of the group's share of BF&M's result for the period ending 31 December 2015 were included in the 2015 results. In addition, GBP22.7 million was credited to the income statement which reflected the negative goodwill arising from the recognition of BF&M Limited as an associate, this was offset by an impairment provision of GBP22.7 million which was provided against the group's equity carrying value of this investment to reflect its fair value. The net effect impact of these items on the 2015 income statement was GBPnil.
6 Profit on disposal of non-current assets
In 2015, a profit of GBP1.6 million was realised in relation to the property, plant and equipment previously owned by AKD Engineering Limited which was sold following the closure of the business at the end of June 2015 and profits of GBP2.1 million were realised during 2015 in relation to the disposal of former sites owned by Abbey Metal Finishing Company Limited and GU Cutting and Grinding Services Limited.
7 Profit on disposal of available-for-sale investments
The profit of GBP1.5 million includes a profit of GBP1.1 million relating to the disposal of the group's investment in Ascendant Group, a Bermudian power company.
8 Finance income and costs
2016 2015
GBP'm GBP'm
Interest payable on loans and bank overdrafts (0.6) (0.7)
Finance costs (0.6) (0.7)
Finance income - interest income on short-term bank deposits 2.7 3.1
Net exchange gain on foreign cash balances 0.4 0.8
Employee benefit expense (note 33) (2.2) (1.7)
----- -----
Net finance income 0.3 1.5
----- -----
The above figures do not include any amounts relating to the banking subsidiaries.
9 Taxation
Analysis of charge in the year 2016 2015
GBP'm GBP'm GBP'm
Restated
Current tax
UK corporation tax
UK corporation tax at 20.00 per cent. (2015: 20.25 per cent.) 1.4 0.2
Double tax relief (1.4) (0.2)
--------- --------
- -
Foreign tax
Corporation tax 11.6 11.8
Adjustment in respect of prior years 0.1 1.6
--------- --------
11.7 13.4
-------- --------
Total current tax 11.7 13.4
Deferred tax
Origination and reversal of timing differences
Overseas 0.7 (0.2)
-------- --------
Tax on profit on ordinary activities 12.4 13.2
-------- --------
Factors affecting tax charge for the year
Profit on ordinary activities before tax 6.5 20.4
Share of associated undertakings profit (5.1) (4.2)
-------- --------
Group profit on ordinary activities before tax 1.4 16.2
-------- --------
Tax on ordinary activities at the standard rate of corporation tax in the UK
of 20.00 per
cent. (2015: 20.25 per cent.) 0.3 3.3
Effects of:
Adjustment to tax in respect of prior years 0.1 1.6
Expenses not deductible for tax purposes 6.6 1.8
Adjustment in respect of foreign tax rates 3.7 3.6
Additional tax arising on dividends from overseas companies 1.0 1.2
Other income not charged to tax (1.5) (1.3)
Increase in tax losses carried forward 1.6 2.4
Movement in other timing differences 0.6 0.6
-------- --------
Total tax charge for the year 12.4 13.2
-------- --------
Adjustment to tax in respect of prior years includes amounts relating to an uncertain tax provision 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 2016.
Effects of expenses not deductible for tax purposes includes GBP4.0 million (2015: GBPnil) arising from the discontinued operation and consists of losses not recoverable and expenses not allowable for tax purposes.
10 Discontinued operation
On 19 December 2016 the group announced its intention to exit the banking and financial services businesses operated by Duncan Lawrie.
The UK loan book was sold to Arbuthnot Latham in December 2016. The sale of the Duncan Lawrie's UK asset management business to Brewin Dolphin was also agreed in 2016, and is expected to complete in May 2017 generating a gain on sale of approximately GBP19.2 million which is not reflected in these results. An orderly wind down of Duncan Lawrie's deposit taking and other banking operations in the UK and Isle of Man is underway.
The assets and liabilities associated with Duncan Lawrie have consequently been presented as held for sale in the 2016 financial statements.
The financial performance for the year ended 31 December 2016 and 31 December 2015 is as follows:
2016 2015
GBP'm GBP'm
Revenue 12.1 13.1
Other operating income 0.1 0.1
----- -----
12.2 13.2
Operating expenses (19.7) (16.7)
----- -----
(7.5) (3.5)
Costs associated with closure:
----- -----
- Staff termination (5.0) -
- Contract settlement (2.6) -
- Advisors fees (2.7) -
----- -----
(10.3) -
Impairment of non-current assets and loans and advances to customers (1.2) (0.1)
Profit on sale of available-for-sale financial assets 1.2 -
Profit on sale of held-to-maturity financial assets 0.6 -
Loss on sale of UK loan book and provision
for loss on sale of Isle of Man loan book (2.8) -
----- -----
Loss from discontinued operation (20.0) (3.6)
----- -----
Cash flows are as follows:
2016 2015
GBP'm GBP'm
Loss from discontinued operation (20.0) (3.6)
Depreciation and amortisation 0.5 0.7
Impairment of assets 0.6 -
Profit on sale of financial assets (1.8) -
Increase/(decrease) in working capital 1.3 (0.6)
Net decrease in banking funds 9.0 -
----- -----
Cash flow from discontinued operation (10.4) (3.5)
Purchase of intangible assets - (0.1)
Purchase of property, plant and equipment (0.1) (0.2)
----- -----
Net cash outflow from discontinued operation (10.5) (3.8)
----- -----
The following assets and liabilities were reclassified as held for sale in relation to Duncan Lawrie:
2016 2015
GBP'm GBP'm
Assets classified as held for sale
Intangible assets 6.3 -
Available-for-sale financial assets 1.0 -
Held-to-maturity financial assets 30.0 -
Trade and other receivables 28.0 -
Cash and cash equivalents 201.6 -
------ -----
Total assets of Duncan Lawrie held for sale 266.9 -
------ -----
Liabilities directly associated with assets classified as held for sale
Trade and other payables (244.0) -
Current income tax liabilities (0.2) -
------ -----
(244.2) -
------ -----
11 Profit for the year
2016 2015
GBP'm GBP'm
The profit of the company was: 4.0 4.1
----- -----
The company has taken advantage of the exemption under Section 408 of the Companies Act 2006 not to disclose its income statement.
12 Equity dividends
2016 2015
GBP'm GBP'm
Amounts recognised as distributions to equity holders in the period:
Final dividend for the year ended 31 December 2015 of
95p (2014: 92p) per share 2.6 2.5
Interim dividend for the year ended 31 December 2016 of
35p (2015: 34p) per share 1.0 1.0
----- -----
3.6 3.5
----- -----
Dividends amounting to GBP0.1 million (2015: 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 2016 of
95p (2015: 95p) per share 2.7 2.7
--- ---
The proposed final dividend is subject to approval by the shareholders at the annual general meeting and has not been included as a liability in these financial statements.
13 (Loss)/earnings per share (EPS)
2016 2015
Weighted Weighted
average average
(Loss)/ number of number of
earnings shares EPS Earnings shares EPS
GBP'm Number Pence GBP'm Number Pence
Restated Restated
Basic and diluted EPS
Attributable to ordinary shareholders (10.7) 2,762,000 (387.4) 1.4 2,762,000 50.7
-------- --------- ------ -------- --------- --------
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 34).
14 Employees
2016 2015
Number Number
Restated
Average number of employees by activity:
Agriculture 79,075 77,554
Engineering 251 338
Food Service 294 307
Central Management 24 22
79,644 78,221
------ --------
2016 2015
GBP'm GBP'm
Restated
Employment costs:
Wages and salaries 82.8 77.0
Social security costs 2.4 2.8
Employee benefit obligations (see note 33) - UK 4.6 1.9
- Overseas 2.2 10.2
------ --------
92.0 91.9
------ --------
Total remuneration paid to key employees who are members of the Executive Committees, excluding directors of Camellia Plc, amounted to GBP1.4 million (2015: GBP0.8 million).
Further details of directors' emoluments are set out on pages 31 to 32.
15 Emoluments of the directors
2016 2015
GBP'm GBP'm
Aggregate emoluments excluding pension contributions 1.8 2.6
----- -----
Emoluments of the highest paid director excluding pension contributions were GBP0.6 million (2015: GBP0.5 million).
Further details of directors' emoluments are set out on pages 31 to 32.
16 Intangible assets
Customer Computer
Goodwill relationships software Total
GBP'000 GBP'000 GBP'000 GBP'000
Group
Cost
At 1 January 2015 4.0 4.8 5.1 13.9
Additions - - 1.3 1.3
Disposals - - (0.1) (0.1)
At 1 January 2016 4.0 4.8 6.3 15.1
Exchange differences - - 0.1 0.1
Additions - - 0.2 0.2
Disposals - - (1.9) (1.9)
Reclassification to assets held for sale (4.0) (4.8) (2.3) (11.1)
-------- ------------- -------- -------
At 31 December 2016 - - 2.4 2.4
-------- ------------- -------- -------
Amortisation
At 1 January 2015 - 2.1 4.7 6.8
Charge for the year - 0.2 0.3 0.5
Disposals - - (0.1) (0.1)
-------- ------------- -------- -------
At 1 January 2016 - 2.3 4.9 7.2
Exchange differences - - 0.1 0.1
Charge for the year - 0.2 0.3 0.5
Disposals - - (1.9) (1.9)
Impairment provision - - 0.2 0.2
Reclassification to assets held for sale - (2.5) (2.3) (4.8)
-------- ------------- -------- -------
At 31 December 2016 - - 1.3 1.3
-------- ------------- -------- -------
Net book value at 31 December 2016 - - 1.1 1.1
-------- ------------- -------- -------
Net book value at 31 December 2015 4.0 2.5 1.4 7.9
-------- ------------- -------- -------
17 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 2015 - 93.4 106.6 19.0 219.0
Transfer from biological assets 123.9 - - - 123.9
Exchange differences (11.5) (1.6) (3.8) (0.2) (17.1)
Additions 5.1 4.2 5.3 1.2 15.8
Disposals - (3.8) (3.5) (1.0) (8.3)
Reclassification to investment properties - (7.8) - - (7.8)
Reclassification to other investments - heritage
assets - - - (0.1) (0.1)
------ --------- --------- ------------ -----
At 1 January 2016 117.5 84.4 104.6 18.9 325.4
Exchange differences 19.8 8.9 11.7 1.3 41.7
Additions 4.5 3.2 5.6 0.9 14.2
Disposals - (0.1) (2.2) (0.3) (2.6)
Reclassification to investment properties - (0.7) - - (0.7)
Reclassification to assets held for sale - - - (3.7) (3.7)
------ --------- --------- ------------ -----
At 31 December 2016 141.8 95.7 119.7 17.1 374.3
------ --------- --------- ------------ -----
Depreciation
At 1 January 2015 - 37.9 65.9 10.2 114.0
Exchange differences (1.1) (0.5) (1.7) (0.1) (3.4)
Charge for the year 6.4 2.6 5.9 1.0 15.9
Disposals - (1.7) (3.1) (0.7) (5.5)
Reclassification to investment properties - (0.6) - - (0.6)
Reclassification to other investments - heritage
assets - - - (0.1) (0.1)
------ --------- --------- ------------ -----
At 1 January 2016 5.3 37.7 67.0 10.3 120.3
Exchange differences 1.4 3.6 6.9 0.8 12.7
Charge for the year 5.7 2.4 6.0 0.8 14.9
Disposals - (0.1) (2.1) (0.3) (2.5)
Impairment provision - - - 0.4 0.4
Reclassification to assets held for sale - - - (3.7) (3.7)
------ --------- --------- ------------ -----
At 31 December 2016 12.4 43.6 77.8 8.3 142.1
------ --------- --------- ------------ -----
Net book value at 31 December 2016 129.4 52.1 41.9 8.8 232.2
------ --------- --------- ------------ -----
Net book value at 31 December 2015 112.2 46.7 37.6 8.6 205.1
------ --------- --------- ------------ -----
Land and buildings at net book value comprise:
2016 2015
GBP'm GBP'm
Freehold 26.0 25.4
Long leasehold 25.6 20.8
Short leasehold 0.5 0.5
------------ -----
52.1 46.7
------------ -----
The amount of expenditure for property, plant and equipment in the course of construction amounted to GBP1.5 million (2015: GBP1.9 million).
18 Investment properties
GBP'm
Group
Cost
At 1 January 2015 -
Exchange differences (0.1)
Additions 8.7
Transfers from property, plant and equipment 7.8
-----
At 1 January 2016 16.4
Exchange differences 0.1
Additions 0.5
Transfers from property, plant and equipment 0.7
-----
At 31 December 2016 17.7
-----
Depreciation
At 1 January 2015 -
Transfers from property, plant and equipment 0.6
-----
At 1 January 2016 0.6
Exchange differences 0.1
Charge for the year -
-----
At 31 December 2016 0.7
-----
Net book value at 31 December 2016 17.0
-----
Net book value at 31 December 2015 15.8
-----
Included in revenue is GBP0.4 million (2015: GBP0.5 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, amount to GBP0.2 million (2015: GBP0.2 million).
At the end of the year the fair value of investment properties was GBP22.8 million (2015: GBP21.4 million). Investment properties were valued by the directors (fair value hierarchy Level 2).
19 Biological assets
Edible Other/
Tea nuts Timber Livestock Total
Non-current: GBP'm GBP'm GBP'm GBP'm GBP'm
Group
At 1 January 2015 85.6 26.0 10.2 18.3 140.1
Transfer to property, plant and equipment (85.4) (24.3) - (14.2) (123.9)
Transfer to current assets (0.2) (1.7) - (3.2) (5.1)
Exchange differences - - (1.7) - (1.7)
New planting additions - - 0.5 - 0.5
Gains arising from changes in fair value less estimated
point-of-sale costs - - 1.7 0.3 2.0
Decreases due to harvesting/sales - - (0.5) (0.3) (0.8)
----- ------ ------ --------- ------
At 1 January 2016 - - 10.2 0.9 11.1
Exchange differences - - 2.3 0.2 2.5
New planting additions - - 0.3 - 0.3
Gains arising from changes in fair value less estimated
point-of-sale costs - - 0.9 0.2 1.1
Decreases due to harvesting/sales - - (0.8) (0.3) (1.1)
----- ------ ------ --------- ------
At 31 December 2016 - - 12.9 1.0 13.9
----- ------ ------ --------- ------
2016 2015
Current: GBP'm GBP'm
Group
Tea 0.3 0.4
Edible nuts 1.3 2.5
Citrus 1.3 0.9
Soya 3.1 1.8
Avocado 0.9 0.4
Other 0.3 0.2
----- -----
7.2 6.2
----- -----
Following the implementation of IAS 16 and IAS 41 (amendments) which require bearer plants to be treated in the same way as property, plant and equipment and the produce on the bearer plants to be treated as current assets, a transfer to those categories as at 1 January 2015 was undertaken. This leaves the remaining long term biological assets which comprise forestry and livestock.
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. At 31 December 2016 professional valuations were obtained on a significant proportion of assets. 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. The fair value of livestock is based on market prices of livestock of similar age and sex.
New planting additions represents new areas planted to the particular crop at cost.
As at 31 December 2016 the area planted to Forestry amounted to 5,946 Hectares (2015: 6,251) from which 169,089 cubic metres (2015: 125,557) were harvested during the year.
Livestock numbers were 4,704 head (2015: 4,500) at 31 December 2016.
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 achieved.
The fair value of biological assets is sensitive to these assumptions, the more significant of which at 31 December 2016 are as follows:
Non-current:
- Timber - a 10% movement in the market price for
trees or the volume of trees assumed would result
in a GBP1.3 million increase/decrease in the fair
value of timber.
Current:
- Macadamia - a 10% increase/decrease in the volumes
assumed would result in a GBP0.1 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 GBP0.9 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
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 GBP0.4 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 review 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.
20 Prepaid operating leases
GBP'm
Group
Cost
At 1 January 2015 0.9
Exchange differences (0.1)
-----
At 1 January 2016 0.8
Exchange differences 0.2
-----
At 31 December 2016 1.0
-----
Net book value at 31 December 2016 1.0
-----
Net book value at 31 December 2015 0.8
-----
21 Investments in subsidiaries
2016 2015
GBP'm GBP'm
Company
Cost
At 1 January and 31 December 73.5 73.5
----- -----
22 Investments in associates
2016 2015
GBP'm GBP'm
Group
At 1 January 73.0 8.7
Exchange differences 14.4 4.2
Transfer from available-for-sale financial assets - 34.4
Negative goodwill on initial recognition as an associate (note 5) - 22.7
Share of profit (note 5) 5.1 4.2
Dividends (2.3) (1.2)
Dilution of holding (0.5) -
Other equity movements 0.1 -
----- -----
At 31 December 89.8 73.0
----- -----
Provision for diminution in value
At 1 January 24.1 -
Exchange differences 4.7 1.5
Provided during year (note 5) - 22.6
----- -----
At 31 December 28.8 24.1
----- -----
Net book value at 31 December 61.0 48.9
----- -----
Details of the group's associates are shown in note 40.
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
2016
Listed
BF&M Bermuda 522.9 (446.2) 71.7 3.8 35.8 52.2
United Finance Limited Bangladesh 80.9 (70.2) 7.0 1.1 38.4 12.4
United Insurance
Company Limited Bangladesh 3.1 (0.7) 0.3 0.2 37.0 3.7
------ ----------- -------- ------ ------
606.9 (517.1) 79.0 5.1 68.3
------ ----------- -------- ------ ------
2015
Listed
BF&M Bermuda 411.9 (348.9) 60.2 2.9 36.1 35.9
United Finance Limited Bangladesh 63.5 (55.4) 6.4 1.1 38.4 10.7
United Insurance
Company Limited Bangladesh 2.5 (0.6) 0.3 0.2 37.0 3.2
------ ----------- -------- ------ ------
477.9 (404.9) 66.9 4.2 49.8
------ ----------- -------- ------ ------
From 1 July 2015, following a re-evaluation of the group's relationship with BF&M Limited, the directors concluded that the group is in a position to exercise significant influence over BF&M Limited. As a result the investment in this company was reclassified from available-for-sale financial assets to an investment in associate during 2015. The result of this reclassification was an increase of GBP57.1 million in 2015 in investments in associate reflecting the group's equity interest in BF&M Limited and available-for-sale financial assets declined by GBP34.4 m, being the market value of the group's shareholding. The difference of GBP22.7 million was transferred to the income statement and this was offset by an impairment provision of GBP22.7 million which was made against the group's equity carrying value of this investment during 2015, due to the significant difference between the equity value of the investment and the market value at 1 July 2015.
23 Available-for-sale financial assets
Group Company
2016 2015 2016 2015
GBP'm GBP'm GBP'm GBP'm
Cost or fair value
At 1 January 35.7 67.8 0.2 0.2
Exchange differences 6.4 1.3 - -
Transfer to investments in associates - (34.4) - -
Fair value adjustment 3.5 0.2 - -
Additions 3.4 2.3 - -
Disposals (7.2) (1.3) - -
Fair value adjustment for disposal (1.2) (0.2) - -
Reclassification to assets held for resale (1.0) - - -
--------- -------- ------------ -----------
At 31 December 39.6 35.7 0.2 0.2
--------- -------- ------------ -----------
Provision for diminution in value
At 1 January 5.1 4.3 - -
Exchange differences 0.6 0.2 - -
Provided during year 0.1 0.6 - -
Disposals (3.4) - - -
--------- -------- ------------ -----------
At 31 December 2.4 5.1 - -
--------- -------- ------------ -----------
Net book value at 31 December 37.2 30.6 0.2 0.2
--------- -------- ------------ -----------
Available-for-sale financial assets include the following:
Group Company
2016 2015 2016 2015
GBP'm GBP'm GBP'm GBP'm
Listed securities:
Equity securities - UK - 0.9 - -
Equity securities - Bermuda 5.1 5.2 - -
Equity securities - Japan 15.7 12.2 - -
Equity securities - Switzerland 8.5 6.7 - -
Equity securities - US 2.8 2.1 - -
Equity securities - India 3.5 1.0 - -
Equity securities - Europe 0.5 0.4 - -
Equity securities - Other 0.4 0.3 - -
Debentures with fixed interest of 12.5% and repayable
twice yearly until 31 October 2019 -
Kenya 0.5 0.6 - -
Unlisted investments 0.2 1.2 0.2 0.2
---------- ---------- ------------ ------------
37.2 30.6 0.2 0.2
---------- ---------- ------------ ------------
Available-for-sale financial assets are denominated in the following currencies:
Group Company
2016 2015 2016 2015
GBP'm GBP'm GBP'm GBP'm
Sterling 0.2 2.2 0.2 0.2
US Dollar 2.8 2.1 - -
Euro 0.5 0.4 - -
Swiss Franc 8.5 6.6 - -
Indian Rupee 3.5 1.0 - -
Bermudian Dollar 5.1 5.2 - -
Japanese Yen 15.7 12.2 - -
Kenyan Shilling 0.5 0.6 - -
Other 0.4 0.3 - -
--------- --------- ----------- ----------
37.2 30.6 0.2 0.2
--------- --------- ----------- ----------
24 Held-to-maturity financial assets
Group
2016 2015
GBP'm GBP'm
Cost or fair value
At 1 January 29.5 -
Additions 30.0 29.5
Disposals (29.5) -
Reclassification to assets held for resale (30.0) -
------ -----
At 31 December - 29.5
------ -----
Net book value comprises:
Debt securities - 29.5
------ -----
Current element - 1.8
Non-current element - 27.7
------ -----
- 29.5
------ -----
Debt securities are held by the group's banking operation and are readily tradable in the London markets.
25 Other investments - heritage assets
Group Company
2016 2015 2016 2015
GBP'm GBP'm GBP'm GBP'm
Cost
At 1 January 9.0 8.8 10.2 8.8
Additions 0.2 0.2 0.2 1.4
At 31 December 9.2 9.0 10.4 10.2
--------- -------- ----- -----
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.
26 Inventories
2016 2015
GBP'm GBP'm
Restated
Group
Made tea 34.8 24.1
Other agricultural produce 1.6 1.0
Work in progress 0.4 1.8
Trading stocks 2.2 1.8
Raw materials and consumables 11.6 9.1
----- --------
50.6 37.8
----- --------
Made tea was previously included in inventory at cost as no reliable fair value was available to reflect the uplift in value arising at the point of harvest of green leaf. Following a reassessment, the fair value for green leaf at the point of harvest can now be more reliably calculated. From 1 January 2015 made tea inventories include the fair value of green leaf which includes a fair value uplift of GBP0.8 million (2015: GBP0.5 million).
27 Trade and other receivables
Group
2016 2015
GBP'm GBP'm
Group
Current:
Amounts due from customers of banking subsidiaries - 14.3
Trade receivables 27.8 25.6
Other receivables 7.6 7.9
Prepayments and accrued income 5.2 7.8
-------- -------
40.6 55.6
-------- -------
Non-current:
Amounts due from customers of banking subsidiaries - 21.6
Other receivables 1.8 1.1
-------- -------
1.8 22.7
-------- -------
The carrying amounts of the group's trade and other receivables are denominated in the following currencies:
2016 2015
GBP'm GBP'm
Current:
Sterling 9.6 27.6
US Dollar 3.8 3.1
Euro 1.4 1.2
Kenyan Shilling 2.1 2.4
Indian Rupee 19.2 17.8
Malawian Kwacha 0.4 0.8
Bangladesh Taka 1.9 1.3
South African Rand 0.4 0.2
Brazilian Real 1.2 0.6
Other 0.6 0.6
----- -----
40.6 55.6
----- -----
Non-current:
Sterling - 21.4
US Dollar 0.3 0.1
Kenyan Shilling 0.5 0.3
Indian Rupee 0.6 0.4
Malawian Kwacha - 0.2
Bangladesh Taka 0.4 0.3
----- -----
1.8 22.7
----- -----
Included within trade receivables is a provision for doubtful debts of GBP0.3 million (2015: GBP0.9 million) and all other trade receivables are with normal trading partners and there is no history of defaults.
Trade receivables include receivables of GBP4.4 million (2015: GBP6.6 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:
2016 2015
GBP'm GBP'm
Up to 30 days 3.1 4.4
30-60 days 0.5 1.4
60-90 days 0.2 0.3
Over 90 days 0.6 0.5
----- -----
4.4 6.6
----- -----
28 Cash and cash equivalents
Group Company
2016 2015 2016 2015
GBP'm GBP'm GBP'm GBP'm
Cash at bank and in hand 31.0 157.2 - 2.2
Short-term bank deposits 37.8 40.1 - -
Short-term liquid investments 4.1 40.5 - -
---------- --------- -------- -------
72.9 237.8 - 2.2
---------- --------- -------- -------
Included in the amounts above are cash and short-term funds, time deposits with banks and building societies, UK treasury bills and certificates of deposit amounting to GBPnil (2015: GBP167.4 million) which are held by the group's banking subsidiaries and which are an integral part of the banking operations.
Cash, cash equivalents and bank overdrafts include the following for the purposes of the cash flow statement:
2016 2015 2016 2015
GBP'm GBP'm GBP'm GBP'm
Cash and cash equivalents (excluding banking
operations) 72.9 70.4 - 2.2
Bank overdrafts (note 30) (1.1) (4.8) - -
------------- ------------- ----- -----
71.8 65.6 - 2.2
------------- ------------- ----- -----
2016 2015 2016 2015
Effective interest rate:
Short-term deposits 2.50 - 12.50% 4.00 - 20.00% - -
Short-term liquid investments 6.45 - 6.49% 0.07 - 0.47% - -
Average maturity period:
Short-term deposits 88 days 103 days - -
Short-term liquid investments 46 days 40 days - -
29 Trade and other payables
Group Company
2016 2015 2016 2015
GBP'm GBP'm GBP'm GBP'm
Current:
Amounts due to customers of banking subsidiaries - 204.2 - -
Trade payables 30.3 26.4 - -
Other taxation and social security 2.6 2.7 - -
Other payables 27.6 20.2 0.1 0.1
Accruals 6.4 5.4 - -
-------- -------- ------------ -----------
66.9 258.9 0.1 0.1
-------- -------- ------------ -----------
Non-current:
Amounts due to customers of banking subsidiaries - 4.4 - -
-------- -------- ------------ -----------
30 Financial liabilities - borrowings
2016 2015
GBP'm GBP'm
Group
Current:
Bank overdrafts 1.1 4.8
Bank loans 0.6 0.6
1.7 5.4
------------ ------------
Current borrowings include the following amounts secured on property, plant and
equipment
and investment properties:
Bank overdrafts 0.2 3.8
Bank loans 0.6 0.6
0.8 4.4
------------ ------------
Non-current:
Bank loans 4.5 5.1
------------ ------------
Non-current borrowings include the following amounts secured on investment properties:
Bank loans 4.5 5.1
------------ ------------
The repayment of bank loans and overdrafts fall due as follows:
Within one year or on demand (included in current liabilities) 1.7 5.4
Between 1 - 2 years 0.6 0.6
Between 2 - 5 years 3.9 4.5
6.2 10.5
------------ ------------
The rates of interest payable by the group ranged between:
2016 2015
% %
Bank overdrafts 2.00 - 33.00 2.25 - 36.00
Bank loans 3.03 3.03
31 Provisions
Onerous lease Others Total
GBP'm GBP'm GBP'm
Group
At 1 January 2015 0.3 0.4 0.7
Utilised in the period (0.1) (0.3) (0.4)
Provided in the period - 0.2 0.2
Unused amounts reversed in period (0.2) - (0.2)
------------- ------ -----
At 1 January 2016 - 0.3 0.3
Utilised in the period - (0.1) (0.1)
Provided in the period - 0.2 0.2
At 31 December 2016 - 0.4 0.4
------------- ------ -----
Current:
At 31 December 2016 - 0.4 0.4
------------- ------ -----
At 31 December 2015 - 0.3 0.3
------------- ------ -----
Others relate to provisions for claims.
32 Deferred tax
The net movement on the deferred tax account is set out below:
Group Company
2016 2015 2016 2015
GBP'm GBP'm GBP'm GBP'm
Restated
At 1 January 37.2 41.4 0.2 0.2
Exchange differences 6.4 (3.4) - -
Charged/(credited) to the income statement 0.7 (0.2) - -
Credited to equity (1.2) (0.6) - -
------- ---------- ------------- ------------
At 31 December 43.1 37.2 0.2 0.2
------- ---------- ------------- ------------
The movement in deferred tax assets and liabilities is set out below:
Deferred tax liabilities
Accelerated Employee
tax benefit
depreciation obligations Other Total
GBP'm GBP'm GBP'm GBP'm
At 1 January 2015 45.1 0.3 - 45.4
Exchange differences (3.5) - - (3.5)
Charged to the income statement 1.6 0.1 0.1 1.8
Credited to equity - (0.4) - (0.4)
------------ ----------- ----- -----
At 1 January 2016 43.2 - 0.1 43.3
Exchange differences 7.7 - 0.2 7.9
Charged to the income statement (1.9) - 2.8 0.9
At 31 December 2016 49.0 - 3.1 52.1
------------ ----------- ----- -----
Deferred tax assets offset (8.8)
-----
Net deferred tax liability after offset 43.3
-----
Deferred tax assets
Employee
benefit
Tax losses obligations Other Total
GBP'm GBP'm GBP'm GBP'm
At 1 January 2015 0.7 0.9 2.4 4.0
Exchange differences - - (0.1) (0.1)
(Charged)/credited to the income statement (0.2) - 2.2 2.0
Credited to equity - 0.2 - 0.2
------------ ----------- ----- -----
At 1 January 2016 0.5 1.1 4.5 6.1
Exchange differences 0.1 0.1 1.3 1.5
(Charged)/credited to the income statement (0.3) (1.3) 1.8 0.2
Credited to equity - 0.9 0.3 1.2
------------ ----------- ----- -----
At 31 December 2016 0.3 0.8 7.9 9.0
------------ ----------- ----- -----
Offset against deferred tax liabilities (8.8)
-----
Net deferred tax asset after offset 0.2
-----
Deferred tax liabilities of GBP24.3 million (2015: GBP20.7 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 GBP9.5 million (2015: GBP7.0 million) in respect of losses that can be carried forward against future taxable income.
33 Employee benefit obligations
(i) Pensions
Certain group subsidiaries operate defined contribution and funded defined benefit pension schemes. The most significant is the UK funded, final salary defined benefit scheme. The assets of this scheme are administered by trustees and are kept separate from those of the group. A full actuarial valuation was undertaken as at 1 July 2014 and updated to 31 December 2016 by a qualified independent actuary. The UK final salary 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 these members have participated in a defined contribution scheme.
The overseas schemes are operated in group subsidiaries located in Bangladesh, India and The Netherlands. Actuarial valuations have been updated to 31 December 2016 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:
2016 2015
% per annum % per annum
UK schemes
Rate of increase in salaries N/a 2.00
Rate of increase to LPI (Limited Price Indexation) pensions in payment 2.40 - 5.00 2.00 - 5.00
Discount rate applied to scheme liabilities 2.65 3.80
Inflation assumption (CPI/RPI) 2.40/3.40 2.00/3.00
Assumptions regarding future mortality experience are based on advice received from independent actuaries. The current mortality tables used are S2PA, on a year of birth basis, with CMI_2013 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 22 years (2015: 22 years) and 24 years respectively (2015: 24 years).
Overseas schemes
Rate of increase in salaries 1.50 - 7.00 1.50 - 7.00 Rate of increase to LPI (Limited Price Indexation) pensions in payment 0.00 - 5.00 0.00 - 5.00 Discount rate applied to scheme liabilities 1.80 - 9.00 2.30 - 9.00 Inflation assumption 0.00 - 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:
2016 2015
% per annum % per annum
Rate of increase in salaries 6.00 - 10.00 6.00 - 10.00
Discount rate applied to scheme liabilities 6.75 - 14.50 8.00 - 14.00
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. Previously these obligations were included in other creditors but from 2016 these obligations have been 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
Pre-retirement discount rate 0.5% lower 1.8% increase
Post-retirement discount rate 0.5% lower 5.7% increase
Inflation rate 0.25% lower 1.5% decrease
Long-term rate of improvement of mortality 0.25% higher 1.4% increase
The above sensitivity analysis assumes that each assumption is changed independently of the others. Therefore, the disclosures are only a guide because the effect of changing more than one assumption is not cumulative. The sensitivity analysis was calculated by re-running the figures as at the last formal actuarial valuation at 1 July 2014. Therefore the analysis is only approximate for the purpose of these IAS19 disclosures as they are on a different set of assumptions and do not reflect subsequent scheme experience.
Duration of the scheme liabilities
The weighted average duration of the UK defined benefit obligation is 15 years.
Analysis of scheme liabilities
As at 1 July 2014 the allocation of the present value of the UK scheme liabilities was as follows:
%
Active members 11
Deferred pensioners 28
Current pensioners 61
---
Total membership 100
---
(iv) Actuarial valuations
2016 2015
UK Overseas Total UK Overseas Total
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
Equities and property 96.5 0.7 97.2 89.6 0.5 90.1
Bonds 62.6 17.6 80.2 53.1 12.8 65.9
Cash 5.0 6.8 11.8 6.9 5.4 12.3
Other - 4.9 4.9 - 3.7 3.7
------ -------- ------ ------ -------- ------
Total fair value of plan assets 164.1 30.0 194.1 149.6 22.4 172.0
Present value of defined benefit obligations (208.7) (52.1) (260.8) (174.1) (36.5) (210.6)
------ -------- ------ ------ -------- ------
Total deficit in the schemes (44.6) (22.1) (66.7) (24.5) (14.1) (38.6)
------ -------- ------ ------ -------- ------
Amount recognised as asset in the balance sheet - 0.1 0.1 - 0.2 0.2
Amount recognised as current liability in the
balance sheet - (0.9) (0.9) - (1.0) (1.0)
Amount recognised as non-current liability in
the balance sheet (44.6) (21.3) (65.9) (24.5) (13.3) (37.8)
------ -------- ------ ------ -------- ------
(44.6) (22.1) (66.7) (24.5) (14.1) (38.6)
Related deferred tax asset (note 32) - 0.8 0.8 - 1.1 1.1
------ -------- ------ ------ -------- ------
Net deficit (44.6) (21.3) (65.9) (24.5) (13.0) (37.5)
------ -------- ------ ------ -------- ------
Movements in the fair value of scheme assets were as follows:
2016 2015
UK Overseas Total UK Overseas Total
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
At 1 January 149.6 22.4 172.0 149.7 19.9 169.6
Transfer from other creditors - 0.6 0.6 - - -
Expected return on plan
assets 5.6 1.8 7.4 5.1 2.0 7.1
Employer contributions 1.4 2.8 4.2 1.5 2.4 3.9
Benefit payments (7.6) (2.1) (9.7) (8.1) (1.8) (9.9)
Actuarial gains/(losses) 15.1 0.4 15.5 1.4 (0.3) 1.1
Exchange differences - 4.1 4.1 - 0.2 0.2
----- -------- ----- ----- -------- -----
At 31 December 164.1 30.0 194.1 149.6 22.4 172.0
----- -------- ----- ----- -------- -----
Movements in the present value of defined benefit obligations were as follows:
2016 2015
UK Overseas Total UK Overseas Total
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
At 1 January (174.1) (36.5) (210.6) (184.3) (26.9) (211.2)
Transfer from other creditors - (1.1) (1.1) - - -
Current service cost (0.4) (1.8) (2.2) (0.8) (1.5) (2.3)
Past service cost - - - - (6.1) (6.1)
Interest cost (6.5) (3.1) (9.6) (6.3) (2.5) (8.8)
Benefit payments 7.6 2.1 9.7 8.1 1.8 9.9
Actuarial (losses)/gains (35.3) (4.5) (39.8) 9.2 (1.2) 8.0
Exchange differences - (7.2) (7.2) - (0.1) (0.1)
------
At 31 December (208.7) (52.1) (260.8) (174.1) (36.5) (210.6)
------
In 2014, the total fair value of plan assets was GBP169.6 m, present value of defined benefit obligations was GBP211.2 million and the deficit was GBP41.6 million. In 2013, the total fair value of plan assets was GBP164.0 million, present value of defined benefit obligations was GBP185.4 million and the deficit was GBP21.4 million and in 2012, the total fair value of plan assets was GBP151.6 million, present value of defined benefit obligations was GBP184.2 million and the deficit was GBP32.6 million.
Income statement
The amounts recognised in the income statement are as follows:
2016 2015
UK Overseas Total UK Overseas Total
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
Amounts charged to operating profit:
Current service cost (0.4) (1.8) (2.2) (0.8) (1.5) (2.3)
Past service cost - - - - (6.1) (6.1)
-------- -----
Total operating charge (0.4) (1.8) (2.2) (0.8) (7.6) (8.4)
Amounts charged to other finance costs:
Interest expense (0.9) (1.3) (2.2) (1.2) (0.5) (1.7)
-------- -----
Total charged to income statement (1.3) (3.1) (4.4) (2.0) (8.1) (10.1)
-------- -----
The past service cost in 2015 of GBP6.1 million relates to legislation enacted in Bangladesh which requires companies to make a payment on retirement or other events terminating employment to all employees, based upon compensation and length of service.
Employer contributions to defined contribution schemes are charged to profit when payable and the costs charged were GBP4.6 million (2015: GBP3.7 million).
Actuarial gains and losses recognised in the statement of comprehensive income
The amounts included in the statement of comprehensive income:
2016 2015
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 15.1 0.4 15.5 1.4 (0.3) 1.1
Loss from changes in demographic assumptions - - - (0.8) - (0.8)
(Loss)/gain from changes in financial assumptions (37.1) (5.3) (42.4) 7.7 (0.4) 7.3
Experience gains/(losses) 1.8 0.8 2.6 2.3 (0.8) 1.5
-------- -----
Actuarial (loss)/gain (20.2) (4.1) (24.3) 10.6 (1.5) 9.1
-------- -----
Cumulative actuarial losses recognised in the statement of comprehensive income are GBP59.3 million (2015: GBP35.0 million).
As the UK defined benefit pension scheme was closed to future accrual and active members were transferred to a defined contribution scheme in 2016, no employer contributions will be paid for the year commencing 1 January 2017, however, a contribution of GBP0.9 million will be paid to reduce the scheme's funding deficit.
34 Share capital
2016 2015
GBP'm GBP'm
Authorised: 2,842,000 (2015: 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 (2015: 2,824,500) shares 0.3 0.3
Group companies hold 62,500 issued shares in the company. These are classified as treasury shares.
35 Reconciliation of profit from continuing operations to cash flow
2016 2015
GBP'm GBP'm
Restated
Group
Profit from continuing operations 25.6 21.1
Share of associates' results (5.1) (4.2)
Depreciation and amortisation 14.9 15.7
Impairment of assets 0.1 0.5
Profit on disposal of non-current assets (0.2) (3.8)
Profit on disposal of investments (1.5) (0.4)
Increase in working capital 3.0 10.2
Pensions and similar provisions less payments (1.5) 4.0
Cash generated from continuing operations 35.3 43.1
36 Reconciliation of net cash flow to movement in net cash
2016 2015
GBP'm GBP'm
Group
(Decrease)/increase in cash and cash equivalents in the year (4.1) 12.5
Net cash outflow/(inflow) from decrease/(increase) in debt 0.6 (5.6)
-----
(Decrease)/increase in net cash resulting from cash flows (3.5) 6.9
Exchange rate movements 10.3 (1.0)
-----
Increase in net cash in the year 6.8 5.9
Net cash at beginning of year 59.9 54.0
-----
Net cash at end of year 66.7 59.9
-----
37 Commitments
Capital commitments
Capital expenditure contracted for at the balance sheet date but not yet incurred is as follows:
2016 2015
GBP'm GBP'm
Group
Property, plant and equipment 1.9 1.4
1.9 1.4
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:
2016 2015
GBP'm GBP'm
Group
Land and buildings:
Within 1 year 2.0 1.4
Between 1 - 5 years 2.8 2.6
After 5 years 18.3 15.0
-----
23.1 19.0
-----
Plant and machinery:
Within 1 year 0.3 0.2
Between 1 - 5 years 0.2 0.2
-----
0.5 0.4
-----
The group's most significant operating lease commitments are long term property leases with renewal terms in excess of 60 years.
38 Contingencies
The group operates in certain countries where its operations are potentially subject to a number of legal claims including taxation. When required, appropriate provisions are made for the expected cost of such claims.
39 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 30, 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:
2016 2015
GBP'm GBP'm
Restated
Borrowings 6.2 10.5
Tangible net assets 329.7 313.0
Ratio 1.88% 3.35%
Borrowings are defined as current and non-current borrowings, as detailed in note 30.
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 2016
Loans and Available for Held to
receivables sale maturity Total
GBP'm GBP'm GBP'm GBP'm
Group
Assets as per balance sheet
Available-for-sale financial assets - 37.2 - 37.2
Trade and other receivables excluding prepayments 37.2 - - 37.2
Cash and cash equivalents 72.9 - - 72.9
110.1 37.2 - 147.3
Company
Available-for-sale financial assets - 0.2 - 0.2
Other financial
liabilities at
amortised cost Total
GBP'm GBP'm
Group
Borrowings 6.2 6.2
Trade and other payables 64.3 64.3
-----
70.5 70.5
-----
Company
Trade and other payables 0.1 0.1
-----
At 31 December 2015
Loans and Available for Held to
receivables sale maturity Total
GBP'm GBP'm GBP'm GBP'm
Group
Assets as per balance sheet
Available-for-sale financial assets - 30.6 - 30.6
Held-to-maturity financial assets - - 29.5 29.5
Trade and other receivables excluding prepayments 34.7 - - 34.7
Loans and advances to customers of banking
subsidiaries 35.8 - - 35.8
Cash and cash equivalents (excluding bank
subsidiaries) 70.4 - - 70.4
Loans and advances to banks by banking subsidiaries 167.4 - - 167.4
-----
308.3 30.6 29.5 368.4
-----
Company
Available-for-sale financial assets - 0.2 - 0.2
Cash and cash equivalents 2.2 - - 2.2
2.2 0.2 - 2.4
-----
Other financial
liabilities at
amortised cost Total
GBP'm GBP'm
Group
Liabilities as per balance sheet
Borrowings 10.5 10.5
Amounts due to customers of banking subsidiaries 208.6 208.6
Trade and other payables 52.0 52.0
271.1 271.1
Company
Trade and other payables 0.1 0.1
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 19 for disclosures of biological assets that are measured at fair value.
At 31 December 2016
Level 1 Level 2 Level 3 Total
GBP'm GBP'm GBP'm GBP'm
Assets
Available-for sale financial assets:
- Equity securities 36.5 - 0.2 36.7
Debt investments:
- Debentures 0.5 - - 0.5
-------
37.0 - 0.2 37.2
-------
At 31 December 2015
Level 1 Level 2 Level 3 Total
GBP'm GBP'm GBP'm GBP'm
Assets
Available-for sale financial assets:
- Equity securities 28.8 - 1.2 30.0
Debt investments:
- Debentures 0.6 - - 0.6
Held-to-maturity financial assets 29.5 - - 29.5
-----
58.9 - 1.2 60.1
-----
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 sufficient 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, including Duncan Lawrie, the group's banking subsidiary, did not, in accordance with group policy, trade in financial instruments throughout the year 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 available-for-sale financial assets. A movement by 5 per cent. in the exchange rate of the Japanese Yen with Sterling, the group's equity balance would increase/decrease by GBP0.8 million (2015: GBP0.6 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 available-for-sale. 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 equity balance would increase/decrease by GBP1.8 million (2015: GBP1.4 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 has no fixed rate exposure.
At 31 December 2016, 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 GBP0.3 million (2015: 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
2016 2015 2016 2015
GBP'm GBP'm GBP'm GBP'm
Sterling 7.5 136.7 5.1 135.4
US Dollar 17.3 76.2 - 59.1
Euro 0.9 13.1 - 12.7
Swiss Franc 0.8 4.5 - 4.2
Kenyan Shilling 19.2 15.7 - -
Indian Rupee 12.5 11.4 0.1 0.5
Malawian Kwacha 0.1 - 0.9 0.9
Bangladesh Taka 9.7 8.2 0.1 3.2
South African Rand 1.5 1.6 - 0.1
Brazilian Real 2.7 2.2 - -
Bermudian Dollar 0.7 0.9 - -
Other - 3.1 - 3.0
72.9 273.6 6.2 219.1
(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 27 per cent. (2015: 30 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 2016, the group had undrawn committed facilities of GBP28.5 million (2015: GBP22.2 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 than 1 Between 1 Between 2 Over 5
year and 2 years and 5 years years Undated Total
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
At 31 December 2016
Assets
Available-for-sale financial assets 0.1 0.1 0.3 - 36.7 37.2
Trade and other receivables 35.4 1.8 - - - 37.2
Cash and cash equivalents (excluding bank
subsidiaries) 72.9 - - - - 72.9
108.4 1.9 0.3 - 36.7 147.3
----------- -------
Liabilities
Borrowings 1.7 0.6 3.9 - - 6.2
Trade and other payables 64.3 - - - - 64.3
----------- -------
66.0 0.6 3.9 - - 70.5
----------- -------
At 31 December 2015
Assets
Available-for-sale financial assets 0.2 0.1 0.3 - 30.0 30.6
Held-to-maturity financial assets 1.8 9.4 12.7 5.6 - 29.5
Trade and other receivables 33.5 1.2 - - - 34.7
Loans and advances to customers of banking
subsidiaries 14.2 6.7 14.6 0.2 0.1 35.8
Cash and cash equivalents
(excluding bank subsidiaries) 70.4 - - - - 70.4
Loans and advances to banks by banking
subsidiaries 167.2 - - - 0.2 167.4
----------- -------
287.3 17.4 27.6 5.8 30.3 368.4
----------- -------
Liabilities
Borrowings 5.4 0.6 4.5 - - 10.5
Deposits by banks at banking subsidiaries 1.5 - 0.7 - - 2.2
Customer accounts held at banking
subsidiaries 202.7 1.5 2.1 0.1 - 206.4
Trade and other payables 52.0 - - - - 52.0
----------- -------
261.6 2.1 7.3 0.1 - 271.1
----------- -------
Included in borrowings due in less than 1 year is GBP1.1 million (2015: GBP4.8 million) repayable on demand.
40 Subsidiary and associated undertakings
Subsidiary undertakings
The subsidiary undertakings of the group at 31 December 2016, which are wholly owned, incorporated in Great Britain unless otherwise stated, were:
Principal
country of Registered
operation Office
Agriculture
Amgoorie India Limited (Incorporated in India - 99.8% 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% 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% holding) Kenya (x)
Eastern Produce Malawi Limited (Incorporated in Malawi - 73.2% holding) Malawi (xii)
Eastern Produce South Africa (Pty) Limited
(Incorporated in South Africa - 73.2% holding) South Africa (ix)
Eastland Camellia Limited (Incorporated in Bangladesh - 93.8% holding) Bangladesh (vii)
Goodricke Group Limited (Incorporated in India - 74.0% holding) India (iii)
Goodricke Tech Limited (Incorporated in India - 99.8% holding) India (iii)
Horizon Farms (An United States of America general partnership - 80% holding) USA (xiii)
Kakuzi Limited (Incorporated in Kenya - 50.7% 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% 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% holding) Malawi (xii)
Zetmac (Pty) Limited (Incorporated in South Africa - 55.8% 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)
AKD Engineering Limited UK (xv)
Atfin GmbH (Incorporated in Germany - 51.0% holding) Germany (xvi)
British Metal Treatments Limited UK (i)
GU Cutting and Grinding Services Limited UK (i)
Unochrome Investments Limited (formerly Loddon Engineering Limited) UK (i)
XiMo AG (Incorporated in Switzerland- 51.0% holding) Switzerland (xvii)
Food Service
Affish BV (Incorporated in Holland) The Netherlands (xviii)
Associated Cold Stores & Transport Limited UK (i)
Duncan Products Limited (Incorporated in Bangladesh) Bangladesh (vii)
Wylax International BV (Incorporated in Holland) The Netherlands (xviii)
Banking and Financial Services
DDY Nominees Limited UK (xix)
Duncan Lawrie Limited UK (xx)
Duncan Lawrie Asset Management Limited UK (xx)
Duncan Lawrie Holdings Limited UK (xxi)
Duncan Lawrie International Holdings Limited (Incorporated in Isle of Man) Isle of Man (xxii)
Duncan Lawrie (IOM) Limited (Incorporated in Isle of Man) Isle of Man (xxii) Duncan Lawrie Offshore Services Limited (Incorporated in Isle of Man) Isle of Man (xxii) Dunlaw Nominees Limited UK (xix) Dunman Nominees Limited (Incorporated in Isle of Man) Isle of Man (xxii) Havelock Nominees Limited (Incorporated in Isle of Man) Isle of Man (xxii) Hobart Place Nominees Limited UK (xxi) Mount Havelock Directors Limited (Incorporated in Isle of Man) Isle of Man (xxii) Mount Havelock Investments Limited (Incorporated in Isle of Man) Isle of Man (xxii) Mount Havelock Secretaries Limited (Incorporated in Isle of Man) Isle of Man (xxii) Investment Holding Affish Limited UK (i) Assam-Dooars Investments Limited UK (i) Associated Fisheries Limited UK (i) Borbam Limited (Incorporated in India - 99.8% 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% holding) 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) Lawrie (Bermuda) Limited (Incorporated in Bermuda) Bermuda (xxiii) Lawrie Group Plc (Owned directly by the company) UK (i) Lawrie International Limited (Incorporated in Bermuda) Bermuda (xxiii) Lebong Investments Limited (Incorporated in India - 94.0% 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 (Incorporated in Malawi - 50.2% held by subsidiaries) Malawi (xii) Shula Limited (Incorporated in Isle of Man) Isle of Man (xxii) 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) 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 (xxi) Sterling Industrial Securities Limited UK (xxi) 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 Limited 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) Unochrome Investments Limited (formerly Loddon Engineering 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
2016 2015 2016 2015
GBP'm GBP'm GBP'm GBP'm
Restated Restated
Current
Assets 23.6 25.0 11.8 7.6
Liabilities (20.0) (18.5) (11.4) (9.1)
Total current net assets/(liabilities) 3.6 6.5 0.4 (1.5)
Non-current
Assets 27.5 23.2 42.4 38.6
Liabilities (5.7) (6.2) (12.4) (12.1)
Total non-current net assets 21.8 17.0 30.0 26.5
Net assets 25.4 23.5 30.4 25.0
Eastern Produce Goodricke Group
South Africa Limited Limited
as at 31 December as at 31 December
2016 2015 2016 2015
GBP'm GBP'm GBP'm GBP'm
Restated Restated
Current
Assets 5.8 5.1 37.9 29.7
Liabilities (1.1) (1.2) (19.8) (17.7)
Total current net assets 4.7 3.9 18.1 12.0
Non-current
Assets 5.3 3.9 30.5 25.5
Liabilities (1.5) (1.2) (10.5) (6.3)
Total non-current net assets 3.8 2.7 20.0 19.2
Net assets 8.5 6.6 38.1 31.2
Horizon Farms Kakuzi Limited
as at 31 December as at 31 December
2016 2015 2016 2015
GBP'm GBP'm GBP'm GBP'm
Restated Restated
Current
Assets 3.6 4.3 16.0 10.8
Liabilities (0.2) (0.6) (3.4) (2.5)
Total current net assets 3.4 3.7 12.6 8.3
Non-current
Assets 8.9 7.7 24.0 18.8
Liabilities (0.8) (0.9) (6.3) (4.8)
Total non-current net assets 8.1 6.8 17.7 14.0
Net assets 11.5 10.5 30.3 22.3
Summarised income statement
Eastern Produce Eastern Produce
Kenya Limited Malawi Limited
as at 31 December as at 31 December
2016 2015 2016 2015
GBP'm GBP'm GBP'm GBP'm
Restated Restated
Revenue 38.9 39.3 21.1 15.5
Profit before tax 4.7 13.0 3.9 2.4
Taxation (1.2) (4.0) (1.2) (1.7)
Other comprehensive
income 0.2 - - -
Total comprehensive
income 3.7 9.0 2.7 0.7
Total comprehensive
income allocated to
non-controlling
interests 1.1 2.7 0.7 0.2
Dividends paid to
non-controlling
interests 1.9 3.0 0.5 0.6
Eastern Produce Goodricke Group
South Africa Limited Limited
as at 31 December as at 31 December
2016 2015 2016 2015
GBP'm GBP'm GBP'm GBP'm
Restated Restated
Revenue 4.5 4.9 72.7 67.5
(Loss)/Profit before tax (0.6) 2.2 6.6 3.2
Taxation 0.2 (0.7) (3.0) (1.7)
Other comprehensive expense - - (1.0) (0.1)
Total comprehensive
(expense)/income (0.4) 1.5 2.6 1.4
Total comprehensive
(expense)/income allocated
to non-controlling
interests (0.1) 0.4 0.5 0.3
Dividends paid to
non-controlling interests - 0.1 0.2 0.2
Horizon Farms Kakuzi Limited
as at 31 December as at 31 December
2016 2015 2016 2015
GBP'm GBP'm GBP'm GBP'm
Restated Restated
Revenue 4.4 4.1 17.2 14.7
Profit before tax 0.8 1.8 5.5 4.5
Taxation (0.3) (0.6) (1.4) (1.4)
Other comprehensive income - - 0.1 -
Total comprehensive income 0.5 1.2 4.2 3.1
Total comprehensive income
allocated to
non-controlling interests 0.1 0.2 2.1 1.6
Dividends paid to
non-controlling interests 0.3 0.3 0.4 0.2
Summarised cash flows
Eastern Produce Eastern Produce
Kenya Limited Malawi Limited
as at 31 December as at 31 December
2016 2015 2016 2015
GBP'm GBP'm GBP'm GBP'm
Cash flows from operating
activities
Cash generated from
operations 7.8 16.4 5.6 3.5
Net interest received/(paid) 0.9 1.3 (0.1) (0.3)
Income tax paid (5.9) (1.8) (1.4) (1.3)
Net cash generated from
operating activities 2.8 15.9 4.1 1.9
Net cash used in investing
activities (0.9) (1.0) (1.9) (0.6)
Net cash used in financing
activities (6.2) (10.1) (1.7) (2.2)
Net (decrease)/increase in
cash and cash equivalents
and bank overdrafts (4.3) 4.8 0.5 (0.9)
Cash, cash equivalents and
bank overdrafts at
beginning of year 14.9 10.3 (0.9) (0.3)
Exchange gains/(losses) on
cash and cash equivalents 2.4 (0.2) - 0.3
Cash, cash equivalents and
bank overdrafts at end of
year 13.0 14.9 (0.4) (0.9)
Eastern Produce Goodricke Group
South Africa Limited Limited
as at 31 December as at 31 December
2016 2015 2016 2015
GBP'm GBP'm GBP'm GBP'm
Cash flows from
operating activities
Cash generated from
operations 2.0 0.9 6.7 4.3
Net interest received 0.1 0.1 - -
Income tax paid - (0.2) (0.8) (0.9)
Net cash generated
from operating
activities 2.1 0.8 5.9 3.4
Net cash used in
investing activities (0.5) (0.3) (3.0) (1.4)
Net cash used in
financing activities - (0.1) (1.1) (1.2)
Net increase in cash
and cash equivalents
and bank overdrafts 1.6 0.4 1.8 0.8
Cash, cash
equivalents and bank
overdrafts at
beginning of year 1.7 1.7 0.6 (0.2)
Exchange
gains/(losses) on
cash and cash
equivalents 0.6 (0.4) 0.1 -
Cash, cash
equivalents and bank
overdrafts at end of
year 3.9 1.7 2.5 0.6
Horizon Farms Kakuzi Limited
as at 31 December as at 31 December
2016 2015 2016 2015
GBP'm GBP'm GBP'm GBP'm
Cash flows from
operating activities
Cash generated from
operations 0.7 3.3 8.5 5.8
Net interest received - - 0.6 0.5
Income tax paid (1.1) (0.3) (1.7) (0.5)
Net cash (used
in)/generated from
operating activities (0.4) 3.0 7.4 5.8
Net cash used in
investing activities - (0.4) (4.8) (4.0)
Net cash used in
financing activities (1.5) (1.3) (0.7) (0.5)
Net (decrease)/increase
in cash and cash
equivalents and bank
overdrafts (1.9) 1.3 1.9 1.3
Cash, cash equivalents
and bank overdrafts at
beginning of year 2.3 0.9 7.8 6.9
Exchange gains on cash
and cash equivalents 0.3 0.1 1.6 (0.4)
Cash, cash equivalents
and bank overdrafts at
end of year 0.7 2.3 11.3 7.8
Associated undertakings
The principal associated undertakings of the group at 31 December 2016 were:
Group
interest
Principal Accounting in equity
country of Registered date capital
operation Office 2016 (%)
Insurance and banking
BF&M Limited (Incorporated in Bermuda - common
stock) Bermuda (xxiii) 31 December 35.8
United Insurance Company Limited (Incorporated in
Bangladesh - ordinary shares) Bangladesh (vii) 31 December 37.0
United Finance Limited (Incorporated in Bangladesh
- ordinary shares) Bangladesh (vii) 31 December 38.4
Registered Offices:
(i) Linton Park (ix) 7 Windsor Street (xvii) Altsagenstrasse 3
Linton Park Tzaneen CH-6048 Horw
Maidstone 850 Luzern
Kent Limpopo Province Switzerland
ME17 4AB South Africa
England
(ii) Amgoorie Tea Garden (x) New Rehema House (xviii) Burg. van der Lelystraat 2
PO: Amguri Rhapta Road 4285 BL
Haloating - 785 681 Westlands Woudrichem
Dist: Sibsagar P O Box 45560 Netherlands
Assam GPO 00100
India Nairobi
Kenya
(iii) Camellia House (xi) Main Office (xix) Wrotham Place
14 Gurusaday Road Punda Milia Road Wrotham
Kolkata - 700019 Makuyu Near Sevenoaks
West Bengal P O Box 24 Kent
India 01000 Thika TN15 7AE
Kenya England
(iv) Koomber Tea Garden (xii) PO Box 53 (xx) 1 Hobart Place
PO: Kumbhir Mulanje London
Cachar - 788 108 Malawi SW1W 0HU
Assam England
India
(v) Sessa Tea Garden (xiii) 2520 West Shaw Lane (xxi) 2 Hobart Place
PO: Dibrugarh - 786001 Suite 101 London
Dist: Dibrugarh Fresno SW1W 0HU
Assam California England
India USA
(vi) Fazenda Maruque s/n sala 03 (xiv) Craigshaw Crescent (xxii) Camellia House
Bairro Maruque West Tullos 16-18 Mount Havelock
Itaberá Aberdeen Douglas
São Paulo AB12 3TB Isle of Man IM1 2QG
Brazil Scotland IM1 2QG
(vii) Camellia House (xv) Tower Bridge House (xxiii) 112 Pitts Bay Road
22 Kazi Nazrul Islam Avenue St Katharine's Way Pembroke
Dhaka 1000 London Bermuda
Bangladesh E1W 1DD HM08
England
(viii) Slangrivier Road (xvi) Robert-Drosten-Platz 1
Slangrivier Plaas D-82380
Wellington Peissenberg
7655 Germany
South Africa
41 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.
Report of the independent auditors
Independent auditors' report to the members of Camellia Plc
Report on the financial statements
Our opinion
In our opinion:
-- Camellia Plc's group financial statements and company financial statements (the "financial
statements") give a true and fair view of the state of the group's and of the company's affairs
as at 31 December 2016 and of the group's loss and the group's and the company's cash flows
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 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.
What we have audited
The financial statements, included within the Annual Report, comprise:
-- the consolidated and company balance sheets as at 31 December 2016;
-- the consolidated income statement and statement of comprehensive income for the year then
ended;
-- the consolidated and company cash flow statements for the year then ended;
-- the group and company statements of changes in equity for the year then ended; and
-- the notes to the financial statements, which include a summary of significant accounting policies
and other explanatory information.
Certain required disclosures have been presented elsewhere in the Annual Report, rather than in the notes to the financial statements. These are cross-referenced from the financial statements and are identified as audited.
The financial reporting framework that has been applied in the preparation of the financial statements is IFRSs as adopted by the European Union and, as regards the company financial statements, as applied in accordance with the provisions of the Companies Act 2006, and applicable law.
In applying the financial reporting framework, the directors have made a number of subjective judgements, for example in respect of significant accounting estimates. In making such estimates, they have made assumptions and considered future events.
Opinions on 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 Report of the Directors for the financial
year for which the financial statements are prepared is consistent with the financial statements;
and
-- the Strategic Report and the Report of the Directors have been prepared in accordance with
applicable legal requirements.
In addition, in light of the knowledge and understanding of the group, the company and their environment obtained in the course of the audit, we are required to report if we have identified any material misstatements in the Strategic Report and the Report of the Directors. We have nothing to report in this respect.
Other matters on which we are required to report by exception
Adequacy of accounting records and information and explanations received
Under the Companies Act 2006 we are required to report to 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 company, or returns adequate for our
audit have not been received from branches not visited by us; or
-- the company financial statements are not in agreement with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Directors' remuneration
Under the Companies Act 2006 we are required to report to you if, in our opinion, certain disclosures of directors' remuneration specified by law are not made. We have no exceptions to report arising from this responsibility.
Responsibilities for the financial statements and the audit
Our responsibilities and those of the directors
As explained more fully in the Statement of the Directors' Responsibilities set out on page 30, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view.
Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland) ("ISAs (UK & Ireland)"). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.
This report, including the opinions, has been prepared for and only for the company's members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
What an audit of financial statements involves
We conducted our audit in accordance with ISAs (UK & Ireland). An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of:
- whether the accounting policies are appropriate to the group's and the company's circumstances
and have been consistently applied and adequately disclosed;
- the reasonableness of significant accounting estimates made by the directors; and
- the overall presentation of the financial statements.
We primarily focus our work in these areas by assessing the directors' judgements against available evidence, forming our own judgements, and evaluating the disclosures in the financial statements.
We test and examine information, using sampling and other auditing techniques, to the extent we consider necessary to provide a reasonable basis for us to draw conclusions. We obtain audit evidence through testing the effectiveness of controls, substantive procedures or a combination of both.
In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. With respect to the Strategic Report and Report of the Directors, we consider whether those reports include the disclosures required by applicable legal requirements.
John Ellis (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
26 April 2017
Five year record
2016 2015 2014 2013 2012
GBP'm GBP'm GBP'm GBP'm GBP'm
Restated
Revenue - continuing operations 257.9 244.7 238.9 251.3 261.5
Profit before tax 26.5 24.0 22.0 59.6 69.7
Taxation (12.4) (13.2) (13.7) (22.1) (25.7)
Profit from continuing operations 14.1 10.8 8.3 37.5 44.0
(Loss)/profit attributable to owners of the parent (10.7) 1.4 2.8 28.3 31.2
Equity dividends paid 3.6 3.5 3.5 3.4 3.2
Equity
Called up share capital 0.3 0.3 0.3 0.3 0.3
Reserves 330.5 320.6 321.4 332.2 313.5
Total shareholders' funds 330.8 320.9 321.7 332.5 313.8
(Loss)/earnings per share (387.4 )p 50.7p 102.7p 102.2p 1,122.9p
Dividend paid per share 130p 126p 125p 122p 116p
This information is provided by RNS
The company news service from the London Stock Exchange
END
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April 27, 2017 02:00 ET (06:00 GMT)
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