Origin Regulatory News (OGN)

Origin Enterprises plc

INTERIM RESULTS STATEMENT

Strong first half performance driven by LATAM contribution and favourable planting profile

7 March 2023: 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 2023 ('H1 2023').

Financial Highlights

Strategic and Operational Highlights

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

"The Group delivered a positive revenue, operating profit and EPS performance in the first half of the year, with improved performances in LATAM and Continental Europe offsetting a reduction in operating profit in Ireland and the UK. LATAM achieved a strong volume led result, delivering a 63.7% constant currency increase in operating profit to €14.2 million.

Group revenue was €1,180.0 million for the first half, an increase of 34.5% on a reported basis and 35.5% at constant currency. Operating profit in H1 2023 was €20.3 million compared to €11.1 million in the same period last year, helped by favourable currency movements. On an underlying basis, the increase in operating profit year-on-year was €6.2 million. 

In Ireland and the UK, a favourable planting profile resulted in solid early season volumes across our seed portfolio, while overall fertiliser demand reduced due to higher global raw material prices. In Continental Europe, Poland and Romania saw strong demand in the crop protection and seed portfolios, with an element of forward buying by growers, while LATAM delivered a strong underlying performance across its product portfolio.

Net debt increased to €130.9 million (31 January 2022: €53.7 million) reflecting a commodity inflation led increase in working capital, cumulative share buyback spend of €53.1 million and acquisition investment of €12.7 million in the 12 month period. Net debt is 1.03 times EBITDA for the twelve months to 31 January 2023, well within our key covenant of 3.5 times. 

During the period, we progressed our M&A strategy with the acquisition of Keystone Environmental, the integration of which is progressing to plan. Today we also announce the acquisition of Agrigem Limited, the largest independent specialist supplier and advisor of ground care products throughout the UK and Ireland, which extends our product range and broadens our offering in the Amenity sector.

We continue to accelerate our sustainability agenda, and progress on the delivery of our environmental objectives was recognised with upgrades of our CDP rating to B in December 2022 and more recently, an upgrade of our MSCI rating to A in February this year. During the period, we also formalised our climate transition plan to 2032, measured our Scope 3 emissions and submitted Scope 1 to Scope 3 emissions targets for validation by the Science Based Targets initiative.

Outlook

In the seasonally quieter H1 FY23, the Group delivered a strong start to the year, with good autumn/winter planting levels, generally favourable weather conditions experienced to date and a strong H1 contribution from LATAM, setting a solid foundation for the rest of the financial year. Origin is well positioned to deliver on the financial and strategic targets outlined in our Capital Markets Day in May 2022, and we will provide an update on full year guidance at the time of the Q3 Trading Update on 15 June 2023."

ENDS

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 (2023: €4.7 million, 2022: €4.6 million) and exceptional items, net of tax (2023: charge of €1.4 million, 2022: gain of €2.8 million)

4  Net bank debt excludes IFRS16 Lease liabilities

Conference Call and Webcast details:

The management team will host a live conference call and webcast, for analysts and institutional investors today, 7 March 2023, 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, Romania and Ukraine. 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 2023 of 8.70 cent compared to 4.99 cent in H1 2022. On a like-for-like basis (excluding the impact of currency movements and acquisitions) the underlying increase in adjusted diluted earnings per share3 was 1.75 cent. 

Group revenue

Group revenue was €1,180.0 million in H1 2023 compared to €877.1 million in the corresponding period last year, an increase of 34.5%. On a constant currency basis, revenues increased by €311.5 million (35.5%).

The decrease in underlying business volumes, excluding crop marketing, was 4.6% in H1 2023 compared to H1 2022 (and 4.5% including crop marketing).  

Operating profit1

Operating profit1 in H1 2023 was €20.3 million compared to €11.1 million in H1 2022. On an underlying basis, the increase in operating profit year-on-year was €6.2 million. 

Associates and joint venture2

Origin's share of the profit after interest and taxation from associates and joint venture amounted to €1.6 million, a €0.3 million increase on H1 2022. 

Net bank debt and financing costs

Net bank debt5 at 31 January 2023 was €130.9 million compared to €53.7 million at 31 January 2022 and is 1.03 times EBITDA4 for the twelve months to 31 January 2023.

The increase in net bank debt, for the 12 month period ended 31 January 2023, reflects a commodity inflation led increase in working capital, cumulative share buyback spend of €53.1 million and acquisition investment of €12.7 million. Net finance costs amounted to €8.6 million compared to €4.8 million in the corresponding period last year. The increase in net finance costs in the period was driven by a higher average net debt level combined with 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 €131.5 million (H1 2022: €41.5 million) and there was an increase in working capital at period end to €138.3 million (H1 2022: €58.9 million). The year-on-year net working capital movement primarily reflects commodity price inflation and targeted growth investment. 

The period end working capital position includes the 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

The Group continues to accelerate its sustainability agenda through our 'Nurturing Growth' framework and to implement our Environmental Management System across our business units. Progress on the delivery of our environmental objectives was recognised with upgrades of Origin's CDP rating from C to B in December 2022 and more recently, an upgrade of our MSCI rating to A in February this year. During the period, the Group also formalised its climate transition plan to 2032, measured its Scope 3 emissions and submitted Scope 1 to Scope 3 emissions targets for validation by the Science Based Targets initiative.

The Group continues to evaluate climate related risks and opportunities within our business model in line with Taskforce on Climate-related Financial Disclosures. In addition to ongoing work to reduce Origin's environmental footprint, management remains focused on developing a model for sustainable land use that underpins food security, tackles climate change, and restores biodiversity and ecosystems.

Dividend

We are pleased to announce that an interim dividend of 3.15 cent per share (H1 2022: 3.15 cent per share) will be paid on 23 June 2023 to shareholders on the register on 2 June 2023. 

Share Buyback Programme

On 28 September 2022 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 80% complete.

Corporate Development

During H1 2023, the Group announced the acquisition of Keystone Environmental Limited ('Keystone'), a leading UK-based ecology solutions provider specialising in the design, planning and delivery of complete ecological solutions. The integration of Keystone is progressing to plan and the Keystone business is performing in line with expectations.

Today we are announcing the acquisition of Agrigem Limited ('Agrigem'), the largest independent specialist supplier and advisor of ground care products throughout the UK and Ireland. Agrigem is an excellent strategic fit for Origin and extends our Amenity offering in a segment we expect will grow further in the coming years.

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 (2023: €4.7 million, 2022: €4.6 million) and exceptional items, net of tax (2023: charge of €1.4 million, 2022: gain of €2.8 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 strong financial performance in H1 with improved performances in LATAM and Continental Europe set against a reduction in operating profit in Ireland and the UK. Group revenue increased by 34.5% to €1,180.0 million on a reported basis and by 35.5% on a constant currency basis. Operating profit and adjusted fully diluted earnings per share grew to €20.3 million and 8.70 cent, respectively. 

The reduction in underlying business volumes, excluding crop marketing, was 4.6% in H1 2023 compared to H1 2022 (and 4.5% including crop marketing).

Ireland and the United Kingdom

Ireland and the United Kingdom recorded an increase in revenues of €192.3 million in the period. Operating profit reduced from €3.2 million to €2.9 million on a reported basis, and on an underlying basis operating profit was marginally lower than the prior period. A favourable planting profile resulted in good early season volumes across our seed portfolio, set against a reduction in overall fertiliser demand as a result of higher prices globally. There was a reduction in underlying business volumes of 4.5% in the period.

Integrated On-Farm Agronomy Services

Integrated On-Farm Agronomy Services recorded increased revenues and contribution in the period, supported by favourable in-field conditions and an encouraging level of winter plantings.

On-farm sentiment is reasonable, with a favourable planting profile, good early season winter crop establishment and global grain prices well above the longer-term average.

Total autumn and winter plantings for principal crops are estimated to be 0.6% ahead of last year at 2.6 million hectares. The expected area of winter wheat remains broadly unchanged at 1.8 million hectares. Planting conditions for oil seed rape have been largely favourable, with the expected planted area up 11.1% to 0.4 million hectares compared to FY22.

Combined autumn/winter and spring plantings for the 2023 crop production year are expected to be in line with last year at 4.4 million hectares.

Business-to-Business Agri-Inputs

Our Business-to-Business Agri-Inputs division had a steady start to the financial year despite overall reduced demand as the global raw material price volatility encountered in FY22 continues into FY23.

Fertiliser

Although fertiliser market pricing volatility persists, on-farm affordability has improved relative to the period in the immediate aftermath of the war in Ukraine, when markets were significantly impacted by scarcity of supply and raw material led price inflation.

While fertiliser had a satisfactory result in H1 2023, reductions in gas prices and softening grain markets are contributing to low levels of fertiliser trading activity over recent weeks. Consequently, as the application windows open, supply chain challenges are likely to persist into H2 2023. In addition to focusing on growing its speciality and bespoke nutrition product ranges, the Group continues to focus on navigating these complex and volatile supply chain challenges and pricing uncertainties into H2 2023.

Amenity

The Group's Amenity business had a good start to the year, recording increased revenues and contribution. The integration of Keystone Environmental Limited, a leading UK-based ecology solutions provider specialising in the design, planning and delivery of complete ecological solutions, is progressing to plan and performing in line with expectations.

Feed Ingredients

Feed Ingredients achieved a satisfactory performance in H1 2023, in line with expectation.

The Group's animal feed manufacturing associate, John Thompson & Sons Limited, in which the Group has a 50% shareholding, delivered a satisfactory performance in the period. Lower fodder stocks as a result of dry weather and reduced fertiliser usage supported animal feed volumes in H1 2023.

Continental Europe1

Continental Europe recorded a €1.3 million increase in underlying operating profit in the seasonally quieter first half. Excluding crop marketing volumes and Ukraine, underlying business volumes decreased by 3.8% in H1 2023, compared to H1 2022, primarily due to the impact of global fertiliser prices on overall volumes set against the effect of forward buying by growers. 

There was a good start to the year in Poland and Romania, with positive cropping profiles and favourable in-field conditions reported. Overall, across Poland and Romania, the autumn and winter planted area is expected to increase, however this is expected to be offset by a corresponding reduction in spring plantings.

Poland

Poland had a good start to the year with increased volumes and contribution across the business.

The business continues to focus on working capital optimisation and margin enhancement initiatives. During the period the Group commenced construction of an expanded facility to enhance production capabilities of Agrii Poland's proprietary own-brand of liquid foliar fertiliser, 'Foliq'.

Autumn and winter plantings are forecasted to be 0.9% ahead of FY22 at 5.5 million hectares. Crop establishment to date is generally good across Poland, with the total cropping area for the 2023 growing season expected to be broadly equivalent to last year at 8.9 million hectares. 

Romania

Romania had a good start to the year, recording increased revenues and overall contribution compared to the prior period.

Dry and mild weather across most of Romania resulted in good winter crop establishment and encouraging on-farm investment decisions, particularly in relation to seed and crop protection requirements.

Autumn and winter plantings are expected to be 10.7% ahead of the prior year at 3.5 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.

Ukraine

In Ukraine, activity levels have further reduced as a result of the war with the planted area also likely to be significantly reduced on prior years.

We continue to support limited localised operations where appropriate and are maintaining a reduced exposure, following the de-risking of the balance sheet through a sustained focus on working capital reduction and restricted trading to a back-to-back/cash basis.

The Group's top priority continues to be the safety and wellbeing of our colleagues in the region and we are actively monitoring the situation on the ground, overseen by the local team.

Latin America

Latin America delivered an excellent performance in the period, recording an increase in underlying business volumes of 35.2%. The volume development and underlying growth is driven by increases across our product range. During the period, the business continued to expand its own product capability with the establishment of First Agbiotech, a dedicated biological business unit supporting research and development of bio-solutions. In the coming months we will invest in increased capacity to facilitate organic growth in our liquid, dry and Controlled Release Fertiliser businesses.

Operating profit increased to €14.2 million from €6.7 million in the comparative period last year, with an underlying increase of €4.3 million.

The total cropping area dedicated to soya, Brazil's principal crop, is expected to increase by 4.4% on the prior year to 43.4 million hectares, with the expected soya harvest increasing to 151.0 million tonnes from the 125.5 million tonnes in the prior year. 

ENDS

Origin Enterprises plc

Condensed Interim Consolidated Income Statement

for the six months ended 31 January 2023

Origin Enterprises plc

Condensed Interim Consolidated Statement of Comprehensive Income

for the six months ended 31 January 2023

Origin Enterprises plc

Condensed Interim Consolidated Statement of Financial Position

as at 31 January 2023

Origin Enterprises plc

Condensed Interim Consolidated Statement of Financial Position (continued)

as at 31 January 2023

Origin Enterprises plc

Condensed Interim Consolidated Statement of Changes in Equity

for the six months ended 31 January 2023