Camellia : Interim Report 2020

CAMELLIA PLC

INTERIM2017REPORT 2020

CAMELLIA PLC

INTERIM REPORT 2020

Registered office

Linton Park

Linton

Maidstone

Kent ME17 4AB

Registered number 00029559

www.camellia.plc.uk

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CAMELLIA PLC

CHAIRMAN'S STATEMENT

It is disappointing to report a first half loss before tax of £12.9 million (2019 H1: £3.9 million profit). The weakness in global tea prices, the impact of extreme weather on our agricultural production and costs related to legal claims have taken their toll, whilst the impact of the Covid-19 pandemic has also had a significant effect. Lockdowns in our production areas and the decimation of the aerospace, travel and hospitality industries have both conspired to influence our half year figures detrimentally and have required us to recognise an impairment on some of our operations in those sectors.

The underlying loss before tax for the first half was £6.0 million (2019 H1: £4.1 million loss).

Dividend

At the time of the final results for 2019, we stated that we would defer paying a final dividend given the need to preserve cash in a fast changing situation, particularly in some of the emerging markets in which we operate. Whilst the path of the virus continues to evolve, we now have better visibility on the impact and the Board is pleased to reinstate the final dividend in respect of 2019 by way of a special dividend of 102p per share payable on 7 November 2020 to shareholders registered at the close of business on

9 October 2020 (2018: 102p). Given the continuing uncertainty, the Board has decided to defer paying an interim dividend and will consider the overall dividend in respect of 2020 when the year is complete.

Strategic objectives

The Group takes a long-term view as to the strategic development of its businesses. The effects of Covid-19, along with the continuing impact of climate change has increased our scrutiny of our portfolio of operations to ensure that they fit these long-term goals.

As recently announced, we are in the process of selling our California joint venture, Horizon Farms. We believe that the long-term climate projections and the limited availability of water to Horizon are of critical concern. Other strategic developments are included in the Operating Review.

Outlook

We have previously stated that our full year results for 2020 would be substantially below those of 2019. This remains the case due to the weakness of the tea price, particularly in Bangladesh, Kenya and Malawi; the direct impact of Covid-19 on our engineering and food service operations; the reduction in the macadamia crop and prices; and legal costs. However, excluding legal costs, impairments and before any profit on disposal of the Horizon Farm property we expect to record an underlying profit before tax. Camellia is financially strong and the demand for our agricultural produce is enduring. Looking to the longer term, we remain optimistic about the future for the Group.

People

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

Malcolm Perkins

Chairman

24 September 2020

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CAMELLIA PLC

OPERATING REVIEW

COVID-19 AND TRADING UPDATE

People

First, I would like to reiterate our gratitude to all of our staff around the world for their continuing support both within the business but also for their help within the communities in which they operate in what have been uniquely challenging times.

Trading

All our agricultural businesses continue to operate, albeit in modified ways to take account of social distancing. The reach of the virus continues to expand in certain of our operating countries, including India and Bangladesh and so we continue to monitor the situation very carefully and our operations provide such support as they can to their staff and the local communities. The impact of the virus on our markets and hence our businesses is variable. As regards tea, the Indian market which is largely driven by packet tea, has held up very well during lockdown but the Bangladesh market, which relies heavily on hot tea stalls, has seen a significant reduction in demand.

The macadamia market has suffered from reduced demand and therefore lower prices, as orders from the food service and hospitality industries have dried up, but the avocado market has been largely unaffected. In the UK all the businesses have seen a significant impact on trading.

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

Financial Position

The Group has a strong balance sheet with substantial liquidity which amounted to £72.8 million in cash and cash equivalents net of borrowings as at 30 June 2020 and we continue to conserve cash wherever possible. In addition, our investment portfolio had a market value of £45.8 million at 30 June 2020. Further detail on going concern matters is set out in note 3 of the accounts.

FIRST HALF OPERATING RESULTS

Agriculture

Tea

Overall tea production in the first half was 42.0m Kg (H1 2019: 43.2m Kg) and prices continued to weaken, but different regions have experienced markedly different conditions.

India: Our own crop production was down by 36% but Bought Leaf production was down by 62%, meaning that total production was down 43%. This was due to the closure of gardens imposed at the start of the pandemic, the impact of cyclone Amphan and an unusually heavy monsoon. In Darjeeling, most of the first flush teas were lost as a result of lockdown.

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