Final Results

Camellia PLC 24 April 2003 Preliminary Announcement - Year Ended 31st December 2002 Consolidated Profit and Loss Account for the year ended 31st December 2002 2002 2001 £'000 £'000 £'000 £'000 Restated Turnover - continuing operations 169,511 170,996 - discontinued operations 7,012 32,351 ------- ------- 176,523 203,347 Cost of sales 134,997 156,851 ------- ------- Gross profit 41,526 46,496 Net operating expenses 35,537 34,592 ------ ------ Operating profit - continuing operations 5,853 11,201 - discontinued operations 136 703 ----- ------ 5,989 11,904 Share of results of associates 11,670 5,349 ------ ------ 17,659 17,253 Investment income 1,431 1,453 Profit on disposal of fixed assets 195 24 Profit on disposal of fixed asset investments 170 573 Profit on disposal of subsidiary undertakings 255 424 Goodwill transferred upon part disposal of a subsidiary - 704 Share of associate's profit on disposal of a subsidiary - 2,065 ------ ------ 19,710 22,496 Net interest payable and similar charges 4,281 4,940 ------ ------ Profit on ordinary activities before taxation 15,429 17,556 Taxation on profit on ordinary activities 4,827 4,183 ------ ------ Profit on ordinary activities after taxation 10,602 13,373 Interest of minority shareholders 3,453 3,146 ------ ------ Profit for the year 7,149 10,227 Dividends 2,270 2,303 ----- ------ Retained profit for the year 4,879 7,924 ===== ====== Earnings per share 269.57p 374.48p ======= ======= Consolidated Balance Sheet as at 31st December 2002 2002 2001 £'000 £'000 £'000 £'000 Restated Fixed assets Intangible assets Goodwill: Positive 1,265 1,219 Negative (3,648) (4,074) ----- ----- (2,383) (2,855) Tangible assets 166,232 172,574 Investments 79,387 72,219 ------- ------- 243,236 241,938 Current assets Stocks 31,467 34,100 Debtors 56,650 55,514 Cash at banks and in hand 154,738 164,493 ------- ------- 242,855 254,107 Creditors: amounts falling due within one year 210,650 212,562 ------- ------- Net current assets 32,205 41,545 ------ ------- Total assets less current liabilities 275,441 283,483 Creditors: amounts falling due after more than one year 38,047 39,587 Provisions for liabilities and charges 7,240 7,595 ------- ------- Net assets 230,154 236,301 ======= ======= Capital and reserves Called up share capital 264 271 Share premium account 423 423 Revaluation reserve 37,273 38,280 Profit and loss account 132,197 135,297 Merger reserve 242 242 ------- ------- Equity shareholders' funds 170,399 174,513 Minority shareholders' interest 59,755 61,788 ------- ------- 230,154 236,301 ======= ======= Consolidated Cash Flow Statement for the year ended 31st December 2002 2002 2001 £'000 £'000 £'000 £'000 Net cash flow from operating activities 12,810 22,033 Capital distribution/dividends received from associates 1,031 629 Returns on investments and servicing of finance Interest received 682 955 Interest paid (4,514) (5,065) Income from investments 1,297 1,662 Dividends paid to minority interests (1,485) (1,632) ----- ----- (4,020) (4,080) Taxation UK corporation tax paid (140) (1,548) Overseas tax paid (2,596) (3,368) ----- ----- (2,736) (4,916) Capital expenditure and financial investment Purchase of tangible fixed assets (10,428) (10,869) Sale of tangible fixed assets 1,429 936 Purchase of investments (2,226) (4,338) Sale of investments 590 1,751 ------ ------ (10,635) (12,520) Acquisitions and disposals Acquisition of business - (557) Disposal of businesses 4,030 2,846 Purchase of additional Siegfried AG shares - (1,439) Purchase of minority interests (331) (542) ----- ----- 3,699 308 Equity dividends paid (2,287) (2,267) ----- ----- Cash outflow before financing (2,138) (813) Financing Loan repayments (5,917) (7,614) New loans 5,242 9,862 Capital element of finance lease rental payments (347) (279) Purchase of own shares (2,079) (1,693) ----- ----- (3,101) 276 ----- ----- Decrease in cash in the period (5,239) (537) ===== ===== Statement of Total Recognised Gains and Losses for the year ended 31st December 2002 2002 2001 £'000 £'000 Restated Profit for the year - includes associates £8,386,000 (2001 - £4,476,000) 7,149 10,227 Release of goodwill on disposal of subsidiary undertaking - 515 Release of goodwill on part disposal of subsidiary undertaking - (704) Impairment on previously revalued tangible assets - (384) Share of associate's fixed asset revaluation - 539 Currency translation differences on foreign currency net investments - includes associate's profit £525,000 (2001 - £505,000) (6,914) (3,008) ----- ----- Total recognised gains and losses for the year 235 7,185 ===== Prior year adjustment (4,515) ----- Total gains and losses recognised since last annual report (4,280) ===== Reconciliation of Movement in Shareholders'Funds for the year ended 31st December 2002 2002 2001 £'000 £'000 Restated Profit for the year 7,149 10,227 Dividends (2,270) (2,303) ------ ------ Retained profit for the year 4,879 7,924 Currency translation differences on foreign currency net investments (6,914) (3,008) Purchase of own shares (2,079) (1,860) Release of goodwill on disposal of subsidiary undertaking - 515 Release of goodwill on part disposal of subsidiary undertaking - (704) Impairment on previously revalued tangible assets - (384) Share of associate's fixed asset revaluation - 539 ----- ----- Net addition in shareholders' funds (4,114) 3,022 Opening shareholders' funds as previously reported 174,513 177,091 Prior year adjustment (5,600) Opening shareholders' funds restated 171,491 ------- ------- Closing shareholders' funds 170,399 174,513 ======= ======= Analysis of turnover, profit and net operating assets Net operating Turnover Operating profit assets 2002 2001 2002 2001 2002 2001 £'000 £'000 £'000 £'000 £'000 £'000 By activity Parent and subsidiary undertakings Agriculture and horticulture 111,327 108,955 8,842 9,557 135,773 141,826 Trading and agency 6,894 29,684 498 821 2,946 3,971 Food storage and distribution 42,791 45,215 576 3,076 30,117 30,398 Engineering 13,122 14,478 421 1,287 12,927 12,521 Fine art trading and philately 291 2,812 94 411 1,793 2,288 Property leasing 2,068 2,177 1,993 2,088 2,956 4,204 Central management and miscellaneous 30 26 (5,550) (5,501) 9,656 8,658 ------- ------- ----- ------ ------- ------- 176,523 203,347 6,874 11,739 196,168 203,866 ======= ======= Banking (83) 152 21,310 21,120 Profit on sale of investments to group company included in banking results (795) - - - Net interest from group companies (7) 13 - - ----- ------ ------- ------- 5,989 11,904 217,478 224,986 ======= ======= Associated undertakings Agriculture and horticulture (44) (34) Pharmaceutical 10,504 4,218 Insurance and leasing 1,210 1,165 ------ ------ Operating profit 17,659 17,253 ====== ====== Chairman's Statement Pre-tax profit for the year ended 31st December 2002 was £15.43 million compared with £17.56 million in 2001. The profit attributable to shareholders was £7.15 million compared with a restated figure of £10.23 million in 2001 and earnings declined from 374.48p per share to 269.57p per share. Siegfried AG again made a substantial contribution to our profits, but continuing lower tea prices and very weak coffee prices had a detrimental effect on profits. The situation in India is causing some disquiet and this is discussed in more detail below. The concerns expressed last year about another 'El Nino' cycle were, unfortunately, substantiated and this pattern will also affect 2003. Dividend The Board is recommending a final dividend of 66p per share which, together with the interim dividend already paid of 20p per share, brings the total distribution for the year to 86p per share compared with 85p per share in 2001. Agriculture and Horticulture Tea India The difficult conditions experienced in 2001 unfortunately continued into 2002. Factors which are affecting the industry's profitability include sale prices that are now lower than for many years, lower domestic demand, decreasing exports and the increasing impact of the production of green leaf from small growers which is sold to dedicated bought leaf factories. These factories pay little or no statutory taxes, nor undertake welfare responsibilities and as a result their end product can be at least 30% cheaper than the organised sector. The Indian Government has to be prepared to take steps to control these factory operations or the situation can only deteriorate further. Disruptions occurred at the year end with the auction system throughout the country as Government tightened regulations with the reintroduction of a more stringent Tea Marketing Control Order. The situation is still not fully resolved. As a result of these factors the Group produced a loss of £418,000 despite a record crop of 29.62 million kgs, which was an increase of 5% over the previous year. On a brighter note, the Instant Tea Factory at Aibheel is working to full capacity with continuing orders from both overseas and a major multi-national beverage manufacturer. The law and order situation throughout the estates has been relatively peaceful, but precautionary measures remained in place. Bangladesh With only average weather conditions, the ten Longbourne Group estates produced a total of 10.31 million kgs which was 7% behind 2001. However prices, which had started poorly at the beginning of the season, improved steadily and by the end of the year were 4% above the previous year. The Group produced a pre-tax profit of £399,000. The newly acquired Eastland Camellia Limited, which has one estate, also produced a slightly lower crop than in 2001 but prices were 4% higher. This estate produces some of the highest priced teas in the country. The 15,000 square foot extension to the warehouse in Chittagong has been completed satisfactorily and will allow for the storage of an additional 15,000 packages of tea. Africa Tea production by subsidiary undertakings amounted to 35.8 million kgs. Climatic conditions were generally beneficial in Malawi, but Kenya and South Africa both suffered from irregular rainfall patterns. 'El Nino' started to bite towards the end of 2002, particularly in South Africa where exceptionally dry conditions were experienced on the majority of the estates. Sale prices for tea were very similar to those experienced in 2001, but inevitably the cost of production increased. The transition to a new Government in Kenya appears to have gone smoothly and pronouncements are being made which are consistent with the need to improve the economic management of the country. In Malawi interest rates for borrowings are still exorbitantly high, presently 41%, and the Malawi kwacha devalued during the year. The South African rand strengthened during 2002 to the extent that its exchange rate against sterling is now higher than the levels witnessed before the rand's dramatic fall during the latter part of 2001. Interest rates remain at a relatively high level in South Africa, and these two factors will have an unfavourable effect on the overall fortunes of our operations. Nepal Himalaya Goodricke Private Limited, the Group's associate company in Nepal, produced a record crop of 306,000 kgs, but will show a small loss of £17,000 compared with a loss of £92,000 in 2001. Further improvements have been made in the factory and a new large generating set is being installed which will allow for increased manufacture of bought leaf. Coffee Coffee production in Kenya fell, mainly due to the disposal by Kakuzi of its 51% owned subsidiary, Garton. Nonetheless, prices realised were again lower and throughout the year we have been selling coffee at below the cost of production. Considerable efforts have been made to reduce costs, but the short term prospects are not encouraging. There is simply too much coffee being produced and until the supply/demand ratio is put into balance, it is difficult to see how profits can be made by any participants in the production sector of this business. The fortunes of our Malawi coffee estates have been affected even more adversely by the fall in prices and costs have been reduced substantially by taking action that must inevitably impinge on the long term health of the bushes. Citrus Yandilla Park experienced difficult conditions in Australia during the year with an abundance of small sized fruit which was difficult to pack and market. A greater than usual proportion of the fruit was destined to go to the juice market, for which no sale contracts existed, resulting in poor prices being achieved. The disappointing quality of the fruit was due to adverse climatic conditions and it is hoped that the 2003 navel harvest will be of a considerably higher quality, resulting in better marketing opportunities. It is, however, encouraging to report that the marketing operations of Vitor go from strength to strength with new opportunities being exploited, particularly in the Pacific Rim region. The prospects for the citrus operations in Chile, United States and South Africa remain encouraging with good progress being made towards maturity. Plans are being prepared for the extension of our citrus activities in these countries. Edible Nuts There was a further increase in the production of macadamia in Malawi and prices improved over the previous year. The South African macadamia operations also performed well and the processing facility has now been changed from a wet to dry operation, hopefully further increasing the quality of the product. In California the almond orchards have come to the end of their useful life and have been uprooted; they will almost certainly be replaced by citrus. The pistachio operations in California enjoyed a very good production season with a crop considerably in excess of that predicted, even though it was an 'on' year in the alternate bearing cycle. Other Horticulture The pineapple joint venture in Kenya with Del Monte was again profitable, although production was substantially down from the previous year on account of the harvesting cycle. Prices recovered somewhat in 2002 and the prospects for 2003 are also encouraging due to a potential lack of supply from South East Asia. In Kenya passion fruit remains disappointing and is gradually being replaced with further areas of avocado, the existing plantings of which continue to perform beyond our initial expectations. Wine grape production in Australia improved over the previous year and prices were reasonable. The prospect for prices, in particular the red varieties, is set to decline due to continuing over-production in Australia. In South Africa the wine grape harvest was satisfactory, but the export market has continued to be difficult throughout the year with producers offering wine for export at very low prices and, in some cases, almost certainly below cost of production. We continue to concentrate our efforts on the premium sector and wine that is not suitable for this market is sold as bulk rather than bottled. During the year our Merlot and Shiraz wines were awarded gold medals in the well-respected 'Michelangelo' wine fair. Table grape production in South Africa was disappointing although prices, mainly due to the weak rand, made up much of the shortfall. Rubber, which is planted on eight estates in Bangladesh, had a successful year and production totalled 600 tonnes, which was in line with budget and a crop of 700 tonnes is anticipated for 2003. Our operation in Brazil again made a modest profit which would have been considerably better had it not been for an area-wide infestation of the bean crop. Assuming reasonable weather conditions and a favourable economic environment, the prospects for this operation continue to be much improved. Trading and Agency The Group's remaining 74.9% interest in British Traders & Shippers was sold in January 2003, but its results are included for 2002. A profit on the sale of our shareholding should be realised in 2003. Food Storage and Distribution Associated Cold Stores & Transport failed to replace the business of a customer lost at the end of 2001 with business of a similar value and the extra cost of providing outside space to accommodate a major customer's requirements impacted on results. The development and implementation of a new IT system is already identifying opportunities for cost savings which should help profits to recover. A further 80% increase in insurance premiums in 2002 also had a significant effect on profits. 2003 premiums have risen again by a further 36%. Losses continued at W G White as caviar sales remained depressed and the costs associated with the new wine distribution business continued to exceed sales from that activity. Responsibility for international sales of wine from the Group's vineyards has been transferred to South Africa in the first quarter of 2003, thus reducing ongoing selling costs for W G White. Changes in the pattern of international air travel and the reduction in tourism to London are holding back caviar sales. In the Netherlands, Affish produced a much improved result in 2002. However, due to a downturn in the Dutch economy, there was a general reduction in eating out of the home, which adversely affected the results of Wylax, the Group's fish distribution business which services the Dutch restaurant sector. Engineering 2002 was the first full year of operations for Abbey Metal Finishing's rebuilt facility, following the fire which severely damaged its premises in June 2000. During the year, sales continued to progress whilst profits remained supported by business interruption insurance income. However, the more constrained civil aerospace market will make it difficult for the company to recover to the level of turnover achieved before the fire. Pressure on margins and the effect on North Sea exploration of the government's imposition of an additional 10% corporation tax on oil companies had an impact on the results of AJT Engineering, AKD Engineering and some divisions of British Metal Treatments. AJT's cold extrusion process again provided a useful addition to sales in its second year of operation. AKD completed the construction of its new office building which now enables all staff to be accommodated together. The company secured its largest ever order, for completion during the first half of 2003. The British Metal Treatments' site at Hove, which had been closed in the previous December, was sold in July and the profit from this contributed to the 2002 results. General Utilities reported a small loss in 2002 due to a further downturn in demand for its profile cutting and precision grinding services. Plans are in hand to consolidate operations onto a single site during 2003, which will contribute to an improvement in the profitability of the business. Property Leasing, Fine Art and Philately Property leasing enjoyed another good year. As anticipated, fine art trading has now ceased as the Lumley Cazalet operations were finally liquidated during 2002. This operation has been very successful for the Group and only comes to a close due to the retirement of our minority partners, to whom we extend our best wishes for the future. Very modest trading within the Group's philately activities continued during the year. Banking The difficulties within the financial services sector resulted in another disappointing year for Duncan Lawrie Limited. The continuing decline in UK base rates has an immediate effect on the profitability of the bank, particularly as our very cautious lending policy dictates that customer deposits should not be utilised as advances to customers who may wish to borrow. Investment management activity has also been restricted due to the decline in stock markets and this also impacts on the management fees earned on portfolio valuations. However, Duncan Lawrie has conducted an extensive review of its operations and will make considerable savings on reorganisations that are presently under way, the main one of which is to move its support staff out of expensive London property into other property already owned by the Group. A lot of positive changes have been made over the last 12 months including the continuing up-dating of our computer systems and other communication systems and we remain confident that a niche market exists for the services offered by Duncan Lawrie as a private bank and that we will be able to return to making a reasonable profit when financial conditions improve generally. Pharmaceutical The Siegfried Group increased net turnover by 13.2% to SFr. 399.0 million and recorded a consolidated profit after tax of SFr. 56.2 million, an increase of more than 81% over the prior year. This constituted the best result in the 130 year history of the Siegfried Group. Our share of these profits amounts to £8,148,000. The improvements have come particularly from the 'Exclusives' division, which produces custom manufactured active pharmaceutical ingredients for multi-national companies and also from the generics side of the business. The Sidroga division, which markets medicinal and herbal teas, continues to show improvement in its trading operations. Other Associated Undertakings and Investments The United Leasing Company Limited had a good year and generated a profit before tax of £2.32 million compared with £2.24 million in 2001. The Bangladesh economy is less buoyant at present and 2003 may be a more difficult year. The United Insurance Company Limited also had a satisfactory year with a profit of £329,000. The Surmah Valley Tea Company's three tea estates had a good year with a crop of 1.90 million kgs and prices considerably ahead of 2001. Duncan Products Limited had a poor year for sales of both water and packet tea. However, it is hoped that a new plant recently commissioned in Dhaka for the production of large commercial jars should improve profitability. Our investments in Bermuda continue to make a positive contribution and it is pleasing to report that the Bermuda stock market has not collapsed in the manner evidenced by most other markets around the globe. Further small purchases have been made and we are very happy with the prospects of the companies in which we invest. Development The main emphasis on development during the year was to continue to bring immature plantings towards maturity. The initial results from the avocado plantings in Kenya and the citrus plantings in California and South Africa are most encouraging and it is likely that further development will take place in these areas. Staff The plight of the stock market and its effect on the health of pension funds has been well documented and debated over the last few months. Our own pension schemes are, unfortunately, not immune from the substantial deterioration in the performance of equities. The FT all-share index fell 25.6% in 2002, which compares with a previously assumed actuarial appreciation of 7%. The disclosures required under FRS 17 show that the pension funds' deficits have increased from £1,575,000 to £17,496,000 during the year. These deficits do, of course, simply reflect just one moment in time and it is possible, indeed it is to be hoped that, a recovery in the stock market will make good these deficits. Of more immediate importance to us are the triennial actuarial valuations that are being prepared for our main pension schemes as at 1st January and 5th April 2003. In this context there is bound to be a significant deterioration since the last valuations three years ago and company pension contributions as a percentage of salaries are set to increase. The directors feel strongly that the present defined benefit schemes should continue, notwithstanding the hopefully temporary deficit in the schemes. We are fortunate to have a generally stable and long serving workforce and it seems only right that they should be allowed to enjoy their well-earned retirement in the knowledge that their post retirement income will not be subject to the volatility of prevailing stock market conditions and annuity rates. 2002 was a difficult year in many parts of the Group's operations and on behalf of the Board I would like to extend my thanks to all employees for dealing with the problems encountered in a positive manner. Notes 1. The directors have decided to recommend a final dividend of 66p per ordinary share payable on 2nd July 2003 to shareholders registered at the close of business on 6th June 2003. The total dividend for the year of 86p per ordinary share compares with 85p per ordinary share paid in the previous year. 2. Earnings per share have been calculated by dividing profit after tax and minority interests of £7,149,000 (2001 - £10,227,000) by the weighted average number of shares in issue at 31st December 2002 of 2,652,023 (2001 - 2,731,019). 3. Taxation on profits on ordinary activities includes overseas taxation of £2.28 million (2001 - £3.06 million), UK corporation tax of £1.44 million (2001 - £2.21 million) and share of associated undertakings tax of £2.75 million (2001 - £2.35 million). 4. The Annual General Meeting is to be held on Thursday, 29th May 2003. 5. The above figures are an abridged statement from the Group's accounts for the year ended 31st December 2002. The audit report on these accounts was unqualified. The statutory accounts for the year ended 31st December 2001 have been delivered to the Registrar of Companies and those for the year ended 31st December 2002 will be delivered after the Annual General Meeting. 6. The Directors Report and Statement of Accounts will be posted to shareholders on 28th April 2003 on which date copies can be obtained from the company's registrars:- Capita IRG Plc, The Registry, 34 Beckenham Road, Beckenham Kent, BR3 4TU or from the company's registered office:- Wrotham Place, Wrotham, Sevenoaks, Kent TN15 7AE Press enquiries to:- Mr. M.C. Perkins Telephone No. 01622 746655 P.E. Hill Company Secretary 24th April 2003 This information is provided by RNS The company news service from the London Stock Exchange

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