Interim Results

RNS Number : 0463H

Origin Enterprises Plc

08 March 2018

 

Origin Enterprises plc

INTERIM RESULTS STATEMENT

Solid start to trading in seasonally quiet first half

 

8 March 2018

Origin Enterprises plc ('Origin' or 'the Group'), the Agri-Services group, today announces its interim results for the half year ended 31 January 2018.

 

Highlights

·    Good first half performance in seasonally quiet trading period with operating profit 12.6 per cent higher at €2.3 million

·    Improved working capital performance with a working capital cash inflow of €10.7 million for the twelve months to 31 January 2018

·    Favourable autumn and winter cropping base established for seasonally important second half

·    Bunn Fertiliser, acquired in August 2017, fully integrated in period

·    Acquisition of Belgium based fertiliser and nutrition business, Pillaert-Mekoson

·    Digital agronomy enablement through launch of new data driven information service and crop monitoring tools

·    Appointment of Rafal Prendke as CEO of the Group's Continental European Division

·    Interim dividend of 3.15 cent per share (2017: 3.15 cent per share)

Results Summary	6 months ended 31 Jan 2018 €'000	6 months ended 31 Jan 2017 €'000		Change     €'000
Group revenue	586,909	564,436		22,473
Operating profit1	2,263	2,010		253
Associates and joint venture2	1,707	1,742		(35)
Total group operating profit1	3,970	3,752		218
Finance cost, net	(4,001)	(3,816)		(185)
Loss before tax1	(31)	(64)		33
Basic loss per share (cent)	(1.61)	(8.09)		6.48
Adjusted diluted earnings per share (cent)3	0.27	0.25		0.02
Group net debt	171,378	161,584		(9,794)
Interim dividend per ordinary share (cent)	3.15	3.15		-

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 (2018: €2.4 million, 2017: €2.0 million) and exceptional items, net of tax (2018: €Nil, 2017: €8.5 million)

Origin Enterprises plc

Chief Executive Officer's comment:

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

"Origin has achieved a good first half result with favourable activity levels on farm supporting a 12.6 per cent increase in Group operating profit in the seasonally quiet trading period.

The acquisition of Belgium based Pillaert-Mekoson in the period scales our market position in Continental Europe and provides further buy and build consolidation and growth opportunity. Our objectives for digital services enablement across Origin's customer and geographic markets were significantly advanced during the period.

We continue to prioritise new growth opportunity in Agri-Services while focusing on cash generation, operational and commercial effectiveness. The autumn and winter cropping profile established to date provides a solid foundation for the seasonally more important second half when over 90% of earnings are typically generated. An update on the full year outlook will be provided at the time of the announcement of the third quarter trading update on 19 June 2018."

ENDS

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:

Ireland:	Tel:	[phone]
UK/International:	Tel:	[phone]
Confirmation Code:		8419764

Replay

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

Replay Access Code:		8419764
Replay Access Numbers:
Dublin:	Tel:	[phone]
UK/International:	Tel:	[phone]

Enquiries

Origin Enterprises plc
Peter Dunne
Group Finance Director	Tel:	[phone]
Andrew Mills
Investor Relations Officer	Tel:	[phone]
Goodbody (ESM Adviser)
Siobhan Wall	Tel:	[phone]
Davy (Nominated Adviser)
Anthony Farrell	Tel:	[phone]
Numis (Stockbroker)
Stuart Skinner	Tel:	[phone]
Powerscourt
Jack Hickey (Ireland)	Tel:	[phone]
Rob Greening (UK)	Tel:	[phone]

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, Belgium, 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

	6 months ended 31 Jan 2018 €'000		6 months ended 31 Jan 2017 €'000
Group revenue	586,909		564,436
Operating profit1	2,263		2,010
Associates and joint venture, net2	1,707		1,742
Group operating profit3	3,970		3,752
Finance cost, net	(4,001)		(3,816)
Pre-tax loss	(31)		(64)
Income tax credit	366		373
Adjusted net profit	335		309
Adjusted diluted earnings per share (cent)3	0.27		0.25
Adjusted net profit reconciliation
Reported net loss	(2,024)		(10,157)
Amortisation of non-ERP intangible assets	2,726		2,307
Tax on amortisation of non-ERP related intangible assets	(367)		(304)
Exceptional items, net of tax	-		8,463
Adjusted net profit	335		309
Adjusted diluted earnings per share (cent)3	0.27		0.25

Origin delivered adjusted diluted earnings per share³ for the period of 0.27 cent compared to adjusted diluted earnings per share of 0.25 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 0.06 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 €586.9 million compared to €564.4 million in the corresponding period last year, an increase of 4.0 per cent.  On an underlying basis at constant currency, revenues increased by €20.3 million (3.6 per cent), reflecting increased agronomy service revenue and crop input volumes in addition to increased fertiliser prices.

Underlying growth in agronomy services and crop input volumes, excluding crop marketing, was 1.2 per cent in the period compared to the corresponding period last year.

Operating profit¹

Operating profit¹ from the Agri-Services business was €2.3 million compared to a profit of €2.0 million in the corresponding period last year.  On an underlying basis at constant currency the increase year on year was €0.1 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 venture²

Origin's share of the profit after interest and taxation from associates and joint venture was in line with the prior year at €1.7million.

Net debt and financing costs

The Group's financial position remains strong.

Average net debt amounted to €222.0 million compared to €210.0 million in the prior year. Net debt at 31 January 2018 was €171.4 million compared with €161.6 million at 31 January 2017, and is 2.17 times EBITDA⁴ for the twelve months to 31 January 2018. The average and period end net debt increase is principally attributable to the acquisition investment spend relating to the UK-based Bunn Fertiliser ('Bunn') and the Pillaert-Mekoson Group ('Pillaert') in Belgium.

Net finance costs amounted to €4.0 million compared to €3.8 million in the corresponding period last year.

At period end our key banking covenants are as follows:

	Banking Covenant	2018 Times	2017 Times
Net debt to EBITDA	Maximum 3.5	2.17	1.95
EBITDA to net interest	Minimum 3.0	11.24	11.51

Working capital

Following the seasonal investment in working capital in the period, the net cash outflow from operating activities was €97.5 million (2017: €140.1 million) and there was an increase of €92.6 million in working capital (2017: €129.3 million). The reduction in year on year net working capital outflow reflects an underlying improvement in working capital utilisation which more than offsets the increased working capital investment associated with the Bunn and Pillaert acquisitions.

Dividend

An interim dividend of 3.15 cent per share will be paid on 20 April 2018 to shareholders on the register on 6 April 2018.

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 (2018: €2.4 million, 2017: €2.0 million) and exceptional items, net of tax (2018: €Nil, 2017: €8.5 million)

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

Review of Operations

Commentary is on a constant currency basis throughout

Ireland and the United Kingdom

			Change on prior year
	2018 €m	2017 €m	Change %	Underlying3 %
Revenue	377.5	354.9	6.4%	5.0%
Operating profit1	1.2	0.9	35.4%	24.5%
Associates and joint venture2	1.7	1.7	-	-
1 Before amortisation of non-ERP intangible assets and exceptional items 2 Profit after interest and tax 3  Excluding currency movements and the impact of acquisitions

Underlying agronomy service and crop input volume growth was 0.4 per cent in the period compared to the corresponding period last year which benefited from the earlier timing of fertiliser demand. On an underlying basis at constant currency there was a 24.5% per cent increase in operating profit, driven principally by higher margins reflecting an improved sales mix.

Integrated On-Farm Agronomy Services

The Group's Integrated Agronomy and On-Farm Services business, Agrii, achieved a satisfactory performance in the first half with all service and input portfolios maintaining solid momentum in competitive trading conditions.

Whilst a later harvest combined, with wet and cold conditions during September, resulted in a delayed start to field operations, overall autumn and winter planting activity was not adversely impacted. Good sowing and growing conditions in October and November enabled significant catch up in drilling activity and crops are generally well established ahead of the spring growing season.

Total autumn and winter plantings for the principal combinable crops are estimated to be marginally above last year at 2.8 million hectares. Total autumn, winter and spring plantings for the 2018 growing season are forecasted to be in line with last year at 4.5 million hectares.

The business continues to embed new organisational design changes successfully throughout its operations as part its overall performance improvement agenda.

Digital Agricultural Services

Digital Agricultural Services performed satisfactorily in the period, recording both profit and margin momentum underpinned by increased software service revenue.

Significant progress was achieved in the period to broaden and enhance Origin's overall customer value and service offering. This organisational and product development activity has culminated in the launch of a new digital platform to coincide with the main second half trading period, called Contour.

Contour is a new digital information service which incorporates an integrated suite of whole farm and field level crop monitoring tools. Contour brings farmers and agronomists closer together by providing highly functional and shared applications which deliver real time content to support in-field decision making. Contour also provides greater empowerment to our agronomists by creating more opportunity for technical conversations with less time required for physical field observation activity.

The development of Origin's digital products and services proposition, alongside the Group's established sector positions in crop technology and serviced farmer relationships, will enable the rapid delivery of more targeted and localised crop advice and agronomy recommendations at field level. This will provide opportunity to increase the number of our serviced hectares of existing and new customers.

Business-to-Business Agri-Inputs

Business-to-Business Agri-Inputs recorded a satisfactory result in the period, with an improved performance from Feed and Amenity set against a lower underlying contribution from Fertiliser. 

Fertiliser

Excluding the impact of the Bunn acquisition, the Group recorded lower sales volumes in the first six months of the financial year. Fertiliser demand in 2018 is reflecting a more normal sales offtake pattern, with primary producers planning a higher proportion of their procurement requirements in the second half of the financial year. Sales margins continue to be positively supported by growth in sales of differentiated fertiliser and bespoke nutrition applications.

Bunn has performed in line with expectations in the first six months, with the business fully integrated in the period. Procurement, sales and customer management functions are centralised, with the blending and distribution facilities fully operational under Origin protocols.

Amenity

Origin Amenity achieved a good result in the period as new go-to-market strategies drove strong early season service and volume growth into the speciality and professional sectors. The acquisitions completed in 2016 and 2017 maintained solid momentum in the period as they continue to provide new service and customer extension.

Feed Ingredients

Feed Ingredients continues to perform well, with the result in the period principally supported by higher volumes. Sustained demand levels are reflecting the impact of fodder shortages and the extended period of housing of animals due to poor ground and grazing conditions. Forward buying momentum was positive in the first six months with customers taking advantage of generally favourable pricing opportunity.

Continental Europe¹

			Change on prior year
	2018 €m	2017 €m	Change %	Underlying3 %
Revenue	121.6	108.5	12.1%	14.7%
Operating profit2	0.9	0.7	28.5%	24.9%
1  Excluding crop marketing. While crop marketing has a significant impact on revenue, its impact on operating profit is insignificant.  An analysis of revenues, profits and margins attributable to agronomy services and inputs more accurately reflects the underlying drivers of business performance. 2  Before amortisation of non-ERP intangible assets and exceptional items 3  Excluding currency movements and the impact of acquisitions

Underlying business volume growth was 3.9 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.

On an underlying basis at constant currency, there was an increase in operating profit of 24.9 per cent.

Poland

Poland performed well in the period, with the business achieving higher revenues and margins across the main agronomy portfolios. The result was delivered against the backdrop of a challenging operating environment for primary producers and reflects the benefit of realised efficiency gains and solid growth in differentiated agronomy packages targeted to meet farmers' individual requirements.

Above average rainfall in many growing regions of northern Poland delayed the completion of the harvest and curtailed new crop planting activity in the period. As a result, autumn and winter plantings are estimated to be approximately 2.9 per cent lower than the prior year at 4.6 million hectares. This shortfall is expected to be recovered through an increase in spring plantings leaving the total cropping area for the growing year broadly equivalent to last year at 8.1 million hectares.

Romania

Romania delivered a satisfactory result in the period with performance underpinned by increased volumes supported by new customer gains delivered against the backdrop of competitive trading conditions. Specialised nutrition portfolios grew solidly in the period reflecting the business meeting the increased demand from primary producers as this market develops. 

The development of enhanced technical sales support remains an area of focus for the business together with the advancement of our knowledge transfer infrastructure through our dedicated research and development function, Agricultura Plus. This function leverages knowledge from across our geographies, to localise solutions for the Romanian market. In addition, our digital offering has gained solid momentum with encouraging initial uptake across the market.

The total sown area for the principal autumn and winter crops is estimated to be in line with the prior year at 3.2 million hectares. The cropping area is well established and in generally good condition, notwithstanding some localised challenges encountered by unseasonally dry weather at the planting stage. Combined winter and spring plantings for the growing season as a whole are currently estimated to be in line with last year at 8.4 million hectares.

Ukraine

Ukraine achieved a solid performance in the seasonally quiet first half of the year against the backdrop of currency volatility and sustained input price inflation. The result in the period was primarily driven by an improved sales mix of value added technologies. The business continues to benefit from new customer gains with an increased level of sales commitments achieved ahead of the main seasonal activity in the second half.

Trading conditions are highly competitive with primary producers firmly focused on crop investment return and flexible financing solutions.

Autumn and winter crop plantings are estimated to be in line with the prior year at 7.8 million hectares with crops generally well established and in good condition. Total autumn, winter and spring plantings are currently forecast at 22.7 million hectares against 22.4 million hectares for the prior year.

Corporate development

In August 2017 the Group completed the acquisition of Bunn in the United Kingdom. Bunn is a leading provider of prescription fertiliser blends and nutrition management systems servicing arable, grassland and horticultural farm enterprises.

In January 2018 Origin announced the completion of the acquisition of the Belgian based Pillaert. Headquartered in Ghent, Pillaert is a leading provider of standard and prescription fertilisers in Belgium and surrounding regions. Pillaert, which enjoys a brand heritage of over 50 years, markets an extensive range of technically based nutrition applications and operates a strong business-to-business and retail customer franchise.

The total cost of both businesses on an enterprise valuation basis inclusive of average working capital was €26 million approximately. Maintainable EBIT for the combined businesses is €3.2 million.

Board and management changes

In February 2018 the Group announced that Imelda Hurley, Chief Financial Officer, indicated her decision to step down from the Board on 28 February 2018 and leave the Group effective 30 April 2018. Origin has initiated a search for a new CFO and an appointment will be made in due course.

Peter Dunne, who joined the Group in 2016, was appointed Group Finance Director in February 2018.

Rafal Prendke has been appointed Chief Executive Officer of the Continental European Division of Origin ('Continental Europe' or 'the Division').  

Rafal joined Origin in 2015 as CEO of Dalgety Polska. He has been the driving force behind the creation of the leading agronomy services and input distribution business in Poland under the Agrii brand.

Continental Europe incorporates the Group's operations in Belgium, Poland, Romania and Ukraine which have sales revenue of over €0.6 billion and 1,100 employees approximately. The establishment of the Division last year optimally leverages Group and in-country organisational strengths to spearhead future business development, technical innovation and growth.

Outlook

Sector sentiment currently remains stable against an improved short term planning environment for primary food producers. The Group is well positioned to respond to current market conditions, and the solid start to the seasonally quiet first half of the financial year provides a good foundation for the seasonally more important second half 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 19 June 2018.

ENDS

 

Origin Enterprises plc

Condensed Interim Consolidated Income Statement       

for the six months ended 31 January 2018

				Six months ended January 2018 Total €'000		Six months ended January 2017 Total €'000		Year ended  July 2017 Total €'000
		Notes				Note 5		Note 5
Revenue		3		586,909		564,436		1,528,468
Cost of sales				(511,273)		(493,556)		(1,297,009)
Gross profit				75,636		70,880		231,459
Operating costs				(76,099)		(81,555)		(178,811)
Share of profit of associates and joint venture				1,707		1,742		4,366
Operating profit/(loss)		3		1,244		(8,933)		57,014
Finance income				602		262		703
Finance expense				(4,603)		(4,078)		(7,617)
(Loss)/profit before income tax				(2,757)		(12,749)		50,100
Income tax credit/(expense)				733		2,592		(4,480)
(Loss)/profit attributable to equity shareholders				(2,024)		(10,157)		45,620
				Six months		Six months		Year
				ended		ended		ended
				January		January		July
				2018		2017		2017
Basic (loss)/earnings per share		4		(1.61c)		(8.09c)		36.33c
Diluted (loss)/earnings per share		4		(1.61c)		(8.09c)		36.15c

Origin Enterprises plc

Condensed Interim Consolidated Statement of Comprehensive Income

for the six months ended 31 January 2018

	Six months ended January 2018 €'000		Six months ended January 2017 €'000		Year ended July 2017 €'000
(Loss)/profit for the period	(2,024)		(10,157)		45,620
Other comprehensive (expense)/income
Items that are not reclassified subsequently to the Group income statement:
Group/Associate defined benefit pension obligations
- remeasurements of Group's defined benefit pension schemes	2,205		(777)		3,407
- deferred tax effect of remeasurements	(365)		193		(519)
- share of remeasurements on associate's defined benefit pension schemes	-		(3,058)		(614)
- share of deferred tax effect of remeasurements - associates	-		551		135
Items that may be reclassified subsequently to the Group income statement:
Group foreign exchange translation details
- exchange difference on translation of foreign operations	(948)		(2,489)		(10,674)
Group/Associate cash flow hedges
- effective portion of changes in fair value of cash flow hedges	(3,243)		1,566		(2,025)
- fair value of cash flow hedges transferred to operating costs	760		(1,721)		1,754
- deferred tax effect of cash flow hedges	436		95		86
- share of associates and joint venture cash flow hedges	(1,879)		(1,372)		(4,289)
- deferred tax effect  of share of associates and joint venture cash flow hedges	235		171		536
Other comprehensive expense for the period, net of tax	(2,799)		(6,841)		(12,203)
Total comprehensive (expense)/income for the period attributable to equity shareholders	(4,823)		(16,998)		33,417

Origin Enterprises plc

Condensed Interim Consolidated Statement of Financial Position

as at 31 January 2018

			January 2018 €'000		January 2017 €'000		July 2017 €'000
	Notes
ASSETS
Non-current assets
Property, plant and equipment	6		117,418		103,151		105,271
Investment properties			9,675		9,675		9,675
Goodwill and intangible assets	7		215,746		188,973		205,961
Investments in associates and joint venture	8		32,269		33,092		34,206
Other financial assets			456		862		531
Derivative financial instruments			986		168		169
Deferred tax assets			4,663		7,132		3,475
Total non-current assets			381,213		343,053		359,288
Current assets
Inventory			221,046		202,255		159,245
Trade and other receivables			229,960		254,212		401,303
Derivative financial instruments			122		1,077		560
Cash and cash equivalents			85,869		74,499		162,631
Total current assets			536,997		532,043		723,739
TOTAL ASSETS			918,210		875,096		1,083,027

Origin Enterprises plc

Condensed Interim Consolidated Statement of Financial Position (continued)

as at 31 January 2018

			January 2018 €'000		January 2017 €'000		July 2017 €'000
	Notes
EQUITY
Called up share capital presented as equity	11		1,264		1,264		1,264
Share premium			160,422		160,399		160,422
Retained earnings and other reserves			97,855		78,346		125,043
TOTAL EQUITY			259,541		240,009		286,729
LIABILITIES
Non-current liabilities
Interest-bearing borrowings			242,131		217,363		177,854
Deferred tax liabilities			18,272		18,597		17,553
Put option liability			5,516		7,998		5,450
Provision for liabilities	9		8,261		3,997		8,072
Post employment benefit obligations			813		7,575		3,646
Derivative financial instruments			-		100		204
Total non-current liabilities			274,993		255,630		212,779
Current liabilities
Interest-bearing borrowings			15,116		18,720		16,227
Trade and other payables			353,028		343,140		548,130
Corporation tax payable			7,657		8,343		11,090
Provision for liabilities	9		4,130		8,071		7,392
Derivative financial instruments			3,745		1,183		680
Total current liabilities			383,676		379,457		583,519
TOTAL LIABILITIES			658,669		635,087		796,298
TOTAL EQUITY AND LIABILITIES			918,210		875,096		1,083,027

Origin Enterprises plc

Condensed Interim Consolidated Statement of Changes in Equity

for the six months ended 31 January 2018

														Share- based payment reserve €'000				Foreign currency translation reserve €'000
								Capital redemption reserve €'000		Cashflow hedge reserve €'000
		Share capital €'000		Share premium €'000		Treasury shares €'000						Revaluation reserve €'000				Re-organisation reserve €'000				Retained earnings €'000
																						Total €'000
	At 1 August 2017	1,264		160,422		(8)		134		(2,665)		12,843		358		(196,884)		(38,076)		349,341		286,729
	Loss for the period	-		-		-		-		-		-		-		-		-		(2,024)		(2,024)
	Other comprehensive expense for the period	-		-		-		-		(3,691)		-		-		-		(948)		1,840		(2,799)
	Share-based payment charge	-		-		-		-		-		-		80		-		-		-		80
	Dividend paid to shareholders (Note 13)	-		-		-		-		-		-		-		-		-		(22,445)		(22,445)
	At 31 January 2018	1,264		160,422		(8)		134		(6,356)		12,843		438		(196,884)		(39,024)		326,712		259,541

Origin Enterprises plc

Condensed Interim Consolidated Statement of Changes in Equity

for the six months ended 31 January 2017

														Share- based payment reserve €'000				Foreign currency translation reserve €'000
								Capital redemption reserve €'000		Cashflow hedge reserve €'000
		Share capital €'000		Share premium €'000		Treasury shares €'000						Revaluation reserve €'000				Re-organisation reserve €'000				Retained earnings €'000
																						Total €'000
	At 1 August 2016	1,264		160,399		(8)		134		1,273		12,843		-		(196,884)		(27,402)		327,683		279,302
	Loss for the period	-		-		-		-		-		-		-		-		-		(10,157)		(10,157)
	Other comprehensive income/(expense) for the period	-		-		-		-		(1,261)		-		-		-		(2,489)		(3,091)		(6,841)
	Share-based payment credit	-		-		-		-		-		-		121		-		-		-		121
	Dividend paid to shareholders (Note 13)	-		-		-		-		-		-		-		-		-		(22,416)		(22,416)
	At 31 January 2017	1,264		160,399		(8)		134		12		12,843		121		(196,884)		(29,891)		292,019		240,009

 

Origin Enterprises plc

Condensed Interim Consolidated Statement of Cash Flows 

for the six months ended 31 January 2018

	Six months ended January 2018 €'000		Six months ended January 2017 €'000		Year ended July 2017 €'000
Cash flows from operating activities
(Loss)/profit before tax	(2,757)		(12,749)		50,100
Exceptional items	-		10,378		12,524
Finance income	(602)		(262)		(703)
Finance expense	4,603		4,078		7,617
Profit on disposal of property, plant and equipment	(128)		(132)		(229)
Share of profit of associates and joint venture	(1,707)		(1,742)		(4,366)
Depreciation of property, plant and equipment	3,498		3,378		7,099
Amortisation of intangible assets	3,972		3,597		6,718
Employee share-based payment charge	80		121		358
Pension contributions in excess of service costs	(691)		(821)		(576)
Payment of exceptional rationalisaton costs	(2,943)		(8,331)		(10,145)
Payment of employment related incentive costs	-		-		-
Payment of exceptional acquisition costs	(1,443)		(275)		(1,532)
Operating cash flow before changes in working capital	1,882		(2,760)		66,865
Increase in inventory	(60,830)		(40,980)		(2,706)
Decrease in trade and other receivables	113,500		171,455		13,765
Decrease in trade and other payables	(145,253)		(259,751)		(37,115)
Cash (absorbed)/generated from operating activities	(90,701)		(132,036)		40,809
Interest paid	(2,698)		(2,817)		(6,336)
Income tax paid	(4,073)		(5,222)		(8,166)
Cash (outflow)/inflow from operating activities	(97,472)		(140,075)		26,307

Origin Enterprises plc

Condensed Interim Consolidated Statement of Cash Flows (continued)

for the six months ended 31 January 2018

	Six months ended January 2018 €'000		Six months ended January 2017 €'000		Year ended July  2017 €'000
Cash flows from investing activities
Proceeds from sale of property, plant and equipment	1,091		225		409
Proceeds from sale of equity investment	-		-		306
Purchase of property, plant and equipment	(6,373)		(3,794)		(11,206)
Additions to intangible assets	(1,505)		(857)		(3,566)
Arising on acquisitions	(16,164)		(956)		(20,305)
Proceeds from business disposal	5,250		-		-
Payment of put option liability	-		(1,746)		(1,746)
Payment of contingent acquisition consideration	(704)		(3,015)		(3,408)
Restricted cash	-		2,948		2,948
Loan repayment from associate	84		-		-
Dividends received from associates	2,351		3,697		3,822
Cash outflow from investing activities	(15,970)		(3,498)		(32,746)
Cash flows from financing activities
Drawdown of bank loans	60,063		64,050		24,031
Payment of dividends to equity shareholders (Note 13)	(22,445)		(22,416)		(26,371)
Increase of finance lease obligations	176		67		-
Cash inflow/(outflow) from financing activities	37,794		41,701		(2,340)
Net decrease in cash and cash equivalents	(75,648)		(101,872)		(8,779)
Translation adjustment	141		(1,610)		(3,963)
Cash and cash equivalents at start of period	146,715		159,457		159,457
Cash and cash equivalents at end of period (Note 10)	71,208		55,975		146,715

Origin Enterprises plc

Notes to the Condensed Interim Consolidated Financial Statements

for the six months ended 31 January 2018

1    Basis of preparation

The Group condensed interim consolidated financial statements has been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting (IAS 34), as endorsed by the EU. The condensed interim consolidated financial statements have been prepared as information for the shareholders and do not include all the information and disclosures required in the annual financial statements. They should be read in conjunction with the Group's annual financial statements in respect of the year ended 31 July 2017, which have been prepared in accordance with IFRSs. The financial statements for the year ended 31 July 2017 are available on the company's website www.originenterprises.com. Those financial statements contained an unqualified audit report.

The Group condensed interim consolidated financial statements for the six months ended 31 January 2018 and the comparative figures for the six months ended 31 January 2017 are unaudited and have not been reviewed by the Auditors. The summary financial statements for the year ended 31 July 2017 represents an abbreviated version of the Group's full accounts for that year.

The Group condensed interim consolidated financial statements are presented in euro and rounded to the nearest thousand, which is the functional currency of the parent.

A comprehensive review of the Group's performance for the six months ended 31 January 2018 is included in the financial highlights section included on pages 5 to 12.  The group's business is seasonal and is heavily weighted towards the second half of the financial year.

2    Accounting policies

The Group interim financial statements have been prepared on the basis of the accounting policies as set out on pages 79 to 84 of the Group's Annual Report for the year ended 31 July 2017.

The Group has not applied early adoption of any standards for which the effective date is not yet required.

3    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 year ended 31 July 2017 to reflect the new business model. Two operating segments have been identified: (1) Ireland and the United Kingdom and (2) Continental Europe. 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 Associate 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 Belgium, Poland, Romania and 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.

      3     Segment information (continued)

(i) Segment revenue and result	Ireland & UK						Continental Europe			Total Group
	Six months ended January 2018 €'000		Six months ended January 2017 €'000			Six months ended January 2018 €'000			Six months ended January 2017 €'000		Six months ended January 2018 €'000		Six months ended January 2017 €'000
Total revenue	534,864		497,703			209,418			209,519		744,282		707,222
Less revenue from associates and joint venture	(157,373)		(142,786)			-			-		(157,373)		(142,786)
Revenue	377,491		354,917			209,418			209,519		586,909		564,436
Segment result	1,220		901			1,043			1,109		2,263		2,010
Profit from associates and joint ventures	1,707		1,742			-			-		1,707		1,742
Amortisation of non-ERP intangible assets	(1,876)		(1,422)			(850)			(885)		(2,726)		(2,307)
Operating profit before exceptional items	1,051		1,221			193			224		1,244		1,445
Exceptional items	-		(10,149)			-			(229)		-		(10,378)
Operating profit / (loss)	1,051		(8,928)			193			(5)		1,244		(8,933)
(ii) Segment earnings before financing costs and tax is reconciled to reported loss before tax and loss after tax as follows:
											Six months ended January 2018 €'000		Six months ended January 2017 €'000
Segment earnings before financing and tax											1,244		(8,933)
Finance income											602		262
Finance expense											(4,603)		(4,078)
Reported loss before tax											(2,757)		(12,749)
Income tax credit											733		2,592
Reported loss after tax											(2,024)		(10,157)

	(iii) Segment assets	Ireland & UK				Continental Europe				Total Group
		Six months ended January 2018 €'000		Six months ended January 2017 €'000		Six months ended January 2018 €'000		Six  months ended January 2017 €'000		Six months ended January 2018 €'000		Six months ended January 2017 €'000
	Assets excluding investment in associates
	and joint venture and investment properties	543,842		517,215		250,003		241,355		793,845		758,570
	Investment in associates and joint venture
	(including other financial assets)	32,725		33,650		-		-		32,725		33,650
	Segment assets	576,567		550,865		250,003		241,355		826,570		792,220
Reconciliation to total assets as reported in Condensed Interim Consolidated Statement of Financial Position
	Cash and cash equivalents									85,869		74,499
	Derivative financial instruments									1,108		1,245
	Deferred tax assets									4,663		7,132
	Total assets as reported in Condensed Interim Consolidated Statement of Financial Position									918,210		875,096

	(iv) Segment liabilities	Ireland & UK				Continental Europe				Total Group
		Six months ended January 2018 €'000		Six months ended January 2017 €'000		Six months ended January 2018 €'000		Six  months ended January 2017 €'000		Six months ended January 2018 €'000		Six months ended January 2017 €'000
	Segment liabilities	259,920		260,210		111,828		110,571		371,748		370,781
Reconciliation to total liabilities as reported in Condensed Interim Consolidated Statement of Financial Position
	Interest-bearing loans and liabilities									257,247		236,083
	Derivative financial instruments									3,745		1,283
	Current and deferred tax liabilities									25,929		26,940
	Total liabilities as reported in Condensed Interim Consolidated Statement of Financial Position									658,669		635,087

4   (Loss)/earnings per share

Basic loss per share

	Six months ended January 2018 €'000		Six months ended January 2017 €'000
Loss for the financial period attributable to equity shareholders	(2,024)		(10,157)
	'000		'000
Weighted average number of ordinary shares for the period	125,582		125,578
	Cent		Cent
Basic loss per share	(1.61)		(8.09)

Diluted loss per share	Six months ended January 2018 €'000		Six months ended January 2017 €'000
Loss for the financial period attributable to equity shareholders	(2,024)		(10,157)
	'000		'000
Weighted average number of ordinary shares used in basic calculation	125,582		125,578
Impact of shares	77		-
Impact of SAYE scheme	531		495
Weighted average number of ordinary shares (diluted) for the period	126,190		126,073
	Cent		Cent
Diluted loss per share (1)	(1.61)		(8.09)

(1)    The impact from potential shares are anti-dilutive for the earnings per share.

4   (Loss)/earnings per share (continued)

	Adjusted basic earnings per share		Six months ended January 2018 €'000		Six months ended January 2017 €'000
	Loss for the financial period attributable to equity shareholders		(2,024)		(10,157)
	Amortisation of non-ERP related intangible assets		2,726		2,307
	Tax on amortisation of non-ERP related intangible assets		(367)		(304)
	Exceptional items, net of tax		-		8,463
	Adjusted basic earnings		335		309
			Cent		Cent
	Adjusted basic earnings per share		0.27		0.25
	Total adjusted basic earnings - as above		335		309
			Cent		Cent
	Total adjusted diluted earnings per share		0.27		0.25

The calculation of basic adjusted earnings per share is based on the weighted average number of shares in issue during the period of 125,581,696 (31 January 2017: 125,578,447). The weighted average number of shares used in the calculation of adjusted diluted earnings/(loss) per share is 126,190,275 (31 January 2017: 126,073,154).

5   Condensed Interim Consolidated Income Statements for the six months ended 31 January 2017 and year ended 31 July 2017

        An analysis of the Condensed Interim Consolidated Income Statement (including exceptional items) for the six months ended 31 January 2017 and year ended 31 July 2017 is set out below.

    Six months ended 31 January 2017

			Six months ended January 2017 Pre- Exceptional €'000		Six months ended January 2017 Exceptional €'000		Six months ended January 2017 Total €'000
	Revenue		564,436		-		564,436
	Cost of sales		(493,556)		-		(493,556)
	Gross profit		70,880		-		70,880
	Operating costs		(71,177)		(10,378)		(81,555)
	Share of profit of associates and joint venture		1,742		-		1,742
	Operating (loss)		1,445		(10,378)			(8,933)
	Finance income		262		-		262
	Finance expense		(4,078)		-		(4,078)
	Loss before income tax		(2,371)		(10,378)		(12,749)
	Income tax credit		677		1,915		2,592
	Loss for the period		(1,694)		(8,463)		(10,157)

5   Condensed Interim Consolidated Income Statements for the six months ended 31 January 2017 and year ended 31 July 2017 (continued)

    Year ended 31 July 2017

			Year ended July 2017 Pre- Exceptional €'000		Year ended July 2017 Exceptional €'000		Year ended July 2017 Total €'000
	Revenue		1,528,468		-		1,528,468
	Cost of sales		(1,297,009)		-		(1,297,009)
	Gross profit		231,459		-		231,459
	Operating costs		(166,287)		(12,524)		(178,811)
	Share of profit of associates and joint venture		4,366		-		4,366
	Operating profit		69,538		(12,524)		57,014
	Finance income		703		-		703
	Finance expense		(7,617)		-		(7,617)
	Profit before income tax		62,624		(12,524)		50,100
	Income tax expense		(7,702)		3,222		(4,480)
	Profit for the year		54,922		(9,302)		45,620

6    Property, plant and equipment

	January 2018 €'000		July 2017 €'000
Net book value
At beginning of period	105,271		102,796
Arising on acquisitions (Note 12)	10,087		388
Additions	6,215		11,816
Disposals	(1,413)		(180)
Depreciation charge	(3,498)		(7,099)
Translation adjustments	756		(2,450)
At end of period	117,418		105,271

7     Goodwill and intangible assets

	January 2018 €'000		July 2017 €'000
Net book value
At beginning of period	205,961		192,696
Arising on acquisitions (Note 12)	10,550		25,602
Additions	1,505		3,566
Amortisation of non-ERP intangible assets	(2,726)		(4,837)
ERP intangible amortisation	(1,246)		(1,881)
Translation adjustments	1,702		(9,185)
At end of period	215,746		205,961

    Included in the total goodwill and intangible assets above is goodwill of €138,504,000 (July 2017: €128,701,000). There have been no indicators of impairment in the first half of the year therefore a full assessment of the carrying value of goodwill and intangibles will be carried out in the second half of the year.

8      Investments in associates and joint venture

	January 2018 €'000		July               2017              €'000
At beginning of period	34,206		39,008
Share of profits after tax	1,707		4,366
Dividends received	(2,351)		(3,822)
Share of other comprehensive expense	(1,644)		(4,232)
Translation adjustments	351		(1,114)
At end of period	32,269		34,206

9   Provision for liabilities 

        The estimate of provisions is a key judgement in the preparation of the Interim condensed financial statements.

				January 2018 €'000			July               2017              €'000
	At beginning of period			15,464			13,778
	Arising on acquisition			-			5,129
	Provided in period			1,323			11,590
	Paid in period			(3,649)			(13,560)
	Released in period			(990)			(977)
	Unwinding of fair value discount			74			-
	Translation adjustments			169			(496)
	At end of period			12,391			15,464

Provisions for liabilities relate to various operating and employment related costs and contingent acquisition consideration that arose on various acquisitions.

10	Analysis of net debt
		31 July 2017 €'000		Cash flow €'000		Non-cash movements €'000		Translation adjustment €'000		31 January 2018 €'000
	Cash	162,631		(76,875)		-		113		85,869
	Overdraft	(15,916)		1,227		-		28		(14,661)
	Cash and cash equivalents	146,715		(75,648)		-		141		71,208
	Finance lease obligations	(739)		(176)		-		34		(881)
	Loans	(177,426)		(60,063)		(466)		(3,750)		(241,705)
	Net debt	(31,450)		(135,887)		(466)		(3,575)		(171,378)

          The loans included above are unsecured and the facility extends to May 2022.

11	Share capital	January 2018 €'000		July 2017 €'000
	Authorised
	250,000,000 ordinary shares of €0.01 each (i)	2,500		2,500
	Allotted, called up and fully paid
	126,378,777 ordinary shares of €0.01 each (i)	1,264		1,264

(i)     Ordinary shareholders are entitled to dividends as declared and each ordinary share carries equal voting rights at meetings of the Company.

12   Acquisition of subsidiary undertakings

     During the period, the Group completed the acquisition of the fertiliser activities and certain assets of Bunn Fertilisers Limited ('Bunn) in the United Kingdom and the acquisition of Pillaert-Mekoson Group ('Pillaert-Mekoson') in Belgium.  These acquisitions complement the Group's prescription fertilisers and speciality nutrition business.

         Details of the acquisitions are as follows:

(i)            On 10 August 2017 the Group completed the acquisition of the fertiliser activities and certain assets of Bunn. Based in the United Kingdom, Bunn is a leading producer of prescription fertiliser blends and nutrition management systems servicing the arable grassland and horticulture sector.

(ii)            On 23 January 2018 the Group announced it had acquired 100% of Pillaert-Mekoson. Based in Belgium, Pillaert-Mekoson markets an extensive range of technically based nutrition applications and operates a strong business and retail customer franchise.

Details of the net assets acquired and goodwill arising from the business combinations are as follows:

							Fair value €'000
Assets
Non-current
Property, plant and equipment							10,087
Intangible assets							2,195
Total non-current assets							12,282
Current assets
Inventory							1,919
Trade receivables							4,578
Other receivables							508
Total current assets							7,005
Liabilities
Trade and other payables							(6,969)
Corporation tax							(371)
Deferred tax liability							(604)
Total liabilities							(7,944)
Total identifiable net assets at fair value							11,343
Goodwill arising on acquisition							8,355
Total net assets acquired							19,698
Consideration satisfied by:
Cash consideration							22,152
Cash acquired							(5,988)
Net cash outflow							16,164
Working capital/net debt adjustment							3,534
Total consideration							19,698

The fair values presented in this note are based on provisional valuations due to the close proximity of the transactions to the end of the half year period.

13    Dividends

On 15 December 2017 a final dividend of 17.85 cent per ordinary share was paid in respect of the year ended 31 July 2017 which when combined with the interim dividend of 3.15 cent per ordinary share brings the total dividend for the year ended 31 July 2017 to 21 cent per ordinary share.

An interim dividend of 3.15 cent (2017: 3.15 cent) per ordinary share will be paid on 20 April 2018 to shareholders on the register on 6 April 2018.  These condensed interim consolidated financial statements do not reflect this dividend payable.

14    Taxation

The taxation credit for the interim period is an estimate based on the expected full year effective tax rate on full year profits.

15   Contingent liabilities

The Group is not aware of any major changes with regard to contingent liabilities in comparison with the situation as of 31 July 2017.

16   Financial commitments  

The Group has a financial commitment of €7.8 million attributable to a strategic partnership with University College Dublin ('UCD'). The commitment is over a four year period.

17   Related party transactions

 Related party transactions occurring in the period were similar in nature to those described in the 2017 Annual Report.

18    Release of half yearly condensed interim consolidated financial statements

The Group condensed interim consolidated financial information was approved for release by the Board on 7 March 2018.

19    Distribution of Interim Report

This interim report is available on the Group's website (www.originenterprises.com). A printed copy is available to the public at the Company's registered office.

 

END

 

 

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