Origin Regulatory News (OGN)

Origin Enterprises plc

INTERIM RESULTS STATEMENT

An encouraging start to trading in seasonally quiet first half

9 March 2017

Origin Enterprises plc ('Origin' or 'the Group'), today announces its interim results for the half year ended 31 January 2017.

Highlights

· Improved first half performance in seasonally quiet trading period

· More stable near term planning environment for primary producers, combined with generally settled weather, has driven good early season demand for agronomy services and inputs

· Solid foundation established for seasonally important second half with cropping base consistent with prior year

· Agreement to acquire the fertiliser blending and nutrition business of Bunn Fertiliser in the UK

· Commencement of a five year collaborative research partnership with University College Dublin to build digitally based agronomy advisory tools

· Origin separately announced today the acquisition of the digital agricultural services group - Resterra

· Interim dividend of 3.15 cent per share (2016: 3.15 cent per share)

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

** Profit after interest and tax

*** Before amortisation of non-ERP intangible assets, net of related deferred tax (2017: €2.0 million, 2016: €3.5 million) and exceptional items, net of tax (2017: €8.5 million, 2016: €Nil)

**** Includes restricted cash of €Nil (2016: €2.9m)

Origin Enterprises plc

Chief Executive Officer's comment:

Commenting on the results, Origin Chief Executive Officer, Tom O'Mahony said:

"The Group achieved good volume growth and margin recovery in the seasonally quiet first half of the financial year following a challenging trading year in 2016. Performance was supported by a more stable near term planning environment for primary producers together with the benefit of generally settled weather, which led to increased on-farm activity throughout the period.

Our investment priorities for technology development and strategic acquisitions are focused on capturing growth opportunity in the provision of dynamic crop management systems that meet the requirements of today's primary producer as well as broadening new customer and service potential.

We remain focused on embedding strategic cost initiatives, working capital management and business integration. The consolidation of acquisitions completed in 2016 in the UK, Poland and Romania is progressing as planned. The performance in the period provides a solid foundation for the seasonally more important second half when over 90% of earnings are typically generated."

ENDS

Capital Markets Site Visit

Origin will host an analyst and institutional investor site visit to our Technology Centre in Throws Farm near Stansted, UK, on Wednesday 14 June 2017. Further information will be circulated in due course.

Conference Call

The results announcement is available on the Company website www.originenterprises.com. There will be a live conference call at 8.30am (GMT) today. To participate in this conference call, please dial the number below. Participants are requested to dial in 5 to 10 minutes prior to the scheduled start time.

Participant access numbers:

Replay

A replay of this call will be available for seven days.

Enquiries

About Origin Enterprises plc

Origin Enterprises plc is a focused Agri-Services group providing specialist on-farm agronomy services and the supply of crop technologies and inputs. The Group has leading market positions in Ireland, the United Kingdom, Poland, Romania and Ukraine. Origin is listed on the ESM and AIM markets of the Irish and London Stock Exchanges.

ESM ticker symbol: OIZ

AIM ticker symbol: OGN

Website: www.originenterprises.com

INTERIM RESULTS STATEMENT

Financial Review - Summary

Origin delivered adjusted diluted earnings per share*** for the period of 0.25 cent compared to adjusted diluted loss per share of 2.47 cent in the corresponding period last year. On a like for like basis (excluding the impact of currency movements and acquisitions) the underlying increase was 3.24 cent. The Group's earnings profile is significantly weighted towards the second half of the financial year when over 90 per cent of earnings are typically generated.

Group revenue

Group revenue was €564.4 million compared to €507.2 million in the corresponding period, an increase of 11.3 per cent. On a like for like basis (excluding the impact of currency movements and acquisitions) revenues increased by €52.7 million (10.4 per cent), principally reflecting a combination of increased agronomy service revenue and crop input volumes partially offset by lower fertiliser prices and crop marketing prices and volumes. Underlying volume growth was 12.8 per cent in the period compared to the corresponding period last year.

Operating profit*

Operating profit* from the Agri-Services business was €2.0 million compared to a loss of €1.8 million in the corresponding period. On a like for like basis (excluding the impact of currency movements and acquisitions) the increase year on year was €3.7 million. The performance in the seasonally quiet first half of the year was mainly attributable to the benefit of higher agronomy service revenue and crop input volumes, together with improved margins.

Associates and joint venture**

Origin's share of the profit after interest and taxation from associates and joint venture increased by €0.2 million to €1.7 million.

Financing costs, net debt and working capital

Net finance costs amounted to €3.8 million, in line with the prior period, however average net debt amounted to €210.0 million compared to €166.0 million in the prior period. The movement is primarily due to the impact of the timing of the receipt of disposal proceeds in the comparative period. The net finance cost remained at prior period levels, despite the increase in average net debt, due to the reduced blended interest rates applying to the period's borrowings. Net debt at 31 January 2017 was €161.6 million***** compared with €168.3 million***** at 31 January 2016, and is 1.95 times EBITDA**** for the twelve months to 31 January 2017.

Following the seasonal investment in working capital, the net cash outflow from operating activities was €140.1 million (2016: €168.5 million). During the period there was an increase of €129.3 million in working capital (2016: €145.8 million), principally reflecting seasonal requirements.

Exceptional items

Exceptional items net of tax amounted to a charge of €8.5 million (2016: €Nil), primarily relating to restructuring costs in the UK.

Dividend

An interim dividend of 3.15 cent per share will be paid on 14 April 2017 to shareholders on the register on 31 March 2017.

* Operating profit/(loss) and Group operating profit/(loss) are stated before amortisation of non-ERP intangible assets and exceptional items

** Profit after interest and tax

*** Before amortisation of non-ERP intangible assets, net of related deferred tax (2017: €2.0 million, 2016: €3.5 million) and exceptional items, net of tax (2017: €8.5 million, 2016: €Nil)

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

***** Includes restricted cash of €Nil (2016: €2.9 million)

Review of Operations

Agri-Services

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

** Excluding the impact of currency movements and acquisitions

Revenue from Agri-Services comprises the totality of Group revenue. It incorporates integrated agronomy and on-farm services and business-to-business agri-inputs. During the period the Group's operations spanned Ireland, the UK, Poland, Romania and Ukraine.

Revenue and operating profit were €564.4 million and €2.0 million, respectively. On a like for like basis, excluding the impact of currency movements and acquisitions, revenue and operating result increased by €52.7 million and €3.7 million, respectively. This was due to a combination of higher agronomy service revenue, crop input volumes and improved margins, partially offset by lower fertiliser prices and crop marketing prices and volumes.

Ireland and the United Kingdom

Underlying volume growth was 12.6 per cent in the period compared to the corresponding period last year. A more favourable short term outlook for farm incomes is principally reflecting the positive impact on output prices of sterling weakness and tighter global dairy supply. This, together with generally settled autumn and winter weather supporting good crop establishment, drove good early season demand in advance of the main application period in the second half.

Integrated On-Farm Agronomy Services

Origin's agronomy services brand is Agrii, which specialises in offering independent and innovative advice, crop inputs and services to arable, fruit and vegetable growers in the UK.

Agrii performed very satisfactorily in the period achieving volume growth and margin recovery across all service and input portfolios.

On-farm activity was robust in the period, with the planted area for the principal autumn and winter crops at 2.95 million hectares compared with 2.96 million hectares for the comparative period. In the case of winter wheat there is an estimated 1.4 per cent increase in plantings to 1.85 million hectares. Winter oil seed rape sowings are currently estimated at 0.5 million hectares which represents a reduction of approximately 10 per cent on last year, largely due to agronomic and rotational crop planning decisions. The total planted area for spring crops is expected to be approximately 1.4 million hectares, compared to 1.3 million in the prior period.

The business has continued to prioritise its performance improvement agendas together with embedding strategic cost initiatives throughout its operations.

Business-to-Business Agri-Inputs

Business-to-Business Agri-Inputs delivered a good result in the period, with an improved performance principally underpinned by year-on-year growth in fertiliser volumes in the UK.

Fertiliser

The Group's fertiliser brands comprise Goulding in Ireland and Origin Fertilisers in the UK.

Against the backdrop of highly competitive trading conditions, the business recorded higher volumes and improved margins in the UK in the period. Strong early season demand reflected greater certainty in fertiliser raw material pricing which provided confidence to primary producers to fix a proportion of their nutrition requirements ahead of the main application period in the second half of the financial year.

Performance in Ireland was satisfactory during the seasonally quiet period for the business.

We anticipate higher market volumes for the year as a whole with application expected to be positively influenced by higher livestock numbers and improved returns for primary dairy producers.  

Amenity

Origin Amenity addresses the maintenance and improvement requirements of the professional sports turf, landscaping and amenity sectors in the UK. It comprises the advisory and input service brands of Rigby Taylor and Headland Amenity, together with the PB Kent portfolio of specialist nutrition applications.

Origin Amenity delivered a good performance in the period, underpinned by further development momentum within the professional sports channel. Headland Amenity, which was acquired in 2016, is performing in line with expectations and the integration progressing as planned.

Feed Ingredients

Feed Ingredients achieved a satisfactory result in the period underpinned by a stable volume performance. Spot demand was generally robust throughout the period while currency volatility impacted customer forward buying momentum.

Central and Eastern Europe

Underlying volume growth was 13.6 per cent in the period compared to the corresponding period last year. Overall there was a satisfactory performance in the seasonally quiet trading period, with good early season momentum in the case of value added crop technologies. Sentiment on-farm is generally cautious as a result of the challenging year experienced by primary producers in 2016. A more concentrated or just-in-time demand profile for services and inputs is anticipated in the second half of the financial year.

Poland

The Group's Polish farm services business, Agrii, performed satisfactorily against lower demand in the period reflecting the impact of a very difficult growing season in 2016 and delayed autumn harvest conditions. The integration of the Kazgod Group, acquired in November 2015, is substantially complete with strong progress achieved to date in relation to customer channel and service portfolio alignment. Autumn and winter crop plantings are equivalent to last year at approximately 5.3 million hectares with no significant establishment issues arising at this stage.

The expansion of Agrii's seed processing and input formulation capacity commenced during the period. This €6 million capital project is expected to be operational early in the 2018 financial year.

Romania

The Group's Romanian operations, comprising the farm service brands of Comfert and Redoxim delivered a very satisfactory result in the period. Performance reflected increased volumes supported by new customer gains together with the benefit of higher margins.

Autumn and winter crop establishment is generally satisfactory against the backdrop of weather related delays to cereal and oil seed rape plantings which is expected to result in a larger area devoted to spring cropping this year. Total plantings for the principal winter crops are estimated at 3.30 million hectares compared with 3.25 million hectares last year. Total oil seed rape plantings are estimated at 600,000 hectares compared with 380,000 hectares for the comparative period.

Integration is progressing to plan with the primary focus concentrated on the development of enhanced technical sales support together with the further development of trial demonstration farms and knowledge transfer infrastructure.

Ukraine

The Group's Ukrainian farm services platform, Agroscope International, achieved higher revenues and margins in the period with performance principally underpinned by good momentum in the sale of value added technologies.

Autumn and winter crop plantings are estimated at 7.6 million hectares compared with 5.8 million hectares last year. Crops are generally well established and in good condition. Total crop plantings for the 2017 production year are expected to be in line with last year at 22.0 million hectares, approximately.

The financing environment for primary producers is currently more favourable and is generally reflective of an improved macro-economic backdrop.

Associates and joint venture

John Thompson & Sons Limited ('John Thompson')

John Thompson, the largest single site multi species animal feed mill in the European Union, in which Origin has a 50 per cent shareholding, delivered a satisfactory result in the period.

Other Group developments

On 12 December 2016, the Group announced the establishment of a dedicated digital, precision agriculture and crop science research partnership with University College Dublin ('UCD'), supported by Science Foundation Ireland ('SFI'). The five year development programme underpinning the research partnership will be financed by a €17.6 million investment which is co-funded by Origin and SFI. The collaboration encompasses a strong multi and inter-disciplinary approach, combining the expertise of UCD in data science and agricultural science with Origin's integrated crop management research and data, system capabilities and extensive on-farm knowledge exchange networks. The aim of the programme is to build digitally based and user driven advisory tools that provide rapid and localised decision support for agronomists and farmers.

Separately, Origin announced today the acquisition of the digital agricultural services group, the Resterra Group ('Resterra'). Under the terms of the transaction, Origin has acquired 100 per cent of the share capital of Resterra, on a debt free cash free basis, for consideration of £11.4 million. Additional contingent deferred consideration of up to £4.8 million will be payable upon the achievement of specific profit targets. Resterra specialises in the delivery of bespoke precision agronomy applications and is a leading provider of agri-tech services to primary producers, input manufacturers and agri-service companies to create, automate and systemise information access for rapid decision making. Resterra will enhance Origin's service capability in existing and wider geographies in addition to strongly complementing the work of the Origin-UCD collaborative partnership.

On 7 March 2017, Origin announced that it had reached agreement to acquire the fertiliser activities and certain assets of Bunn Fertiliser Limited in the UK ('Bunn') based on an enterprise value consideration of £18.2 million. Bunn is a leading provider of prescription fertiliser blends and nutrition management systems servicing arable, grassland and horticultural sectors. The transaction extends Origin's existing fertiliser blending activities, as well as its customer service capabilities, and will enable the Group to optimise operational and logistical efficiencies. The acquisition is subject to a number of conditions including clearance from the Competition and Markets Authority in the UK.

Outlook

The Group is well positioned to respond to current market conditions, and the encouraging start to the seasonally quiet first half provides a good foundation for the seasonally more important second half of the financial year when over 90 per cent of earnings typically arise.

A further update will be provided at the timing of the announcement of the third quarter Trading Update on 25 May 2017.

ENDS

Origin Enterprises plc

Condensed Interim Consolidated Income Statement

for the six months ended 31 January 2017

Origin Enterprises plc

Condensed Interim Consolidated Statement of Comprehensive Income

for the six months ended 31 January 2017

Origin Enterprises plc

Condensed Interim Consolidated Statement of Financial Position

as at 31 January 2017

Origin Enterprises plc

Condensed Interim Consolidated Statement of Financial Position

as at 31 January 2017

Origin Enterprises plc

Condensed Interim Consolidated Statement of Changes in Equity

for the six months ended 31 January 2017

Origin Enterprises plc

Condensed Interim Consolidated Statement of Changes in Equity

for the six months ended 31 January 2016

Origin Enterprises plc

Condensed Interim Consolidated Statement of Cash Flows 

for the six months ended 31 January 2017

Origin Enterprises plc

Condensed Interim Consolidated Statement of Cash Flows

for the six months ended 31 January 2017