Origin Regulatory News (OGN)

Origin Enterprises plc

PRELIMINARY RESULTS STATEMENT

Strong underlying performance

27 September 2017

Origin Enterprises plc ('Origin' or 'the Group'), the Agri-Services group, today announces its full year results for the year ended 31 July 2017.

Highlights

· Adjusted diluted earnings per share up 4.7 per cent to 46.62 cent, ahead of guidance, and up 14.7 per cent on an underlying basis at constant currency

· Operating profit of €70.0 million, an increase of 4.1 per cent and up 12.3 per cent on an underlying basis at constant currency

· Group operating margin up 20 basis points to 4.6 per cent

· Dedicated research partnership with University College Dublin and acquisition of Digital Agricultural Services group, Resterra, providing complementary extension in crop technology transfer

· Completion of acquisition of fertiliser blending and nutrition business of Bunn Fertiliser in the UK in August 2017

· Proposed final dividend of 17.85 cent, giving a total dividend of 21.0 cent (2016: 21.0 cent)

Results Summary

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

2 Profit after interest and tax before amortisation of non-ERP intangible assets and before exceptional items

3 Before amortisation of non-ERP intangible assets, net of related deferred tax (2017: €3.9m, 2016: €3.1m) and exceptional items, net of tax (2017: €9.3m, 2016: €4.7m credit)

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

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

"Origin has delivered a solid financial result in 2017, recording a 4.7 per cent increase in adjusted diluted earnings per share. While market conditions were highly competitive, a combination of sustained volume growth and higher margins underpinned a strong underlying business performance which more than offset the adverse currency translation impact of sterling depreciation.

Demand for agronomy services and inputs was positively influenced by a more stable near term planning environment for primary producers together with the benefit of generally settled weather leading to good crop planting and growing conditions.

We continue to prioritise growth opportunity in Agri-Services while also focusing on operational and commercial effectiveness. The acquisition development and innovation investments made during the year will broaden the Group's service offer and capabilities in systemised crop technology transfer.

The Group is well positioned to capitalise on its scalable business platforms, development opportunities and strong balance sheet."

ENDS

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

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About Origin Enterprises plc

Origin Enterprises plc is a focused Agri-Services group providing specialist On-Farm Agronomy Services, Digital Agricultural 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

Financial Review - Summary

Origin delivered a 4.7 per cent increase in adjusted diluted earnings per share3 for the year ending 31 July 2017 to 46.62 cent. On a like-for-like basis (adjusted for the impact of currency movements and acquisitions) there was an underlying increase in adjusted diluted earnings per share of 14.7 per cent.

Group revenue

Group revenue comprises the totality of revenue from the Group's wholly owned operations which are based in Ireland, the United Kingdom, Poland, Romania and Ukraine. These businesses provide Integrated Agronomy and On-Farm Services, Business-to-Business Agri-Inputs and Digital Agricultural Services.

Group revenue increased to €1,528.5 million from €1,521.3 million in the prior year, an increase of 0.5 per cent. On an underlying basis at constant currency, revenue increased by €51.6 million (3.4 per cent), with this movement principally reflecting increased service revenue and input volumes.

Underlying volume growth in agronomy services and inputs (excluding crop marketing volumes) was 5.11 per cent for the year.

Operating profit1

Operating profit1 amounted to €70.0 million compared to €67.3 million in the previous year, an increase of 4.1 per cent. On an underlying basis at constant currency, operating profit1 increased by €8.3 million (12.3 per cent). This increase was primarily driven by higher volumes in agronomy services and inputs together with improved year-on-year margins. The Group operating margin has increased from 4.4 per cent to 4.6 per cent.

Associates and joint venture2

Origin's share of the profit after interest and taxation from associates and joint venture amounted to €4.4 million in the period.

Finance costs and net debt

Net finance costs amounted to €6.9 million, a decrease of €0.5 million (6.1 per cent) on the prior year level. Average net debt amounted to €217.0 million compared to €190.0 million last year. Actual net debt at 31 July 2017 was €31.5 million4 compared to actual net cash of €3.1 million4 at the end of the previous year. The year-on-year movement in average net debt is driven largely by the timing of the 2016 acquisitions in Continental Europe. The year-on-year movement in year end net debt is driven primarily by the current year acquisition spend of €25.5 million and the timing of working capital movements.

Origin's financial position remains strong. At year end the Group had unsecured committed banking facilities of €430 million (2016: €430 million), of which €400m million will expire in May 2022 and €30 million will expire in September 2018.

At year end our key banking covenants are as follows:

Working capital

For the year ended 31 July 2017, there was working capital outflow of €26.0 million. Investment in working capital remains a key area of focus for the Group given the associated funding costs. The year end represents the low point in the working capital cycle for the Group reflecting the seasonality of the business.

Adjusted diluted earnings per share ('EPS')3

EPS3 amounted to 46.62 cent per share, an increase of 4.7 per cent from 2016. This movement was driven by an increase in like-for-like underlying profits of 14.7 per cent, along with the positive impact of acquisitions of 1.4 per cent. This was partly offset by an 11.4 per cent reduction in EPS as a result of foreign currency translation, most notably the translation of sterling earnings into euro.

Return on capital employed

Return on capital employed is a key performance indicator for the Group and represents Group earnings before interest, tax and amortisation of non-ERP related intangible assets from continuing operations ("EBITA") taken as a percentage of the Group Net Assets. For the purposes of this calculation:

(i) EBITA includes the net profit contribution from associates and joint venture (after interest and tax) and excludes the impact of exceptional and non-recurring items.

(ii) Group Net Assets means total assets less total liabilities as shown in the annual report excluding net debt, derivative financial instruments, put option liabilities, accumulated amortisation of non-ERP related intangible assets and taxation related balances. Net Assets are also adjusted to reflect the average level of acquisition investment spend and the average level of working capital for the accounting period.

Exceptional items

Exceptional items net of tax amounted to €9.3 million in the year. These principally relate to restructuring costs in the UK, along with acquisition and integration costs and are summarised in the table below:

New reporting segments

In recognition of the increased size of the Group's operations in Continental Europe, a series of changes have been made to internal reporting structures to reflect better how performance is managed, and the Group will now have two separate reporting segments as set out below.

Ireland and the United Kingdom

This segment includes the Group's wholly owned Irish and UK based Business-to-Business Agri-Input operations, Integrated Agronomy and On-Farm Service operations and Digital Agricultural Services business. In addition, this segment includes the Group's associates and joint venture undertakings.

Continental Europe

This segment includes the Group's operations in Poland, Romania and Ukraine.

Dividend

The Board recommends a final dividend of 17.85 cent per ordinary share which, when combined with the interim dividend of 3.15 cent per ordinary share, brings the total dividend for the year to 21.0 cent per ordinary share (2016: 21.0 cent). Subject to shareholder approval at the Annual General Meeting, this final dividend will be paid on 15 December 2017 to shareholders on the register on 1 December 2017.

Brexit

It is too early to assess the longer term implications of Brexit following the UK referendum vote in 2016 to leave the European Union. The Group recognises the period of uncertainty that currently exists until greater clarity on the final outcomes of the Brexit negotiations emerge, notably in relation to the implications for UK domestic agricultural policy, regulation and the future trading relationship between the UK and the European Union. The Group is planning a variety of scenarios which will be updated as Brexit outcomes become clearer. We continue to progress a number of strategic initiatives aimed at providing long term sustainable benefits to the Group. We are confident that our business model is well placed to address the challenges and opportunities that may arise.

Investor relations

The Group continues to focus on effective communications with shareholders. Contact with institutional shareholders is the responsibility of the Chief Executive Officer, Chief Financial Officer and Investor Relations Officer. During the year there were 165 meetings / conference calls with institutional investors across nine financial centres. A visit to Throws Farm Technology Centre in the UK took place, focusing on Origin's direct farm crop research and knowledge transfer capabilities, together with an overview of the Group's Business-to-Business Agri-Inputs business. This visit built on the Group's first Capital Markets Day in 2016.

Following a selection process the Group announces today the appointment of Numis as our London-based Broker.

Annual General Meeting (AGM)

The AGM will be held on 24 November 2017 at 11.00 a.m. in the Westbury Hotel, Grafton Street, Dublin 2.

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

2 Profit after interest and tax before amortisation of non-ERP intangible assets and before exceptional items

3 Before amortisation of non-ERP intangible assets, net of related deferred tax (2017: €3.9m, 2016: €3.1m) and exceptional items, net of tax (2017: €9.3m, 2016: €4.7m credit)

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

5 The Group was in a net cash position in 2016

Review of Operations

Commentary is on a constant currency basis throughout

Ireland and the United Kingdom

Ireland and the UK delivered a satisfactory performance recording a 12.2 per cent increase in underlying operating profit in a competitive market environment. Underlying volume growth in agronomy services and inputs was 4.8 per cent reflecting favourable demand. Operating margin increased by 50 basis points to 5.6 per cent primarily driven by higher sales of value added technologies.

The positive impact of sterling depreciation on crop output values, along with a favourable year-on-year backdrop to global dairy markets, and lower unit costs for key macro inputs, were the principal drivers of an improvement in farm incomes in the period.

Integrated Agronomy and On-Farm Services

The Group's Integrated Agronomy and On-Farm Services business, Agrii, delivered a satisfactory performance following particularly difficult trading conditions in 2016. Higher output prices in local currency together with lower than expected input cost inflation supported increased agronomy services and input demand. The business responded well to the more challenging market dynamic with a renewed focus on high service channels and value added technologies resulting in higher volumes and improved margins across all service and input portfolios.

Agrii continues to extend the Group's position in the provision of systemised crop technology transfer direct to farm. This is supported by a comprehensive service offer, market leading agronomic research and technical support, and strong software based decision support capabilities.

Digital Agricultural Services

In March 2017 the Group completed the acquisition of Resterra, the Digital Agricultural Services group. Resterra specialises in the delivery of bespoke digital agronomy applications and is a leading provider of agri-tech services to primary producers, input manufacturers and agri-services companies.

Strong progress on integration in the period has complemented a very satisfactory financial performance from Digital Agricultural Services. Priority focus areas since the acquisition of Resterra have included the development of new agronomy applications, organisational design and the launch of precision farming services across Origin's Continental European footprint.

Business-to-Business Agri-Inputs

Business-to-Business Agri-Inputs delivered good growth in operating profits in the period with performance principally supported by higher volumes and margins in fertiliser.

Fertiliser

Strong early season demand drove higher volumes for the year as a whole as primary producers benefitted from greater certainty in raw material pricing and more favourable farm economics.

Speciality nutrition applications maintained solid development momentum and underpinned improved margins in the period. The business is focused on addressing the evolving requirements of primary producers for balanced nutrition planning to restore soil health and optimise crop productivity. Our branded presence on-farm continues to be enhanced, for example, through technologies that facilitate the effective delivery of essential trace elements to animals and arable crops using prescription fertiliser applications.

Amenity

Origin Amenity, which incorporates a market leading portfolio of brands focused on the provision of management and maintenance solutions to the professional sports turf, landscaping, general amenity and niche grassland sectors in the UK, achieved a very satisfactory performance in the year reflecting good underlying volume growth across all business channels.

New customer development continues to be supported through the formation of industry leading partnerships together with comprehensive product development and formulation capabilities, enabling the business to meet the requirements for new and innovative integrated turf improvement programmes.

The integration of Headland Amenity, acquired in 2016, was successfully completed in the period. In July 2017 the Group acquired Linemark in the UK. Linemark is an innovative market leader in advanced sports and amenity marking solutions. The acquisition enhances the existing service offer as well as providing new customer extension opportunity.

Feed Ingredients

Feed Ingredients achieved a satisfactory performance underpinned by good volume growth in competitive trading conditions. Volume improvement largely reflects a more favourable demand backdrop resulting from a combination of higher dairy cow numbers and improved returns for grassland farm enterprises that are seeking to maximise milk production following the abolition of production quotas in 2015.

There was an excellent operational performance from the business in the period including the successful implementation of a new Enterprise Resource Planning system and the commissioning of new grain handling and logistics capacity.

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.

Continental Europe1

Continental Europe performed satisfactorily in 2017 delivering a 10.3 per cent increase in underlying operating profit. Underlying agronomy services and input volumes (excluding crop marketing volumes) increased by 6.2 per cent reflecting positive growth momentum in the sales of value added technologies. Market conditions were generally highly competitive as farmers responded to volatile output markets and the impact of the challenging growing season in 2016. Operating margin has reduced from 4.6 percent to 4.1 percent in the period primarily reflecting the timing of acquisitions in 2016.

Poland

Poland delivered a solid performance in 2017. Higher margins in the period were underpinned by an improved portfolio mix of value added technologies. On-farm activity showed positive momentum against a weak 2016 comparative, however service and input demand was largely subdued reflecting a delayed start to spring seasonal activity in 2017 and the impact on primary producers of poor harvest yield and quality in 2016. Total winter and spring plantings for the main arable, root and vegetable crops were broadly in line with 2016 levels at approximately 7.4 million hectares.

The new €6 million seed processing and input formulation facility is on target to be operational early in the 2018 financial year. This facility will enhance the product capabilities of the business and extend its market leadership in the provision of high performing certified seed varieties to Polish farmers.

Romania

Romania delivered a strong performance in the period with good growth achieved across the principal sales channels. Demand was resilient in the case of the main cropping enterprises underpinned by a 2 per cent increase in the total arable, root and vegetable cropping area to approximately 6.6 million hectares. Crop development was satisfactory, notwithstanding the impact of intermittent unseasonal weather patterns in the third quarter.

Nutrition portfolios performed strongly in 2017 reflecting the focus on meeting demand from primary producers for improved ranges and speciality applications.

Good progress was achieved in business integration with the continued development of trial demonstration farms and knowledge transfer infrastructure supporting the delivery of enhanced technical support on-farm.

Ukraine

Ukraine delivered a good performance in the period, achieving higher revenues and margins underpinned by a favourable portfolio mix of services and input technologies.

An improved macro-economic backdrop contributed to a more favourable financing environment for primary producers. Total winter and spring plantings for the main arable, root and vegetable crops were broadly in line with 2016 levels at approximately 22.0 million hectares.

Soil fertility and seed technology applications maintained good growth momentum with new customer gains supported through an expansion of the agronomy sales force together with an extension of the regional distribution footprint of the business. Solid progress has been made during the year leveraging the Group's supply chain partnerships to secure access to high specification technologies.

Other Developments

During the year, Origin continued its investments in innovation with the appointment of Professor Jimmy Burke as Head of Research and Knowledge Transfer.

The Group also announced the establishment of a dedicated digital, precision agriculture and crop science collaborative research partnership with University College Dublin, supported by Science Foundation Ireland ('SFI'). This five year development programme underpinning the research partnership is being financed by a €17.6 million investment which is co-funded by Origin and SFI.

Origin announced in March that it had reached agreement to acquire the fertiliser blending and nutrition business of Bunn Fertiliser in the UK. Bunn is a leading provider of prescription fertiliser blends and nutrition management systems servicing arable, grassland and horticultural enterprises. In August 2017, Origin announced the completion of this transaction following the acceptance by the Competition and Markets Authority of a number of undertakings provided by Origin, including the disposal of one Bunn fertiliser blending facility.

Outlook

While we anticipate a stable operating environment for primary producers in 2018, farm sentiment is expected to remain cautious reflecting general volatility in output markets. Origin remains focused on capturing growth opportunity in systemised crop technology transfer and is well positioned to capitalise on its scalable business platforms, development opportunities and strong balance sheet.

ENDS

Origin Enterprises plc

Consolidated Income Statement

For the financial year ended 31 July 2017

Origin Enterprises plc

Consolidated Statement of Comprehensive Income

For the financial year ended 31 July 2017

Origin Enterprises plc

Consolidated Statement of Financial Position

As at 31 July 2017

Origin Enterprises plc

As at 31 July 2017

Origin Enterprises plc

Consolidated Statement of Changes in Equity

For the financial year ended 31 July 2017

Origin Enterprises plc

Consolidated Statement of Cash Flows

For the financial year ended 31 July 2017

Origin Enterprises plc

Notes to the preliminary results statement

For the financial year ended 31 July 2017

1 Basis of preparation

The financial information included on pages 14 to 37 of this preliminary results statement has been extracted from the Group financial statements for the year ended 31 July 2017 on which the auditor has issued an unqualified audit opinion.

The financial information has been prepared in accordance with the accounting policies set out in the Group's consolidated financial statements for the year ended 31 July 2017, which were prepared in accordance with International Financial Reporting Standards as adopted by the EU.

The consolidated financial information is presented in euro, rounded to the nearest thousand which is the functional currency of the parent.

2 Segment information

IFRS 8, 'Operating Segments' requires operating segments to be identified on the basis of internal reports that are regularly reviewed by the Chief Operating Decision Maker ('CODM') in order to allocate resources to the segments and to assess their performance.

Following the acquisition of three businesses in Continental Europe during 2016 and subsequent restructuring of the Group's business, the basis of segmentation was amended during the current financial year to reflect the new business model. The revised basis of segmentation is outlined in the paragraphs below but in all instances the changes were deemed necessary to better enable the CODM to evaluate the results of the business in the context of the economic environment in which the business operates, to make appropriate strategic decisions and to more accurately reflect the business model under which the Group now operates in each of these geographical regions. All comparative amounts have been restated to reflect the new basis of segmentation. The reclassification has no impact on revenue or operating profit reported by the Group.

Ireland and the United Kingdom

This segment includes the Group's wholly owned Irish and UK based Business-to-Business Agri-Inputs operations, Integrated Agronomy and On-Farm Services operations and Digital Agricultural Services business. In addition, this segment includes the Group's Associates and joint venture undertakings.

Continental Europe

This segment includes the Group's Business-to-Business Agri-Inputs operations, Integrated Agronomy and On-Farm Services operations in Poland, Romania and the Ukraine.

Information regarding the results of each reportable segment is included below. Performance is measured based on segment operating profit as included in the internal management reports that are reviewed by the Group's CODM, being the Origin Executive Directors. Segment operating profit is used to measure performance, as this information is the most relevant in evaluating the results of the Group's segments. Segment results include all items directly attributable to a segment.

(i) Segment revenue and results

(ii) Segment earnings before financing costs and tax is reconciled to reported profit before tax and profit after tax as follows:

3 Exceptional items

Exceptional items are those that, in management's judgement, should be separately presented and disclosed by virtue of their nature or amount. Such items are included within the Consolidated Income Statement caption to which they relate. The following exceptional items arose during the year:

(i) Rationalisation costs

Rationalisation costs comprise the compensation and termination payments arising from the restructuring of our agronomy services businesses in the UK. The tax impact of this exceptional item in the current year is a tax credit of €2.1 million (2016: €0.6 million).

(ii) Gain on disposal of investment

A gain on disposal of an investment in Adaptris Group Limited was recorded in the prior year of €1.3 million. The tax impact of this exceptional item in the prior year was a tax charge of €0.3 million.

(iii) Transaction and strategy related costs

Transaction related costs principally comprise costs incurred in relation to the acquisitions completed during the year and post year end. Strategy related costs relate to once off consultancy costs in the prior year associated with the Groups' Agrii Services five-year strategy review. The tax impact of this exceptional item in the current year is a tax credit of €0.9 million (2016: €0.2 million).

(iv) Organisational redesign costs

During the year the Group incurred costs relating to the commencement of an organisation redesign project, the purpose of which is to enhance the Origin Group's central capabilities to enable it to continue to support the Group as it grows. The primary areas of focus are on how the reporting and management structures, in addition to centralised functions, need to evolve as the Group continues to integrate existing businesses and expands its footprint. The project is expected to complete within the next year. The tax impact of this exceptional item in the current year is a tax credit of €0.2 million.

(v) Fair value adjustment on investment properties

During the prior year the Group commissioned an independent valuations expert to conduct a valuation of the Groups' investment properties. The valuation was on the basis of market value and complies with the requirements of the Valuation and Appraisal Standards issued under the auspices of the Society of Chartered Surveyors. This valuation resulted in an increase to the carrying value of investment properties of €2.1 million. The tax impact of this exceptional item was a tax charge of €0.7 million in the prior year.

(vi) Fair value of put option liability

This gain relates to the movement in fair value of the put option liability in respect of the Agroscope acquisition. The tax impact of this exceptional item in the current year is nil.

4 Earnings per share

Basic earnings per share

Diluted earnings per share

Adjusted diluted earnings per share