preliminary results 2018 - origin enterprises · this presentation, whether as a result of new...

Preliminary Results 201826 September 2018

Forward-Looking Statements

This presentation contains forward‐looking statements. These statements have been made by the Directors in good faith based on the information available to them up to the time of the preparation of this presentation. Due to the inherent uncertainties, including both economic and business risk factors underlying such forward‐looking information, actual results may differ materially from those expressed or implied by these forward‐looking statements. The Directors undertake no obligation to update any forward‐looking statements contained in this presentation, whether as a result of new information, future events or otherwise.

Preliminary Results 2018 2

2018 Highlights& Business Overview


2018 Performance

Financial• Results ahead of guidance:

4.6% increase in operating profit to €71.2 million

Share of PAT of associates and joint venture €7.2 million

7.6% increase in adjusted diluted EPS to 48.80 cent

• Strong cashflow performance Free cash flow of €56.6 million Positive working capital cash inflow of €0.7 million

Year end leverage at 0.54x

• Final dividend 17.85 cent giving total dividend of 21.00 cent (2017: 21.00 cent)

Summary & Highlights

Preliminary Results 2018

4

Operational• Strong business performance in

highly challenging season for crop growers, livestock farmers and amenity professionals

• Full integration of acquisitions completed in 2018

• Agri‐Services Digital enablement and new customer application roll out well advanced in period

• Completion of new €6.0 million seed processing and input formulation facility in Poland

• Investment in new operating capacity for Feed business

Strategic• Evolution of Group portfolio with

first time entry in Latin America. Meets objectives for seasonality balance and geographical diversification and to build scale internationally

• Significant strengthening of organisation and leadership teams including:

− New and devolved capability organised on a Geographical profit centre basis

− Enhanced Group services and functional leadership

− Appointment of new CFO

− Appointment of CEO Continental Europe

− Appointment of CEO Latin American Division

All percentage movements quoted above are in constant currency

2018 Agri-Services in Overview Key Facts, Customer Channel and Geography

Distribution Points

112

Customers

49,000Input Formulation& Processing Facilities

32

Sales Force

700DemonstrationFarms

73Direct FarmCustomer Footprint

12.7m haTrial Units

60,000

1 Excluding associates and joint venture

Customer Channel1

Revenue EBIT

€71.2m€1.63bn

53%

47%

52%

48%

Direct FarmBusiness‐to‐Business

Geography1

Revenue EBIT

€71.2m€1.63bn

64%

36%

77%

23%

Ireland / UKContinentalEurope


Agri-Services – The Business

59%

15%

5%

3%

18%

Combinable CropsGrasslandRoots & VegAmenityFeed / other

Service application and gross margin profile


2018 Revenue 2018 Gross Margin

47%

25%

11%

7%

10%

Crop ProtectionNutritionSeedAmenityFeed / Other

TradingReview


Agronomy Service and Input Revenue1 Analysis


1 Excludes crop marketing revenues and volumes

Currency

(2.86%)Underlying

+5.87%Acquisitions

+5.63%

Volume

+2.66%Price

+3.21%

Growth in Agronomy Service and Input Revenue fromFY 2017 to FY 2018

+8.64%1

Trading Review

• Underlying volume growth of 2.1%• Resilient performance against significantly curtailed

spring seasonal growth and delayed crop development• More favourable market sentiment as positive output

price development supports improved returns for crop growers and livestock farmers

• Strong performances in feed, fertiliser and speciality nutrition offset the 2018 season impact on agronomy service volumes

• Digital Agricultural Services performed well with solid foundation for further momentum in 2019

• Margin contraction driven by business mix and higher commodity prices

Ireland & the UK


52.753.4

54.8

2016 2017 2018

Operating profit (€’m)

1 Before amortisation of non‐ERP intangible assets and exceptional items2 Excluding currency movements and the impact of acquisitions

Year ended 31 July2018€’m

2017€’m

Change%

Underlying2

%

Revenue 1,038.1 955.0 8.7% 6.1%

Operating profit1 54.8 53.4 2.5% 1.4%

Operating margin1 5.3% 5.6% (30bps) (30bps)

Associates and joint venture 7.2 4.4 65.4% 70.0%

Trading Review

• Underlying volume growth of 4.0%• Performance in line with last year despite condensed

spring growth and sustained dry summer conditions impacting farmers crop potential

• Speciality agronomy, nutrition and fertiliser portfolios perform well

• Digital services adoption achieves good momentum• Completion of new seed processing and input

formulation capacity investment in Poland• Belgium first time entry with acquisition and

integration of fertiliser and speciality nutrition business ‐ Pillaert‐Mekoson

Continental Europe1


14.9

16.2 16.2

2016 2017 2018

Operating profit (€’m)

1 Excluding crop marketing revenues, volumes and operating profits2 Before amortisation of non‐ERP intangible assets and exceptional items3 Excluding currency movements and the impact of acquisitions


2017€’m

Change%

Underlying3

%

Revenue 431.0 397.3 8.5% 5.4%

Operating profit2 16.2 16.2 0.6% 0.9%

Operating margin2 3.8% 4.1% (30bps) (30bps)

FinancialReview


2018 PerformanceSummary & Highlights


OperatingProfit

€71.2mAdjustedEPS

48.80c

Free Cash Flow

€56.6m

Revenue

€1.6bn+6.5% (rc1)+9.0% (cc1)

2017: €32.5m

UnderlyingVolume Growth

+2.7%2

GroupOperating Margin

4.4%ROCE

13.5%Dividend

17.85c final21.00c total(20bps)

Profit After Tax

€61.7m

WorkingCapital Inflow

+€0.7mNet Debt

€38.4mNet Debt / EBITDA

0.54

+4.8% (rc1)+7.6%(cc1)

(20bps)

2017: 0.492017: (€26.0m) 2017: €31.5m

+1.7% (rc1)+4.6%(cc1)

+4.7% (rc1)+7.6%(cc1)

1 rc denotes reported currency; cc denotes constant currency2 Represents underlying volume growth in agronomic services and inputs (excluding crop marketing volumes)3 Before amortisation of non‐ERP intangible amortisation and exceptional items

2018 Financial HighlightsYear ended 31 July

13

2018€’m

2017€’m

% Change

% Constant Currency

Group revenue 1,627.5 1,528.5 6.5% 9.0%

Group operating profit1Agri‐ServicesAssociates and joint venture2

71.27.2

70.04.4

1.7%65.4%

4.6%70.0%

Total group operating profit 78.4 74.4 5.4% 8.4%

Finance costs, net (8.1) (6.9) (16.9%) (21.7%)

Profit before tax 70.3 67.5 4.3% 7.0%

Adjusted diluted EPS3 48.80 46.62c 4.7% 7.6%

Return on capital employed 13.5% 13.7% (20bps)

Dividend per share 21.00c 21.00c ‐

Net debt4 (38.4) (31.5) (22.0%)

1 Before amortisation of non‐ERP intangible assets and exceptional items2 Profit after interest and tax before amortisation of non‐ERP intangible assets and before exceptional items3 Before amortisation of non‐ERP intangible assets, net of related deferred tax (2018: €4.9m, 2017: €3.9m) and exceptional items, net of tax (2018: €Nil, 2017: €9.3m)4 Includes restricted cash of €0.5m (2017: €Nil)


Group Revenue


€1,528.5m€1,627.5m

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

FY17 Underlying Acquisitions FY18 (excl. currency)

Currency FY18

+€61.4m+4.0%

+€76.1m+5.0%

+€99.0m+6.5%

(€38.5m)(2.5%)

+€137.5m+9.0%

€m

Group Operating Profit


€70.0m €71.2m

0

10

20

30

40

50

60

70

80

90

FY17 Underlying Acquisitions FY18 (excl. currency)

Currency FY18

+€0.7m+1.0%

(€2.0m)(2.9%) +€1.2m

+1.7%

+€2.5m+3.6%

+€3.2m+4.6%

€m

Earnings per Share


46.62c48.80c

0.00

10.00

20.00

30.00

40.00

50.00

60.00

FY17 Underlying Acquisitions FY18(excl. currency)

Currency FY18

+2.66c+5.7%

(1.37c)(2.9%)

+ 0.89c+1.9%

+2.18c+4.7%

+3.55c+7.6%

€ cent per share

Operating Margin Analysis


3.00

3.50

4.00

4.50

5.00

5.50

FY17 Business portfolio mix Increased fertiliser inputprices

FY18

%

+0.5% (0.7%)

4.6%

4.4%

Cash Flow Year ended 31 July



2017€’m

Cash flow from operating activities 80.0 78.5Change in working capital 0.7 (26.0)Interest and tax (17.4) (14.5)Cash flow from ongoing operating activities 63.3 38.0Exceptional and one off items (7.0) (11.7)Net cash flow from operating activities 56.3 26.3

Excellent cash flow performance driven by good working capital management

Balance SheetYear ended 31 July

19

As at 31 July2018€’m

2017€’m

Tangible assets 129.8 114.9

Goodwill and intangible assets 216.3 206.0

Associates and joint venture 48.6 34.7

Working capital 17.2 12.4

Deferred and contingent acquisition consideration (13.1) (14.7)

Provisions for liabilities, including pension (5.2) (9.8)

Net debt (38.4) (31.5)

Taxation – including deferred tax (27.0) (25.2)

Other 2.0 (0.1)

Shareholders’ funds 330.2 286.7


Strong Balance Sheet provides headroom for further acquisitions

Banking Facilities and Covenants


Year ended 31 July 2018 2017 2016

Net debt to EBITDA 0.54 0.49 ‐1

Covenant <3.50 <3.50 <3.50

EBITDA to net interest 9.81 11.45 11.06

Covenant >3.00 >3.00 >3.00

1 Group was in a net cash position at 31 July 2016

All terms as defined for bank covenant testing purposes

Committedbanking facilities

€430 millionWeighted average debt maturity in year 2018

3.66 years

Strategy& Development


The Strategic Context for Farming & Food


Population growth

Productivity and Yield Gaps

Regulation and Escalating Cost of Innovation

Increasing Farm Professionalisation

Consolidation

Climate Change and Environmental

Stewardship

Digital Agriculture and Greater Technology

Enablement

Macro trends

Investment Proposition


Market leading

positions with developed routes‐to‐market

Consistent & maintainable

cash generation

Favourable long term market

fundamentals

Long term customer & supplier partnerships

Industryleading R&D and technical excellence

Strongbalance

sheet with flexibility for

M&A

Diversified geographic & business portfolio

Balanced organic growth, international expansionand M&A potential

Well positioned to embrace Digitisation of Agri‐Services

974 531 82 6

Business Strategy


StrategicDeliverables

Our VisionTo build sustainable value through being the leading and trusted partner of choice to the farmers, growers and amenity professionals we serve

Our PurposeTo deliver innovative and customised crop management systems through:• Our people• On‐going research &

development• Agronomic expertise• Collaboration & partnership• Integrated solutions• A service based approach• Supply chain excellence

Scale• Buy & build agronomy

services and crop inputs distribution

• Expand own product based capabilities

• Invest to drive organic growth

Portfolio Positioning• Maintain differentiated

position as specialist route‐to‐market for crop technologies, services & inputs

• Target opportunities which leverage our operating model and provide balanced diversification and counter seasonality

Focus• Prioritise customised

focus through science based innovation

• Leverage & digital capabilities to positively support the competitiveness, profitability and sustainability of our customers’ enterprises

People and Organisation• Develop & empower

entrepreneurial leadership teams

• Drive performance through devolved accountabilities

Proven buy & build and yield technology transfer capability

Ireland and the UK


Intensification & farm consolidation driving market opportunity

Source: Management information

Sales Force 370

Customers 30,000

Footprint 1.4m ha

Farm size 100 – 2,000 ha

Sector Consolidated

Market Position #1

Avg. Wheat yield 8.0 t/ha

Continental Europe

Sales Force 330

Customers 19,000

Footprint 11.3m ha

Farm size 100 – 50,000 ha

Sector Fragmented

Market Position #1 – #3

Avg. Wheat yield 3.0 – 4.0 t/ha

Ireland UK

Ukraine

Poland

Romania

Belgium

Source: Management information

Latin America

Primary producers• Increasing professionalisation• Increasing intensification and farm consolidationSpeciality nutrition• Second stage application dedicated

to professional holdingsSpeciality inputs – growing market• US$1.7bn in 2016• US$2.2bn in 2021

Brazil – market overview


Global Player

0510152025303540

0

50

100

150

200

250 Production (million t)Planted area (million ha)Fertiliser (million t)

Grain production, planted area and fertiliser consumption

2.42.5 2.6

3.0 3.13.3

3.4 3.23.7

Yield (t/ha)

> 2x Total area of UK

+22% from 2015/2016

Available to be converted into cropland

+30% from 15 years ago

Croplandarea (m ha)

Grain production (m tons)

Pasture land (m ha)

Soya yield(1,000 t/ha)

59

228

198

3.3

#3Production

#2Export

#1Production

#1Export

#1Production

#1Export

#1Production

#1Export

% Global Trade

21%

44%

31%

75%

Corn

Sugar

Coffee

FCOJ

Source: CONAB, Rabobank, IBGE

#2Production

#2Export 39%Soy

Fertiliser(million t)(millions)

Latin America

Crop input development

• Leading developer and manufacturer of high value nutrition and speciality inputs

• Paraná state based• Supplies Brazil and export market


Crop services

• Leading provider of agronomy services, inputs and crop handling / marketing services

• Paraná state based

Main crops • Soy beans• Corn

Customers

1,200Turnover

€28.4m1

EBITDA

€9.3m1Sales Force

60

Customers

4,000EBITDA

€4.3m1

Turnover

€88.2m1

Sales Force

65Market: Branded Retail Market: Direct Farm Distribution

• Sugar Cane• Wheat

• Farm Size – 100 – 1,000 ha• Two crops per year• Fragmented market• Well capitalised primary producers• Favourable logistics to export

Paraná Production Forecast – Million tns

19,586

17,838

3,41

1

24,835

20,942

4,13

4

Soybean Corn Wheat

2016/17

2026/27

+ 17%+ 21%

+ 27%

Paraná State200,000km2

> 2x Total areaof Ireland

Source: CONAB, Rabobank, IBGE

Brazil investment

1 EUR/BRL 4.4 at June 2018

Priorities for Capital Allocation


Strongbalance sheetStrong cash generationFlexibility to invest

Reinvestment

DividendAcquisitions

Reinvestment incore

Sustaining / investment capexPeople

R&D and technology

Acquisitions basedon strategic relevance and expected returns

Target ROCE of 15%

Consistentdividend policyc. 45% ofFree Cash Flow

Summary& Outlook


Summary and Outlook


1Resilient business performance in challenging trading conditions

2Strong cashflow and working capital management

3The Group is well positioned to capitalise on scalable and diversified business platform

4Improving on‐farm sentiment may be challenged in the UK by the uncertain nature of Brexit and its timing

5Strong balance sheet and cash generation provides flexibility to invest in new opportunities

6Continued investments in Digital, Application Research and Innovation

7Continuing a balance between organic and acquired growth

8Organic growth will be driven by R&D and Agronomist knowledge driving yield improvement andfarm consolidation

9Pipeline of M&A opportunity in Agronomy Services, Fertiliser, Speciality Products and Amenity

www.originenterprises.com

4‐6 Riverwalk, Citywest Business Campus, Dublin 24, IrelandT: +353 1 5634900 F: +353 1 5634916

preliminary results 2018 - origin enterprises · this presentation, whether as a result of new...

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