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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 | |
|---|---|---|---|---|---|---|---|---|---|---|
| -30.00 | -0.66% | 4,510.00 | 4,440.00 | 4,540.00 | 2 | 16:35:18 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Offices-holdng Companies,nec | 320.9M | -13M | -4.7067 | -9.65 | 125.39M |
From Apr 2019 to Apr 2024
TIDMCAM
RNS Number : 3894L
Camellia PLC
19 April 2018
Camellia Plc
Final results
Camellia Plc (AIM:CAM) Final results for the year ended 31 December 2017.
Malcolm Perkins, Chairman, stated:
"2017 saw an improved performance from the Group, particularly from the Agriculture division, which reflected the higher tea prices in the second half of the year. We also completed the sale and closure of Duncan Lawrie which resulted in one off gains of GBP20.3 million being reflected in the 2017 results."
"For 2018, early signs of a better macadamia crop and some good prices for tea in the first quarter give us reasons to be optimistic and our UK based businesses are busier than they have been for some time. However it is too early in the year to predict outcomes with any certainty."
Hot Features
Premium
Financial highlights
Year ended Year ended
31 December 2017 31 December 2016
GBP'm GBP'm
Revenue - continuing operations 298.3 257.9
Profit before tax - continuing operations 27.6 26.5
Profit/(loss) from discontinued operation 14.8 (20.0)
Profit/(loss) for the year 28.6 (5.9)
Earnings per share 803.8 p (387.4) p
Earnings per share - continuing operations 268.0 p 336.7 p
Proposed final dividend 98 p 95 p
Total dividend for the year 135 p 130 p
Highlights
* Improved trading profits, particularly in Agriculture,
driven by higher tea prices, partially offset by
adverse weather impact on macadamia production.
* Excellent performance from Food Service; mixed
results from Engineering.
* Continuing portfolio refinement to enhance core
businesses and divest peripheral activities including
completion of the Duncan Lawrie disposal.
* Significant investment in key crops, plant and
equipment to propel future growth.
* Results from associate BF&M impacted by hurricane
claims in the Caribbean.
* Substantial net cash resources.
This announcement contains inside information for the purpose of Article 7 of the Market Abuse Regulation (EU) No. 596/2014.
The Annual Report will be available on the investor relations section of the Company's website www.camellia.plc.uk
Enquiries
Camellia Plc 01622 746655 Tom Franks, Chief Executive Susan Walker, Chief Financial Officer Panmure Gordon (UK) Limited 020 7886 2500 Nominated Adviser and Broker Andrew Godber Erik Anderson
Camellia at a glance
Camellia Plc is an international group - a global family of diverse companies with a 130-year history employing approximately 80,000 people worldwide. Our operations are in Agriculture, Engineering, Food Service and the holding of Investments. From the outset, 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 operate.
-- Sustainability. We are committed not only to the ultimate
welfare of our employees but also to the communities in
which they live. We believe our businesses can and should
grow with respect and care for the environment rather than
at the cost of it. We proactively invest in ensuring that
the environments where we do business are continually protected
and improved, and seek to minimise any damage our activities
may cause.
Our continuing business is made up as follows:
AGRICULTURE
2017: Turnover - GBP239.4 million, Trading profit - GBP35.6 million
Mature Immature
area area
Core crops Locations Ha. Ha.
Tea India, Bangladesh, Kenya, Malawi 32,292 2,511
Macadamia Kenya, South Africa, Malawi 2,474 1,224
Avocados Kenya 415 192
Speciality crops
Arable Brazil 3,437 -
Forestry Kenya, Malawi, Brazil 2,488 3,378
Rubber Bangladesh 1,610 365
Citrus USA 169 8
Pistachios USA 131 -
Wine grapes South Africa 63 12
Almonds USA 56 -
Pineapples Kenya 24 -
Other
Joint Projects Kenya 1,580 -
Cattle Kenya 4,409 head
================= ================================= ========== ========
ENGINEERING
2017: Turnover - GBP20.5 million, Trading loss - GBP2.6 million
Subsidiary Locations Abbey Metal Finishing UK, Germany AJT Engineering UK XiMo Switzerland, Hungary ===================== ====================
FOOD SERVICE
2017: Turnover - GBP37.8 million, Trading profit - GBP1.8 million
Subsidiary Locations
ACS&T UK
Jing tea UK
Affish The Netherlands
Wylax The Netherlands
======================== ================= ==================== ============
INVESTMENTS
Market value
at
31/12/17
Investment type Locations GBP'm
Investment Portfolio Global 47.0
Investment Property UK, Malawi, Isle of Man, Brazil 23.4
UK, India, Bangladesh, Kenya, South
Collections* Africa 9.4
* Collections are
stated at cost
======================== ================= ==================== ============
ASSOCIATES
2017: Share of results after
taxation - GBP2.0 million
Holding
Location Activity %
Life and Non-life
BF&M Bermuda insurance 36.3
United Finance Bangladesh Banking 38.4
United Insurance Bangladesh Non-life insurance 37.0
ASSETS HELD FOR SALE
BMT (Great Yarmouth) UK
GU Cutting and Grinding UK
Property in Loddon UK
Directors and advisers
Directors Malcolm Perkins, FCA Chairman (iii)
Deputy Chairman, independent
Chris Relleen, FCA non-executive
Director and senior independent
Director (i) (ii) (iii)
Tom Franks, FCA Chief Executive
Graham Mclean, MSc Managing Director of Agriculture
Susan Walker, FCCA Chief Financial Officer
Independent non-executive
William Gibson Director (i) (ii) (iii)
Frédéric Independent non-executive
Vuilleumier Director (i)
Independent non-executive
Gautam Dalal, FCA Director
(i) Audit committee
(ii) Remuneration committee
(iii) Nomination committee
Secretary Julia Morton, ACIS
Registered office Linton Park
Linton
Maidstone
Kent ME17 4AB
Registered number 00029559
Nominated adviser Panmure Gordon (UK)
and Limited
broker One New Change
London EC4M 9AF
Registrars Link Asset Services
The Registry
34 Beckenham Road
Kent BR3 4ZF
Independent auditors Deloitte LLP
Statutory Auditors
2 New Street Square
London EC4A 3BZ
Website www.camellia.plc.uk
Chairman's statement
I am pleased to report the results for 2017, which reflect a profit for the year of GBP28.6 million (2016: loss GBP5.9 million); this includes the previously disclosed exceptional gain on the sale of Duncan Lawrie's UK asset management business of GBP19.2 million, about which more is set out in the Chief Financial Officer's report.
There were no other significant changes to the Group structure in the year; however in line with our strategy and as set out in more detail in the Chief Executive's report, we made a small acquisition of a packet tea business in India during the year and since the year end we have acquired a majority shareholding in Jing Tea. Jing Tea is a UK based distributor of branded speciality teas to the retail and food service sectors internationally.
In pursuing our strategic objectives, we have decided to sell two of our smaller engineering businesses, BMT (Great Yarmouth) and GU Cutting and Grinding, although the sales have yet to complete. More details are provided in the Chief Executive's report.
Trading in 2017 was mixed with a weak start being followed by a much better second half. Our tea operations performed well as good yields combined with an improving tea price as the year progressed. However, for the second year running, the macadamia crop was impacted by drought which led to disappointing volumes. Our speciality crops continue to provide an excellent return which once again demonstrates the benefits of our diversified agricultural strategy.
Elsewhere, as previously disclosed, our associate BF&M reported a significant reduction in profitability as a result of the two major hurricanes in September 2017.
Camellia is a business with operations across a number of geographical areas, particularly in emerging markets, all of which are vulnerable to a global political atmosphere which is relatively unstable by recent historical standards. Furthermore, changing weather patterns led to a severe drought in the Cape and Kenya, flooding in Bangladesh and an unprecedented hurricane season in the Caribbean. It is a credit to our staff across the world that they continue to operate successfully in the face of these challenges.
Board Members
I was delighted to announce the appointment of Gautam Dalal to the Board as a non-executive Director with effect from 1 March. Gautam's wide experience of the markets in which we operate will be of great benefit to the executive team.
Dividend
Your Board is recommending a final dividend of 98p per share which, together with the interim dividend already paid of 37p per share, brings the total distribution for the year to 135p per share compared with 130p per share for 2016.
Outlook
As so much of our result depends on crop volumes in the second half of the year it is not possible to forecast outturns with any degree of confidence. However, early signs of a better macadamia crop, some good prices for tea in the first quarter of 2018 and continuing strength in our UK markets give us reasons to be optimistic at this stage.
Staff
As always, my thanks go out to all our staff for their efforts in 2017.
Malcolm Perkins
Chairman
18 April 2018
Chief Executive's Report
Camellia is a unique group, not only in our ethos and culture, but also in the diversity and quality of our assets. Our financial position is strong and following our withdrawal from the UK financial services market our financial risks are substantially reduced. In his statement the Chairman rightly reflects on the difficulties of operating in emerging markets, however this access to some of the world's fastest expanding economies also provides us with opportunities for growth.
In the Agriculture division, whilst climate change and political uncertainty in many of our operating countries are largely outside our control, we have four key advantages. First, we are growing a selection of crops which are increasingly in demand from an urbanising, longer living and more health conscious consumer who is ever more concerned with the provenance of their food. Second, our focus on sustainability has put us in a strong position to benefit from these global trends. Third, we have been operating in many of our territories for a very long time. Fourth, we have the resources to pursue our strategic goals. Furthermore, whilst our expenditure on sustainability may not always be immediately apparent, our long standing investment in irrigation, community welfare and better agricultural practices is an integral part of our success. We will continue to build on these strong foundations for the benefit of all our stakeholders.
In our other divisions we continue to take steps to invest where we believe that it is in the long term interests of the Group and to divest where we no longer believe that to be the case.
Over the last three years we have disposed of Duncan Lawrie Asset Management at a substantial profit and closed or sold Duncan Lawrie Private Bank, AKD Engineering and Loddon all of which were loss-making. This process of refining our portfolio is an important part of our long term strategy and a summary of the acquisitions made during 2017 and since the year end is set out below:
-- Tea City. A collection of Indian packet tea brands which
was bought by Goodricke to add to its existing brand portfolio.
-- Jing Tea. A UK based branded speciality teas business selling
to the retail and food service sectors internationally.
Both of these acquisitions will help to bring us closer to our market place and its changing trends; Jing Tea will also enable us to distribute our high end teas more profitably.
In addition to these acquisitions we are proposing to make a number of small disposals and other changes to the portfolio as follows:
-- BMT (Great Yarmouth) and GU Cutting and Grinding. Both
of these companies have been with the Group for many years,
and whilst both remain cash generative they are too small
and too niche to represent good investment opportunities
or to deliver long term growth for the Group. I am pleased
to say that each is in the process of being sold to its
respective management team.
-- XiMo. Having now successfully demonstrated production of
sample quantities of its catalysts, the next stage is to
confirm the same capabilities on a larger scale in order
to prove that the process is viable commercially. This
stage will require significant additional investment and
we are actively seeking third party funding for this next
step.
I strongly believe that these changes to the portfolio support our long term strategy and will make a positive contribution to the Group in the future.
I am also pleased that we have been able to raise the dividend again this year. Other than in 2008 when we held the dividend, we have raised the dividend every year since the merger with Linton Park in 2005.
On other matters, I am pleased that the 2017 triennial UK pension scheme valuation shows a small surplus of GBP7.1 million as against a previous deficit of GBP7.9 million. We will continue to monitor the position carefully, mindful of our continuing and future obligations to the members.
BUSINESS STRATEGY
The overall Group strategy, which is set out on page 20, remains unchanged with each division expected to perform against an agreed divisional strategy with goals and targets for the short, medium and long term. These are summarised below:
Agriculture
-- To focus on our core crops of tea, macadamia and avocado
where we have scale and geographic spread. Where appropriate
opportunities arise, to add to our production capability
in these three crops, as well as to make aligned acquisitions
and investments to enable us to capture more of the value
chain.
-- To maintain and potentially to grow our portfolio of non-core
crops in order to retain the diversity of location and crop
which has historically proved so valuable in shielding the
Group from the impact of climate change and commodity price
fluctuations.
-- To utilise our agricultural expertise to make the most of
the estates that we already have and to develop new estates
where possible and appropriate.
Agriculture is the largest division and is the area where we see the best long term investment opportunities for the Group. This will remain our focus for future investment.
Engineering
Engineering North. To take advantage of the recovering oil sector whilst diversifying into adjacent sectors in order to create a sustainably profitable engineering business.
Engineering South. To continue to grow Abbey Metal Finishing and its joint venture in Germany, Atfin, as quality suppliers to the aerospace industry.
XiMo. To find new investors to take the technology to the next phase in its development.
Food Service
ACS&T. To continue to operate as a high quality business in the storage and distribution of frozen foods, aiming to achieve critical mass by profitable growth and if appropriate, acquisition.
Affish and Wylax. To establish a sustainably profitable business model that works in the European fish distribution market.
Investments
Investment Portfolio. The Group has a portfolio, principally of listed investments, the strategy for which remains to invest in high quality companies where we believe that there is long term value. This portfolio also enables us to balance our geographic risk exposure.
Investment Property. The strategy is to continue to invest in quality assets where an appropriate yield may be realised. The process of developing some of our existing properties to enhance yield will continue.
Collections. The Group has collections of art, philately and manuscripts which are regularly reviewed and are added to or sold as appropriate.
Associates
The Group has three associate companies in the financial services sector of which BF&M, the listed Bermudian insurance business, is the most significant. With all our associates, we continually monitor our investment and may increase or decrease our holding in the future.
PERFORMANCE
Agriculture
Tea Production
2017 saw the Group's second highest ever production levels through our own and managed clients factories. Total Made Tea produced was 95.0 million kgs (2016: 99.1 million kgs).
Mature Immature 2017 2016
area area Volume Volume
Ha. Ha. mkg* mkg*
India 14,369 1,394 27.6 28.6
Bangladesh 8,578 635 13.6 14.1
Kenya 4,101 55 13.5 15.1
Malawi 5,244 427 17.0 15.6
------ -------- ------ ------
Total 32,292 2,511 71.7 73.4
------ -------- ------ ------
* Estate volumes only, in addition 19.3 million kg of tea was produced for smallholders (2016: 20.3 million kg) and a further 4.0 million kg for managed clients (2016: 5.4 million kg).
Tea pricing and operations
India
India had a record production year in the Dooars gardens. Volumes in Darjeeling for the year were materially impacted by the previously reported strike. A new dedicated Bought Leaf factory (Jogopur) was successfully opened at our Danguajhar factory site and Bought Leaf production was restarted in Assam on Sessa and Borpatra gardens.
Tea prices for India were generally lower than the previous year other than those from the Dooars region. Prices at the start of the year were under pressure due to high volumes of unsold teas from 2016's record production, but improved from the mid-year point to levels above the previous year's, particularly for the Dooars and Assam CTC's, whilst the Assam orthodox market was down on the previous year. Darjeeling prices were volatile due to the supply constraints inflicted by the strike. First flush teas sold well but the majority of the second flush and main season teas were lost.
The situation was not helped by the implementation of GST in India, which hindered both the auctions and tea sales in general as the market familiarised itself with the new system.
Our average selling price over the year was 6.4% lower than the previous year.
Goodricke Group's Good Manufacturing Practice (GMP) certificate was renewed, as were other certifications including FSSC and RFA for all our Assam, Darjeeling and Cachar gardens. The Trust Tea certification for the Bought Leaf initiative is being implemented across all our gardens in the Dooars, and Goodricke won a social sustainability Bronze award for their WASH (Water, Air and ventilation, Sanitation and Hygiene) programme, at the North American Tea Sustainability Awards.
In total, India's national production volumes for 2017 were up on 2016, primarily due to higher production in south India and increasing volumes from the Bought Leaf sector. Costs continue to rise through wage and general inflation which, without compensatory increases in the market price, creates margin pressure. To mitigate this, efforts continue to reduce seasonal labour requirements through the mechanisation of planting, pruning, spraying and plucking.
During the year, Goodricke acquired a number of well-known Indian brands including Tea City, Supercup and Samovar. This will result in increased volumes of packet tea being produced and sold in 2018 in line with our strategy of moving up the value chain.
Bangladesh
Our Bangladesh operations had another successful year achieving their second highest ever production despite the heavy rainfall which led to significant flooding in many areas.
As in India, prices in the Bangladesh market were under pressure during the first half of the year due to high levels of prior year's stock remaining unsold. Import tariff levels were raised again during the year and prices recovered well in the third quarter and remained firm through to the end of the year. Our average selling price over the year was 4.3% lower than the previous year.
Production trials were conducted on both orthodox and green teas with some very encouraging results and feedback from the domestic and export markets. These trials will continue with the aim of reaching commercial production in 2018. Trials have started on shear plucking in an effort to reduce harvesting costs through improved productivity.
RFA certification was achieved on all gardens in September. Duncan Brothers being only the second, but by far the largest, producer to achieve this certification in Bangladesh.
Kenya
Our production was impacted by drought during the first half of the year but saw an upturn as the weather improved in the final quarter.
Tea prices in Kenya firmed at the start of the year as it became apparent that the dry conditions were going to have an impact on national production. These growing conditions did not improve until the 4th quarter which saw record production. However, despite this, our average selling price for the year was 21.5% ahead of the previous year.
The wage negotiations remain unresolved for the Collective Bargaining Agreement years of 2014/15, and 2016/17 which creates uncertainty in the cost base and agitation, frustration and industrial action at the operational level. To mitigate the risk of escalating labour costs, our efforts to develop more mechanised processes continue. To this end automated withering has been installed on a trial basis in our Chemomi factory and the area under mechanised tea harvesting has expanded and will continue to do so. The research and development initiative into new harvester technology continues with the engagement of a UK specialist engineering company to design and fabricate a new prototype.
The number of smallholders continues to increase as does the volume derived from this sector. Smallholder production represents a significant proportion of our total volumes in Kenya and remains a critical factor in the wider social responsibility and sustainability strategy of our tea operations.
All the estates and registered smallholders are RFA and FSSC certified and Eastern Produce Kenya won an environmental sustainability Gold award for our "Wise Use" programme at the North American Tea Sustainability Awards.
Malawi
Our Malawi operations achieved an all-time record crop and also began a project to produce and sell commercial volumes of green tea which has met with significant interest from buyers.
Tea prices in Malawi were firm throughout 2017 due to strong demand resulting from an undersupplied Kenyan market. Our average tea selling price for the year was 21.2% higher than the previous year.
The Malawi Tea Revitalisation 2020 programme continues with the roll out of some excellent initiatives in nutrition, gender empowerment and smallholder production. Eastern Produce Malawi won a social sustainability Gold award at the North American Tea Sustainability Awards for its Diversity, Inclusion and Women's Welfare policy in line with the UN Sustainable Development Goal 5, "to achieve gender equality and empowerment of women and girls".
All estates and smallholders are RFA certified and three factories have FSSC 22000 certification; the first tea factories in Malawi to achieve this.
Macadamia Production
Macadamia production in 2017 was disappointing and showed a slight decrease from the already significantly reduced volumes in Malawi and South Africa seen in 2016. This was due to drought conditions that affected both regions and the consequential reduction in nut volumes and size.
Mature Immature Volume Volume
area area 2017 2016
Ha. Ha. Tonnes Tonnes
Malawi 1,296 212 329 388
South Africa 804 359 273 265
Kenya 374 653 178 138
------ -------- ------ ------
Total 2,474 1,224 780 791
------ -------- ------ ------
Macadamia Pricing
Due to rising demand for macadamia products, prices remained firm and in line with the previous year's levels during the first half of the year. As it became apparent in the market that supply was once again impacted by drought, particularly in southern Africa, prices reached record highs; our average selling price for the year was 7.4% ahead of the prior year. Significant progress was made in the development of the Maclands brand.
Macadamia Operations
Malawi
Overall Malawi volumes were below those of 2016 and the lowest seen in the last 15 years, which is indicative of the drought impact. The operation is focusing on agronomic activities to mitigate the impacts of climate change and to improve the resilience of the orchards to a changing growing environment. Such initiatives include heavy mulching, tree thinning, plant density reduction and replanting. Currently over 50% of our orchards are still young in production potential terms so the prospects for improved volumes going forward are positive.
The processing factory is FSSC 22000 certified.
South Africa
Volumes were disappointing though marginally up on the previous year. As with the Malawi operations, the focus is on agronomic activities which will improve the ability of the orchards to cope with more extreme climate challenges. There is also significant investment being made to expand water resources for irrigation from the Simpson Dam on Mambedi estate.
Due to the rising costs of labour, investment is being made in the mechanisation of certain activities including harvesting, sorting and processing.
The development of Mambedi estate to macadamia continues with over 80Ha of new planting completed, bringing the total development to just under 300Ha.
The processing factory successfully completed the second phase of upgrading and is FSSC 22000 certified.
The renewal of the lease for our Wales estate is under negotiation. If unsuccessful, it will result in Eastern Produce South Africa having to vacate the property at the expiry of the lease in March 2020 with the last harvest from the estate likely to be that for 2019.
Kenya
Production volumes were up on the previous year's levels but were also impacted by the dry conditions experienced in Kenya in the first half of the year. To combat this, similar initiatives to those of Malawi and South Africa are under way.
The footprint of the orchards continues to grow with an additional 73Ha planted to bring the total development to 1,027Ha. The age profile of the orchards is very young and volumes are expected to grow rapidly with the developing maturity profile.
The cracking facility successfully completed its second full season of processing and is FSSC 22000 certified.
Avocado Production
Mature Immature Volume Volume
area area 2017* 2016*
Ha. Ha. mkg mkg
Kenya 415 192 7.3 7.1
* Estate volumes only. In addition 0.9 million kg of smallholder fruit was packed (2016: 1.8 million kg)
Avocado Pricing and Operations
Avocado production was in line with expectations for the year despite the dry conditions which had a negative impact on fruit size. We exported an increased volume of Hass but Pinkerton volumes were down on the previous year. Fruit sourced from smallholders was significantly reduced as unscrupulous exporters took advantage of European demand to export immature fruit. As a result of these exports and the associated reputational damage, Kenyan fruit is now frequently being discounted in the European market. However, by maintaining the standard of our own fruit, pricing achieved through the year was firm and in line with the previous year for similar sized fruit.
New avocado development continues with 60Ha of orchards planted. The total orchard footprint now stands at 607Ha. In addition, Eastern Produce Kenya is undertaking a three year trial of Hass avocado near Kitale in western Kenya to investigate the viability of avocado production in that region.
Speciality Crops Production
Mature Immature Volume Volume
area area 2017 2016
Ha. Ha. Tonnes Tonnes
Arable (Brazil) 3,437 - 24,472 24,078
Rubber (Bangladesh) 1,610 365 640 638
Citrus (USA) 169 8 8,851 4,293
Pistachio (USA) 131 - 30(i) 678
Wine grapes (South Africa) 63 12 444 437
Almonds (USA) 56 - 100 94
Pineapples (Kenya) 24 - 1,414 1,656
m3 m3
Forestry 2,488 3,378 93,758(ii) 56,772(ii)
(i) 2017 was an 'off year' for Pistachios
(ii) Volumes quoted are for conversion to value added products
rather than own use as fuel wood
Speciality Crops Pricing and Operations
Arable. Record yields were once again achieved in soya and establishing forward contracts early for the 2017 crop ensured that the prices achieved were in line with the prior year despite an oversupplied market. Record yields were also achieved in the maize crop which more than compensated for the lower than expected prices which arose from oversupply in the market.
Rubber. Production was in line with the previous year. Demand was disappointing, leading to sustained low prices throughout the year.
Citrus. In California we had a good year, with record yields being achieved for the Murcotts without an impact on prices. Navel oranges also performed well with good yields and prices.
Wine. The continuing drought in the Cape meant that grape production was below expectations but in line with the previous year's volumes. Wine sales were also disappointing. Investment was made in the winery to improve handling and quality in production.
Almonds. Production and pricing was in line with expectation for this relatively immature development.
Pineapples. These are being phased out at Kakuzi and will be replaced with Pinkerton avocado.
Forestry. Better sales of large poles at Kakuzi led to a much improved result.
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 GBP35.6 million (2016: GBP29.9 million) on revenue of
GBP239.4 million (2016: GBP207.1 million).
Engineering
Engineering North
Engineering North continued to struggle in 2017 as the anticipated pick up in the oil industry failed to translate into significant additional sales or profits. The new Site Services division, which provides services to the hydroelectric sector, has made an encouraging start. As a result, total revenue at AJT Engineering rose to
GBP8.0 million from GBP6.9 million in 2016.
Engineering South
Abbey Metal Finishing and its subsidiary Atfin made a substantially increased operating profit in 2017 as demand grew for their services to the aerospace industry. The two other companies in this division are in the process of being sold.
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. As stated earlier, we are now seeking partners to finance the next stage of its development.
In total, the Engineering division made a trading loss of GBP2.6 million (2016: trading loss GBP2.6 million) on revenue of GBP20.5 million (2016: GBP18.8 million).
Food Service
ACS&T saw revenue and profits grow substantially in 2017 as demand increased for its services from its major customers.
In the Netherlands, both Affish and Wylax succeeded in increasing revenue, but due to exchange rate movements and a competitive market ended the year loss making.
In total the Food Service division made a trading profit of GBP1.8 million (2016: GBP0.8 million) on revenue of
GBP37.8 million (2016: GBP31.6 million).
Investments
Investment Portfolio. The gains on sale for the year were GBP0.7 million (2016: GBP1.5 million). The total value of the portfolio at 31 December 2017 was GBP47.0 million (2016: GBP37.2 million).
Investment Property. We continue to work on our estate of investment properties in order to maximise the value and the return. Following refurbishment in 2016, No. 6 Hobart Place was let during the year as was a property in Queen Square in Bristol. On the Linton Park estate work has commenced to convert surplus buildings into residential property for rent.
Collections. The collections are held at cost. A number of minor additions and disposals were made during the year.
Associates
BF&M recorded a strong operating year from its core insurance and investment advisory services. However, two category 5 hurricanes in the Caribbean in September 2017 (Irma and Maria) resulted in significant costs and the need to purchase additional reinsurance cover which has led BF&M to report a reduced profit before tax of Bermudian Dollar 1.9 million (2016: Bermudian Dollar 17.9 million).
Our two associate companies in Bangladesh, United Insurance and United Finance, saw marginally lower profits than in 2016 as a result of falling interest rates and political uncertainty.
In total, the share of the results of associates amounted to GBP2.0 million (2016: GBP5.1 million).
Discontinued Operation - Duncan Lawrie
As previously stated, the wind down of the remaining assets of Duncan Lawrie continued throughout 2017 and the banking license was finally returned in December, indicating that the regulators in the UK are satisfied that all issues have been dealt with. The full financial impact of the disposals and closure are summarised in the Chief Financial Officer's Report.
POLITICAL, LEGISLATIVE and LEGAL ISSUES
The Group is present in many jurisdictions and is subject to local legislation. The following issues may have a material impact on the Group:
-- At the start of 2016 the Government of Malawi put forward
new legislation which proposed, inter alia, the conversion
of all freehold property into 50 year leaseholds.
-- The Group 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 which may
impact the costs of imports, particularly tea, and the
prices paid to producers.
CAPITAL INVESTMENT and DEVELOPMENT
We continued to invest in our assets during the year and GBP15.0 million was spent on property, plant and equipment and investment property (2016: GBP10.2 million) including the following key projects:
-- Starting the rebuilding of the Simpson Dam in Mambedi,
South Africa to assist with water retention for the macadamia
estates.
-- Trialing a new automated withering system at Chemomi factory,
Kenya in order to improve quality and reduce labour costs.
-- Building a Bought Leaf factory at our Dangujuar garden
in India.
-- Continuing improvements to Linton Park winery in South
Africa.
-- Developing the Ruo factory and irrigation in Malawi.
-- Development of our investment properties in the UK.
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 2017:
-- 91Ha (2016: 65Ha) of new avocado plantings were completed
in Kenya.
-- 73Ha (2016: 97Ha) of new macadamia plantings were carried
out in Kenya, 82Ha (2016: 47Ha) in South Africa and 48Ha
(2016: 12Ha) 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 these environments are protected and improved. Our focus is on the long-term stability, security and continuity of our businesses and those communities. We support and integrate the UN Sustainable Development Goals into our sustainability strategy.
We invest in, monitor and report on, both Environmental and Social sustainability initiatives across all our divisions. In 2017 the Group launched a new on-line system for capturing data relating to our global environmental footprint. The system allows us to monitor our energy use, Greenhouse Gas emissions, Water and Waste, the results of which are summarised below.
As part of our wider drive towards greater sustainability, we have developed a range of mid to long-term targets to reduce, in some cases substantially, the environmental impact of our operations. As an example, strategic improvements in our usage and sourcing of energy supports our ambition to align with Science Based Targets. Targets adopted by companies to reduce Greenhouse Gas emissions are considered "science-based" if they are in line with the level of decarbonisation required to keep the global temperature increase below 2 degrees Celsius compared with pre-industrial temperatures.
Whilst monitoring and reducing our environmental footprint is critical, so too is ensuring the well-being of the communities in which we operate. We refer to this social sustainability as our "licence to trade". 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 certifications and traceability. The vast majority of our tea gardens are RFA certified and all our macadamia, avocado and winery 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 the Baseline (average of the three years 2013-2015) and how we have progressed since that time.
2017 2016 Baseline
Energy & Carbon
Total Energy Consumed (TWh) 1.25 1.22 1.22
Total Carbon Emissions (tonnes CO(2) e)(i) 222,775 224,277 272,685
Scope 1 (tonnes CO(2) e) 167,321 161,620 151,138
Scope 2 (tonnes CO(2) e) 55,455 62,657 61,546
Water
Total water withdrawal (million m3)(ii) 40.9 40.1 35.0
Waste
Total waste (tonnes)(iii) 3,773 7,561 8,282
(i) A 1.4% decrease in Greenhouse Gas emissions in 2017 has
been achieved through a focus on more efficient use of
energy, reduced tea production in 2017, and a reduction
in emissions of electricity from the grid, offset by an
increase in fossil fuel usage in certain of our operations.
(ii) Dry conditions in Kenya and South Africa as well as an
expansion of our irrigation infrastructure in a number
of our operations to help address the impact of drought
have increased water use.
(iii) These are restated figures and take account of the fact
that we no longer consider certain types of compost to
be waste. There are ongoing initiatives to increase our
waste recycling rates in a number of our operations.
Some of the initiatives we are undertaking include:
-- Pursuing limited resource use efficiency, this year alone
we identified over 200 energy and water management projects
across the Group.
-- Ongoing investment in energy efficient technology includes:
upgrading lighting and trialing energy efficient motors
and variable speed drives, continued growth in the use
of renewable energy via solar projects and the increasing
use of energy efficient transport across the Group.
-- Development of modern water management solutions is aligned
with energy efficiency and improved sanitation projects
in many of our operations. Precision Agriculture is increasingly
used to determine the water status of both soil and plant
for efficient use of water in irrigation. We also implement
systemic water management processes by encouraging water
recycling, water harvesting through rainwater capture and
by building dams.
Social Sustainability
We believe that all employees should be remunerated fairly and that they and their families should have access to education, healthcare and housing. The table below shows the provision of schools and healthcare by the Group in 2017. In addition, we continue to provide housing for over 200,000 people.
2017
Schools* 284
School children educated annually 33,259
Hospitals/clinics* 114
Patient treatments annually 795,581
* The funding and operation of schools and hospitals, provided for our employees 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 CSR initiatives across the Group, we contribute to improved health and nutrition, hygiene and sanitation of our communities. We assist with the improvement of local infrastructure by supporting road, water, healthcare and education projects. In 2017, our work in this area was recognised by the Tea Association, USA. Our continued focus on developing sustainable housing for our working communities is reflected in major housing renewal projects in India, Bangladesh, Kenya and Malawi.
Health
All our tea estates have a hospital, clinic or dispensary. In addition in India and Bangladesh staff have access to central Group operated hospitals to which more serious cases can be referred. We provide medical services, including where appropriate antiretroviral drugs, in those communities where HIV/AIDs is prevalent. We also give medical support to schools that are either run locally or by our operations.
During 2017 in India, we made our hospital facilities available to visiting surgeons to perform over 400 medical treatments for cleft palates, club feet and eye conditions. In Bangladesh, our Primary Health Care initiative is extended to all estates and provides the communities with comprehensive and specialist health programmes.
Education
We are committed to providing the opportunity for development for all. We provide schools in areas where we operate, either by building and running the schools or by supporting state educational projects in our communities. Aiming to develop education and opportunity for all employees, we provide skills development programmes and adult education. For example, in Malawi we support students from technical colleges by providing employment opportunities. In India, over 350 adults received educational support through a range of initiatives, including the Peter Leggatt Educational Stipend.
Female economic empowerment
In order to support our working mothers and enable them to take part in the economic process, we provide over 16,000 places at fixed and mobile crèches across our operations.
Smallholders
Demonstrating our commitment to responsible sourcing, we continue to develop smallholder programmes including agricultural training days in Kenya, Malawi and India. In 2017, we produced 19.2 million kgs of smallholder Made Tea across the Group. In Kenya, 220,000 cartons of avocados were packed for smallholders during the year. These initiatives enabled over 30,000 local farmers to improve their earnings by benefiting from our agricultural expertise, infrastructure and access to market.
Wages
We are committed to paying fair wages, benefits and allowances in accordance with local legislation and trade union agreements and have received certifications from Fairtrade, the Rainforest Alliance and WEITA, among others, all of which require an audit of the Group's employment practices as part of maintaining the accreditations. We are 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.
Senior Appointments
Following the retirement of Arun Singh, Chief Executive of Goodricke since 2006, I am pleased to report the appointment of Atul Asthana who will also take his place on the Agriculture Executive Committee. I am also pleased to report the appointment of Amarpal Takk who joins us as Group General Counsel and Company Secretary with effect from 20 April 2018 following the resignation of Julia Morton. I would like to thank both Arun and Julia for their service to the Group over the years.
Tom Franks
Chief Executive
18 April 2018
Chief Financial Officer's report
Overview of results
The profit for the year ending 31 December 2017 was GBP28.6 million (2016: loss GBP5.9 million). The profit improvement reflects, inter alia, the discontinuation of Duncan Lawrie which straddled two financial years and resulted in a gain in 2017 on the sale of Duncan Lawrie's asset management business while the losses on the sale of the loan books were reflected in the 2016 results. In addition, a significant increase in profits in Agriculture as a result of a recovery in tea prices in the second half of 2017 led to the trading profit from our continuing businesses increasing to GBP26.4 million (2016: GBP19.0 million). These gains were partly offset by lower results from BF&M, and provisions and impairments in respect of GU Cutting and Grinding and BMT (Great Yarmouth).
The Group had net assets of GBP417.9 million (2016: GBP379.6 million) and net cash and cash equivalents of GBP106.8 million (2016: GBP71.8 million, excluding balances relating to our banking operations).
Discontinued operation
During 2017, the Group completed the sale of Duncan Lawrie's UK asset management business as well as the disposals of various businesses operated by Duncan Lawrie's Isle of Man subsidiaries. The disposal of Duncan Lawrie's UK asset management business generated a gain on sale of GBP19.2 million which is reflected in the results for 2017, as is a small net profit on the sale of the Isle of Man asset management business and trust operations. In December 2016, we completed the sale of the UK loan book. Duncan Lawrie's banking licences were surrendered in 2017 and the business is now closed.
The profit from the discontinued operation in 2017 was GBP14.8 million (2016: loss GBP20.0 million) comprising the following:
2017 2016
GBP'm GBP'm
Duncan Lawrie's operating loss (5.5) (7.5)
Profit on sale of Duncan Lawrie's UK asset management business 19.2 -
Profit on sale of Duncan Lawrie's Isle of Man asset management and trust businesses 1.1 -
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)
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
----- -----
Profit/(loss) from discontinued operation 14.8 (20.0)
----- -----
BF&M
Following the two significant hurricanes during 2017, BF&M's share price fell significantly. However, due to its conservative underwriting policies, there has been no impact on its balance sheet strength. The prospects for BF&M remain good and the underlying net asset value of the business remains significantly ahead of the share price and accordingly no impairment provision has been made.
GU Cutting and Grinding and BMT (Great Yarmouth)
As a consequence of the decision to sell GU Cutting and Grinding and BMT (Great Yarmouth), these businesses have been reclassified as held for sale at the end of 2017 and an impairment charge of GBP1.8 million has been recognised (2016: nil). The trading profits for these businesses (GBP0.3 million in 2017) are reported within Engineering.
Currencies
Over the course of the year ending 31 December 2017, Sterling strengthened substantially against all our key operating currencies. This has resulted in a loss on foreign exchange translation of GBP28.4 million (2016: gain GBP52.0 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 2017 would have been GBP0.5 million lower. Our profit before tax from continuing operations includes an exchange loss of GBP0.1 million on transactions during the year (2016: gain GBP0.4 million).
Cash
The Group's net cash position increased to GBP106.8 million at 31 December 2017 (2016: GBP71.8 million excluding net cash balances held within Duncan Lawrie) reflecting, inter alia, strong net cash inflows from continuing operating activities of GBP30.9 million (2016: inflow GBP21.5 million) and the discontinuation of the Duncan Lawrie business. The Group has loans outstanding amounting to GBP4.5 million.
A number of the Group's key trading subsidiaries have minority shareholders such that when cash is repatriated to the UK by way of dividends, those minorities are entitled to their share of the relevant dividend. In a number of cases, withholding taxes are also payable from our share of those dividends.
Funds are reserved within our subsidiary companies for:
-- Long term development projects within our core crop portfolio.
-- Ongoing wage negotiations, the largest of which is the multi-year
Kenyan Collective Bargaining Agreement (referred to below)
which has been ongoing for 4 years.
-- Disputed taxation assessments (see below).
These will reduce the net cash available to the Group in future years as they are resolved.
However, following the finalisation of the triennial valuation for the UK defined benefit pension scheme, no deficit reduction payments are required for the time being.
Dividends
In line with the Group's long term strategy, 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 hoped that this historical trend is maintained. Dividend cover in 2017 is 5.9x the total dividend for the year of 135p per share. The dividend is covered 2.0x from our profit after tax from continuing operations.
Taxation
The Group's effective tax rate of 32.5% (2016: 190.8%) reflects the profit from the various Duncan Lawrie sales which are expected to be non-taxable and available UK losses.
The 2016 tax charge reflects the losses incurred in the UK in respect of the discontinued operation which were not able to be relieved due to the lack of taxable profits in the UK.
Tax and other provisions
The wage negotiations in Kenya remain unresolved for the Collective Bargaining Agreement years of 2014/15 and 2016/17 which creates uncertainty as to the cost base of our businesses in Kenya. We also have ongoing wage negotiations in India and Bangladesh. While we consider we have made adequate provision for the likely outcome of this ongoing negotiation it is difficult to be definitive.
We are carrying provisions for taxation arising from assessments raised by the Malawi Revenue Authority for unpaid taxes from prior years. The amount of this provision is GBP2.3 million at 31 December 2017.
We have been advised that the gain on sale of Duncan Lawrie's asset management business should be exempt from tax because of the nature of the assets sold. Accordingly, no provision has been made for tax on this gain.
In India assessments have been received for GBP3.8 million of excise duties and GBP1.3 million of income taxes. These are being contested and no provisions have been made.
In India, a long running dispute between our local subsidiaries and the Government of West Bengal over the payment of a land tax, locally called 'Salami', remains unresolved. Lawyers acting for the Group have advised that payment of Salami does not apply, accordingly no provisions have been made. The sums contested amount to GBP1.4 million excluding penalties.
In some of our jurisdictions, the tax authorities have levied assessments in respect of prior years. In a number of situations the liability position under statute and case law is clear and provision has been made in line with those. Unfortunately, in other situations the law is either unclear or under developed and in these instances we make provisions on a best estimate basis for the liabilities likely to arise, having taken advice as appropriate.
Pensions and post-employment benefits
The Group operates a number of defined benefit pension schemes, the largest of which is in the UK. Our 2017 triennial valuation for the UK scheme has been agreed and shows a surplus of GBP7.1 million. I am pleased to report that as a consequence of this surplus, no further deficit reduction contributions are required for the meantime.
The overseas defined benefit schemes are located in Bangladesh, India and the Netherlands. The UK scheme was closed to future accrual during 2016. Our businesses in Kenya, India and Bangladesh also have obligations to pay terminal gratuities based on years of service and, in some cases based on salaries.
In aggregate, our employee benefit schemes currently show deficits on an IAS 19 basis of GBP30.9 million (2016: GBP66.7 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 gain of GBP34.3 million (2016: net actuarial loss of GBP24.3 million) is reflected in the Statement of Comprehensive Income. The gain this year reflects:
-- For the UK Scheme, the effect of updating the mortality
assumptions to bring them in line with the latest tables
available together with better than expected returns on
the scheme's assets.
-- For the overseas schemes, higher discounts rates in India
offset in part by higher than expected salary increases
elsewhere.
In addition, GBP2.7 million (2016: GBP2.2 million) has been charged to our Income Statement in respect of employee benefit obligations.
Contributions to externally funded defined benefit schemes are determined after consultation with the respective trustees and actuaries.
Shareholders' funds
Equity attributable to Camellia's shareholders at the 2017 year end was GBP368.4 million (2016: GBP330.8 million).
A reconciliation is set out in the Group statement of changes in equity.
Susan Walker
Chief Financial Officer
18 April 2018
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 2017 and a description of the principal risks and uncertainties facing the Group. A fair review of the business of the Group is incorporated within the Chairman's Statement and the Chief Executive's Report on pages 6 to 16. 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 17 to 19. 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 7 to 16 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.
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 to the Accounts. The following risks relating to the Group's principal operations have been identified:
Agriculture
Risk Potential Impact Mitigation
Climate change Current agricultural patterns and Geographical spread of operations to
practices become unsustainable. lessen the impact of extreme weather
on the Group as
a whole.
Drought Level of rainfall a ecting crop Investment in irrigation, water
yields. storage and drought resistant crop
varieties.
Price volatility Changes in prices at auction impact Use of forward contracts, product and
profitability each season. crop diversification and building
long term strategic
relationships with key customers.
Currency fluctuation Profit volatility arising from sales Monitoring of foreign exchange rates
in US dollars and Euros where there and cash management.
is no natural hedge
against the cost of production in
local currency.
Cost of labour Increased cost of production and Introduction of more e cient labour
lower profitability. 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 the
ownership in Kenya, Malawi and South (for example if freeholds become assistance of lawyers and local trade
Africa leaseholds) or potentially 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
Key customer dependence Losing a major customer. Diversification of the customer base
and careful customer relationship
management.
Dependence on the oil and gas and Changes in market conditions leading E orts 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 Contamination of the local and wider Strict compliance with legislation,
environment due to the use of training employees to adopt safe
machinery and chemicals. working practices and
Payment of fines and claims and lessen the impact on the environment.
reputational damage. Regular external audits.
==================================== ===================================== =====================================
Food Service
Risk Potential Impact Mitigation
Key customer dependence Losing a major customer. Diversification of the customer base
and careful customer relationship
management.
Health and safety Vulnerability of the employees to Strict compliance with legislation
injury at work due to the use of and training employees to adopt safe
machinery and chemicals. working practices.
Payment of fines and claims, criminal Regular external audits.
prosecutions and reputational damage.
Environmental Contamination of local and wider Strict compliance with legislation,
environment due to the use of training employees to adopt safe
machinery and chemicals. Payment working practices and
of fines and claims, criminal lessen the impact on the environment.
prosecutions and reputational damage. Regular external audits.
IT systems Interruption to services for Implementation of a disaster recovery
customers. plan.
==================================== ===================================== =====================================
Investments
Risk Potential Impact Mitigation
Market Decline in the value of investments. Portfolio diversification, careful
stock selection and the regular
monitoring of individual
company stock performance.
==================================== ===================================== =====================================
Group
Risk Potential Impact Mitigation
UK Pensions. Increases in inflation Increase in the final salary pension The Board monitors the funding
and/or reductions in long term scheme deficit with a resultant position of the pension scheme.
government bond yields. increase in the funding
requirement.
Overseas Pensions. Increases in Increase in the pension scheme Regular monitoring of the funding
inflation and/or reductions in long deficits with a resultant increase in position, investment strategy and
term government bond yields. the funding requirement. performance of the assets.
Changes in local laws prohibiting Regular reviews of the funding
the investment of the schemes' position of the pension schemes and
assets. local legislation using
external advisors, where appropriate.
==================================== ===================================== =====================================
Taxation risk
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 expenses already recorded.
At the year-end, 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.
Uncertainties impacting taxation also arise from potential changes to legislation. The OECD's Base Erosion and Profit Shifting 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 pages 6 to 16.
Equality
We have consciously and continuously worked towards encouraging equality in management positions across our operations.
Disability
The Group complies with local regulations to encourage employees with disabilities to work in our operations and where appropriate, makes adjustments to working practices.
Child Labour
The use of child labour is prohibited across the Group. 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
The Group continues 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 2017 is available on the Company's website.
Anti-Bribery and Corruption
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 strictly prohibits bribery as part of its normal 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.
The Board reviews monthly reports with a range of financial and other indicators to monitor the performance of each division depending on the nature of its operations.
For the Agriculture division, the Board receives monthly data on sales prices and volumes, cost of production and crop yields against budget. Rainfall and other climate data are also reviewed.
For the Engineering division, the Board receives monthly data on revenue, profit and margins. In addition, the value of the outstanding order book is reviewed.
For the Food Service division, the Board receives monthly data on revenue, profit and margins. In addition, cold store utilisation is monitored.
For Investments, the value and performance 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 subsidiaries. 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 2017 2016 2015
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
warnings the official regulatory bodies
responsible for enforcing regulations in the areas of:
- Employment - - -
- Worker health and safety 1 1 3
- Environmental protection - - -
2 Child Labour
a) Minimum age The number of employees who were less than
16 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
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 223 287 317
4 Health
The number of employee days absence as a result of sickness
a) Sickness absence during the financial year(i) 235,265 237,527 238,160
The number of claims for compensation arising from
Sickness occupational health issues received during
b) claims the financial year in respect of continuing operations 3 10 20
5 Industrial Disputes
The number of employee days absence as a result of
Strikes industrial disputes 321,409 33,331 951
(i) This excludes the relevant number of days for 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.
(ii) As reported elsewhere, in 2017 all the Darjeeling tea gardens
were subject to prolonged strikes.
Employees
The Group keeps employees informed, through internal publications, the website and social media on the performance of the Group and on matters affecting them as employees and arrangements to that end are made by the local management.
It is also 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 2017:
Men Women
Company Directors(i) 6 1
Other senior managers(ii) 7 2
All employees 40,559 34,454
(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
18 April 2018
Report of the directors
The Directors present their report together with the audited consolidated accounts for the year ended
31 December 2017.
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 16.
Results and dividends
The profit after tax for the year amounted to GBP28.6 million (2016: loss GBP5.9 million). The Board has proposed a final dividend for the year of 98p per share payable on 13 July 2018 to holders of the ordinary shares registered at the close of business on 15 June 2018. The total dividend payable for 2017 is therefore 135p per share (2016: 130p per share). Details are shown in note 12 to the Accounts.
Directors
The Directors are listed on page 4. The following Directors had beneficial interests in the shares of the Company.
Camellia Plc ordinary shares of 10p each: 31 December 1 January
2017 2017
Malcolm Perkins 1,673 1,673
Tom Franks 100 100
Susan Walker 100 100
Under the Company's articles of association all the Directors are required to retire annually. Accordingly, Malcolm Perkins, Tom Franks, Susan Walker, Graham Mclean, Chris Relleen, Frédéric Vuilleumier and William Gibson will retire and, being eligible, will seek re-election at the AGM on 7 June 2018. Gautam Dalal was appointed as a Director on 1 March 2018 and will seek election to the Board at the AGM.
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
25 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 at PricewaterhouseCoopers. He was appointed as an independent non-executive Director and Deputy Chairman in January 2006 having previously been a non-executive Director of Linton Park Plc. He is senior independent Director, chairman of the audit committee and a member of the nomination and remuneration committees.
William Gibson was appointed as an independent non-executive Director in September 2014. He was previously chairman and managing director of Westminster Press and an executive director of the Financial Times Group. He is chairman of the remuneration committee and a member of the audit and nomination committees.
Frédéric Vuilleumier was appointed as an independent non-executive director in March 2013. He is partner of Oberson Abels SA, a law office based in Geneva, Switzerland. He is a member of the audit committee.
Gautam Dalal was appointed as an independent non-executive director in March 2018. He is a non-executive director and the vice chair of the Barts Health NHS Trust, a non-executive director of ZincOx Resources plc,
a trustee and treasurer of SOAS, University of London. He was previously a partner at KPMG, London from 1990 to 2010, a founder-director of the UK India Business Council, a member of the Asian Business Association, a trustee of The National Gallery and a director of AMREF Health Africa's International Board.
Substantial shareholdings
As at 18 April 2018 the Company has been advised of the following interests in its share capital:
% of total
Beneficial shareholder Shareholder No. of Shares voting rights
Camellia Private Trust
Company Limited Camellia Holding AG 1,427,000 51.67
Lynchwood Nominees
Fide Holding NV* Limited 360,500 13.05
HSBC Global Custody
Quaero Capital SA Nominee (UK) Limited 133,588 4.84
* 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 AGM in 2017, shareholders gave authority for the Company to purchase up to 276,200 of its own shares. This authority expires at the conclusion of this year's AGM at which a resolution proposing renewal of the authority will be submitted to shareholders.
Disclosure of information to auditors
A resolution proposing the reappointment of Deloitte LLP will be put to the AGM on 7 June 2018.
Each of the persons who were Directors at the time when this Directors' report was approved has confirmed that:
-- So far as each Director is aware, there is no relevant audit
information of which the Company's auditors are unaware.
-- Each Director has taken all the steps that ought to have
been taken as a Director, including making appropriate enquiries
of fellow Directors and of the Company's auditors for that
purpose, in order to be aware of any information needed
by the Company's auditors in connection with preparing their
report and to establish that the Company's auditors are
aware of that information.
Employees
Details in relation to employees are set out on pages 24 and 25.
R&D
The Group undertakes some R&D projects within its operations in order to improve efficiency and grow revenues and in the case of XiMo, as the core of its business.
Future development
Details of future developments are set out in the Chief Executive's Report.
Going concern
After reviewing the Group's budget for 2018 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 29 to 32.
By order of the Board
Julia Morton
Secretary
18 April 2018
Corporate governance
Statement of compliance
This statement on pages 29 to 32 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"). The Chairman considers the application of standards of corporate governance that are appropriate for the Group's nature, status, profile, size and circumstances play 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 eight Directors, four of whom are independent non-executive Directors. The remaining Directors are executive Directors, including the executive Chairman. Chris Relleen, the Deputy Chairman, has been designated as the senior independent director. The names and brief biographical details of each Director appear on pages 26 and 27.
There is on-going dialogue between the Chairman and the Chief Executive with the majority shareholder whose views are reported to the Board. The Company is also in contact with other significant shareholders.
The Board has established remuneration, audit and nomination committees. Terms of reference of each of the committees can be viewed on the Company's website.
The Board 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 at the end of 2018.
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 judgements on matters referred to the Board. The Board met nine times in 2017.
Attendance by Directors at Board and committee meetings held during the year was as follows:
Director Board Audit Remuneration Nomination Malcolm Perkins 9/9 - - 1/1 Chris Relleen 9/9 3/3 3/3 1/1 Tom Franks 9/9 - - - Graham Mclean 9/9 - - - Susan Walker 9/9 - - - William Gibson 9/9 3/3 3/3 1/1 Frédéric Vuilleumier 8/9 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 Managing Director of Jing Tea, the Company Secretary and the UK 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 met once during the year to recommend the appointment of a non-executive Director.
Audit committee
The audit committee is chaired by Chris Relleen. The other members of the committee are Frédéric Vuilleumier and William Gibson. During 2017, 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 monitor the effectiveness of the Group's risk management
practices.
-- To review the effectiveness of the Group's internal control
system. The committee regularly reviews the effectiveness
of internal audit activities carried out by the Group's
accounting function and senior management.
-- 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
auditors.
-- To review non-audit services provided by 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 matters in relation to the financial statements:
Biological assets. One of the key areas of judgement that the committee considered in reviewing the financial statements was the valuation of the biological assets in accordance with IAS 41. Valuations are carried out by external professional valuers or are based on discounted cash flows. These were considered for consistency of approach and assumptions agreed as reasonable. For more details see note 19 to the accounts.
Pensions. A key area of judgement is in relation to the value of the pension scheme obligation. Whilst this is conducted by independent actuaries, the size of the obligation means that a relatively minor difference in the assumptions could result in a material change in the obligation. The committee considered the competence of the actuaries and the key assumptions adopted and concluded that the work performed is sufficient to support the value.
Assets held for sale. The committee considered the reclassification of BMT (Great Yarmouth) and GU Cutting and Grinding as assets held for sale including reviewing the impairment provisions required.
Tax and other uncertain provisions. The basis of provisions for material uncertain tax situations were considered by the committee as were the provision in respect of the ongoing Collective Bargaining Agreement negotiations for 2014/15 and 2016/17. The committee is satisfied that the provisions represent best estimates of the likely liabilities.
External auditor
To assess the effectiveness of the external audit process, the external auditor is required to report to the audit committee and confirm their independence in accordance with ethical standards and that they had maintained appropriate internal safeguards to ensure their independence and objectivity. In addition to the steps taken by the Board to safeguard auditor objectivity, Deloitte operates a five year rotation policy for audit partners for a listed entity.
The committee reviewed those non-audit services provided by the external auditor and satisfied itself that the scale and nature of those services were such that the external auditors objectivity and independence were safeguarded.
Following the appointment of Deloitte LLP as the Group's external auditor, the committee oversaw the transition from PricewaterhouseCoopers LLP.
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 34 to 35.
Insurance
The Company purchases insurance to cover its Directors in respect of legal actions against them in their capacity as Directors of the Company. All Directors have access to independent professional advice at the Company's expense.
Share capital structure
The share capital of the Company is set out in note 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. Group 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
18 April 2018
Statement of directors' responsibilities
The Directors are responsible for preparing the Annual Report and the Financial Statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors are required to prepare the Group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU and Article 4 of the IAS Regulation and have also chosen to prepare the parent company financial statements under IFRSs as adopted by the EU. Under Company law the Directors must not approve the accounts unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the Company for that period. In preparing these financial statements, International Accounting Standard 1 requires that Directors:
-- Properly select and apply accounting policies.
-- Present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information.
-- Provide additional disclosures when compliance with the
specific requirements in IFRSs are insufficient to enable
users to understand the impact of particular transactions,
other events and conditions on the entity's financial position
and financial performance; and
-- Make an assessment of the Company's ability to continue
as a going concern.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Responsibility statement
We confirm that to the best of our knowledge:
-- The financial statements, prepared in accordance with International
Financial Reporting Standards as adopted by the EU, give
a true and fair view of the assets, liabilities, financial
position and profit or loss of the Company and the undertakings
included in the consolidation taken as a whole.
-- The strategic report includes a fair review of the development
and performance of the business and the position of the
Company and the undertakings included in the consolidation
taken as a whole, together with a description of the principal
risks and uncertainties that they face.
-- The Annual Report and financial statements, taken as a whole,
are fair, balanced and understandable and provide the information
necessary for shareholders to assess the Company's position
and performance, business model and strategy.
On behalf of the Board
Malcolm Perkins
Chairman
18 April 2018
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 32.
Policy on Directors' remuneration
The policy agreed by the committee is as follows:-
-- To seek to provide remuneration packages that will attract,
retain and motivate the right people for the roles.
-- So far as is practicable to align the interests of the executives
with those of shareholders.
-- To reflect the overriding remuneration philosophy and the
principles of the wider Group.
In implementing the second point, the Company does not operate profit related bonus, share option or share incentive schemes for Directors as the Group's activities are based largely on agriculture, which is highly dependent on factors outside management control such as the weather and market prices.
The policy is designed to ensure that the Directors manage the Group's businesses for the long term in line with the strategy of the Group.
In determining this remuneration policy and the remuneration of Directors, consideration has been given to the relevant provisions of the QCA guidelines.
The remuneration policy was approved by shareholders at the 2017 AGM. The committee considers any views of the shareholders expressed on Directors' remuneration.
At the AGM on 1 June 2017, the Remuneration Report for the year to 31 December 2016 was approved by shareholders with 99.46% of the votes cast in favour, 0.53% of the votes cast against and 0.01 votes withheld.
Service contracts
Malcolm Perkins, Tom Franks, Graham Mclean and Susan Walker are each employed on rolling service contracts.
Date of Service
Director Contract
Malcolm Perkins 25 April 2002
Tom Franks 8 April 2015
Graham Mclean 10 April 2015
Susan Walker 14 April 2015
The service contracts are terminable at any time by a one year period of notice from the Company or the Director. Following their initial appointment non-executive Directors may seek re-election by shareholders at each subsequent annual general meeting. Non-executive Directors do not have service agreements. There are no specific contractual provisions for compensation upon early termination of a non-executive Director's employment.
The following sections on Directors' remuneration and pensions have been audited.
Directors' remuneration
Employer
Benefits in Pension
Remuneration Kind Contribution Total
2017 2016 2017 2016 2017 2016 2017 2016
GBP GBP GBP GBP GBP GBP GBP GBP
Executive
Malcolm Perkins 442,344 442,344 76,630 33,212 - - 518,974 475,556
Tom Franks 522,500 495,000 55,887 68,095 - - 578,387 563,095
Susan Walker 295,625 250,000 24,695 30,676 5,500 20,000 325,820 300,676
Graham Mclean 322,500 275,000 26,770 37,209 4,475 22,000 353,745 334,209
Non-executive
William Gibson 44,651 43,350 - - - - 44,651 43,350
Chris Relleen 68,077 87,500 - - - - 68,077 87,500
Frédéric
Vuilleumier 42,024 40,800 - - - - 42,024 40,800
Totals 1,737,721 1,633,994 183,982 169,192 9,975 42,000 1,931,678 1,845,186
---------- -------------- ------- ------------- ----- ------------- --------- ---------
Notes
(i) The executive Directors' benefits in kind include the value
attributed to medical insurance, permanent health insurance,
spouse/partner travel and cash alternatives to company
cars.
(ii) Chris Relleen received an additional annual fee for his
chairmanship of the audit committee and for his non-executive
directorship of Duncan Lawrie Limited.
(iii) William Gibson received an additional annual fee for his
chairmanship of the remuneration committee.
Directors' pensions
Malcolm Perkins received no payment for pensionable service during 2017. Tom Franks receives an excess non-pensionable salary supplement equivalent to 10% of base salary. Graham Mclean and Susan Walker were members of the Linton Park Group Personal Pension Scheme which is a defined contribution based scheme until 5 April 2017. As a result of the change to the taxation rules on pension annual allowances, the company ceased contributions to the Linton Park Group Personal Pension Scheme on 6 April for Graham Mclean and Susan Walker. They instead receive an excess non-pensionable salary supplement equivalent to 10% of base salary. These payments are included in 'Remuneration' in the table above.
In addition to the above, an unfunded pension of US$200,000 per annum is paid to Gordon Fox, a former Director of the Company.
By order of the Board
Julia Morton
Secretary
18 April 2018
Consolidated income statement
for the year ended 31 December 2017
2017 2016
Notes GBP'm GBP'm
Continuing operations
Revenue 2 298.3 257.9
Cost of sales (219.3) (188.5)
------ ------
Gross profit 79.0 69.4
Other operating income 2.4 2.3
Distribution costs (13.9) (14.7)
Administrative expenses 3 (41.1) (38.0)
------ ------
Trading profit 1, 3 26.4 19.0
Share of associates' results 4 2.0 5.1
Impairment of property, plant and equipment and provisions 5 (1.8) -
Profit on disposal of available-for-sale investments 6 0.7 1.5
------ ------
27.3 25.6
Investment income 0.6 0.6
----------------------------------------------------------- ----- ------ ------
Finance income 7 3.0 2.7
Finance costs 7 (0.5) (0.6)
Net exchange (loss)/gain 7 (0.1) 0.4
Employee benefit expense 7 (2.7) (2.2)
----------------------------------------------------------- ----- ------ ------
Net finance (cost)/income 7 (0.3) 0.3
------ ------
Profit before tax from continuing operations 27.6 26.5
Taxation 8 (13.8) (12.4)
------ --------
Profit after tax from continuing operations 13.8 14.1
Profit/(loss) from discontinued operation 10 14.8 (20.0)
------ --------
Profit/(loss) for the year 28.6 (5.9)
------ --------
Profit/(loss) attributable to:
Owners of the parent 22.2 (10.7)
Non-controlling interests 6.4 4.8
------ --------
28.6 (5.9)
------ --------
Earnings per share - basic and diluted 13 803.8p (387.4)p
Earnings per share - continuing operations 13 268.0p 336.7p
Earnings per share - discontinued operation 13 535.8p (724.1)p
Statement of comprehensive income
for the year ended 31 December 2017
2017 2016
Notes GBP'm GBP'm
Group
Profit/(loss) for the year 28.6 (5.9)
----- -----
Other comprehensive income/(expense):
Items that will not be reclassified subsequently to profit or loss:
Remeasurements of post employment benefit obligations 33 34.3 (24.3)
Deferred tax movement in relation to post employment benefit obligations 32 (1.0) 1.2
----- -----
33.3 (23.1)
----- -----
Items that may be reclassified subsequently to profit or loss:
Foreign exchange translation differences (28.4) 52.0
Available-for-sale investments:
Valuation gains taken to equity 23 10.9 3.5
Transferred to income statement on sale 23 (0.3) (1.2)
Share of other comprehensive income of associates - 0.2
(17.8) 54.5
----- -----
Other comprehensive income for the year, net of tax 15.5 31.4
----- -----
Total comprehensive income for the year 44.1 25.5
----- -----
Total comprehensive income attributable to:
Owners of the parent 41.1 13.8
Non-controlling interests 3.0 11.7
----- -----
44.1 25.5
----- -----
Company
Profit for the year 3.9 4.0
----- -----
Total comprehensive income for the year 3.9 4.0
----- -----
Consolidated balance sheet
at 31 December 2017
2017 2016
Notes GBP'm GBP'm
Non-current assets
Intangible assets 16 3.2 1.1
Property, plant and equipment 17 216.3 232.2
Investment properties 18 17.6 17.0
Biological assets 19 12.8 13.9
Prepaid operating leases 20 0.9 1.0
Investments in associates 22 55.4 61.0
Deferred tax assets 32 0.2 0.2
Available-for-sale financial assets 23 47.0 37.2
Other investments - heritage assets 25 9.4 9.2
Retirement benefit surplus 33 0.3 0.1
Trade and other receivables 27 1.9 1.8
Total non-current assets 365.0 374.7
----- ------
Current assets
Inventories 26 47.4 50.6
Biological assets 19 6.6 7.2
Trade and other receivables 27 43.7 40.6
Current income tax assets 0.9 1.0
Cash and cash equivalents 28 108.0 72.9
----- ------
206.6 172.3
Assets classified as held for sale 9 4.9 -
Assets classified as held for sale - discontinued operation 10 - 266.9
Total current assets 211.5 439.2
----- ------
Current liabilities
Borrowings 30 (1.8) (1.7)
Trade and other payables 29 (56.5) (58.7)
Current income tax liabilities (7.9) (6.5)
Employee benefit obligations 33 (0.7) (0.9)
Provisions 31 (15.2) (8.6)
----- ------
(82.1) (76.4)
Liabilities directly associated with assets classified as held for sale 9 (1.8) -
Liabilities directly associated with assets classified as held for sale - discontinued
operation 10 - (244.2)
----- ------
Total current liabilities (83.9) (320.6)
----- ------
Net current assets 127.6 118.6
----- ------
Total assets less current liabilities 492.6 493.3
----- ------
Non-current liabilities
Borrowings 30 (4.0) (4.5)
Deferred tax liabilities 32 (40.2) (43.3)
Employee benefit obligations 33 (30.5) (65.9)
Total non-current liabilities (74.7) (113.7)
----- ------
Net assets 417.9 379.6
----- ------
Equity
Called up share capital 34 0.3 0.3
Share premium 15.3 15.3
Reserves 352.8 315.2
----- ------
Equity attributable to owners of the parent 368.4 330.8
Non-controlling interests 49.5 48.8
----- ------
Total equity 417.9 379.6
----- ------
Company balance sheet
at 31 December 2017
2017 2016
Notes GBP'm GBP'm
Non-current assets
Investments in subsidiaries 21 73.5 73.5
Available-for-sale financial assets 23 - 0.2
Other investments - heritage assets 25 10.6 10.4
----- -----
Total non-current assets 84.1 84.1
----- -----
Current assets
Amounts due from group undertakings 3.5 18.3
Current income tax asset 0.1 0.1
Cash and cash equivalents 28 0.1 -
----- -----
Total current assets 3.7 18.4
----- -----
Current liabilities
Trade and other payables 29 (0.2) (0.1)
Amounts due to group undertakings (20.7) (35.7)
----- -----
Total current liabilities (20.9) (35.8)
----- -----
Net current liabilities (17.2) (17.4)
----- -----
Total assets less current liabilities 66.9 66.7
----- -----
Non-current liabilities
Deferred tax liabilities 32 (0.2) (0.2)
----- -----
Total non-current liabilities (0.2) (0.2)
----- -----
Net assets 66.7 66.5
----- -----
Equity
Called up share capital 34 0.3 0.3
Share premium 15.3 15.3
Reserves 51.1 50.9
----- -----
Total equity 66.7 66.5
----- -----
The profit for the Company is shown in note 11.
The notes on pages 43 to 101 form part of the financial statements.
The financial statements on pages 36 to 101 were approved on 18 April 2018 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 2017
2017 2016
Notes GBP'm GBP'm
Cash generated from operations
Cash flows from operating activities 35 40.7 35.3
Interest paid (0.5) (0.7)
Income taxes paid (12.3) (15.8)
Interest received 3.0 2.7
------ ------
Net cash flow from operating activities 30.9 21.5
------ ------
Cash flows from investing activities
Purchase of intangible assets (2.5) (0.2)
Purchase of property, plant and equipment (20.6) (14.2)
Proceeds from sale of non-current assets 1.3 0.3
Purchase of investment property (0.2) (0.5)
Biological assets: non-current - additions (0.2) (0.3)
Part disposal of subsidiaries 0.2 1.2
Cash balances transferred to assets held for sale (0.3) -
Investment in associates (1.0) -
Dividends received from associates 2.8 2.3
Purchase of investments (4.0) (2.4)
Proceeds from sale of investments 1.8 5.6
Income from investments 0.6 0.6
Purchase of other investments - heritage assets (0.2) (0.2)
------ ------
Net cash flow from investing activities (22.3) (7.8)
------ ------
Cash flows from financing activities
Equity dividends paid (3.6) (3.6)
Dividends paid to non-controlling interests (2.5) (3.3)
New loans 0.1 0.1
Loans repaid (0.6) (0.6)
------ ------
Net cash flow from financing activities (6.6) (7.4)
------ ------
Net increase in cash and cash equivalents from continuing operations 2.0 6.3
Net cash inflow/(outflow) from discontinued operation 10 38.2 (10.5)
Cash and cash equivalents at beginning of year 28 71.8 65.6
Exchange (losses)/gains on cash (5.2) 10.4
------ ------
Cash and cash equivalents at end of year 28 106.8 71.8
------ ------
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.
Company cash flow statement
for the year ended 31 December 2017
2017 2016
Notes GBP'm GBP'm
Cash generated from operations
Profit before tax 3.9 4.0
Adjustments for:
Impairment of available-for-sale financial assets 0.2 -
Interest income (0.2) (0.3)
Dividends from group companies (5.2) (4.8)
Increase in trade and other payables 0.1 -
Net movement in intra-group balances (0.2) (2.3)
----- -----
Cash used in operations (1.4) (3.4)
Interest received 0.2 0.3
----- -----
Net cash flow from operating activities (1.2) (3.1)
----- -----
Cash flows from investing activities
Purchase of other investments - heritage assets (0.2) (0.2)
Dividends received 5.2 4.8
----- -----
Net cash flow from investing activities 5.0 4.6
----- -----
Cash flows from financing activities
Equity dividends paid (3.7) (3.7)
----- -----
Net cash flow from financing activities (3.7) (3.7)
----- -----
Net movement in cash and cash equivalents 0.1 (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 0.1 -
----- -----
Statement of changes in equity
for the year ended 31
December 2017
Non-
Share Share Treasury Retained Other controlling Total
capital premium shares earnings reserves Total interests equity
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
Group
At 1 January 2016 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 - - - (0.6) - (0.6) - (0.6)
-------- -------- -------- -------- -------- ------ ----------- ------
At 31 December
2016 0.3 15.3 (0.4) 272.1 43.5 330.8 48.8 379.6
Total
comprehensive
income/(expense)
for the year - - - 55.2 (14.1) 41.1 3.0 44.1
Dividends - - - (3.6) - (3.6) (2.5) (6.1)
Non-controlling
interest
subscription - - - - - - 0.2 0.2
Share of
associate's other
equity movements - - - 0.1 - 0.1 - 0.1
-------- -------- -------- -------- -------- ------ ----------- ------
At 31 December
2017 0.3 15.3 (0.4) 323.8 29.4 368.4 49.5 417.9
-------- -------- -------- -------- -------- ------ ----------- ------
Company
At 1 January 2016 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
Total
comprehensive
income
for the year - - - 3.9 - 3.9 - 3.9
Dividends - - - (3.7) - (3.7) - (3.7)
-------- -------- -------- -------- -------- ------ ----------- ------
At 31 December
2017 0.3 15.3 - 39.0 12.1 66.7 - 66.7
-------- -------- -------- -------- -------- ------ ----------- ------
Other reserves of the Group include net exchange differences of GBP26.1 million deficit (2016: GBP1.3 million deficit).
Group retained earnings includes GBP157.4 million (2016: GBP159.0 million) which would require exchange control permission for remittance as dividends.
Accounting policies
The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all years presented, unless otherwise stated.
Basis of preparation
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU, IFRS IC interpretations and the Companies Act 2006 applicable to companies reporting under IFRS.
The consolidated financial statements have been prepared on the historical cost basis as modified by the revaluation of biological assets, available-for-sale investments, financial assets and financial liabilities and assets held for sale.
Where necessary, comparative figures have been adjusted to conform with changes in presentation in the current year. During the year, GBP8.6 million of comparative amounts previously classified as other payables have been reclassified as provisions.
Going concern
The Directors have, at the time of approving the financial statements, a reasonable expectation that the Company and the Group have adequate resources to continue to operate for the foreseeable future. They therefore continue to adopt the going concern basis of accounting in preparing the financial statements.
Basis of consolidation
Subsidiaries
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 31 December each year.
On acquisition, the assets and liabilities of a subsidiary are measured at their fair values at the date of acquisition. Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill. Any deficiency of the cost of acquisition below the fair values of the identifiable net assets acquired (i.e. discount on acquisition) is credited to the income statement in the period of acquisition. The Group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, at the non-controlling interest's proportionate share of the recognised amounts of acquiree's identifiable net assets.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated Income Statement from the effective date of acquisition or disposal, as appropriate.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by the Group.
All Intra-Group transactions, balances, income and expenses are eliminated on consolidation.
Associates
An associate is an entity over which the Group is in a position to exercise significant influence, but not control or joint control, through participation in the financial and operating policy decisions of that entity.
Investments in associates are accounted for by the equity method of accounting. Under this method the Group's share of the post-acquisition profits or losses of associates is recognised in the Income Statement and its share of post-acquisition movements in reserves is recognised in reserves.
Foreign currency translation
Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Translation differences on non-monetary items carried at fair value are reported as part of the fair value gain or loss. Gains and losses arising on retranslation are included in the Income Statement, except for exchange differences arising on non-monetary items where the changes in fair value are recognised directly in equity.
The consolidated financial statements are presented in sterling which is the Company's functional and presentation currency. On consolidation, income statements and cash flows of foreign entities are translated into pounds sterling at average exchange rates for the year and their balance sheets are translated at the exchange rates ruling at the balance sheet date. Exchange differences arising from the translation of the net investment in foreign entities and of borrowings designated as hedges of such investments, are taken to equity. When a foreign entity is sold such exchange differences arising since 1 January 2004 are recognised in the Income Statement as part of the gain or loss on disposal.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the exchange rate ruling on the date of acquisition. The Group has elected to treat goodwill and fair value adjustments arising on acquisitions prior to 1 January 2004, the date of the Group's transition from UK GAAP to IFRS, as sterling denominated assets and liabilities.
Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of discounts, value added tax and other sales related taxes and after eliminating intra-group sales.
Revenue from the sale of goods is recognised when all the following conditions are satisfied:
(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.
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 Chief Executive. 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 notes 5 and 6.
Intangible assets
(i) Goodwill
Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group's interest in the fair value of the identifiable assets, liabilities and contingent liabilities of a subsidiary or associate at the date of acquisition.
Goodwill is recognised as an asset and reviewed for impairment at least annually or more frequently if events or changes in circumstances indicate a potential impairment. Any impairment is recognised immediately in the income statement and is not subsequently reversed.
On disposal of a subsidiary or associate, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.
(ii) Identifiable intangible assets
Indefinite life identifiable intangible assets include certain brands acquired. They are not amortised but tested for impairment annually or more frequently if an impairment indicator is triggered, any impairment is charged to the income statement as it arises. The assessment of the classification of intangible assets as indefinite is reviewed annually.
Finite life identifiable intangible assets include certain brands, customer relationships and other intangible assets acquired on the acquisition of subsidiaries. Acquired intangible assets with finite lives are initially recognised at cost and amortised on a straight-line basis over their estimated useful lives, not exceeding 20 years. Intangible assets' estimated lives are re-evaluated annually and an impairment test is carried out if certain indicators of impairment exist.
(iii) Computer software
Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. Computer software licences are held at cost and are amortised on a straight-line basis over 3 to 7 years.
Costs associated with developing or maintaining computer software programmes are recognised as an expense as incurred. Costs that are directly associated with identifiable and unique software products controlled by the Group and which are expected to generate economic benefits exceeding costs beyond one year, are recognised as an intangible asset and amortised over their estimated useful lives.
Property, plant and equipment
Property, plant and equipment now includes biological assets (bearer plants) which are accounted for under IAS 16.
Land and buildings comprises mainly factories and offices. All property, plant and equipment is shown at cost less subsequent depreciation and impairment, except for land, which is shown at cost less impairment. Cost includes expenditure that is directly attributable to the acquisition of these assets.
On transition to IFRS, the Group followed the transitional provisions and elected that previous UK GAAP revaluations be treated as deemed cost.
Subsequent costs are included in the assets' carrying amount, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. Repairs and maintenance are charged to the income statement during the financial period in which they are incurred.
No depreciation is provided on freehold land. Depreciation of other property, plant and equipment is calculated to write off their cost less residual value over their expected useful lives.
The rates of depreciation used for the other assets are as follows:-
Biological assets (Bearer plants) 20 to 50 years
Freehold and long leasehold buildings nil to 50 years
Other short leasehold land and unexpired term of the lease
buildings
Plant, machinery, fixtures, fittings 3 to 25 years
and equipment
No depreciation is provided on bearer plants until maturity when commercial levels of production have been reached.
Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets, or, where shorter, over the term of the relevant lease.
The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is included in the income statement.
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 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.
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 fine art, 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.
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.
Discontinued operations and non-current assets held for sale
A discontinued operation is a separate major line of business or geographic area of operation that has either been disposed of, abandoned or is part of a plan to dispose of a major line of business or geographic area. An operation is classified as a discontinued operation in the year that the above criteria are met. In the consolidated Income Statement, profit/loss from discontinued operations is reported separately from the results from continuing operations. Prior periods Income Statement and cash flow are presented on a comparable basis.
Non-current assets classified as held for sale are measured at the lower of the carrying amount and fair value less costs to sell.
Non-current assets are classified as held for sale if their carrying amount will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset is available for immediate sale in its present condition. Management must be committed to the sale which should be expected to qualify for recognition as a completed sale within one year from the date of classification.
Trade payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities.
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.
Borrowings
Interest-bearing bank loans and overdrafts are initially recorded at the proceeds received, net of direct issue costs. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are accounted for on an accrual basis to the Income Statement using the effective interest method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise.
Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the liability method. Deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction, other than in a business combination, that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred tax is determined using tax rates and laws that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related tax asset is realised or the tax liability is settled.
Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.
Deferred tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.
Employee benefits
(i) Pension obligations
Group companies operate various pension schemes. The schemes are funded through payments to insurance companies or trustee-administered funds. The Group has both defined benefit and defined contribution plans.
A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate fund. The Group has no legal or constructive obligations to pay further contributions to the fund. Contributions are recognised as an expense in the Income Statement when they are due.
A defined benefit plan is a pension plan that defines an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation. The pension cost for defined benefit schemes is assessed in accordance with the advice of qualified independent actuaries using the "projected unit" funding method.
The liability recognised in the Balance Sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the balance sheet date less the fair value of plan assets. Independent actuaries calculate the obligation annually using the "projected unit" funding method. Actuarial gains and losses arising from experience adjustments and changes in actuarial adjustments are recognised in full in the period in which they occur, they are not recognised in the Income Statement and are presented in the Statement of Comprehensive Income.
Past service costs are recognised directly in the Income Statement.
(ii) Other post-employment benefit obligations
Some Group companies have unfunded obligations to pay terminal gratuities to employees. Provisions are made for the estimated liability for gratuities as a result of services rendered by employees up to the balance sheet date and any movement in the provision is recognised in the Income Statement.
The estimated monetary liability for employees' accrued annual leave entitlement at the balance sheet date is recognised as an accrual.
Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated.
Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
Where any Group company purchases the Company's equity share capital (treasury shares), the consideration paid, including any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to the Company's equity holders until the shares are cancelled or reissued. Where such shares are subsequently reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the Company's equity holders.
Dividend distribution
Dividend distribution to the Company's shareholders is recognised as a liability in the Group's financial statements in the period in which the dividends are approved by the Company's shareholders. Interim dividends are recognised when paid.
Sources of estimation uncertainty
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) Biological assets
Biological assets are carried at fair value less estimated point-of-sale costs. Where meaningful market-determined prices do not exist to assess the fair value of biological assets, the fair value has been determined based on the net present value of expected future cash flows from those assets, discounted at appropriate pre-tax rates. In determining the fair value of biological assets where the discounting of expected future cash flows has been used, the Directors have made certain assumptions about expected life-span of the plantings, yields, selling prices, costs and discount rates. Details of assumptions made and sensitivity analysis are given in note 19.
(iii) Retirement benefit obligations
Pension accounting requires certain assumptions to be made in order to value obligations and to determine the impact on the Income Statement. These figures are particularly sensitive to assumptions for discount rates, mortality, inflation rates and expected long-term rates of return on assets. Details of assumptions made and sensitivity analysis are given in note 33
(iv) 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 2017:
IAS 7 (amendments) Statement of cashflows - effective from 1 January 2017
The Group has adopted the amendments to IAS 7 for the first time in the current year.
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.
The amendments to IAS 7 and IAS 12 have not 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 2018, and have not been applied in preparing these consolidated financial statements. None of these is expected to have a significant effect on the consolidated financial statements of the Group, except the following set out below:
IFRS 9 Financial Instruments - effective from 1 January 2018
The standard covers the classification, measurement and derecognition of financial instruments and applies an approach where the business model of an entity and the cash flows associated with each financial asset defines the classification of the financial instrument. IFRS 9 applies a forward-looking impairment model that will replace the currently applicable incurred loss model.
Classification and measurement
Under IFRS 9 the classification of financial assets is based both on the business model within which the asset is held and the contractual cash flow characteristics of the asset. There are three principal classification categories for financial assets that are debt instruments: (i) amortised cost, (ii) fair value through other comprehensive income (FVTOCI) and (iii) fair value through profit or loss (FVTPL). Equity investments in scope of IFRS 9 are measured at fair value with gains and losses recognised in profit or loss unless an irrevocable election is made to recognise gains or losses in Other comprehensive income.
At the date of initial application of IFRS 9, the Group has elected to apply the FVTOCI option for all of its non-controlling equity interests that were classified as Available for sale financial assets ("AFS") under IAS 39. This election results in all gains and losses being presented in Other comprehensive income except dividend income which is recognised in profit or loss. This differs from the current treatment of AFS instruments under IAS 39 where gains and losses recognised in Other comprehensive income are reclassified to profit and loss on derecognition or impairment. There will be no other changes in the classification and measurement for any of the Group's other financial assets or liabilities.
The Group has elected not to restate comparatives on initial application of IFRS 9. The full impact of adopting IFRS 9 on the Group's consolidated financial statements will depend on the financial instruments that the Group holds during 2018 as well as on economic conditions and judgements will be made at the year end. The Group has performed a preliminary assessment of the potential impact of adopting IFRS 9 based on the financial instruments as at the date of initial application of IFRS 9. Based on the Group's preliminary assessment, the adoption of IFRS 9 will not have a material impact on the financial statements.
Impairment
The impairment model under IFRS 9 reflects "expected" credit losses, as opposed to "incurred" credit losses under IAS 39. Under the impairment approach in IFRS 9, it is not necessary for a credit event to have occurred before credit losses are recognised. The amount of expected credit losses should be assessed on initial recognition of the related asset and updated at each reporting date.
The Group expects to apply the simplified approach to recognise lifetime expected credit losses for its trade receivables as required or permitted by IFRS.
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
-- Recognise the revenue
The adoption of IFRS 15 is not expected to have a material financial impact on the financial statements of the Group as the Group's revenue recognition practises are in line with IFRS 15 in all material respects.
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.
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
2017 2016 2017 2016 2017 2016 2017 2016 2017 2016
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
Revenue
External sales 239.4 207.1 20.5 18.8 37.8 31.6 0.6 0.4 298.3 257.9
------ -------- ------ --------- ----- ------ ----- -------- ------ ------
Trading profit
Segment
profit/(loss) 35.6 29.9 (2.6) (2.6) 1.8 0.8 - 0.1 34.8 28.2
------ -------- ------ --------- ----- ------ ----- -------- ------ ------
Unallocated
corporate expenses (8.4) (9.2)
------ ------
Trading profit 26.4 19.0
Share of
associates'
results 2.0 5.1
Impairment of
property, plant
and equipment and
provisions (1.8) -
Profit on disposal
of
available-for-sale
investments 0.7 1.5
Investment income 0.6 0.6
Net finance
(cost)/income (0.3) 0.3
------ ------
Profit before tax
from continuing
operations 27.6 26.5
Taxation (13.8) (12.4)
------ ------
Profit after tax
from continuing
operations 13.8 14.1
------ ------
Other information
Segment assets 344.2 354.8 18.1 19.1 26.2 24.0 20.0 18.5 408.5 416.4
Investments in
associates 55.4 61.0
Discontinued
operation - 266.9
Unallocated assets 112.6 69.6
Consolidated total
assets 576.5 813.9
------ ------
Segment liabilities (56.6) (55.4) (7.9) (4.6) (6.5) (5.4) - - (71.0) (65.4)
Discontinued
operation - (244.2)
Unallocated
liabilities (87.6) (124.7)
------ ------
Consolidated total
liabilities (158.6) (434.3)
------ ------
Capital expenditure 17.2 13.0 0.3 0.4 2.3 0.6 1.0 0.7 20.8 14.7
Depreciation (11.4) (11.0) (1.8) (1.9) (1.7) (1.7) (0.3) (0.2) (15.2) (14.8)
Amortisation (0.3) (0.3) (0.3) (0.3)
Impairments (0.9) (0.2) (0.1) (1.1) (0.1)
Segment assets consist primarily of intangible assets, property, plant and equipment, investment properties, biological assets, prepaid operating leases, inventories, trade and other receivables and cash and cash equivalents. Receivables for tax have been excluded. Investments in associates, valued using the equity method, have been shown separately in the segment information. Segment liabilities are primarily those relating to the operating activities and generally exclude liabilities for taxes, short-term loans, finance leases and non-current liabilities.
Geographical segments
The Group's 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 revenue by geographical market, irrespective of the origin of the goods/services:
2017 2016
GBP'm GBP'm
United Kingdom 53.9 41.4
Continental Europe 34.1 35.6
Bangladesh 28.1 24.2
India 85.6 67.2
Kenya 42.3 35.6
Malawi 11.0 8.6
North America and Bermuda 9.9 10.1
South Africa 2.9 1.5
South America 6.5 5.3
Other 24.0 28.4
----- -----
298.3 257.9
----- -----
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
2017 2016 2017 2016 2017 2016
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
United Kingdom 58.0 60.4 3.2 1.1 0.2 0.5
Continental Europe 6.3 6.1 0.1 0.1 - -
Bangladesh 63.1 69.6 2.5 1.1 - -
India 103.4 104.8 5.2 4.6 - -
Kenya 89.8 84.6 4.0 3.5 - -
Malawi 51.4 52.7 2.9 2.0 - -
North America and
Bermuda 12.2 12.5 0.2 0.2 - -
South Africa 13.4 13.0 2.0 1.2 - -
South America 10.9 12.7 0.5 0.4 - -
------------- ------------ ------------- ------------ ------------- -------------
408.5 416.4 20.6 14.2 0.2 0.5
------------- ------------ ------------- ------------ ------------- -------------
2 Revenue
An analysis of the Group's revenue is as follows:
2017 2016
GBP'm GBP'm
Sale of goods 238.8 206.5
Distribution and warehousing revenue 37.8 31.6
Engineering services revenue 20.5 18.8
Agency commission revenue 0.6 0.6
Property rental revenue 0.6 0.4
----- -----
Total Group revenue 298.3 257.9
Other operating income 2.4 2.3
Investment income 0.6 0.6
Interest income 3.0 2.7
----- -----
Total Group income 304.3 263.5
----- -----
3 Trading profit
2017 2016
GBP'm GBP'm
The following items have been included in arriving at trading profit:
Employment costs (note 14) 101.5 92.0
Inventories:
Cost of inventories recognised as an expense (included in cost of sales) 162.8 137.6
Cost of inventories provision recognised as an expense (included in cost of sales) 0.1 0.3
Fair value gain included in Made Tea 1.2 0.8
Depreciation of property, plant and equipment:
Owned assets 15.0 14.6
Under finance leases 0.1 -
Amortisation of intangibles (included in administrative expenses) 0.3 0.3
Gain from change in fair value of non-current biological assets 1.1 1.1
Impairment of available-for-sale financial assets
(included in administrative expenses) 0.2 0.1
Profit on disposal of property, plant and equipment 0.1 0.2
Operating leases - lease payments:
Plant and machinery 0.3 0.4
Property 0.6 0.6
Repairs and maintenance expenditure on property, plant and equipment 5.5 4.6
----- -----
Currency exchange (gains)/losses (credited)/charged to income include:
Revenue - (0.3)
Cost of sales - 0.1
Distribution costs - 0.1
Administrative expenses (0.2) (0.2)
Finance income 0.1 (0.4)
----- -----
(0.1) (0.7)
----- -----
During the year the Group (including its overseas subsidiaries) obtained the following services
from the Company's auditor and its associates:
Audit services:
Statutory audit:
Parent company and consolidated financial statements 0.2 0.2
Subsidiary companies 0.5 0.8
----- -----
0.7 1.0
Audit - related regulatory reporting 0.1 0.1
Other services not covered above 0.2 -
----- -----
1.0 1.1
----- -----
4 Share of associates' results
The Group's share of the results of associates is analysed below:
2017 2016
GBP'm GBP'm
Profit before tax 2.0 6.0
Taxation - (0.9)
----- -----
Profit after tax 2.0 5.1
----- -----
5 Impairment of property, plant and equipment and provisions
Following a decision to sell both British Metal Treatments Limited and GU Cutting and Grinding Services Limited to their respective management teams, the assets and liabilities associated with the two companies have been fair valued and reclassified as held for sale (note 9). Impairments and provisions totalling GBP1.8 million have been charged to the income statement.
6 Profit on disposal of available-for-sale investments
In 2016, the profit of GBP1.5 million included a profit of GBP1.1 million relating to the disposal of the Group's investment in Ascendant Group, a Bermudian power company.
7 Finance income and costs
2017 2016
GBP'm GBP'm
Interest payable on loans and bank overdrafts (0.5) (0.6)
----- -----
Finance costs (0.5) (0.6)
Finance income - interest income on short-term bank deposits 3.0 2.7
Net exchange (loss)/gain on foreign cash balances (0.1) 0.4
Employee benefit expense (note 33) (2.7) (2.2)
----- -----
Net finance (cost)/income (0.3) 0.3
----- -----
8 Taxation
Analysis of charge in the year 2017 2016
GBP'm GBP'm GBP'm
Current tax
UK corporation tax
UK corporation tax at 19.25 per cent. (2016: 20.00 per cent.) 1.8 1.4
Double tax relief (1.8) (1.4)
-------- -----
- -
Foreign tax
Corporation tax 14.0 11.6
Adjustment in respect of prior years 0.3 0.1
-------- -----
14.3 11.7
------- -----
Total current tax 14.3 11.7
Deferred tax
Origination and reversal of timing differences
Overseas (0.5) 0.7
------- -----
Tax on profit on ordinary activities 13.8 12.4
------- -----
Factors affecting tax charge for the year
Profit on ordinary activities before tax 42.4 6.5
Share of associated undertakings profit (2.0) (5.1)
------- -----
Group profit on ordinary activities before tax 40.4 1.4
------- -----
Tax on ordinary activities at the standard rate of corporation tax in the UK of
19.25 per
cent. (2016: 20.00 per cent.) 7.8 0.3
Effects of:
Adjustment to tax in respect of prior years 0.3 0.1
Expenses not deductible for tax purposes 2.6 6.6
Adjustment in respect of foreign tax rates 4.6 3.7
Additional tax arising on dividends from overseas companies 1.1 1.0
Other income not charged to tax (2.2) (1.5)
Profit on disposal of discontinued operation not charged to tax (3.9) -
Increase in tax losses carried forward 1.9 1.6
Movement in other timing differences 1.6 0.6
------- -----
Total tax charge for the year 13.8 12.4
------- -----
The Profit on disposal of discontinued operation not charged to tax arises from the disposal of Duncan Lawrie Asset Management, the gain from which is not expected to be chargeable to tax. Expenses not deductible for tax purposes in 2016 included GBP4.0 million arising from the discontinued operation and consists of losses not recoverable and expenses not allowable for tax purposes.
9 Assets classified as held for sale
Following a decision to sell both British Metal Treatments Limited and GU Cutting and Grinding Services Limited, the assets and liabilities associated with the two companies have been fair valued and reclassified as held for sale. The disposal of these companies which form part of the Engineering segment is expected to complete during 2018.
The following assets and liabilities were reclassified as held for sale in relation to British Metal Treatments Limited and GU Cutting and Grinding Services Limited:
2017 2016
GBP'm GBP'm
Assets classified as held for sale
Property, plant and equipment 2.7 -
Inventories 0.9 -
Trade and other receivables 1.2 -
Cash and cash equivalents 0.3 -
----- -----
5.1 -
Impairments (0.9) -
----- -----
Assets classified as held for sale 4.2 -
----- -----
Liabilities directly associated with assets
classified as held for sale
Trade and other payables (0.9) -
Provisions (0.9) -
----- -----
(1.8) -
----- -----
In addition, the property previously occupied by Loddon Engineering was sold in March 2018. GBP0.7 million has been reclassified from investment property to assets held for sale.
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 assets and liabilities associated with Duncan Lawrie were consequently presented as held for sale in the 2016 financial statements.
The UK loan book was sold to Arbuthnot Latham in December 2016. The sale of the Duncan Lawrie Asset Management to Brewin Dolphin was also agreed in 2016 and completed in 2017, generating a gain on sale of GBP19.2 million which is reflected in these results.
The financial performance for the year end 31 December 2017 and 31 December 2016 is as follows:
2017 2016
GBP'm GBP'm
Revenue 2.8 12.1
Other operating income - 0.1
----- -----
2.8 12.2
Operating expenses (8.3) (19.7)
----- -----
(5.5) (7.5)
Costs associated with closure:
----- -----
- Staff termination - (5.0)
- Contract settlement - (2.6)
- Advisors fees - (2.7)
----- -----
- (10.3)
Profit on sale of Duncan Lawrie Asset Management 19.2 -
Profit on sale of other operations 1.1 -
Impairment of non-current assets and loans
and advances to customers - (1.2)
Profit on sale of available-for-sale-investments - 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)
----- -----
Profit/(loss) from discontinued operation 14.8 (20.0)
----- -----
Cash flows are as follows:
2017 2016
GBP'm GBP'm
Profit/(loss) from discontinued operation 14.8 (20.0)
Depreciation and amortisation - 0.5
Profit on sale of operations (20.3) -
Impairment of assets - 0.6
Profit on sale of financial assets - (1.8)
Increase in working capital 17.3 1.3
Net decrease in banking funds - 9.0
----- -----
Cash flow from discontinued operation 11.8 (10.4)
Proceeds from sale of operations 26.4 -
Purchase of property, plant and equipment - (0.1)
----- -----
Net cash inflow/(outflow) from discontinued
operation 38.2 (10.5)
----- -----
The following assets and liabilities were reclassified as held for sale in relation to Duncan Lawrie:
2017 2016
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
2017 2016
GBP'm GBP'm
The profit of the Company was: 3.9 4.0
----- -----
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
2017 2016
GBP'm GBP'm
Amounts recognised as distributions to equity holders in the period:
Final dividend for the year ended 31 December 2016 of 95p
(2015: 95p) per share 2.6 2.6
Interim dividend for the year ended 31 December 2017 of 37p
(2016: 35p) per share 1.0 1.0
3.6 3.6
----- -----
Dividends amounting to GBP0.1 million (2016: 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 2017 of 98p
(2016: 95p) per share 2.8 2.7
--- ---
The proposed final dividend is subject to approval by the shareholders at the AGM and has not been included as a liability in these financial statements.
13 Earnings/(loss) per share (EPS)
2017 2016
Weighted Weighted
average average
number of (Loss)/ number of
Earnings shares EPS earnings shares EPS
GBP'm Number Pence GBP'm Number Pence
Attributable to ordinary
shareholders 22.2 2,762,000 803.8 (10.7) 2,762,000 (387.4)
-------- --------- ----- -------- --------- ------
Attributable to ordinary
shareholders - continuing
operations 7.4 2,762,000 268.0 9.3 2,762,000 336.7
-------- --------- ----- -------- --------- ------
Attributable to ordinary
shareholders - discontinued
operation 14.8 2,762,000 535.8 (20.0) 2,762,000 (724.1)
-------- --------- ----- -------- --------- ------
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
2017 2016
Number Number
Average number of employees by activity:
Agriculture 79,665 79,075
Engineering 250 251
Food Service 334 294
Central Management 26 24
80,275 79,644
------ ------
2017 2016
GBP'm GBP'm
Employment costs:
Wages and salaries 91.3 82.8
Social security costs 2.5 2.4
Employee benefit obligations (see note 33) - UK 1.4 4.6
- Overseas 6.3 2.2
------ ------
101.5 92.0
------ ------
Total remuneration paid to key employees who are members of the Executive Committees, excluding Directors of Camellia Plc, amounted to GBP2.1 million (2016: GBP1.4 million).
15 Emoluments of the Directors
2017 2016
GBP'm GBP'm
Aggregate emoluments excluding pension contributions 1.9 1.8
----- -----
Emoluments of the highest paid Director excluding pension contributions were GBP0.6 million
(2016: GBP0.6 million).
Further details of Directors' emoluments are set out on pages 34 to 35.
16 Intangible assets
Customer Computer
Goodwill relationships Brands software Total
GBP'm GBP'm GBP'm GBP'm GBP'm
Group
Cost
At 1 January 2016 4.0 4.8 - 6.4 15.2
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 1 January 2017 - - - 2.4 2.4
Exchange differences - - (0.1) - (0.1)
Additions - - 2.4 0.1 2.5
Disposals - - - (0.1) (0.1)
-------- ------------- ------ -------- -----
At 31 December 2017 - - 2.3 2.4 4.7
-------- ------------- ------ -------- -----
Amortisation
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 1 January 2017 - - - 1.3 1.3
Charge for the year - - - 0.3 0.3
Disposals - - - (0.1) (0.1)
-------- ------------- ------ -------- -----
At 31 December 2017 - - - 1.5 1.5
-------- ------------- ------ -------- -----
Net book value at 31 December 2017 - - 2.3 0.9 3.2
-------- ------------- ------ -------- -----
Net book value at 31 December 2016 - - - 1.1 1.1
-------- ------------- ------ -------- -----
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 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 1 January 2017 141.8 95.7 119.7 17.1 374.3
Exchange differences (12.7) (4.0) (4.9) (0.7) (22.3)
Additions 5.8 5.3 8.5 1.0 20.6
Disposals (1.3) (0.2) (2.5) (0.3) (4.3)
Transfer between categories - 10.7 (10.7) - -
Reclassification to investment properties - (2.3) - - (2.3)
Reclassification to assets held for sale - (3.1) (3.9) - (7.0)
------ --------- --------- ------------ -----
At 31 December 2017 133.6 102.1 106.2 17.1 359.0
------ --------- --------- ------------ -----
Depreciation
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 1 January 2017 12.4 43.6 77.8 8.3 142.1
Exchange differences (1.3) (1.4) (2.7) (0.6) (6.0)
Charge for the year 6.0 1.5 6.6 1.0 15.1
Disposals (0.3) (0.1) (2.4) (0.3) (3.1)
Transfer between categories - 9.2 (9.2) - (0.0)
Impairment provision - 0.1 0.2 - 0.3
Reclassification to investment properties - (1.1) - - (1.1)
Reclassification to assets held for sale - (0.9) (3.7) - (4.6)
------ --------- --------- ------------ -----
At 31 December 2017 16.8 50.9 66.6 8.4 142.7
------ --------- --------- ------------ -----
Net book value at 31 December 2017 116.8 51.2 39.6 8.7 216.3
------ --------- --------- ------------ -----
Net book value at 31 December 2016 129.4 52.1 41.9 8.8 232.2
------ --------- --------- ------------ -----
Land and buildings at net book value comprise:
2017 2016
GBP'm GBP'm
Freehold 26.6 26.0
Long leasehold 24.3 25.6
Short leasehold 0.3 0.5
------------ -----
51.2 52.1
------------ -----
The amount of expenditure for property, plant and equipment in the course of construction amounted to GBP3.3 million (2016: GBP1.5 million).
18 Investment properties
GBP'm
Group
Cost
At 1 January 2016 16.4
Exchange differences 0.1
Additions 0.5
Transfers from property, plant and equipment 0.7
-----
At 1 January 2017 17.7
Additions 0.2
Transfers from property, plant and equipment 2.3
Reclassification to assets held for sale (0.7)
-----
At 31 December 2017 19.5
-----
Depreciation
At 1 January 2016 0.6
Exchange differences 0.1
-----
At 1 January 2017 0.7
Transfers from property, plant and equipment 1.1
Charge for the year 0.1
-----
At 31 December 2016 1.9
-----
Net book value at 31 December 2017 17.6
-----
Net book value at 31 December 2016 17.0
-----
Included in revenue is GBP0.6 million (2016: GBP0.4 million) of rental income generated from investment properties. Direct operating expenses arising on the investment property, the majority of which generated rental income in the period, amounted to GBP0.2 million (2016: GBP0.2 million).
At the end of the year the fair value of the investment properties was GBP23.4 million (2016: GBP22.8 million). Investment properties were valued by the Directors (fair value hierarchy Level 2).
19 Biological assets
Forestry Livestock Total
Non-current: GBP'm GBP'm GBP'm
Group
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 (0.8) (0.3) (1.1)
-------- --------- -----
At 1 January 2017 12.9 1.0 13.9
Exchange differences (1.2) (0.1) (1.3)
New planting additions 0.2 - 0.2
Gains arising from changes
in fair value less estimated point-of-sale costs 0.8 0.3 1.1
Decreases due to harvesting (0.8) (0.3) (1.1)
-------- --------- -----
At 31 December 2017 11.9 0.9 12.8
-------- --------- -----
2017 2016
Current: GBP'm GBP'm
Group
Tea 0.2 0.3
Edible nuts 1.9 1.3
Citrus 1.0 1.3
Soya 2.3 3.1
Avocado 1.1 0.9
Other 0.1 0.3
----- -----
6.6 7.2
----- -----
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 2017 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. There are no individually significant unobservable inputs. The fair value of livestock is based on market prices of livestock of similar age and sex.
New planting additions represent new areas planted to the particular crop at cost.
As at 31 December 2017 the area planted to Forestry amounted to 5,866 Hectares (2016: 5,946) from which 196,121 cubic metres (2016: 169,089) were harvested during the year.
Livestock numbers were 4,502 head (2016: 4,704) at 31 December 2017.
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 46.
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 are as follows:
Non-current:
- Forestry - a 10% movement in the market price for trees
or volume of trees assumed would result in a GBP1.2 million
(2016: GBP1.3 million) increase/decrease in the fair value
of forestry.
Current:
- Macadamia - a 10% increase/decrease in the volumes assumed
would result in a GBP0.2 million
(2016: 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 GBP1.0 million
(2016: 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 (2016:
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 GBP0.2 million (2016: 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. The Group does not anticipate that these prices will decline significantly in the foreseeable future. There are no futures markets available for the majority of crops grown by the Group. The Group's exposure to this risk is mitigated by the geographical spread of its operations, selective forward selling in certain instances when considered appropriate, and regular reviews of available market data on sales and production. The Group monitors closely the returns it achieves from its crops and considers replacing its biological assets when yields decline with age or markets change.
Further financial risk arises from changes in market prices of key cost components. Such costs are closely monitored.
20 Prepaid operating leases
GBP'm
Group
Cost
At 1 January 2016 0.8
Exchange differences 0.2
-----
At 1 January 2017 1.0
Exchange differences (0.1)
-----
At 31 December 2017 0.9
-----
Net book value at 31 December 2017 0.9
-----
Net book value at 31 December 2016 1.0
-----
21 Investments in subsidiaries
2017 2016
GBP'm GBP'm
Company
Cost
At 1 January and 31 December 73.5 73.5
----- -----
Details of the Company's subsidiaries are shown in note 40.
22 Investments in associates
2017 2016
GBP'm GBP'm
Group
At 1 January 89.8 73.0
Exchange differences (8.4) 14.4
Share of profit (note 4) 2.0 5.1
Dividends (2.8) (2.3)
Additions 1.0 -
Other equity movements 0.1 (0.4)
At 31 December 81.7 89.8
----- -----
Provision for diminution in value
At 1 January 28.8 24.1
Exchange differences (2.5) 4.7
----- -----
At 31 December 26.3 28.8
----- -----
Net book value at 31 December 55.4 61.0
----- -----
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
2017
Listed
BF&M Bermuda 702.4 (632.4) 69.9 0.9 36.3 40.9
United Finance Limited Bangladesh 81.0 (71.5) 7.4 0.9 38.4 13.8
United Insurance Company Limited Bangladesh 3.0 (0.8) 0.3 0.2 37.0 4.1
------ ----------- -------- ------ ------
786.4 (704.7) 77.6 2.0 58.8
------ ----------- -------- ------ ------
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
------ ----------- -------- ------ ------
23 Available-for-sale financial assets
Group Company
2017 2016 2017 2016
GBP'm GBP'm GBP'm GBP'm
Cost or fair value
At 1 January 39.6 35.7 0.2 0.2
Exchange differences (3.7) 6.4 - -
Fair value adjustment 10.9 3.5 - -
Additions 4.0 3.4 - -
Disposals (1.1) (7.2) - -
Fair value adjustment for disposal (0.3) (1.2) - -
Reclassification to assets held for resale - (1.0) - -
------ ----- ------- ------
At 31 December 49.4 39.6 0.2 0.2
------ ----- ------- ------
Provision for diminution in value
At 1 January 2.4 5.1 - -
Exchange differences (0.2) 0.6 - -
Provided during year 0.2 0.1 0.2 -
Disposals - (3.4) - -
------ ----- ------- ------
At 31 December 2.4 2.4 0.2 -
------ ----- ------- ------
Net book value at 31 December 47.0 37.2 - 0.2
------ ----- ------- ------
Available-for-sale financial assets include the following:
Group Company
2017 2016 2017 2016
GBP'm GBP'm GBP'm GBP'm
Listed securities:
Equity securities - Bermuda 5.2 5.1 - -
Equity securities - Japan 20.3 15.7 - -
Equity securities - Switzerland 9.5 8.5 - -
Equity securities - US 4.1 2.8 - -
Equity securities - India 3.8 3.5 - -
Equity securities - Europe 0.5 0.5 - -
Equity securities - Other 0.3 0.4 - -
Treasury infrastructure bonds - 12.0% to 12.2%
interest payable twice yearly and redeemable in November 2022 - Kenya 1.5 - - -
Treasury infrastructure bonds - 12.0% to 12.2%
interest payable twice yearly and redeemable in November 2024 - Kenya 1.5 - - -
Debentures with fixed interest of 12.5% and
repayable twice yearly until 31 October 2019 - Kenya 0.3 0.5 - -
Unlisted investments - 0.2 - 0.2
----- ----- ------ -----
47.0 37.2 - 0.2
----- ----- ------ -----
Available-for-sale financial assets are denominated in the following currencies:
Group Company
2017 2016 2017 2016
GBP'm GBP'm GBP'm GBP'm
Sterling - 0.2 - 0.2
US Dollar 4.1 2.8 - -
Euro 0.5 0.5 - -
Swiss Franc 9.5 8.5 - -
Indian Rupee 3.8 3.5 - -
Bermudian Dollar 5.2 5.1 - -
Japanese Yen 20.3 15.7 - -
Kenyan Shilling 3.3 0.5 - -
Other 0.3 0.4 - -
-------- -------- ----- -----
47.0 37.2 - 0.2
-------- -------- ----- -----
24 Held-to-maturity financial assets
Group
2017 2016
GBP'm GBP'm
Cost or fair value
At 1 January - 29.5
Additions - 30.0
Disposals - (29.5)
Reclassification to assets held for resale - (30.0)
------ -----
At 31 December - -
------ -----
25 Other investments - heritage assets
Group Company
2017 2016 2017 2016
GBP'm GBP'm GBP'm GBP'm
Cost
At 1 January 9.2 9.0 10.4 10.2
Additions 0.2 0.2 0.2 0.2
At 31 December 9.4 9.2 10.6 10.4
------ ----- ------- -------
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
2017 2016
GBP'm GBP'm
Group
Made Tea 31.3 34.8
Other agricultural produce 1.9 1.6
Work in progress 0.2 0.4
Trading stocks 2.5 2.2
Raw materials and consumables 11.5 11.6
----- -----
47.4 50.6
----- -----
Made Tea inventories include the fair value of green leaf which includes a fair value uplift of GBP1.2 million (2016: GBP0.8 million).
27 Trade and other receivables
Group
2017 2016
GBP'm GBP'm
Group
Current:
Trade receivables 30.3 27.8
Amounts owed by associated undertakings 0.1 -
Other receivables 7.4 7.6
Prepayments and accrued income 5.9 5.2
-------- --------
43.7 40.6
-------- --------
Non-current:
Other receivables 1.9 1.8
-------- --------
1.9 1.8
-------- --------
The carrying amounts of the Group's trade and other receivables are denominated in the following currencies:
2017 2016
GBP'm GBP'm
Current:
Sterling 11.7 9.6
US Dollar 3.5 3.8
Euro 1.3 1.4
Kenyan Shilling 2.5 2.1
Indian Rupee 19.5 19.2
Malawian Kwacha 0.9 0.4
Bangladesh Taka 2.3 1.9
South African Rand 0.2 0.4
Brazilian Real 0.9 1.2
Other 0.9 0.6
----- -----
43.7 40.6
----- -----
Non-current:
US Dollar - 0.3
Kenyan Shilling 0.5 0.5
Indian Rupee 1.1 0.6
Bangladesh Taka 0.3 0.4
----- -----
1.9 1.8
----- -----
Included within trade receivables is a provision for doubtful debts of GBP0.3 million (2016: GBP0.3 million) and all other trade receivables are with normal trading partners and there is no history of defaults.
Trade receivables include receivables of GBP6.0 million (2016: GBP4.4 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:
2017 2016
GBP'm GBP'm
Up to 30 days 4.0 3.1
30-60 days 0.8 0.5
60-90 days 0.3 0.2
Over 90 days 0.9 0.6
----- -----
6.0 4.4
----- -----
28 Cash and cash equivalents
Group Company
2017 2016 2017 2016
GBP'm GBP'm GBP'm GBP'm
Cash at bank and in hand 42.8 31.0 0.1 -
Short-term bank deposits 61.1 37.8 - -
Short-term liquid investments 4.1 4.1 - -
--------- -------- -------- --------
108.0 72.9 0.1 -
--------- -------- -------- --------
Cash, cash equivalents and bank overdrafts include the following for the purposes of the cash flow statement:
2017 2016 2017 2016
GBP'm GBP'm GBP'm GBP'm
Cash and cash equivalents 108.0 72.9 0.1 -
Bank overdrafts (note 30) (1.2) (1.1) - -
------------- ------------- ----- -----
106.8 71.8 0.1 -
------------- ------------- ----- -----
2017 2016 2017 2016
Effective interest rate:
Short-term deposits 0.57 - 12.00% 2.50 - 12.50% - -
Short-term liquid investments 5.08 - 9.75% 6.45 - 6.49% - -
Average maturity period:
Short-term deposits 58 days 88 days - -
Short-term liquid investments 64 days 46 days - -
29 Trade and other payables
Group Company
2017 2016 2017 2016
GBP'm GBP'm GBP'm GBP'm
Current:
Trade payables 28.3 30.3 - -
Other taxation and social security 1.6 2.6 - -
Other payables 18.4 19.4 0.2 0.1
Accruals 8.2 6.4 - -
------- ------ --------- --------
56.5 58.7 0.2 0.1
------- ------ --------- --------
30 Financial liabilities - borrowings
2017 2016
GBP'm GBP'm
Group
Current:
Bank overdrafts 1.2 1.1
Bank loans 0.6 0.6
1.8 1.7
----- -----
Current borrowings include the following amounts secured on property,
plant and equipment and investment properties:
Bank overdrafts 0.8 0.2
Bank loans 0.6 0.6
1.4 0.8
----- -----
Non-current:
Bank loans 3.9 4.5
Finance leases 0.1 -
----- -----
4.0 4.5
Non-current borrowings include the following amounts secured on plant and equipment and investment
properties:
Bank loans 3.9 4.5
Finance leases 0.1 -
----- -----
4.0 4.5
----- -----
The repayment of bank loans and overdrafts fall due as follows:
Within one year or on demand (included in current liabilities) 1.8 1.7
Between 1 - 2 years 0.6 0.6
Between 2 - 5 years 3.3 3.9
5.7 6.2
----- -----
Minimum finance lease payments fall due as follows:
Between 2 - 5 years 0.1 -
----- -----
0.1 -
Future finance charges on finance leases - -
----- -----
Present value of finance lease liabilities 0.1 -
----- -----
The rates of interest payable by the group ranged between:
2017 2016
% %
Bank overdrafts 2.25 - 21.50 2.00 - 33.00
Bank loans 3.03 3.03
Finance leases 6.80 - 9.50 -
31 Provisions
Wages and salaries Claims Total
GBP'm GBP'm GBP'm
Group
At 1 January 2016 4.0 0.8 4.8
Exchange differences 1.0 - 1.0
Utilised in the period (2.0) (0.1) (2.1)
Provided in the period 4.7 0.2 4.9
------------------ ------ -----
At 1 January 2017 7.7 0.9 8.6
Exchange differences (1.0) - (1.0)
Utilised in the period (0.4) - (0.4)
Provided in the period 7.7 0.7 8.4
Unused amounts reversed in period - (0.4) (0.4)
At 31 December 2017 14.0 1.2 15.2
------------------ ------ -----
Current:
At 31 December 2017 14.0 1.2 15.2
------------------ ------ -----
At 31 December 2016 7.7 0.9 8.6
------------------ ------ -----
The wages and salaries provisions are in respect of unresolved wage negotiations in Kenya for the Collective Bargaining Agreement years of 2014/15 and 2016/17 and ongoing wage negotiations in India and Bangladesh.
32 Deferred tax
The net movement on the deferred tax account is set out below:
Group Company
2017 2016 2017 2016
GBP'm GBP'm GBP'm GBP'm
At 1 January 43.1 37.2 0.2 0.2
Exchange differences (3.7) 6.4 - -
(Credited)/charged to the income statement (0.5) 0.7 - -
Credited to equity 1.1 (1.2) - -
------- ------ -------- -------
At 31 December 40.0 43.1 0.2 0.2
------- ------ -------- -------
The movement in deferred tax assets and liabilities is set out below:
Deferred tax liabilities
Accelerated
tax
depreciation Other Total
GBP'm GBP'm GBP'm
At 1 January 2016 43.2 0.1 43.3
Exchange differences 7.7 0.2 7.9
(Credited)/charged to the income statement (1.9) 2.8 0.9
At 1 January 2017 49.0 3.1 52.1
Exchange differences (4.4) (0.2) (4.6 )
Charged/(credited) to the income statement 3.5 (2.0) 1.5
At 31 December 2017 48.1 0.9 49.0
-------------- ----- -----
Deferred tax assets offset (8.8 )
-----
Net deferred tax liability after offset 40.2
-----
Deferred tax assets
Pension
scheme
Tax losses asset Other Total
GBP'm GBP'm GBP'm GBP'm
At 1 January 2016 0.5 1.1 4.5 6.1
Exchange differences 0.1 0.1 1.3 1.5
Credited to the income statement (0.3 ) (1.3) 1.8 0.2
Credited to equity - 0.9 0.3 1.2
---------- ---------- ----- -----
At 1 January 2017 0.3 0.8 7.9 9.0
Exchange differences - (0.5) (0.4) (0.9)
Credited to the income statement 0.4 0.1 1.5 2.0
Charged to equity - (1.0) (0.1) (1.1)
Recategorisation - 3.8 (3.8) -
---------- ---------- ----- -----
At 31 December 2017 0.7 3.2 5.1 9.0
---------- ---------- ----- -----
Offset against deferred tax liabilities (8.8)
-----
Net deferred tax asset after offset 0.2
-----
Deferred tax liabilities of GBP23.8 million (2016: GBP24.3 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 GBP10.9 million (2016: GBP9.5 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. The performance of the assets is monitored on a regular basis by the trustees and their investment advisors. A full actuarial valuation was undertaken as at 1 July 2017 and updated to 31 December 2017 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 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 2017 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:
2017 2016
% 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 2.20 - 5.00 2.40 - 5.00
Discount rate applied to scheme liabilities 2.45 2.65
Inflation assumption (CPI/RPI) 2.20/3.20 2.40/3.40
Assumptions regarding future mortality experience are based on advice received from independent actuaries. The current mortality tables used are SAPS 2, males 105% and females 104%, on a year of birth basis, with CMI_2016 future improvement factors and subject to a long term annual rate of future improvement of 1.25% per annum. This results in males and females aged 65 having life expectancies of 21.7 years (2016: 22.5 years) and 23 years respectively (2016: 24.4 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 - 3.00 0.00 - 5.00 Discount rate applied to scheme liabilities 2.00 - 7.50 1.80 - 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:
2017 2016
% per annum % per annum
Rate of increase in salaries 6.00 - 10.00 6.00 - 10.00
Discount rate applied to scheme liabilities 7.00 - 13.50 6.75 - 14.50
Inflation assumptions 0.00 - 10.00 0.00 - 10.00
(iii) Leave obligations
Certain Group subsidiaries located in India have an obligation to pay leave benefit, based on years of service. These obligations are estimated annually using the projected unit method by qualified independent actuaries. These schemes are unfunded.
Sensitivity analysis
The sensitivity of the UK defined benefit obligation to changes in the weighted principal assumptions is:
Impact
on defined
Change benefit
in assumption obligation
Discount rate 0.5% higher 7.2% decrease
Discount rate 0.5% lower 8.1% increase
Rate of RPI inflation 0.25% higher 1.8% increase
Rate of RPI inflation 0.25% lower 1.7% decrease
Life expectancy +1 year 4.5% increase
Life expectancy -1 year 4.5% decrease
The above changes in assumptions may have an impact on the value of the scheme's investment holdings. For example, the scheme holds a proportion of its assets in corporate bonds. A fall in the discount rate as a result of lower UK corporate bond yields would lead to an increase in the value of these assets, thus mitigating the increase in the defined benefit obligation to some extent. The sensitivities have been calculated by changing the key assumption only and leaving all others fixed.
Duration of the scheme liabilities
The weighted average duration of the UK scheme's liabilities is 15 years.
Analysis of scheme liabilities
The liabilities of the UK scheme are split as follows:
%
Deferred pensioners 41
Current pensioners 59
---
Total membership 100
---
(iv) Actuarial valuations
2017 2016
UK Overseas Total UK Overseas Total
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
Equities and property 108.6 0.7 109.3 96.5 0.7 97.2
Bonds 48.2 19.5 67.7 62.6 17.6 80.2
Diversified growth 16.9 - 16.9 - - -
Cash 0.6 7.2 7.8 5.0 6.8 11.8
Other - 4.9 4.9 - 4.9 4.9
------ -------- ------ ------ -------- ------
Total fair value of plan assets 174.3 32.3 206.6 164.1 30.0 194.1
Present value of defined benefit obligations (188.6) (48.9) (237.5) (208.7) (52.1) (260.8)
------ -------- ------ ------ -------- ------
Total deficit in the schemes (14.3) (16.6) (30.9) (44.6) (22.1) (66.7)
------ -------- ------ ------ -------- ------
Amount recognised as asset in the balance sheet - 0.3 0.3 - 0.1 0.1
Amount recognised as current liability in the
balance sheet - (0.7) (0.7) - (0.9) (0.9)
Amount recognised as non-current liability in
the balance sheet (14.3) (16.2) (30.5) (44.6) (21.3) (65.9)
------ -------- ------ ------ -------- ------
(14.3) (16.6) (30.9) (44.6) (22.1) (66.7)
Related deferred tax asset (note 32) - 3.2 3.2 - 0.8 0.8
------ -------- ------ ------ -------- ------
Net deficit (14.3) (13.4) (27.7) (44.6) (21.3) (65.9)
------ -------- ------ ------ -------- ------
Movements in the fair value of scheme assets were as follows:
2017 2016
UK Overseas Total UK Overseas Total
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
At 1 January 164.1 30.0 194.1 149.6 22.4 172.0
Transfer from other creditors - - - - 0.6 0.6
Expected return on plan assets 4.1 1.8 5.9 5.6 1.8 7.4
Employer contributions 0.9 3.8 4.7 1.4 2.8 4.2
Benefit payments (9.6) (2.1) (11.7) (7.6) (2.1) (9.7)
Actuarial gains 14.8 0.1 14.9 15.1 0.4 15.5
Exchange differences - (1.3) (1.3) - 4.1 4.1
----- -------- ----- ----- -------- -----
At 31 December 174.3 32.3 206.6 164.1 30.0 194.1
--------
Movements in the present value of defined benefit obligations were as follows:
2017 2016
UK Overseas Total UK Overseas Total
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
At 1 January (208.7) (52.1) (260.8) (174.1) (36.5) (210.6)
Transfer from other creditors - - - - (1.1) (1.1)
Current service cost - (2.5) (2.5) (0.4) (1.8) (2.2)
Interest cost (5.3) (3.3) (8.6) (6.5) (3.1) (9.6)
Benefit payments 9.6 2.1 11.7 7.6 2.1 9.7
Actuarial gains/(losses) 15.8 3.6 19.4 (35.3) (4.5) (39.8)
Exchange differences - 3.3 3.3 - (7.2) (7.2)
------ -------- ------ ------ -------- ------
At 31 December (188.6) (48.9) (237.5) (208.7) (52.1) (260.8)
--------
In 2015, the total fair value of plan assets was GBP172.0 million, present value of defined benefit obligations was GBP210.6 million and the deficit was GBP38.6 million. In 2014, the total fair value of plan assets was GBP169.6 million, present value of defined benefit obligations was GBP211.2 million and the deficit was GBP41.6 million and 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.
Income Statement
The amounts recognised in the Income Statement are as follows:
2017 2016
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 - (2.5) (2.5) (0.4) (1.8) (2.2)
Total operating charge - (2.5) (2.5) (0.4) (1.8) (2.2)
Amounts charged to other finance costs:
Interest expense (1.2) (1.5) (2.7) (0.9) (1.3) (2.2)
----- -------- ----- ----- -------- -----
Total charged to income statement (1.2) (4.0) (5.2) (1.3) (3.1) (4.4)
--------
Employer contributions to defined contribution schemes are charged to profit when payable and the costs charged were GBP5.2 million (2016: GBP4.6 million).
Actuarial gains and losses recognised in the Statement of Comprehensive Income
The amounts included in the Statement of Comprehensive Income:
2017 2016
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 14.8 0.1 14.9 15.1 0.4 15.5
Gain from changes in demographic assumptions 14.7 - 14.7 - - -
(Loss)/gain from changes in financial assumptions (4.8) 4.8 - (37.1) (5.3) (42.4)
Experience gains/(losses) 5.9 (1.2) 4.7 1.8 0.8 2.6
----- -------- ----- ----- -------- -----
Actuarial gain/(loss) 30.6 3.7 34.3 (20.2) (4.1) (24.3)
--------
Cumulative actuarial losses recognised in the Statement of Comprehensive Income are GBP25.0 million (2016: GBP59.3 million).
As the UK defined benefit pension scheme was closed to future accrual and active members were transferred to a defined contribution scheme, no employer contributions will be paid for the year commencing 1 January 2018, however, contributions totalling GBP0.2 million will be paid in accordance with the previous schedule of contributions. No contributions will be made after 1 April 2018 as the latest actuarial valuation shows a funding surplus of GBP7.1 million.
34 Share capital
2017 2016
GBP'm GBP'm
Authorised: 2,842,000 (2016: 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 (2016:
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
2017 2016
GBP'm GBP'm
Group
Profit from continuing operations 27.3 25.6
Share of associates' results (2.0) (5.1)
Depreciation and amortisation 15.4 14.9
Impairment of assets and provisions 1.8 0.1
Profit on disposal of non-current assets (0.1) (0.2)
Profit on disposal of investments (0.7) (1.5)
Increase in working capital 1.2 3.0
Pensions and similar provisions less payments (2.2) (1.5)
Cash generated from continuing operations 40.7 35.3
36 Reconciliation of net cash flow to movement in net cash
2017 2016
GBP'm GBP'm
Group
Increase/(decrease) in cash and cash equivalents
in the year 40.2 (4.1)
Net cash outflow from decrease in debt 0.5 0.6
Increase/(decrease) in net cash resulting from
cash flows 40.7 (3.5)
Exchange rate movements (5.2) 10.3
Increase in net cash in the year 35.5 6.8
Net cash at beginning of year 66.7 59.9
Net cash at end of year 102.2 66.7
37 Commitments
Capital commitments
Capital expenditure contracted for at the balance sheet date but not yet incurred is as follows:
2017 2016
GBP'm GBP'm
Group
Property, plant and equipment 2.5 1.9
2.5 1.9
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:
2017 2016
GBP'm GBP'm
Group
Land and buildings:
Within 1 year 1.0 2.0
Between 1 - 5 years 3.0 2.8
After 5 years 17.1 18.3
21.1 23.1
Plant and machinery:
Within 1 year 0.2 0.3
Between 1 - 5 years 0.2 0.2
0.4 0.5
The Group's most significant operating lease commitments are long term property leases with renewal terms in excess of 60 years.
38 Contingencies
In India, assessments have been received for excise duties of GBP3.8 million and of GBP1.3 million for income tax matters. These are being contested on the basis that they are without technical merit.
In India, a long running dispute between our local subsidiaries and the Government of West Bengal over the payment of a land transfer tax, locally called, "Salami", remains unresolved. Lawyers acting for the Group have advised that payment of Salami does not apply. The sum in dispute, excluding fines and penalties, amounts to GBP1.4 million. Since the year end, and pending resolution of the dispute (which, if resolved in our favour, will result in the sums being returned), the Group has agreed to deposit the tax in seven equal annual instalments in order to allow the normal functioning of the estates.
The Group operates in certain countries where its operations are potentially subject to a number of legal claims. When required, appropriate provisions are made for the expected cost of such claims.
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:
2017 2016
GBP'm GBP'm
Borrowings 5.8 6.2
Tangible net assets 365.2 329.7
Ratio 1.59% 1.88%
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 2017
Loans Available
and for
receivables sale Total
GBP'm GBP'm GBP'm
Group
Assets as per Balance Sheet
Available-for-sale financial assets - 47.0 47.0
Trade and other receivables excluding
prepayments 39.7 - 39.7
Cash and cash equivalents 108.0 - 108.0
147.7 47.0 194.7
Other financial
liabilities
at
amortised
cost Total
GBP'm GBP'm
Group
Liabilities as per Balance Sheet
Borrowings 5.8 5.8
Trade and other payables 69.7 69.7
75.5 75.5
Company
Trade and other payables 0.1 0.1
At 31 December 2016
Available
Loans and for
receivables sale Total
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 (excluding
bank subsidiaries) 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
Liabilities as per Balance Sheet
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
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 2017
Level
Level 1 3 Total
GBP'm GBP'm GBP'm
Assets
Available-for sale financial assets:
- Equity securities 43.7 - 43.7
Debt investments:
- Debentures 3.3 - 3.3
47.0 - 47.0
At 31 December 2016
Level
Level 1 3 Total
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
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 discontinued banking subsidiary, did not, in accordance with Group policy, trade in financial instruments throughout the period under review.
(A) Market risk
(i) Foreign exchange risk
The Group has no material exposure to foreign currency
exchange risk on currencies other than the functional
currencies of the operating entities, with the exception
of significant Japanese 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 GBP1.0 million (2016:
GBP0.8 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 GBP2.2 million (2016: GBP1.8 million).
The Group's exposure to commodity price risk is not significant.
(iii) Cash flow and interest rate risk
The Group's interest rate risk arises from interest-bearing
assets and short and long-term borrowings. Borrowings
issued at variable rates expose the Group to cash flow
interest rate risk. The Group's UK borrowings of GBP4.6
million are at fixed rates.
At 31 December 2017, 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 (2016: 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
2017 2016 2017 2016
GBP'm GBP'm GBP'm GBP'm
Sterling 40.9 7.5 4.6 5.1
US Dollar 13.1 17.3 - -
Euro 0.9 0.9 0.1 -
Swiss Franc 0.6 0.8 - -
Kenyan Shilling 26.8 19.2 - -
Indian Rupee 9.4 12.5 0.6 0.1
Malawian Kwacha 0.1 0.1 0.3 0.9
Bangladesh Taka 10.9 9.7 0.1 0.1
South African Rand 0.6 1.5 0.1 -
Brazilian Real 2.7 2.7 - -
Bermudian Dollar 2.0 0.7 - -
108.0 72.9 5.8 6.2
(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. (2016: 27 per cent.) of total trade receivables.
(C) Liquidity risk
Ultimate responsibility for liquidity risk management rests with the board of Directors. The Group manages liquidity risk by maintaining adequate reserves and banking facilities by continuously monitoring forecast and actual cash flows and managing the maturity profiles of financial assets and liabilities.
At 31 December 2017, the Group had undrawn committed facilities of GBP25.8 million (2016: GBP28.5 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 Between Between Over
1 1 2 5
and 2 and 5
year years years years Undated Total
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
At 31 December
2017
Assets
Available-for-sale
financial assets 0.1 0.2 1.5 1.5 43.7 47.0
Trade and other
receivables 37.8 1.9 - - - 39.7
Cash and cash
equivalents 108.0 - - - - 108.0
145.9 2.1 1.5 1.5 43.7 194.7
Liabilities
Borrowings 1.8 0.6 3.4 - - 5.8
Trade and other
payables 54.9 - - - - 54.9
56.7 0.6 3.4 - - 60.7
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 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 56.1 - - - - 56.1
57.8 0.6 3.9 - - 62.3
Included in borrowings due in less than 1 year is GBP1.2 million (2016: GBP1.1 million) repayable on demand.
40 Subsidiary and associated undertakings
Subsidiary undertakings
The subsidiary undertakings of the Group at 31 December 2017, which are wholly owned and incorporated in Great Britain unless otherwise stated, were:
Principal
country of Registered
operation Office
Agriculture
Amgoorie India Limited (Incorporated in India - 99.8 per cent. holding) India (ii)
Amo Tea Company Limited Bangladesh (i)
C.C. Lawrie Comércio e Participacões Ltda. (Incorporated in Brazil) Brazil (vi)
Chittagong Warehouse Limited (Incorporated in Bangladesh - 93.3% holding) Bangladesh (vii)
Duncan Brothers Limited (Incorporated in Bangladesh) Bangladesh (vii)
Eastern Produce Cape (Pty) Limited (Incorporated in South Africa) South Africa (viii)
Eastern Produce Estates South Africa (Pty) Limited (Incorporated in
South Africa - held by Eastern Produce South Africa (Pty) Limited) South Africa (ix)
Eastern Produce Kenya Limited (Incorporated in Kenya - 70.0 per cent.
holding) Kenya (x)
Eastern Produce Malawi Limited (Incorporated in Malawi- 73.2 per cent.
holding) Malawi (xii)
Eastern Produce South Africa (Pty) Limited (Incorporated in South Africa -
73.2 per cent. holding) South Africa (ix)
Eastland Camellia Limited (Incorporated in Bangladesh - 93.8% holding) Bangladesh (vii)
Goodricke Group Limited (Incorporated in India - 76.5 per cent. holding) India (iii)
Goodricke Tech Limited (Incorporated in India - 99.8 per cent. holding) India (iii)
Horizon Farms (An United States of America general partnership - 80 per
cent. holding) USA (xiii)
Kakuzi Limited (Incorporated in Kenya - 50.7 per cent. holding) Kenya (xi)
Koomber Tea Company Limited (Incorporated in India) India (iv)
Octavius Steel & Company of Bangladesh Limited (Incorporated in
Bangladesh) Bangladesh (vii)
Robertson Bois Dickson Anderson Limited UK (i)
Stewart Holl (India) Limited (Incorporated in India - 92.0 per cent. holding) India (v)
Surmah Valley Tea Company Limited Bangladesh (i)
The Allynugger Tea Company Limited Bangladesh (i)
The Chandpore Tea Company Limited Bangladesh (i)
The Lungla (Sylhet) Tea Company Limited Bangladesh (i)
The Mazdehee Tea Company Limited Bangladesh (i)
Victoria Investments Limited (Incorporated in Malawi - 73.2 per cent. holding) Malawi (xii)
Zetmac (Pty) Limited (Incorporated in South Africa - 55.8 per cent. held by
Eastern Produce Estates South Africa (Pty) Limited) South Africa (ix)
Engineering
Abbey Metal Finishing Company Limited UK (i)
AJT Engineering Limited UK (xiv)
AKD Engineering Limited UK (xv)
Atfin GmbH (Incorporated in Germany - 51.0 per cent. 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 per cent. 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
Duncan Lawrie Limited UK (i)
Duncan Lawrie Holdings Limited UK (i)
Duncan Lawrie International Holdings Limited (Incorporated in Isle of Man) Isle of Man (xix)
Duncan Lawrie (IOM) Limited (Incorporated in Isle of Man) Isle of Man (xix) Duncan Lawrie Offshore Services Limited (Incorporated in Isle of Man) Isle of Man (xix) Dunman Nominees Limited (Incorporated in Isle of Man) Isle of Man (xix) Havelock Nominees Limited (Incorporated in Isle of Man) Isle of Man (xix) Hobart Place Nominees Limited UK (i) Mount Havelock Directors Limited (Incorporated in Isle of Man) Isle of Man (xix) Mount Havelock Investments Limited (Incorporated in Isle of Man) Isle of Man (xix) Mount Havelock Secretaries Limited (Incorporated in Isle of Man) Isle of Man (xix) Investment Holding Affish Limited UK (i) Assam Dooars Investments Limited UK (i) Associated Fisheries Limited UK (i) Borbam Limited (Incorporated in India - 99.8 per cent. holding) India (iii) Bordure Limited UK (i) Duncan Properties Limited (Incorporated in Bangladesh) Bangladesh (vii) Eastern Produce Investments Limited UK (i) Elgin Investments Limited (Incorporated in India - 99.8 per cent. holding) India (iii) Endogram Limited India (iii) EP USA Inc. (Incorporated in the United States of America) USA (xiii) EP California Inc. (Incorporated in the United States of America) USA (xiii) John Ingham & Sons Limited UK (i) Koomber Properties Limited (Incorporated in India - 94.0 per cent. holding) India (iii) Lawrie (Bermuda) Limited (Incorporated in Bermuda) Bermuda (xx) Lawrie Group Plc (Owned directly by the company) UK (i) Lawrie International Limited (Incorporated in Bermuda) Bermuda (xx) Lebong Investments Limited (Incorporated in India - 94.0 per cent. holding) India (iii) Linton Park Plc (Owned directly by the company) UK (i) Lintak Investments Limited (Incorporated in Kenya) Kenya (x) Longbourne Holdings Limited Bangladesh (i) Plantation House Investments Limited Malawi (xii) (Incorporated in Malawi - 50.2 per cent. held by subsidiaries) Shula Limited (Incorporated in Isle of Man) Isle of Man (xix) Unochrome Industries Limited UK (i) Western Dooars Investments Limited UK (i) Other Linton Park Services Limited UK (i) Dormant companies ACS&T Gloucester Limited UK (i) ACS&T Grimsby Limited UK (i) ACS&T Humberside Limited UK (i) ACS&T Seamer Limited UK (i) ACS&T Tewkesbury Limited UK (i) ACS&T Wolverhampton Limited UK (i) Alex Lawrie & Company Limited UK (i) Amgoorie Investments Limited UK (i) Assam-Dooars Holdings Limited UK (i) Associated Fisheries (Scotland) Limited UK (xiv) Banbury Tea Warehouses Limited UK (i) Blantyre & East Africa Limited UK (xiv) Blantyre Insurance & General Agencies Limited (Incorporated in Malawi - Eastern Produce Malawi Limited) Malawi (xii) Bonathaba Farms (Pty) Limited (Incorporated in South Africa) South Africa (viii) British African Tea Estates (Holdings) Limited UK (i) British African Tea Estates Limited UK (i) British Heat Treatments Limited UK (i) British Indian Tea Company Limited UK (i) British United Trawlers Limited UK (i) BTS Chemicals Limited UK (i) BUT Engineers (Fleetwood) Limited UK (i) BUT Engineers (Grimsby) Limited UK (i) Camellia Investments Limited UK (i) Chisambo Holdings Limited UK (i) Chisambo Tea Estate Limited UK (i) Cholo Holdings Limited UK (i) Craighead Investments Limited UK (i) David Field Limited UK (i) East African Tea Plantations Limited (Incorporated in Kenya - held by Eastern Produce Kenya Limited) Kenya (x) Eastern Produce Africa Limited UK (i) Eastern Produce Kakuzi Services Limited (Incorporated in Kenya - held by Kakuzi Limited) Kenya (x) EP (RBDA) Limited (Incorporated in Malawi - Eastern Produce Malawi Limited) Malawi (xii) Estate Services Limited (Incorporated in Kenya - held by Kakuzi Limited) Kenya (xi) Feltham 1 Limited UK (i) Feltham 2 Limited UK (i) Fescol Limited UK (i) G. F. Sleight & Sons Limited UK (i) Goodricke Lawrie Consultants Limited UK (i) Gotha Tea Estates Limited UK (i) Granton Transport Limited UK (xiv) Hamstead Village Investments Limited UK (i) Hellyer Brothers Limited UK (i) Horace Hickling & Company Limited UK (i) Hudson Brothers Trawlers Limited UK (i) Humber Commercials Limited UK (i) Humber St. Andrew's Engineering Company Limited UK (i) Isa Bheel Tea Company Limited UK (i) Jatel Plc UK (i) Jetinga Holdings Limited UK (i) Jetinga Valley Tea Company Limited UK (i) Kaguru EPZ Limited (Incorporated in Kenya - held by Kakuzi Limited) Kenya (xi) Kapsumbeiwa Factory Company Limited UK (i) Kip Koimet Limited (Incorporated in Kenya - held by Eastern Produce Kenya Limited) Kenya (x) Kumadzi Tea Estates Limited UK (i)
Lankapara Tea Company Limited UK (i) Lawrie Bhutan Limited UK (i) Lawrie Plantation Services Limited UK (i) Leasing Investments Limited UK (i) Nasonia Tea Company Limited (Incorporated in Malawi) Malawi (xii) North West Profiles Limited UK (i) Octavius Steel & Company (London) Limited UK (i) Robert Hudson Holdings Limited UK (i) Rosehaugh (Africa) Limited UK (i) Ruo Estates Limited UK (i) Ruo Estates Holdings Limited UK (i) Sandbach Export Limited UK (i) Sapekoe Pusela (Pty) Limited (Incorporated in South Africa - held by Eastern Produce South Africa (Pty) Limited) South Africa (ix) Silverthorne-Gillott Limited UK (i) SIS Securities Limited UK (i) Sterling Industrial Securities Limited UK (i) Stewart Holl Investments Limited UK (i) The Amgoorie Tea Estates Limited UK (i) The Bagracote Tea Company, Limited UK (i) The Ceylon Upcountry Tea Estates Limited UK (i) The Dejoo Tea Company Limited UK (i) The Dhoolie Tea Company Limited UK (i) The Doolahat Tea Company Limited UK (i) The Eastern Produce & Estates Company Limited UK (i) The Endogram Tea Company Limited UK (i) The Jhanzie Tea Association Ltd UK (i) The Harmutty Tea Company Limited UK (i) The Kapsumbeiwa Tea Company Limited UK (i) The Longai Valley Tea Company Limited UK (i) The Tyspane Tea Company Limited UK (i) Thyolo Highlands Tea Estates Limited UK (i) Vaghamon (Travancore) Tea Company Limited UK (i) Walter Duncan & Goodricke Limited UK (i) WDG Properties Limited UK (i) Western Dooars Tea Holdings Limited UK (i)
Summarised financial information on subsidiaries with material non-controlling interests
Summarised balance sheet
Eastern Produce Eastern Produce
Kenya Limited Malawi Limited
as at 31 December as at 31 December
2017 2016 2017 2016
GBP'm GBP'm GBP'm GBP'm
Current
Assets 29.0 23.6 11.9 11.8
Liabilities (25.1) (20.0) (9.5) (11.4)
----------- ---------- ----------- ----------
Total current net assets/(liabilities) 3.9 3.6 2.4 0.4
----------- ---------- ----------- ----------
Non-current
Assets 26.5 27.5 39.3 42.4
Liabilities (4.1) (5.7) (12.0) (12.4)
----------- ---------- ----------- ----------
Total non-current net assets 22.4 21.8 27.3 30.0
----------- ---------- ----------- ----------
Net assets 26.3 25.4 29.7 30.4
Eastern Produce Goodricke Group
South Africa Limited Limited
as at 31 December as at 31 December
2017 2016 2017 2016
GBP'm GBP'm GBP'm GBP'm
Current
Assets 3.9 5.8 36.9 37.9
Liabilities (1.2) (1.1) (22.0) (19.8)
------------ ----------- ----------- ----------
Total current net assets 2.7 4.7 14.9 18.1
------------ ----------- ----------- ----------
Non-current
Assets 6.2 5.3 34.8 30.5
Liabilities (1.1) (1.5) (10.3) (10.5)
------------ ----------- ----------- ----------
Total non-current net assets 5.1 3.8 24.5 20.0
------------ ----------- ----------- ----------
Net assets 7.8 8.5 39.4 38.1
Horizon Farms Kakuzi Limited
as at 31 December as at 31 December
2017 2016 2017 2016
GBP'm GBP'm GBP'm GBP'm
Current
Assets 4.3 3.6 17.1 16.0
Liabilities (0.5) (0.2) (4.4) (3.4)
--------- -------- ----------- ----------
Total current net assets 3.8 3.4 12.7 12.6
--------- -------- ----------- ----------
Non-current
Assets 7.9 8.9 24.0 24.0
Liabilities (0.7) (0.8) (5.8) (6.3)
--------- -------- ----------- ----------
Total non-current net assets 7.2 8.1 18.2 17.7
--------- -------- ----------- ----------
Net assets 11.0 11.5 30.9 30.3
Summarised income statement
Eastern Produce Eastern Produce
Kenya Limited for year Malawi Limited for year
ended 31 December ended 31 December
2017 2016 2017 2016
GBP'm GBP'm GBP'm GBP'm
Revenue 44.0 38.9 26.0 21.1
--------------- -------------- -------------- -------------
Profit before tax 9.0 4.7 5.2 3.9
Taxation (3.0) (1.2) (1.8) (1.2)
Other comprehensive income (2.1) 0.2 (2.7) -
--------------- -------------- -------------- -------------
Total comprehensive income 3.9 3.7 0.7 2.7
--------------- -------------- -------------- -------------
Total comprehensive income allocated to
non-controlling interests 1.2 1.1 0.2 0.7
Dividends paid to non-controlling
interests 0.8 1.9 0.5 0.5
Eastern Produce Goodricke Group
South Africa Limited for Limited for year
year ended 31 December ended 31 December
2017 2016 2017 2016
GBP'm GBP'm GBP'm GBP'm
Revenue 3.7 4.5 84.0 72.7
-------------- ------------- ----------- ----------
(Loss)/profit before tax (1.3) (0.6) 5.4 6.6
Taxation 0.4 0.2 (2.1) (3.0)
Other comprehensive expense - - (0.7) (1.0)
-------------- ------------- ----------- ----------
Total comprehensive (expense)/income (0.9) (0.4) 2.6 2.6
-------------- ------------- ----------- ----------
Total comprehensive (expense)/income allocated
to non-controlling interests (0.2) (0.1) 0.8 0.5
Dividends paid to non-controlling interests - - 0.3 0.2
Kakuzi Limited for
Horizon Farms for year year ended
ended 31 December 31 December
2017 2016 2017 2016
GBP'm GBP'm GBP'm GBP'm
Revenue 6.6 4.4 19.2 17.2
------------ ----------- ---------- ---------
Profit before tax 3.8 0.8 6.3 5.5
Taxation (1.4) (0.3) (1.9) (1.4)
Other comprehensive income (0.8) - (2.9) 0.1
------------ ----------- ---------- ---------
Total comprehensive income 1.6 0.5 1.5 4.2
------------ ----------- ---------- ---------
Total comprehensive income allocated to
non-controlling interests 0.3 0.1 0.7 2.1
Dividends paid to non-controlling interests 0.4 0.3 0.4 0.4
Summarised cash flows
Eastern Produce
Eastern Produce Malawi Limited for
Kenya Limited for year year ended
ended 31 December 31 December
2017 2016 2017 2016
GBP'm GBP'm GBP'm GBP'm
Cash flows from operating activities
Cash generated from operations 17.3 7.8 6.0 5.6
Net interest received/(paid) 1.1 0.9 0.1 (0.1)
Income tax paid (3.4) (5.9) (1.0) (1.4)
Net cash generated from operating activities 15.0 2.8 5.1 4.1
Net cash used in investing activities (3.4) (0.9) (2.9) (1.9)
Net cash used in financing activities (2.8) (6.2) (1.2) (1.7)
Net increase/(decrease) in cash and cash
equivalents and bank overdrafts 8.8 (4.3) 1.0 0.5
Cash, cash equivalents and bank overdrafts
at beginning of year 13.0 14.9 (0.4) (0.9)
Exchange (losses)/gains on cash and cash
equivalents (1.4) 2.4 (0.1) -
Cash, cash equivalents and bank overdrafts
at end of year 20.4 13.0 0.5 (0.4)
Eastern Produce Goodricke Group
South Africa Limited for year Limited for year
ended 31 December ended 31 December
2017 2016 2017 2016
GBP'm GBP'm GBP'm GBP'm
Cash flows from operating activities
Cash generated from operations 0.1 2.0 8.2 6.7
Net interest received 0.1 0.1 - -
Income tax paid - - (1.6) (0.8)
Net cash generated from operating
activities 0.2 2.1 6.6 5.9
Net cash used in investing activities (1.5) (0.5) (6.3) (3.0)
Net cash generated from/(used in)
financing
activities 0.1 - (1.4) (1.1)
Net (decrease)/increase in cash and cash
equivalents and bank overdrafts (1.2) 1.6 (1.1) 1.8
Cash, cash equivalents and bank overdrafts
at beginning of year 3.9 1.7 2.5 0.6
Exchange (losses)/gains on cash and cash
equivalents (0.2) 0.6 0.2 0.1
Cash, cash equivalents and bank overdrafts
at end of year 2.5 3.9 1.6 2.5
Kakuzi Limited for
Horizon Farms for year year ended
ended 31 December 31 December
2017 2016 2017 2016
GBP'm GBP'm GBP'm GBP'm
Cash flows from operating activities
Cash generated from operations 5.0 0.7 9.8 8.5
Net interest received - - 0.7 0.6
Income tax paid (1.0) (1.1) (0.9) (1.7)
Net cash generated from/(used in) operating
activities 4.0 (0.4) 9.6 7.4
Net cash used in investing activities (0.2) - (6.2) (4.8)
Net cash used in financing activities (1.9) (1.5) (0.9) (0.7)
Net increase/(decrease) in cash and cash
equivalents and bank overdrafts 1.9 (1.9) 2.5 1.9
Cash, cash equivalents and bank overdrafts
at beginning of year 0.7 2.3 11.3 7.8
Exchange (losses)/gains on cash and cash
equivalents (0.1) 0.3 (1.2) 1.6
Cash, cash equivalents and bank overdrafts
at end of year 2.5 0.7 12.6 11.3
Associated undertakings
The principal associated undertakings of the Group at 31 December 2017 were:
Group
interest
Principal Accounting in equity
country Registered
of date capital
operation Office 2017 (%)
Insurance and banking
BF&M Limited (Incorporated
in Bermuda - common stock) Bermuda (xx) 31 December 36.3
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
Linton Tzaneen 3
Maidstone 850 CH-6048 Horw
Kent Limpopo Province Luzern
ME17 4AB South Africa Switzerland
England
(ii) Amgoorie Tea Garden (x) New Rehema House (xviii) Burg. van der
PO: Amguri Rhapta Road Lelystraat 2
Haloating - 785 Westlands 4285 BL
681 P O Box 45560 Woudrichem
Dist: Sibsagar GPO 00100 Netherlands
Assam Nairobi
India Kenya
(iii) Camellia House (xi) Main Office (xix) First Names House
14 Gurusaday Road Punda Milia Victoria Road
Kolkata - 700019 Road Douglas
West Bengal Makuyu Isle of Man
India P O Box 24 IM2 4DF
01000 Thika
Kenya
(iv) Koomber Tea Garden (xii) PO Box 53 (xx) 112 Pitts Bay
PO: Kumbhir Mulanje Road
Cachar - 788 108 Malawi Pembroke
Assam Bermuda
India HM08
(v) Sessa Tea Garden (xiii) 2520 West Shaw
PO: Dibrugarh - Lane
786001 Suite 101
Dist: Dibrugarh Fresno
Assam California
India USA
(vi) Fazenda Maruque (xiv) Craigshaw Crescent
s/n sala 03 West Tullos
Bairro Maruque Aberdeen
Itaberá AB12 3TB
São Paulo Scotland
Brazil
(vii) Camellia House (xv) Tower Bridge
22 Kazi Nazrul House
Islam Avenue St Katharine's
Dhaka 1000 Way
Bangladesh London
E1W 1DD
England
(viii) Slangrivier Road (xvi) Robert-Drosten-Platz
Slangrivier Plaas 1
Wellington D-82380
7655 Peissenberg
South Africa Germany
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.
Gordon Fox is listed as a person of significant influence on the Company's register, a copy of which has been filed at the UK Registrar of Companies.
Report of the independent auditors
INDEPENT AUDITOR'S REPORT TO THE MEMBERS OF CAMELLIA PLC
Report on the audit of the financial statements
Opinion
In our opinion:
-- The financial statements give a true and fair view of the
state of the Group's and of the parent company's affairs
as at 31 December 2017 and of the Group's profit for the
year then ended;
-- The Group financial statements have been properly prepared
in accordance with International Financial Reporting Standards
(IFRSs) as adopted by the European Union;
-- The parent company financial statements have been properly
prepared in accordance with IFRSs as adopted by the European
Union and as applied in accordance with the provisions of
the Companies Act 2006; and
-- The financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
We have audited the financial statements of Camellia Plc (the 'parent company') and its subsidiaries (the 'Group') which comprise:
-- The consolidated income statement;
-- The consolidated statement of comprehensive income;
-- The consolidated and parent company balance sheets;
-- The consolidated and parent company statements of changes
in equity;
-- The consolidated and parent company cash flow statements;
and
-- The related notes 1 to 41.
The financial reporting framework that has been applied in their preparation is applicable law and IFRSs as adopted by the European Union and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the auditor's responsibilities for the audit of the financial statements section of our report.
We are independent of the Group and the parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Summary of our audit approach
Key audit The key audit matters that we identified in the
matters current year were:
* Revenue recognition
* Fair value of biological assets under IAS 41
'Agriculture'
* Impairment of factories and bearer plants
* Profit on disposal of Duncan Lawrie businesses
Materiality The materiality that we used for the Group financial
statements was GBP1.4m which was determined on
the basis of 5% of profit before tax from continuing
operations.
Scoping Our scoping provides full scope audit coverage
of 98% of the Group's revenue, 91% of the Group's
profit before tax and 78% of the Group's net assets.
Conclusions relating to going concern
We are required by ISAs (UK) to report in respect of the following
matters where:
We have nothing to report in
* The directors' use of the going concern basis of respect of these matters.
accounting in preparation of the financial statements
is not appropriate; or
* The directors have not disclosed in the financial
statements any identified material uncertainties that
may cast significant doubt about the Group's or the
parent company's ability to continue to adopt the
going concern basis of accounting for a period of at
least twelve months from the date when the financial
statements are authorised for issue.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Revenue recognition
Key audit matter The Group's agricultural operations involve
description a wide range of customer delivery models,
including auction and retail sales. Per IAS
18, revenue is recognised when the significant
risks and rewards of ownership have been
transferred to the buyer. Given the complexity
of the Group's operations and the terms of
business with buyers, there is a risk of
inappropriate cut-off of revenue recognition
around the balance sheet date.
The Group's agricultural revenue is included
within Sale of Goods of GBP238.8m, disclosed
in note 2 to the financial statements. Further
information regarding the agricultural revenue
recognition policy is in the principal accounting
policies disclosed in the financial statements.
How our scope of We have performed the following procedures
work responded to in order to address the risk:
the key audit matter * We gained an understanding of the key processes used
to record revenue transactions and assessed the
design and implementation of controls.
* We performed detailed cut-off testing of revenue
transactions during the period either side of the
balance sheet date with reference to the relevant
terms of business, dispatch or delivery documentation
as appropriate.
* We examined material journal entries that were posted
to revenue accounts and obtained supporting evidence
to test the appropriateness of revenue recognition.
Key observations We have concluded that revenue is appropriately
recognised in the correct accounting period
in accordance with IAS 18 Revenue.
Fair value of biological assets under IAS 41 'Agriculture'
Key audit matter The Group holds GBP6.6 million (2016: GBP7.2
description million) of biological assets as current
assets. As required by IAS 41 'Agriculture',
management estimates the fair value of these
assets through the use of valuation models
and recent transaction prices. Significant
judgement is required for key assumptions
for each model, including the life-span of
the plantings, yields, selling prices, costs
and discount rates. The valuation is sensitive
to some of the underlying assumptions.
Biological assets are disclosed in note 19
to the financial statements, the valuation
is discussed as a key source of estimation
uncertainty and the valuation policy is disclosed
in the principal accounting policies.
How our scope of We have performed the following procedures
work responded to in order to address the risk:
the key audit matter * We gained an understanding of key controls around the
valuation of biological assets and assessed the
design and implementation of controls.
* For a sample of fair value models,
* We assessed the inputs by assessing the historical
accuracy of management's forecasts and utilising
third-party and market data;
* We tested the mechanical integrity of the model.
Key observations From the work performed, we are satisfied
that the key assumptions applied in respect
of the valuation of biological assets are
appropriate.
Impairment of factories and bearer plants
Key audit matter The Group holds GBP216.3 million (2016: GBP232.2
description million) of property, plant and equipment
(PP&E), which includes factories and bearer
plants. Management identified gardens as
cash generating units (CGUs) and performed
an annual review for indicators of impairment.
This considered indicators such as underutilisation,
adverse weather conditions and land use rights.
There is, therefore, a risk that an impairment
is required but not recognised.
PP&E is disclosed in note 17 to the financial
statements, the valuation is discussed as
source of estimation uncertainty, and the
valuation policy is disclosed in the principal
accounting policies.
How our scope of We gained an understanding of key controls
work responded to around the valuation of biological assets
the key audit matter and assessed the design and implementation
of controls.
We challenged management's assessment as
to whether indicators of impairment exist
for factories and bearer plants with reference
to disease or crop damage, sustained generation
of operating losses, long term commodity
price reductions, underutilised plant or
warehousing, loss of key customers, long
term failure of water or power supply, variation
in rights to land use, significant changes
in tax or foreign exchange rates.
We also challenged management's allocation
of assets to individual cash generating units.
Key observations We concur with management that no impairment
of factories and bearer plants is required.
Profit on disposal of Duncan Lawrie businesses
Key audit matter On 19 December 2016 the Group announced that,
description due to lower interest rates and other factors
changing the outlook for private banking,
it would sell most of the Duncan Lawrie business
and wind down the remainder. This process
began in December 2016 and each company in
the Duncan Lawrie Group prepared their accounts
on a basis other than going concern.
The Group completed the disposals during
the year and recognised a profit on disposal
of GBP20.3 million, as disclosed in note
10 of the financial statements. Due to its
materiality to the Group and the complexity
of accounting and taxation arrangements,
we have identified the calculation of the
gain on the disposal of Duncan Lawrie Asset
Management of GBP19.2 million as representing
a key audit matter.
How our scope of We have performed the following procedures
work responded to in order to address the risk
the key audit matter * We gained an understanding of key controls around the
accounting for the gain on disposal and assessed the
design and implementation of the controls;
* We agreed transactions and amounts to appropriate
evidences including legal agreements, cash received,
board minutes and ledger entries;
* We recalculated the gain on disposal and checked the
accounting for each aspect of the transaction;
* We involved taxation specialists to assist us in
auditing the taxation position resulting from the
disposal of the Duncan Lawrie Asset Management
business. In particular we assessed the
reasonableness of management's assumption that the
intangible assets sold can be treated under the
capital gains regime and the resultant conclusion
that there is no de-grouping charge or required
additional disclosure.
Key observations From our work performed, we are satisfied
that the asset disposals for the Duncan Lawrie
Group have been accounted for and disclosed
appropriately in the financial statements.
Our application of materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work and in evaluating the results of our work.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Group financial statements Parent company financial
statements
Materiality GBP1.4 million GBP0.6 million
Basis for determining 5% of profit before tax 2% of net assets, capped
materiality from at 50% of Group materiality
continuing operations.
Rationale for We have used a profit based We have used net assets
the benchmark measure given the Group measure given that entity
applied is listed and therefore is a holding company,
shareholders focus on profitability. generating no revenue.
The profit is adjusted
for the discontinued operations
to avoid distortion that
could otherwise arise due
to non-recurring items.
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of GBP0.07 million for the Group and GBP0.03 million for the parent company, as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements.
An overview of the scope of our audit
The Group holds agricultural operations in countries across Africa, North and South America, and Asia, with its principal crops grown in Bangladesh, India, Kenya and Malawi. The Group's engineering, food service and discontinued banking operations are located in Europe, principally in the UK. Our Group audit was scoped by obtaining an understanding of the Group and its environment, including Group-wide controls, and assessing the risks of material misstatement at the Group level. Of the group's 80 principal components, 35 were subject to a full audit and 3 were subject to specified audit procedures where the extent of our testing was based on our assessment of the risks of material misstatement and of the materiality of the Group's operations at those locations.
These 38 components represent the principal business units and account for 98% of the Group's revenue and 91% of the Group's profit before tax and 78% of the Group's net assets.
The group engagement team worked from the group's London office, directing and supervising the work of component auditors. Senior members of the group audit team visited the Bangladesh, India, Kenya and Malawi components during the current year to discuss the component auditors' risk assessment, and review documentation of the findings from their work.
Scope Revenue % Profit before Net assets
tax % %
Full scope 88 87 68
Specified audit procedures 10 4 10
Review at group level 2 9 22
Other information
The directors are responsible for the We have nothing to report other information. The other information in respect of these matters. comprises the information included in the annual report, other than the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
Responsibilities of directors
As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group's and the parent company's ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Use of our report
This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.
Report on other legal and regulatory requirements
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
-- The information given in the strategic report and the directors'
report for the financial year for which the financial statements
are prepared is consistent with the financial statements;
and
-- The strategic report and the directors' report have been
prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Group and or the parent company and their environment obtained in the course of the audit, we have not identified any material misstatements in the strategic report or the directors' report.
Matters on which we are required to report by exception
Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are We have nothing to report
required to report to you if, in in respect of these matters.
our opinion:
-- We have not received all the information
and explanations we require for
our audit; or
-- Adequate accounting records have
not been kept by the parent company,
or returns adequate for our audit
have not been received from branches
not visited by us; or
-- The parent company financial statements
are not in agreement with the
accounting records and returns.
Directors' remuneration
Under the Companies Act 2006 we are We have nothing to report also required to report if in our opinion in respect of this matter. certain disclosures of directors' remuneration have not been made.
Michael Williams, FCA (Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
London, United Kingdom
18 April 2018
Five year record
2017 2016 2015 2014 2013
GBP'm GBP'm GBP'm GBP'm GBP'm
Restated
Revenue - continuing operations 298.3 257.9 244.7 238.9 251.3
Profit before tax 27.6 26.5 24.0 22.0 59.6
Taxation (13.8) (12.4) (13.2) (13.7) (22.1)
Profit from continuing operations 13.8 14.1 10.8 8.3 37.5
Profit/(loss) attributable to owners of the parent 22.2 (10.7) 1.4 2.8 28.3
Equity dividends paid 3.6 3.6 3.5 3.5 3.4
Equity
Called up share capital 0.3 0.3 0.3 0.3 0.3
Reserves 368.1 330.5 320.6 321.4 332.2
Total shareholders' funds 368.4 330.8 320.9 321.7 332.5
Earnings/(loss) per share 803.8p (387.4)p 50.7p 102.7p 1020.2p
Dividend paid per share 132p 130p 126p 125p 122p
This information is provided by RNS
The company news service from the London Stock Exchange
END
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April 19, 2018 02:00 ET (06:00 GMT)
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