REG - Camellia PLC - Value Enhancement Plan

CamelliaAnnouncement

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RNS Number : 1159J  Camellia PLC  19 May 2025

19 May 2025
Camellia Plc

('Camellia', the 'Company')

Value Enhancement Plan

'Value creation and sustainable profitability'

 

Camellia announces its Value Enhancement Plan ('VEP'), designed to generate
value and sustainable profitability for the benefit of shareholders and all
stakeholders. This follows a comprehensive business review by the Board and
leadership team.

Camellia is also, separately, today announcing a proposed tender offer of up
to 350,000 shares at £54.00 per share, totalling £18.9 million (the 'Tender
Offer').

About Camellia

Camellia Plc is the ultimate holding company of a group of agricultural
businesses incorporated in jurisdictions across the world (the 'Operating
Companies'), while also owning and operating other assets outside of
agriculture.

Camellia's purpose is to grow and nurture agricultural businesses and assets
of the highest quality - creating value for today's shareholders, while
investing for the long term. Camellia's Operating Companies are committed to
working fairly, sustainably and with integrity for the wellbeing of their
employees, communities, and the natural environment.

The Operating Companies collectively own and manage 50,000 hectares of mature
land across seven countries (Bangladesh, Brazil, India, Kenya, Malawi, South
Africa, and Tanzania). The majority of the Group's revenue is derived from the
growing of tea, avocado, macadamia, rubber, wine grapes, blueberries, arable
crops, forestry and livestock. The Operating Companies have well-established
and industrial-scale operations, with reputations for high-quality products.

Camellia's results for the year ended 31 December 2024 showed revenue
increased by 3% to £262.2 million (2023: £254.2 million), a trading loss of
£5.5 million (2023: loss of £10.3 million) and a breakeven profit before
tax. The results reflected improvement from 2023 but continued difficult
trading conditions across many of its markets. Following strategic disposals
of non-core assets and operations, the Group's balance sheet was significantly
strengthened, with net cash and borrowings, treasury deposits and money market
investments of £124.7 million (2023: £32.5 million). As a result of the
improved financial liquidity and confidence in prospects, as supported by the
formulation of the VEP, the dividend was restarted funded out of reserves,
with a proposed final ordinary dividend in respect of the 2024 financial year
of 260p (2023: Nil).

Summary of the VEP

Covering the medium term, the VEP plans to:

·      Improve operating results

·      Reduce overall risk

·      Invest in growth

Byron Coombs, Chief Executive, commented:

"Camellia has a well-established portfolio of high-quality agricultural
businesses that own and manage 50,000 hectares of mature land across three
continents, and which offer significant potential. The strengthened Board and
leadership team have been looking carefully at how to improve the performance
of the Group to provide sustainable and growing shareholder returns.  The
outcome of this, the Value Enhancement Plan, is designed to generate long-term
shareholder value. This will be achieved by improving operating performance,
reducing inherent risk and volatility of earnings, and investing in growth
opportunities.

"We have highly experienced management teams, robust systems and processes,
and a strong balance sheet which can be employed to improve returns for the
benefit of all our stakeholders, including the many communities of people that
our operating companies sustain."

Components of the VEP

1.   Improve operating results

With a focus on profit and cashflow, improvement will be achieved by focussing
on better land and factory utilisation, technology and farm infrastructure
development, crop strategy and management, product marketing, and delivery
logistics.

During 2024, Camellia worked with the Operating Companies to strengthen their
boards and management teams, while continuing to foster operational autonomy
and entrepreneurialism.

Camellia will support improvement in the Operating Companies performance
through higher maintenance capital expenditure as well as new growth capital
investment. Investments will be made in areas such as water resilience, farm
technology, factory efficiency, power supply resilience, farm mechanisation
and crop diversification, as well as upskilling management teams.

As a result, maintenance capital expenditure over the medium-term is expected
to rise to £8 million to £10 million per annum (2024: £7.9 million).

2.   Reduce overall risk

The VEP aims to mitigate inherent risks, such as the impact of climate change,
and thereby reduce volatility of earnings.

This will be delivered through more diversification across business models,
crops and geography, as well as improved workforce management and
productivity.  Actions have already begun in this area through the
establishment of avocado farms in Tanzania, the sale of parts of the property
portfolio and the sale of Chulsa tea estate in India.

There will also be disposals of some operating assets, including those with
higher risk profiles, less predictable cashflow, or where Camellia is not the
best placed owner. Disposals are anticipated at both the Group portfolio level
and within individual Operating Companies.

Supported by the strong balance sheet, the Group will prioritise selling at
the optimum price and time.

3.   Invest in growth

Camellia will explore attractive opportunities connected to the Operating
Companies that build on their deep expertise and experience.

Operating companies will look for organic investment which is likely to be
focused on efficiency projects such as solar and mechanisation to improve
profitability, as well as crop diversification opportunities..

Camellia will also look at low-risk diversification through inorganic
investments into familiar crops or geographies, or expansion into downstream
activities related to the existing businesses.

The Board expects that growth capital investment will be between £15 million
and £25 million per annum over the coming years (2024: £1.6 million) ,
dependent on suitable opportunities.

Capital Allocation Priorities

The Board has set the following capital allocation priorities:

·      Maintenance of a strong balance sheet

·      Payment of ordinary dividends

·      Investment in the business

In addition, the Camellia is today announcing a return of capital to
shareholders through a one-off Tender Offer.

Maintenance of a strong balance sheet

The long-term sustainability of Camellia is of paramount importance to the
Board. The Board prioritises the financial strength of the balance sheet and
the ability of Camellia to continue in the event of a severe downside
scenario. The Board has determined that a strategic reserve should be
maintained to protect against risks where mitigation is not possible.

The Board's view is that debt levels should be reduced and kept to a minimum
to cushion against inherent market risks.

Camellia anticipates that the Group will continue to sell non-core property
and heritage assets, as and when the market presents acceptable values.  The
proceeds from these will provide support to the other capital allocation
priorities.

Ordinary dividends

The Board is committed to providing regular income to its shareholders through
reliable ordinary dividends.

While the 2024 dividend of 260p is being funded out of reserves, the Board
views 260p as a sustainable dividend due to the cash reserves that Camellia
has and the expectation that successful delivery of the VEP will lead to a
business that can deliver profits to consistently cover this dividend with the
potential to then grow.

To cover the 260p dividend, the Group will need to, in the first instance,
deliver a return on capital exceeding 5% with an expectation of higher returns
further out which can support a growing dividend.

Camellia will move from the payment of two dividends per annum to one, full
and final ordinary dividend. This reflects the majority of crops being sold in
the second half of the year and the uncertainty of results until that time.

Investment in the business

As detailed above, total investment comprised of maintenance capital and
growth capital is expected to rise above that made in recent years to a range
of £23 million to £35 million per annum (2024: total of £9.5 million). The
Board will assess investment potential against an industry and country ROI and
will only proceed with investments that are expected to deliver attractive
risk adjusted returns. Investment in the near-term will be funded out of cash
on the balance sheet, with proceeds from disposals and improved operating
cashflow funding investment over the medium and longer term.

Tender Offer

The Company has announced a proposed Tender Offer of up to 350,000 shares at
£54.00 per share, totalling £18,900,000. The Tender Offer price represents a
premium of 6.4% over the closing price of £50.75 on 16 May 2025 (the last
trading day before this announcement) and a 16.9% premium over the 3-month
volume weighted average price up to 16 May 2025 of £46.20.  The Board does
not anticipate announcing any further tender offers and is not seeking
authority to continue the existing on-market share buyback programme after it
concludes at the AGM on 5 June 2025.

Corporate Presentation and Investor Meet Company presentation:

A recorded presentation covering the VEP, along with a transcript, is
available on Camellia's website https://www.camellia.plc.uk
(https://www.camellia.plc.uk) .

Camellia will also be hosting a live presentation via Investor Meet Company on
Wednesday, 21 May 2025 at 10:00 BST to discuss the VEP. The presentation is
open to all existing and potential shareholders, with the opportunity for live
Q&A.  Investors can sign up to Investor Meet Company for free
at: https://www.investormeetcompany.com/camellia-plc/register-investor
(https://www.investormeetcompany.com/camellia-plc/register-investor) .
Questions can be submitted ahead of the event via the Investor Meet Company
dashboard up until Wednesday, 21 May 2025, 09:00 BST, or at any time during
the presentation.

This announcement contains inside information under Article 7 of the Market
Abuse Regulation (EU) No. 596/2014, as part of UK domestic law via the
European Union (Withdrawal) Act 2018.

Enquiries:

Camellia Plc
                              01622 746655 /
investorrelations@camellia.co.uk (mailto:investorrelations@camellia.co.uk)

Byron Coombs Chief Executive

Oliver Capon, Chief Financial Officer

Panmure Liberum (Nominated Adviser and Broker)            020 7886
2500

Emma Earl

Rupert Dearden

Equitory Limited (Investor Relations)

Catherine Miles

H/Advisers Maitland (Financial PR)
                                     07785
292617

William
Clutterbuck

Investors can register to receive updates and news from the Company by
registering their email address at investorrelations@camellia.co.uk
(mailto:investorrelations@camellia.co.uk) .

 

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