Final Results

Camellia PLC 27 April 2004 Camellia Plc Preliminary Results For Year Ended 31 December 2003 Highlights from the results:- Year ended Year ended 31 December 2003 31 December 2002 Â£000 Â£000 Turnover - continuing operations 170,758 165,470 Profit before taxation 27,522 15,429 Profit after taxation 26,330 10,602 Earnings per share 999.18p 269.57p Dividends 87.00p 86.00p Extract from Chairman's Statement Camellia Plc Chairman's Statement Pre-tax profit for the year ended 31 December 2003 was Â£27.52 million compared with Â£15.43 million in 2002. The profit attributable to shareholders was Â£25.98 million compared with Â£7.15 million in 2002 and earnings increased from 269.57p per share to 999.18p per share. The results were dominated by a profit of Â£21.20 million which was realised on the sale of the Group's warehouse complex situated at Banbury. Siegfried also made a substantial contribution to profits but these positive factors were to some extent countered by low tea and coffee prices and the impact of a substantial appreciation in the values of the South African rand and Australian dollar against the US dollar. Dividend The Board is recommending a final dividend of 67p per share, which, together with the interim dividend already paid of 20p per share, brings the total distribution for the year to 87p per share compared with 86p per share in 2002. Agriculture and Horticulture Tea India Unfortunately the depressed price situation experienced over the last three years continued in 2003. The market was adversely affected by lower exports, increased production and a smaller than anticipated increase in domestic consumption. These factors were aggravated by continuing pressure from small growers in Northern India and the bought leaf factories. However, during 2003 weather conditions were favourable and the Goodricke Group and our other companies in Assam produced satisfactory crops. The quality of tea manufactured was the Group's paramount interest and this generated prices at auction which were above the district averages and this policy will continue in the current year. Unfortunately the Group Gardens, despite a crop of 28.24 million kgs which was only slightly down on the previous year, produced a loss of Â£496,000 before exceptional items. The Instant Tea Factory at Aibheel operated at full capacity during the year and additional equipment has now been installed to cater for increased demand for this high quality product. The company has for some time sought to rationalise its extensive tea holdings in Darjeeling, which have not been profitable for several years. However, mindful of its obligations to the workers and their families, it had been resolved to seek wholly suitable purchasers. Such an opportunity arose at the end of 2003 and accordingly the shares of Dooteriah and Kalej Valley Tea Estates Private Ltd were sold to an Indian concern in February 2004 leading to an impairment provision of Â£1.90 million. An agreement was also completed by Tiru Tea Limited for the sale of 4 small tea gardens, namely Nurbong, Sivitar, Mullotar and Monteviot, of which only one has a factory, to a local tea concern. The company will now be concentrating on radical improvements for field, factory and welfare for its remaining Darjeeling Gardens. The security situation in Assam, while still not normal, has improved due to tough measures taken to remove insurgents operating from the Kingdom of Bhutan. Bangladesh As weather conditions were largely satisfactory, the ten Longbourne Gardens produced a total of 11.16 million kgs, which was almost a record crop. Prices were satisfactory for the whole of 2003 due to good export demand from Pakistan and a healthy domestic market. As a result, the Longbourne Group has produced a profit of Â£905,000. The company's small tea packaging operations have been relocated at the warehouse in Chittagong and are operating satisfactorily. A residential school for boys from the workers' community aged from 10 to 14 was opened in March 2004. This is a further example of our wish to improve the facilities offered to our workers on the gardens. Africa Tea production by subsidiary undertakings increased in 2003 and amounted to 39.1 million kilos. This production can be considered satisfactory when viewed with the effects of 'El Nino', the cycle of which started in late 2002. Tea prices were reasonable in US dollar terms but were substantially reduced when translated into local currencies, in particular the South African rand. The strengthening of the South African rand, which appreciated by 22% during the year has resulted in a substantial loss from the Sapekoe tea operations. This is particularly disappointing, as so much has been achieved in restructuring the management of that company to make it competitive in world markets. We are not alone in suffering from the impact of the strong rand which unfortunately has continued to strengthen against the dollar in 2004 resulting in projected losses which cannot be sustained. Unless we can be confident that the rand will weaken in the near future we will have no alternative but to severely reduce the scale of our tea operations in South Africa. The Group has continued its emphasis on producing quality teas and this has contributed to a successful year in both Kenya and Malawi. Nepal Himalaya Goodricke Private Limited produced a record crop of 311,000 kgs but will show a loss of Â£18,000 compared with a loss of Â£17,000 in 2002. The planned improvements to the factory have been satisfactorily completed. In early 2004 the Group, along with its Nepali Partners, entered into a memorandum of understanding to sell the assets and goodwill of Gorkha Lawrie Private Limited to a local party. Unfortunately this company had been making losses for several years due to increasing local tea packaging activity with which it was difficult to compete. Coffee The fortunes of our coffee operations in Kenya and Malawi did not improve in 2003. Prices continued to fall in world markets particularly for the arabica coffee that was grown on our plantations. Production has increased substantially in countries where the cost of production is lower than in Kenya. In addition, the demand for arabica coffee appears to be reducing as technological advances allow greater quantities of the cheaper robusta coffee to be used in the production of instant coffee. During the last few years the Kakuzi coffee operations have lost approximately US$1 million per annum and, due to the fact that there seemed little likelihood of an imminent improvement in the prospects for this commodity, the decision was made to remove all coffee bushes and prepare the land for replanting with alternative crops. This decision has far- reaching consequences for Kakuzi and the surrounding communities and we are attempting to mitigate these problems as far as possible. It will, however, inevitably take sometime before the newly planted crops make a contribution to profits. This decision also resulted in an impairment provision being required of Â£4.19 million of which Â£1.63 million is shown in the profit and loss account. During the year work started on replanting the coffee areas in Malawi to fuel wood plantations for use in our tea operations. Citrus Yandilla Park experienced a difficult year in 2003 with considerably reduced production and very competitive market conditions. A large part of our exports are shipped to America and, as previously noted, the Australian dollar strengthened substantially against the US dollar resulting in lower returns. Both Chile and South Africa increased their production of citrus as these plantings continue to mature. The new orchards in California enjoyed a most encouraging first year of production being nearly 300% up on our original projection. Planting of further areas of citrus is presently being undertaken on land that was previously planted with almonds. Edible Nuts 2003 was an 'off' year for pistachios in California, with only minimal production. Both South Africa and Malawi increased their production of macadamia nuts and achieved higher prices. Prospects for our macadamia interests remain encouraging and since the year end we have increased our shareholding to over 50% in the macadamia processing factory in South Africa. Other Horticulture The pineapple joint venture in Kenya with Del Monte substantially increased its production at prices somewhat higher than the previous year. We are in discussions with our partner concerning the possibility of extending the area under pineapple. The avocado production in Kenya showed a further increase in 2003 and prices were also beneficial. Here again we are looking at further investment in the avocado sector as we are confident that the growing conditions in Kenya are excellent, as is the timing of the exports into European markets. Production from our wine grapes in Australia was slightly ahead of the previous year although prices were considerably reduced as a result of the present glut in production. In South Africa we enjoyed a very successful harvest but market conditions for South Africa are also difficult due to the strength of the rand and over production. We are re-vamping our marketing operations and are now selling wine in a number of European countries as well as in North America. Our premium wines continue to attract considerable interest. The rubber plantations in Bangladesh had a successful year and production totalled 638 tonnes which is in line with budget. A new semi automated gas-fired dryer went into operation at Lungla Garden. It is pleasing to report a very good result from our operations in Brazil. Growing conditions were good resulting in an increased yield and prices, particularly for soya, were beneficial. Whilst the conditions relating to the 2003 year were to some extent exceptional, the prospects for our operations in Brazil remain encouraging and local management are to be congratulated in all that they have achieved over the last two years. Food Storage and Distribution The results for Associated Cold Stores & Transport were most disappointing. The expected savings as a result of the implementation of a new IT system are taking longer to materialise than we had hoped and business is very competitive with rates being forced down due to over capacity and cost pressure particularly from the major supermarkets. It appears inevitable that some form of rationalisation must take place in the cold storage industry. Insurance costs have stabilised albeit at a high level and we must also be concerned about the effects of the revised Working Time Directive due to be implemented in 2005 particularly as it relates to our drivers. Losses continued at W G White due to reduced caviar sales. It appeared unlikely that the fortunes of W G White would improve to an extent that we would consider satisfactory and we have, therefore, disposed of this business in early 2004. The Affish Group enjoyed a better year in 2003 with the fish trading side of the business being particularly profitable. There has, however, been little improvement in the fortunes of our distribution business servicing the Dutch restaurant sector. Engineering The engineering sector continued to operate in a challenging environment. As anticipated last year it has proved difficult for Abbey to recover to the level of turnover achieved prior to the fire in 2000. Business interruption insurance income has now ceased. The North Sea oil and gas industry servicing companies improved their results over the previous year but much still needs to be done to return these companies to an acceptable level of return on capital. The impact of major oil companies disposing of their North Sea interests to smaller operating companies is definitely changing the environment in which we operate but there are good opportunities to develop. British Metal Treatments experienced mixed fortunes with good contributions from the galvanising operations in Great Yarmouth and the plating operation in Port Glasgow offset by losses at our Birmingham operation. This has now been closed and some work will transfer to Port Glasgow, which should help to further increase the viability of that site. General Utilities has now moved on to one site and the benefits of this should flow through in 2004. Property Leasing and Philately Property leasing again produced useful profits and, as previously noted, we have disposed of our interest in the warehouse complex situated at Banbury. The directors considered that a buoyant commercial property market combined with historically low interest rates and the eventual requirement for the total redevelopment of the site all contributed to it being the right time to dispose of this investment. Further modest activity within the Group's philately operation continued during the year. Rationalisation of the stock will be carried out during 2004 giving the opportunity of increased sales. Banking It is pleasing to report a significant turnaround in the results of Duncan Lawrie Limited. A profit in 2003 of just over Â£400,000 compares with a loss in 2002 of Â£878,000. The profit this year is after accounting for the exceptional one-off costs of the move of business support staff to Wrotham in July 2003 amounting to Â£142,000. The increase of prices on the London Stock Exchange has contributed to a better result from our investment management business and opportunities are being examined to see how we might increase our presence in this sector. A rise in interest rates will, of course, also help the profitability of the bank, and whilst the prospects look much more encouraging than a year ago further work is necessary to be able to grow the bank in the niche markets in which it operates. Pharmaceutical The Siegfried Group generated revenues of SFr. 366.2 million which represented a decrease of 8.2% in SFr. but only 4% in local currency terms. Profits after tax were SFr. 53.3 million, which compares with SFr. 56.2 million in the record year of 2002. The 'Siegfried Division' which comprises the Group's activities for active pharmaceutical ingredients (API's), Generics and Biologics felt the full impact of weaker demand for API's which led to a substantial drop in capacity utilisation. The generics and biologics business however continued to grow in sales and in profits. With effect from January 2004 the Division was reorganised into three business units. The Siegfried Actives business develops and manufactures API's for patent protected pharmaceuticals. The Siegfried Generics business unit develops dossiers for product registration and develops finished dosage forms for mainly European generics companies. Siegfried Biologics, located in Germany, develops and manufactures biotechnology-based pharmaceutical active substances. The Sidroga Division develops and markets plant-based natural medicines and wellness products, particularly teas. After adjusting for the closing of the tea packing activities in Bremen, Germany, a 5.4% growth in sales for 2003 resulted. At the same time, innovative products made an important contribution. Other Associated Undertakings and Investments The United Leasing Company Limited had another good year and generated a profit before tax of Â£2.25 million compared with Â£2.32 million in 2002. However, the Bangladesh economy is affected by political uncertainties and there is increased competition for leasing business and other financial products, thus the current year may be more difficult. The United Insurance Company Limited also had a satisfactory year with a profit of Â£307,000 compared with Â£329,000 in the previous year. The Group's associated tea company, Surmah Valley Tea Company Limited, also had a satisfactory year. A water bottling plant for 20 litre office and institutional jars opened in Dhaka in the latter part of 2003. It is planned to move the bottling plant in Chittagong from its existing site to a new plant adjacent to the tea warehouse. Our Bermuda investments have shown a very satisfactory capital appreciation and also contributed good investment income. There are less opportunities for further investment in Bermuda due to very illiquid markets and the opportunity is being taken to examine other investments in markets presently considered to be undervalued. Development 2003 has been a very difficult year in certain parts of the Group but we continue to invest in bringing immature plantings to maturity. We are also continuing to invest in the facilities and amenities on our plantations and as noted above we have increased the capacity of our instant tea plant in India. There remain good opportunities for further development in the edible nut sector and also in citrus in South Africa, Chile and California. Staff 2003 was again a very difficult year for many of our operations. These difficulties have, however, been met with resilience and good humour by our staff and I extend my thanks to them for their positive contribution. M C Perkins Chairman 27 April 2004 Consolidated profit and loss account for the year ended 31 December 2003 2003 2002 Note Â£000 Â£000 Turnover - continuing operations 170,758 165,470 - discontinued operations 3,927 11,053 --------- -------- 174,685 176,523 Cost of sales 136,944 134,997 --------- -------- Gross profit 37,741 41,526 --------- -------- Net operating expenses - normal activities 37,146 35,537 - impairment of assets 1 3,304 - --------- -------- 40,450 35,537 --------- -------- Operating (loss)/profit - continuing operations (1,105) 6,764 - discontinued operations (1,604) (775) --------- -------- (2,709) 5,989 Share of associates' results before interest 10,278 11,670 --------- -------- Operating profit including associates 7,569 17,659 Investment income 1,255 1,431 Profit on disposal of fixed assets 2 21,799 195 Profit on disposal of fixed asset investments 668 170 Profit on disposal of a subsidiary and a business 3 302 255 Provision for loss on disposal of a business 4 (237) - --------- -------- Profit on ordinary activities before interest 31,356 19,710 Net finance costs 3,834 4,281 --------- -------- Profit on ordinary activities before taxation 27,522 15,429 Taxation on profit on ordinary activities 5 1,192 4,827 --------- -------- Profit on ordinary activities after taxation 26,330 10,602 Minority interests 348 3,453 --------- -------- Profit for the year 25,982 7,149 Equity dividends 6 2,258 2,270 --------- -------- Profit transferred to reserves 23,724 4,879 ========= ======== Earnings per share 7 999.18p 269.57p Consolidated balance sheet at 31 December 2003 2003 2002 Â£000 Â£000 Â£000 Fixed assets Intangible assets Goodwill: Positive 1,157 1,265 Negative (3,038) (3,648) --------- --------- (1,881) (2,383) Tangible assets 155,946 166,232 Investments 83,965 79,387 --------- --------- 238,030 243,236 Current assets Stocks 25,053 31,467 Debtors 47,412 56,650 Cash and deposits 162,657 154,738 --------- --------- 235,122 242,855 Creditors: due within one year 198,964 210,650 --------- --------- Net current assets 36,158 32,205 --------- --------- Total assets less current liabilities 274,188 275,441 Creditors: due after one year 27,970 38,047 Provisions for liabilities and charges 4,158 7,240 --------- --------- 32,128 45,287 --------- --------- 242,060 230,154 ========= ========= Capital and reserves Called up share capital 260 264 Share premium account 423 423 Revaluation reserve 35,092 37,273 Merger reserve 242 242 Profit and loss account 150,465 132,197 --------- --------- Equity shareholders' funds 186,482 170,399 Equity minority interests 55,578 59,755 --------- --------- 242,060 230,154 ========= ========= Consolidated cash flow statement for the year ended 31 December 2003 2003 2002 Note Â£000 Â£000 Â£000 Cash flow from operating activities 8 5,419 12,810 Dividends received/capital distribution from associates 2,371 1,031 Returns on investments and servicing of finance Interest received 415 682 Interest paid (4,360) (4,514) Income from investments 1,285 1,297 Dividends paid to minority shareholders (1,866) (1,485) --------- --------- (4,526) (4,020) Taxation UK taxation (167) (140) Overseas taxation (2,030) (2,596) --------- --------- (2,197) (2,736) Capital expenditure and financial investment Purchase of tangible fixed assets (8,200) (10,428) Sale of tangible fixed assets 23,051 1,429 Purchase of investments (1,396) (2,226) Sale of investments 942 590 --------- --------- 14,397 (10,635) Acquisitions and disposals Purchase of minority interests (349) (331) Disposal of businesses 1,902 4,030 --------- --------- 1,553 3,699 Equity dividends paid (2,261) (2,287) --------- --------- Cash inflow/(outflow) before financing 14,756 (2,138) Financing New loans 4,107 5,242 Loan repayments (14,660) (5,917) Finance lease repayments (467) (347) Purchase of own shares (1,229) (2,079) --------- --------- (12,249) (3,101) --------- --------- Increase/(decrease) in cash in period 9 2,507 (5,239) ========= ========= Reconciliation of movement in shareholders' funds for the year ended 31 December 2003 2003 2002 Â£000 Â£000 Profit for the year 25,982 7,149 Dividends (2,258) (2,270) -------- -------- Retained profit for the year 23,724 4,879 Exchange differences (4,530) (6,914) Purchase of own shares (1,229) (2,079) Impairments of previously revalued fixed assets (1,112) - Release of negative goodwill on impairment of fixed assets (462) - Release of negative goodwill on disposal of a business (308) - -------- -------- Net addition to shareholders' funds 16,083 (4,114) Opening equity shareholders' funds 170,399 174,513 -------- -------- Closing equity shareholders' funds 186,482 170,399 ======== ======== Notes 1 Impairment of assets 2003 2002 Â£000 Â£000 Impairment of fixed assets (1,968) - Impairment of current assets (1,897) - Negative goodwill transferred from reserves 462 - Negative goodwill transferred from fixed assets 99 - ------- ------- (3,304) - ======= ======= Negative goodwill transferred from reserves and fixed assets relates to the impairment of fixed assets. The group has made full provision for debts due from its associated undertaking Dooteriah & Kalej Valley Tea Estates Private Limited amounting to Â£1.897 million. This company was sold in February 2004. The amount attributable to minority interests is Â£445,000. An impairment of Â£1,626,000 has been charged in relation to the fixed assets of Kakuzi Limited. These fixed assets are associated with the production of coffee. A strategic decision has been made to discontinue this crop. The amount attributable to minority interests is Â£974,000. An impairment of Â£240,000 has been charged in relation to the fixed assets of the Birmingham division of British Metal Treatments Limited. A decision was taken to close this division in 2004. The amount attributable to minority interests is Â£50,000. An impairment of Â£102,000 has been charged in respect of property in Bangladesh. 2 Profit on disposal of fixed assets 2003 2002 Â£000 Â£000 Profit on disposal of Banbury warehouse 21,201 - Profit on disposal of other land and property 598 195 ------- ------- 21,799 195 ======= ======= 3 Profit on disposal of a subsidiary and a business 2003 2002 Â£000 Â£000 Profit on disposal of shares in subsidiary undertakings 288 255 Loss on disposal of a business (138) - Negative goodwill transferred from reserves 135 - Negative goodwill transferred from fixed assets 17 - ------- ------- 302 255 ======= ======= 4 Provision for loss on disposal of a business 2003 2002 Â£000 Â£000 Provision for loss on disposal of a business before goodwill (445) - Negative goodwill transferred from reserves 173 - Negative goodwill transferred from fixed assets 35 - ------- ------- (237) - ======= ======= 5 Taxation on profit on ordinary activities Analysis of charge in the year 2003 2002 Â£000 Â£000 Â£000 Current tax UK corporation tax UK corporation tax 2,011 1,435 Adjustment in respect of prior years (5) (283) Double tax relief (1,947) (1,445) -------- -------- 59 (293) Foreign tax Corporation tax 2,349 2,284 Adjustment in respect of prior years (3) - -------- -------- 2,346 2,284 -------- -------- Total current tax 2,405 1,991 Deferred tax Origination and reversal of timing differences United Kingdom (1,154) (826) Overseas (1,498) 915 -------- -------- Total deferred tax (2,652) 89 Share of associated undertakings tax 1,439 2,747 -------- -------- Tax on profit on ordinary activities 1,192 4,827 ======== ======== 6 The directors have proposed a final dividend of 67.00p per share, payable on 2 July 2004 to shareholders on the register of members at the close of business on 11 June 2004. 7 Earnings per share Earnings per share have been calculated by dividing the weighted average number of ordinary shares in issue for the year of 2,600,345 (2002:2,652,023) into the profit for the year of Â£25,982,000 (2002:Â£7,149,000). 8 Reconciliation of operating profit to cash flow from operating activities All continuing 2003 2002 Â£000 Â£000 Operating (loss)/profit (2,709) 5,989 Depreciation 8,735 8,539 Asset impairments 3,304 - Amortisation of goodwill (351) (375) Loss/(profit)on sale of assets 367 (250) Other non cash movements (284) (472) Decrease in stocks 5,902 1,812 Decrease/(increase) in debtors 5,380 (1,533) Decrease in creditors (7,726) (4,150) Net (increase)/decrease in funds of banking subsidiaries (7,199) 3,250 ------- ------- Cash flow from operating activities 5,419 12,810 ======= ======= 9 Reconciliation of net cash flow to movement in net debt 2003 2002 Â£000 Â£000 Increase/(decrease) in cash in the year 2,507 (5,239) Cash inflow from increase in debt 11,020 1,022 New finance leases (566) (824) ------- ------- Decrease/(increase) in net debt resulting from cash flows 12,961 (5,041) Net overdraft/(cash balances) of businesses sold 136 (3,557) Exchange rate movements 560 219 ------- ------- Decrease/(increase) in net debt in the year 13,657 (8,379) Net debt at 1 January (57,417) (49,038) ------- ------- Net debt at 31 December (43,760) (57,417) ======= ======= The information above, which does not constitute full financial statements within the meaning of s.240 CA 1985: - Has been extracted from the statutory accounts of Camellia Plc for the year ended 31 December 2003. The auditors have given an unqualified audit report. - Were approved by the directors on 27 April 2004. - Audited financial statements will be posted to shareholders and be available to the public on 28 April 2004. - Will be filed with the Registrar of Companies after the Annual General Meeting on 27 May 2004. Press Enquiries: Malcolm Perkins, Chairman Tel: 01622 746655 This information is provided by RNS The company news service from the London Stock Exchange

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