Origin Regulatory News (OGN)

Origin Enterprises plc

INTERIM RESULTS STATEMENT

Solid H1 delivery despite challenging northern hemisphere weather conditions and market dynamics

5 March 2024: Origin Enterprises plc ('Origin' or 'the Group'), the international Agri-Services group, providing specialist agronomy advice, crop inputs and digital solutions to promote sustainable land use, today announces its interim results for the half year ended 31 January 2024 ('H1 2024').

Highlights

· Underlying business volumes, excluding crop marketing, reduced by 2.6% due to adverse weather conditions impacting autumn/winter planting activity in the northern hemisphere

· Expected correction in global feed and fertiliser raw materials pricing contributed to the decrease in H1 2024 Group revenues to ?854.9 million and operating profit of ?12.7 million, set in the context of a very strong H1 2023 performance driven by rising commodity markets and strong on-farm demand

· Diversification of profit drivers, geographic and sectoral, continues to reduce the impact of adverse weather events in our core UK and Ireland market on our overall profitability

· Acquisition of Groundtrax Systems Limited further enhances our product capability in the Amenity, Environmental and Ecology portfolio

· Cumulative acquisition spend of ?54.2 million in last 12 months, including the completion of put/call option for the residual 35% interest in Fortgreen in Latin America, bringing it under 100% control

· In addition, there was a partial payment of suspended amounts owing in compliance with international sanctions of ?34.3 million, contributing to an increase in net bank debt4 to ?215.8 million

· Higher interest rates in the period increased finance costs to ?8.8 million

· Adjusted diluted earnings per share of 3.75 cent (H1 2023: 8.70 cent)

· Interim dividend of 3.15 cent per share (H1 2023: 3.15 cent per share)

· ?20.0 million FY24 share buyback programme approximately 27% complete

· Appointment of TJ Kelly as Divisional Managing Director of Amenity, Environment and Ecology from 1 August 2024 and a search process to recruit a new CFO is well advanced. TJ will continue as an Executive Director of the Board

1  Before amortisation of non-ERP intangible assets and exceptional items

2  Profit after interest and tax

3  Before amortisation of non-ERP intangible assets, net of related deferred tax (2024: ?5.2 million, 2023: ?4.7 million) and exceptional items, net of tax (2024: charge of ?2.7 million, 2023: charge of ?1.4 million)

4  Net bank debt excludes IFRS16 Lease liabilities

Commenting on the results, Origin Chief Executive Officer, Sean Coyle said:

"The Group delivered a solid operating profit in H1 2024 compared to a very strong H1 2023 performance. The H1 result was achieved despite challenging planting and weaker in-field conditions across our markets. This performance has been underpinned by the Group's continued focus on the strategic diversification of its earnings base.

A challenging planting profile and a downward-moving price environment resulted in reduced early season volumes across our portfolio, with Ireland and the UK, and Continental Europe experiencing more challenging conditions. Latin America and our Amenity, Environmental and Ecology businesses delivered solid results despite also being impacted by fertiliser price dynamics.

The integration of recent complementary acquisitions in the Amenity, Environmental, and Ecology division continues to progress, including our most recent acquisition, Groundtrax Systems Limited, which extends our product range and offering in the sustainable urban drainage systems sector. Our ambition is for this division to represent 30% of Group operating profit by the end of FY26 and on 1 August 2024 TJ Kelly will move from the CFO role to take up a role as Divisional MD reflecting this ambition.

Outlook

On-farm sentiment remains cautious, as growers shift towards spring planting and seek to optimise yields from a reduced autumn/winter planted area. Whilst progress in spring planting and the main application period in the months through to the end of May will be key to full year results, we now anticipate full year earnings in the range of 44c to 49c, reflecting the effects of adverse weather conditions. We continue to invest in broadening our product portfolio and diversifying our earnings. Further guidance will be provided with our Q3 Trading Update on 13 June 2024."

ENDS

This announcement contains inside information. The person responsible for arranging release of this announcement on behalf of Origin is Barbara Keane, General Counsel & Company Secretary.

Conference Call and Webcast details:

The management team will host a live conference call and webcast, for analysts and institutional investors today, 5 March 2024, at 08:30 (Irish/UK time). Registration details for the Conference Call and Webcast can be accessed at: www.originenterprises.com

Alternatively, please contact FTI Consulting by email at originenterprises@fticonsulting.com

Participants are requested to dial in 5 to 10 minutes prior to the scheduled start time.

Enquiries

About Origin Enterprises plc

Origin Enterprises plc is an international Agronomy-Services group, providing specialist advice, inputs, services and digital solutions to promote sustainable land use. The Group has leading market positions in Ireland, the United Kingdom, Brazil, Poland and Romania. Origin is listed on the Euronext Growth (Dublin) and AIM markets of the Irish and London Stock Exchanges.

Euronext Growth (Dublin) ticker symbol: OIZ

AIM ticker symbol: OGN

Website: www.originenterprises.com

INTERIM RESULTS STATEMENT

Financial Review - Summary

Origin delivered an adjusted diluted earnings per share3 in H1 2024 of 3.75 cent compared to 8.70 cent in H1 2023. On a like-for-like basis (excluding the impact of currency movements and acquisitions) the underlying decrease in adjusted diluted earnings per share3 was 6.08 cent. 

Group revenue

Group revenue was ?854.9 million in H1 2024 compared to ?1,180.0 million in the corresponding period last year, a decrease of 27.6%. On a constant currency basis, revenues decreased by ?336.3 million (28.5%).

The decrease in underlying business volumes, excluding crop marketing, was 2.6% in H1 2024 compared to H1 2023 (increase of 1.2% including crop marketing).  

Operating profit1

Operating profit1 in H1 2024 was ?12.7 million compared to ?20.3 million in H1 2023. On an underlying basis, the decrease in operating profit year-on-year was ?9.4 million. 

Associates and joint venture2

Origin's share of profit after interest and taxation from associates and joint venture amounted to ?1.4 million, a ?0.2 million decrease on H1 2023. 

Net bank debt and financing costs

Net bank debt5 at 31 January 2024 was ?215.8 million compared to ?130.9 million at 31 January 2023 and is 2.09 times EBITDA4 for the twelve months to 31 January 2024.

The increase in net bank debt, for the 12-month period ended 31 January 2024, reflects an acquisition spend of ?54.2 million, including the settlement of the Fortgreen put/call option, payment of c.50% of outstanding suspended supplier amounts in compliance with sanctions regimes amounting to ?34.3 million and cumulative shareholder returns of ?29.5 million.

Net finance costs amounted to ?8.8 million compared to ?8.6 million in H1 2023. The increase in net finance costs in the period was primarily driven by higher interest rates across each of the markets in which the Group operates.

At period end, the Group's key banking covenants are as follows:

Working capital

Following the seasonal investment in working capital in the period, the net cash outflow from operating activities was ?214.3 million (H1 2023: ?131.5 million) and there was an increase in working capital at period end to ?164.4 million (H1 2023: ?138.3 million). The period end working capital position includes the residual net impact of trade payables which have been suspended in accordance with international sanctions imposed by authorities in response to the Russian invasion of Ukraine in 2022. We continue to closely monitor the situation with regard to sanctions and act accordingly.

Sustainability

We are delighted to announce our participation in a £3.3 million Nitrogen Use Efficiency project sponsored by the Department for Environment, Food and Rural Affairs in the UK to optimise UK grassland farming's mineral nitrogen fertiliser use. As the exclusive fertiliser company in this project, we will leverage our expertise in crop nutrition and digital solutions to enhance farm efficiency and environmental enhancement. Progress on the delivery of our environmental objectives was sustained in the period and we maintained our CDP rating at B.

Dividend

We are pleased to announce that an interim dividend of 3.15 cent per share (H1 2023: 3.15 cent per share) will be paid on 21 June 2024 to shareholders on the register on 31 May 2024. 

Share Buyback Programme

On 21 November 2023 the Group commenced a share buyback programme to repurchase up to ?20.0 million of ordinary shares. The programme is progressing to plan and is currently approximately 27% complete.

Corporate Development

Subsequent to the period end, we completed the acquisition of Groundtrax Systems Limited, a leading supplier of ground protection and sustainable urban drainage systems, which extends our product range and offering in the Amenity sector. During the period we completed the Fortgreen put/call option, bringing it under 100% control.

Appointment of Divisional Managing Director of Amenity, Environmental and Ecology Services

We are pleased to announce the appointment of TJ Kelly, Group CFO, to the newly established role of Divisional Managing Director of our Amenity, Environmental and Ecology Services division, effective 1 August, 2024. In line with our strategic objectives, and consistent with recent acquisitions, Origin is committed to accelerating its presence in amenity, environmental and ecology markets. Providing sustainable ecological and environmental solutions in the emerging nature economy, in areas such as forestry, landscaping and habitat conservation, represents a significant growth opportunity in existing and new geographies. Our ambition is for this division to represent 30% of Group operating profit by the end of FY26. TJ's appointment to this position reflects this ambition.

The recruitment of a new Group CFO is well advanced and a further update will be provided in due course. To ensure an orderly transition, TJ will continue as Group CFO until the appointment of his successor. In his new role, TJ will continue as an Executive Director of the Board.

1 Operating profit and Group operating profit are stated before amortisation of non-ERP intangible assets and exceptional items

2 Profit after interest and tax

3 Before amortisation of non-ERP intangible assets, net of related deferred tax (2024: ?5.2 million, 2023: ?4.7 million) and exceptional items, net of tax (2024: charge of ?2.7 million, 2023: charge of ?1.4 million)

4 Net debt/EBITDA ratio as per the requirements of the Group's syndicated bank loan agreement

5 Net bank debt excludes IFRS16 Lease liabilities

Review of Operations

Group Overview

Origin delivered a solid operating profit performance in H1, set against an exceptional H1 FY23. Group revenue decreased by 27.6% to ?854.9 million on a reported basis and by 28.5% on a constant currency basis. Operating profit and adjusted fully diluted earnings per share reduced to ?12.7 million and 3.75 cent, respectively. 

The reduction in underlying business volumes, excluding crop marketing, was 2.6% in H1 2024 compared to H1 2023 (increase of 1.2% including crop marketing).

Ireland and the United Kingdom

Ireland and the United Kingdom recorded a decrease in revenues of ?237.9 million in the period. Operating profit reduced from ?2.9 million in H1 2023 to an operating loss of ?3.1 million in H1 2024.

The decreased contribution is a result of a reduced winter planting profile impacting early season volumes across the crop protection and fertiliser portfolios, together with the impact of a further correction in global feed and fertiliser raw material pricing. These factors contributed to a reduction in underlying business volumes of 5.7% in the period.

Integrated On-Farm Agronomy Services

Integrated On-Farm Agronomy Services saw reduced revenues and contribution in the period. Persistent wet weather across the period resulted in delayed in-field activity, and combined with a downward moving price market, led to less purchasing on-farm.

The challenging weather conditions encountered across the UK to date has impacted the planting profile with a shift to spring planting expected. Total autumn and winter plantings for principal crops are estimated to be 20% behind last year at 2.1 million hectares, with the expected area of winter wheat back 24% to 1.4 million hectares, however on-going rainfall puts the viability of a portion of this crop at risk.

At this point in the year, combined autumn/winter and spring plantings for the 2024 crop production year are expected to be 4% behind 2023 at 4.1 million hectares.

Business-to-Business Agri-Inputs

Business-to-Business Agri-Inputs had a steady H1 2024 with reduced revenues, compared to H1 2023 driven by the continued correction in global feed and fertiliser raw material pricing. Volumes have also been impacted by the adverse weather experienced to date.

Fertiliser

Fertiliser delivered a satisfactory result in H1 2024, with reduced volumes set in the context of the continuing global correction in fertiliser raw material pricing. Despite these challenges, the Group continues to execute strongly across the business. 

In addition to focusing on growing its speciality and bespoke nutrition product ranges, the Group continues to maintain a focus on sustainable land use and soil health and we will continue to invest in innovative products to meet evolving needs of our customers.

Feed Ingredients

Feed Ingredients delivered a satisfactory performance in H1 2024, in line with expectations.

The Group's animal feed manufacturing associate, John Thompson & Sons Limited, in which the Group has a 50% shareholding, also delivered a solid performance in the period.

Amenity, Environmental and Ecology

The Group's Amenity, Environmental and Ecology business delivered a good result in the period, recording increased revenues and operating profit compared to the prior year. The result reflected a positive operating profit from the Group's recent acquisitions in this sector, with integration progressing to plan. 

Continental Europe1

Continental Europe had a satisfactory start to the year in the seasonally quieter first half, delivering an operating profit of ?1.5 million. Cautious farm sentiment and raw material price uncertainty has resulted in delayed on-farm purchasing decisions in the period compared to 2023 which had seen stronger early season demand in anticipation of on-farm price increases. Consequently, excluding crop marketing volumes, underlying business volumes decreased by 6.1% in H1 2024, compared to H1 2023. 

Poland

Poland had a solid start to the year despite reduced volumes and contribution across the business, in the seasonally quiet H1. In 2024 we have experienced more cautious farm sentiment reflecting weather and output price concerns.

Autumn and winter plantings are forecasted to be marginally ahead of FY23 at 5.6 million hectares. Crop establishment to date is generally good across Poland, with the total cropping area for the 2024 growing season expected to be broadly equivalent to last year at 9.0 million hectares. 

Romania

Romania had a slow start to the year, recording reduced volumes and earnings compared to the prior period, reflecting cautious farm sentiment from weather and output price concerns.

Dry conditions in autumn led to delayed planting and autumn and winter plantings are expected to be 5% behind of the prior year at 3.4 million hectares. Combined winter and spring plantings for the growing season are currently forecasted to be in line with last year at 8.4 million hectares.

Latin America

Latin America delivered a solid performance in the period, recording an increase in underlying business volumes of 32.5%. The Group continues to invest in the sales organisation and operations infrastructure to meet future growth plans, including during the start-up phase of our F1rstAg biologicals business. Volume growth in our lower margin Controlled Release Fertiliser business was stronger than our Physiology and Nutrition business, contributing to a negative mix effect on margin. Market pricing also fell, reflecting the underlying downward movement in global fertiliser raw material prices.

As a result, operating profit decreased marginally to ?13.9 million in H1 2024 from ?14.2 million in H1 2023, with an underlying reduction of ?0.4 million.

The total cropping area dedicated to soya, Brazil's principal crop, is expected to increase by 4% on the prior year to 45.4 million hectares. The expected soya harvest is currently estimated to be 150.1 million tonnes, down from the 154.6 million tonnes in the prior year.

ENDS

Origin Enterprises plc

Condensed Interim Consolidated Income Statement

for the six months ended 31 January 2024

Origin Enterprises plc

Condensed Interim Consolidated Statement of Comprehensive Income

for the six months ended 31 January 2024

Origin Enterprises plc

Condensed Interim Consolidated Statement of Financial Position

as at 31 January 2024

Origin Enterprises plc

Condensed Interim Consolidated Statement of Financial Position (continued)

as at 31 January 2024

Origin Enterprises plc

Condensed Interim Consolidated Statement of Changes in Equity

for the six months ended 31 January 2024