I am pleased to present my second report as Chief Executive.

As set out in the Chairman’s statement, the only major structural change to the Group this year was the decision to withdraw from our investment in Duncan Lawrie. A combination of lower interest rates, a weaker housing market and the consequent need to inject significantly more capital than we had anticipated led to the decision to dispose of this operation.

Now that the sale of the asset management division of Duncan Lawrie has received the relevant regulatory approvals for the change of control, the transaction is expected to complete in May 2017 we will then be able to finalise the process of formally winding down the bank and extract the capital that the Group has invested. This capital will then be available for investment in the Group’s remaining operations, subject to ensuring that we are able to meet our obligations as regards the pension fund deficit described more fully in the Chief Financial Officer’s report on page 16.

I am pleased to report improved performance from all three remaining divisions, reflecting the increased focus on these businesses arising from the managerial changes announced last year.

As a result of the decision to withdraw from Duncan Lawrie, the Group’s remaining assets in Banking and Financial Services consist only of associate companies and therefore this is no longer reported as a separate division.



The overall Group strategy, which is set out on page 18, remains unchanged with each division expected to perform against an agreed divisional strategy which sets out the goals and targets for the short and medium term and are set out below.



The Agriculture division strategy remains the same with the focus on our core crops of tea, macadamia and avocado where we have scale and geographic spread and therefore the opportunity to build a significant market presence.

Agriculture is the largest division, accounting for c80% of Group turnover and is the area where we have the greatest critical mass and see the best opportunities for the Group at the current time. It is therefore likely that this will be a focus for future investment.



Engineering North.

AJT Engineering continues to be impacted by the low oil price and the sharply reduced investment from the oil industry in the North Sea. Significant steps have been taken to reduce the size of the workforce, cut costs and diversify the business into other industries. Good progress has been made in this direction in both the rail and hydroelectric sectors, but the future for AJT Engineering will depend on a recovery of the oil sector in the North Sea.

Engineering South

TThe principal driver of growth in Engineering South continues to be Abbey Metal Finishing and its joint venture in Germany, Atfin which returned to profitability last year. Neither is yet at full capacity and both companies will continue to grow their We intend for the remaining businesses in Engineering South to continue to grow organically over the coming years.



UK. ACS&T operates as a niche high quality operator in the storage and distribution of frozen foods together with some ambient food service provision as demand and space allows. The business will expand and invest where appropriate to serve the needs of its customers.


Affish and Wylax, our fish trading and distribution businesses in the Netherlands, returned to profitability last year following the change in management early in 2016. They continue to work on their medium term strategy.



Investment Portfolio.

The Group has a portfolio, principally of listed investments, the strategy for which remains to invest for the long term 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.


The Group has collections of art, philately and manuscripts which are regularly reviewed and are added to or sold as appropriate in order to enhance the collections.


The Group has three associate companies in the financial services sector of which BF&M, the listed Bermudian insurance business is the most significant, our shares in this company having a market value of £52.2 million at 31 December 2016. With all our associates, we continually monitor our investment and may increase or decrease our holding in the future.



Mature area
Immature area
Volume 2015*
Volume 2014*

*Estate volumes only, in addition 20.3 million kg of tea was produced for smallholders (2015: 17.8 million kg) and a further 5.4 million kg for managed clients (2015: 4.7 million kg).


Our Indian tea operations saw a record production of 28.6 million kg, 10.9% higher than 2015 as a result of excellent growing conditions, particularly in Assam. Average tea prices in 2016 were up 1.7% in Rupee terms against 2015 levels. However, we believe that prices would have been higher had it not been for the problems with the implementation of the Pan India Tea Auction and the well-publicised impact of Indian demonetisation. Costs of labour continue to rise at a higher rate than prices and therefore we are investing in the mechanisation of field operations and the automation of our factory processes to improve productivity and reduce costs. In 2016, all spraying activities were mechanised along with some pruning and plucking.

Packet tea volumes were maintained at similar levels to last year and average selling prices were 3.1% higher than those of 2015.

All Assam and Darjeeling estates are Rainforest Alliance certified and all factories are FSSC 22000 (Food Safety System Certification) certified.


Production on our Bangladesh estates was also at record levels, being 36.9% higher than in 2015 due to benign weather conditions and the significant investments made over the last few years to improve yields. Average prices achieved were up 11.8% on 2015 reflecting the continuation of high duty tariffs on imported tea and strong local demand. However, there was a notable decline in prices towards the end of the year as the Chittagong auction became over supplied and this has continued during the first quarter of 2017.

During 2016 infilling was completed on the previous four years’ replanting. A multiyear project to develop reservoir capacity for irrigation is underway.


Kenya also achieved record production in 2016, but as a result of excellent growing conditions across Kenya (total country production was 19% up on 2015), the average tea price was 21.4% lower than in 2015. 95% of Kenyan teas are exported and prices are subject to significant volatility linked to production volumes. Fluctuations in the Kenyan tea price have a major impact on Group profitability. During the year, the Labour Court awarded an increase of 32% in wage rates spread over 2014 and 2015, but this remains subject to appeal and further negotiations with the trade unions.

During 2016 we increased the area of production under mechanical harvesting as well as increasing the level of automation in some of our factories. All factories are FSSC 22000 certified and all estates and outgrowers are Rainforest Alliance certified.

To date in 2017 there has been a drought across the entire tea producing area of Kenya, resulting in reduced volumes of crop and an increase in prices. 2017 will see a general election and continued discussions with trade unions and the Labour Court to resolve the ongoing impasse on wages.


Production in Malawi also increased in 2016 and consequently pricing was down 6.4% on 2015. Production costs per kg were higher than those of 2015 despite the higher crop, reflecting inflationary pressure through substantial currency devaluation and significant wage increases. With our backing and support, the tea industry in Malawi has engaged in an industry revitalisation programme which looks to achieve, inter alia, a rise in wages and improvement in production levels as well raising the quality and price of Malawi’s tea. To date there has been good progress in engaging with the trade union resulting in the signing of the first ever collective bargaining agreement in the industry’s history in Malawi.

All estates and outgrowers are Rainforest Alliance certified, two factories have UTZ certification and three factories have FSSC 22000 certification.

2017 started with good growing conditions due to a normal wet season and prices have remained reasonably firm on the back of reduced volumes from Kenya. In 2016 we started producing a green tea which has been well received by the market, and we will be looking to increase volumes in 2017.


 Mature area
Immature area
Volume 2015
Volume 2014
South Africa804276265574

Macadamia production in 2016 was significantly reduced in Malawi and South Africa due to the drought that affected both regions and the consequential reduction in nut size. In Kenya the estates are still predominantly immature and production is increasing in line with the maturity of the trees.



Average prices for macadamia in 2016 were up 2.1% on 2015 levels, which reflected the reduced volumes across the industry brought on by the droughts in South Africa and Malawi. The Group has created a brand ‘Maclands’, to promote and market our macadamia nuts to wholesalers and food manufacturers.




Production of macadamia nuts was down 26.8% on the previous year due to the impact of dry weather conditions. This has also impacted 2017 volumes which are significantly lower than those of 2016. The processing factory has been FSSC 22000 certified.

South Africa

Volumes in 2016 were 53.8% below those of 2015, again reflecting the drought during 2015. Despite more normal rainfall in the last few months, the drought conditions experienced in 2016 are also likely to have an adverse effect on the crop for 2017. The ongoing development of the Mambedi Estate to macadamia orchards was delayed due to the drought but is expected to resume in 2017. The processing factory successfully completed the second phase of upgrading and has been FSSC 22000 certified.


New plantings continued with 97 Ha being planted in the year. Construction of a macadamia processing factory, which began in April 2015, was completed in time to process the 2016 harvest and has operated ahead of expectations. The facility has been FSSC 22000 certified.

As with Malawi and South Africa 2017 yields are expected to suffer from the dry weather experienced in 2016 such that overall volumes in Kenya are expected to be similar to that of 2016



      Mature area
Immature area
Volume 2015*
Volume 2014*

* Estate volumes only. In addition 1.8 million kg of smallholder fruit was packed (2015: 2.3 million kg)



Good rainfall supported a satisfactory crop for the year, being 2% down on 2015 volumes (including smallholders). Average prices for Hass avocados in 2016 were at record levels (up 28.8% on 2015) as a result of demand from the European market. New plantings totalling 39 Ha of orchard were established and this development will continue in 2017. The avocado operations are FSSC 22000, Tesco’s Natures Choice and GLOBAL G.A.P.certified and Rainforest Alliance will be added to this list in 2017. The smallholder initiative is gaining momentum with the number of registered growers increasing each year.


Mature area
Immature area
Volume 2015
Volume 2014
Rubber (Bangladesh)1,610365638629
Citrus (USA)16984,2934,884
Arable (Brazil)3,374 –24,07825,888
Pineapples (Kenya)52
Wine grapes (South Africa)6211625718
Pistachio (USA)131678
Almonds (USA)56_




* 2015 was an ‘off year’ for Pistachios
** Volumes quoted are for conversion to value addition products rather than own use as fuel wood


Record soya production levels were recorded and the maize and soya crops in Brazil sold at significantly higher average prices than in 2015.

Sales volumes for rubber were 20% below those of 2015, however prices in 2016 were 6.8% higher reflecting increasing demand for natural latex.

Prices for California citrus were down 9.2% in the year and in common with other California based growers, our volumes were also lower.

Average prices for pistachios in 2016 were 50% lower than 2015 levels due to record crops in California. 2017 is an ‘off’ year.

Wine grape production in South Africa was down 30% on last year due to the dry weather conditions and bottled wine sale volumes were also lower. Results were in line with expectations although slightly down on the previous year.

Almond prices were reasonable despite the large crops in California and profits have been included in Group profit in 2016 for the first time.

Prices for fresh pineapple production in Kenya were marginally up on 2015.

Forestry operations continued to produce satisfactory volumes for fuel wood and value addition products.

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 £29.9 million (2015: £26.7 million) on turnover of £207.1 million (2015: £186.5 million).



Engineering North

Engineering North had a difficult year with the low oil price continuing to affect North Sea investment and impacting the order book for AJT Engineering in Aberdeen. Turnover at AJT Engineering fell from £9.6 million in 2015 to £6.9 million in 2016. With the oil price remaining low, the company is braced for another difficult year although it is to be hoped that the investment made in diversification into other sectors referenced above will start to show results this year. AJT Engineering achieved ISO 14001:2015 certification.

Engineering South

Abbey Metal Finishing returned to an operating profit in 2016 for the first time since the move to its new facility in 2010. Demand for its services in the aerospace sector shows no sign of slowing down and the company is now working on projects for Airbus, Rolls-Royce and SAFRAN. Its subsidiary, Atfin in Germany, has also now been approved by a number of key customers including Rolls-Royce, MTU and Aubert & Duval, and moved into profit in the last quarter of 2016.


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.

In total, the Engineering division made a trading loss of £2.6 million (2015: trading loss £5.5 million) on turnover of £18.8 million (2015: £25.8 million).



ACS&T saw turnover fall by 8.7% following a withdrawal from unprofitable business and as a result profits were in line with those of 2015. Capacity utilisation to date in 2017 has been significantly higher than normal for the time of year. ACS&T achieved ISO 14001:2015 certification.

In the Netherlands, both Affish and Wylax experienced challenging trading conditions, particularly as a result of currency movements, the impact of which had to be partially absorbed, but they have both returned to profitability.

In total the Food Service division made a trading profit of £0.8 million (2015: £0.7 million) on turnover of £31.6 million (2015: £31.9 million).



Investment Portfolio

Despite the significant fluctuations in both global equity and currency markets the value of the portfolio increased, assisted by the relative weakness of sterling. During the year we divested our long term holding in Ascendant Group and a number of additions and disposals were made across the portfolio. The gains on sale for the year were £1.5 million (2015: £0.4 million). The total value of the portfolio at 31 December 2016 was £37.2 million (2015: £30.6 million).

Investment Property

The site previously occupied by Loddon Engineering was transferred to investment property and has been let this year.Improvements were also carried out on certain properties. Following refurbishment, 6 Hobart Place, London is now available for rent.


The collections are held at cost. A number of minor additions and disposals were made during the year.


BF&M experienced strong underlying trading in 2016. However, claims arising from the damage caused by hurricanes Matthew in the Bahamas and Nicole in Bermuda reduced profits for the year by Bermudian Dollar 10.1 million and together with claims arising from a significant fire in Bermuda led BF&M to report a profit before tax of Bermudian Dollar 17.9 million (2015: Bermudian Dollar 30.1 million). BF&M has been accounted for as an associate since 1 July 2015.

Our two associate companies in Bangladesh, United Insurance and United Finance, saw profits lower than 2015 reflecting increased competition in the insurance industry and lower interest rates respectively.

In total, the share of the results of associates amounted to £5.1 million (2015: £4.2 million).

Discontinued Operation – Duncan Lawrie

During the year, the Board announced the discontinuation of Duncan Lawrie’s operations. The UK loan book has been sold to Arbuthnot Latham and we also announced the sale of the UK asset management division to Brewin Dolphin, subject to regulatory approval. Regulatory approval for the change of control has since been received.

In the Isle of Man, agreement has been reached with First Names Group to manage the trust business for a period of 6 months. During this time, the clients will be asked to transfer their business to First Names Group. An agreement has also been signed with Canaccord Genuity for the sale of the Isle of Man asset management business.

An orderly wind down of Duncan Lawrie’s deposit taking and other banking operations in the UK and Isle of Man is underway. Duncan Lawrie is fully funded to return all cash balances to clients.



The Group is present in many jurisdictions, and is subject to local legislation. The following issues either have had, or may have, a material impact on the Group:

  • As stated last year, 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. There has been no update on this proposed legislation and therefore the impact on the Group is hard to assess.
  • The Board 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 but we remain concerned about the costs of imports, particularly tea, on demand and the prices paid to producers.
  • 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 general election in Kenya is due to take place on 8 August 2017. Historically these have been occasions of significant and sometimes violent unrest and we continue to monitor the situation carefully.



We continued to invest in our assets during the year and £10.2 million was spent on property, plant and equipment and investment property (2015: £19.4 million) including the following key projects:

  •  Completion of the macadamia cracking facility in Kenya
  • Phase 2 of the upgrade to the macadamia cracking facility in South Africa
  • Significant upgrades to the winery in South Africa
  • Improvements at nine tea factories
  • Additional irrigation facilities in India, Bangladesh, Kenya, Malawi and South Africa including the creation of three new reservoirs in Bangladesh
  • Improvements to our investment property portfolio.

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 2016:

  •  65 Ha (2015: 36 Ha) of new avocado plantings were completed in Kenya
  • 97 Ha (2015: 158 Ha) of new macadamia plantings were carried out in Kenya, 47 Ha (2015: 81 Ha) in South Africa and 12 Ha (2015: 5 Ha) in Malawi.



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 that the environments where we do business are continually protected and improved. Our focus is on the long-term stability, security and continuity of our businesses and those communities.

In order to achieve this, we invest in, monitor and report on both Environmental and Social sustainability initiatives across all our divisions. In 2016, for the first time the Group compiled its global environmental footprint beyond CO2 emissions. We measured and reviewed our impact in Greenhouse Gas emissions (GHG), Water and Waste, the results of which are summarised below. The Group is currently developing a range of longterm reduction targets on which we will report in due course.

Whilst monitoring and reducing our environmental footprint is critical, so too is ensuring the well-being of the communities in which we operate and on which we depend. We refer to this as ‘social sustainability’. 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 traceability and accreditation. 63% of our tea gardens are RFA certified and all our macadamia and avocado 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 those metrics and also how they have developed since 2013.

Energy & Carbon2016201520142013
Total Energy Consumed (TWh)1.22
Total Carbon Emissions (tonnes CO2e)1224,227211,603212,821213,631
Scope 1 (tonnes CO2e)161,620151,315149,539152,561
Scope 2 (tonnes CO2e)62,65760,28863,28161,070
Total water withdrawal (million m3)240.134.937.631.8
Total waste (tonnes)327,90827,05324,42524,304


  1. The significant increase in tea production in 2016 coupled with a lack of availability of other sources of power has led to an increase in Greenhouse Gas emissions in 2016 of 6.0%. Power shortages and the reliance on fossil fuels is a feature of developing countries and we are working to develop alternative, cleaner sources of energy.
  2. The continued drought in Malawi and South Africa has increased the irrigation requirements of our Agricultural businesses.
  3. Compost from agriculture accounts for over 80% of our waste impact. We are working to reduce waste and improve our recycling rates across all business units.


Some of the initiatives we are undertaking include:

  • Pursuing operational efficiency, we are sharing energy management knowledge and expertise across our operations.
  • Investment in renewable energy via solar projects in India and Africa, and environmental management systems adopted by all EU businesses.
  • Developing modern water management solutions in many of our operations, such as micro-sprinklers in Africa and Regulated Deficit Irrigation. We build damns to collect water and support local wildlife and create wetlands to improve waste water quality before release into the waterways. Our work in this area is recognized by GLOBAL G.A.P . who awarded their International Award for Sustainable Water Use to our ‘Stretching the Rains’ project at Kakuzi, Kenya.

Social Sustainability

The key areas of social sustainability that we consider important are access for our employees to a fair wage and for them and their families to education, healthcare and housing. The table below shows the provision of schools and healthcare by the Group in 2016. In addition, we provide housing for over 200,000 people.

School children educated annually31,942
Patients treated annually559,000

*The funding and operation of schools and hospitals, provided for our workers 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 initiatives in Corporate Social Responsibility (CSR) across the group, we contribute to improved health and nutrition, hygiene and sanitation of our communities. We seek to optimise local infrastructure by supporting roads, access to water, local healthcare initiatives and education projects. This year, we have actively supported Forum for the Future’s Tea 2030 and Ethical Tea Partnership’s Malawi 2020 tea revitalisation projects. Our continued focus on developing sustainable housing for our working communities is reflected in major housing renewal projects in Malawi, Kenya and India.


On an ongoing basis, the majority of our tea estates in India and Bangladesh have a hospital or a clinic and in India and Bangladesh we have 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 companies.

Pursuing our vision to contribute to greater health, every year we engage in projects which contribute to the health of the local community. For example this year we helped fund a new paediatric wing in a local hospital in Malawi and over 300 special needs children were educated at the Goodricke School for Special Education and Interlink Calcutta (of which we fund 50% of the running costs).


Central to our social initiatives is the ability to provide the opportunity for development for all. We provide schools and crèches in areas where we operate, either by building and running the schools or by supporting state educational projects in our communities. We support almost 32,000 children each year through education initiatives.


Demonstrating our commitment to responsible sourcing, we developed the first, fully commercialised, smallholder empowerment scheme in East Africa, SIREET. This and other smallholder programmes form an integral part of our businesses in Kenya, Malawi and India.

Amongst other initiatives, we processed 86.3 million kg of green leaf tea and 1.6 million kg of avocados were packed and exported for smallholders during the year, we also ran agricultural practice training days. These initiatives enabled over 20,000 local farmers to improve their earnings by benefiting from our agricultural expertise, infrastructure and access to market.


The remuneration of workers in the tea industry remains a serious challenge. Resolving the issue of low pay in this industry is a complex task which has to involve growers, buyers, retailers, NGOs and governments but ultimately will not be addressed until the price of a cup of tea adequately reflects the resources required to produce it. We believe in taking an active role in this process and will continue to back up our principles with action.

As a Group we are committed to paying fair wages, benefits and allowances in accordance with local legislation and trade union agreements and have received certifications from UTZ, Fairtrade and the Rainforest Alliance, which require an audit of the Group’s employment practices as part of maintaining the accreditations. We are also a key 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.


In summary, I am pleased with the performance of the Group this year, albeit there remains much to do. Clearly the disposal of our interest in Duncan Lawrie was disappointing but the improved performance in all the continuing divisions is encouraging. Furthermore the cash that will become available from the closure of Duncan Lawrie, together with the substantial cash balances available elsewhere in the Group, will allow us to take advantage of the opportunities that will come. Inevitably many of the markets that we are in will continue to face challenges but I believe that we are well placed to face these and confident in our ability to continue to grow the business.

Tom Franks
Chief Executive
26 April 2017

Our 2021 Annual Report is now available.