Origin Enterprises : 2023 Preliminary Results

Origin Enterprises plc

PRELIMINARY RESULTS STATEMENT

Strong operational delivery, robust cash generation; adjusted EPS of 53.16 cent, at the top end of guidance

Dublin, London, 26 September 2023: Origin Enterprises plc ('Origin' or 'the Group'), the international Agronomy-Services group, providing specialist advice, inputs and digital solutions to promote sustainable land use, announces its results for the financial year ended 31 July 2023 ('FY23').

Results highlights for FY23

• Strong Group performance delivering operating profit1 of €90.8 million
• Increase in Group revenue of 4.9% to €2.5 billion
• Adjusted diluted earnings per share3 of 53.16 cent
• Strong cash generation and conversion with free cash flow of €104.4 million (free cash flow conversion of 178.2%)
• Year end net cash4 position of €53.2 million (FY22: €43.4 million)
• Completion of four complementary acquisitions in the Group's strategically important Amenity, Environmental and Ecology business
• Strong ESG progress with improved external ESG ratings
• Proposed final dividend of 13.65 cent per share with total FY23 dividend of 16.8 cent
• Completion of €20.0 million share buyback

Commenting on FY23 performance, Origin's Chief Executive Officer, Sean Coyle said:

"Origin delivered a strong overall performance in declining commodity markets. The Group delivered an operating profit of €90.8 million resulting in adjusted diluted earnings per share of 53.16 cent, at the top end of our guidance.

Effective operational execution helped deliver a robust cash performance with a net cash position of €53.2 million at year end. This result was driven by a strong free cash flow of €104.4 million which included a working capital inflow of €43.9 million, as fertiliser raw materials and feed prices decreased globally, combined with favourable timing impacts of purchases and sales.

We continue to pursue a disciplined approach to capital allocation to drive shareholder returns. We made strong progress against a number of our strategic objectives with four acquisitions, totalling €30.1 million, in our Amenity, Environmental and Ecology business. These acquisitions complement our organic growth strategy and broaden our expertise and capabilities in the growing market for ecological and environmental products and services. From our strong cash flow, we also returned €38.0 million to shareholders this year through a combination of share buybacks and dividends.

We have, however, taken the difficult decision to close our Ukraine business at the end of September. This decision was taken after much deliberation, given the reduced activity levels and the market dynamics over recent years which have resulted in the business being loss making, with little evidence that the trading environment will improve.

Thanks to the continued dedication of all our staff, we continue to drive sustainable growth and are on track to deliver our strategic ambitions as set out in our 2022 Capital Markets Day. We delivered a return on capital employed in FY23 within our targeted range at 12.6% and we will continue to invest for growth across our existing operations and strengthen our earnings potential through margin accretive acquisitions."

Group revenue

Group revenue increased by 4.9% to €2,456.2 million on a reported basis and 6.5% on a constant currency basis. Excluding crop marketing, revenue in the Agronomy and Inputs businesses delivered constant currency growth of 5.2%, with price growth of 12.5%, reflecting global commodity prices, and an increase of 1.1% from acquisitions set against reduced volumes of 8.4%, driven primarily by a combination of reduced Ukraine activity and lower fertiliser volumes.

Operating profit1

Operating profit1 amounted to €90.8 million compared to the unique contribution in FY22 of €119.7 million, which was impacted by strong commodity prices and highly volatile trading conditions. Excluding FY22's result, the operating profit delivered in FY23 of €90.8m exceeds the previous best of the Group with increases recorded in Continental Europe and Latin America set against the expected reduced contribution from Ireland and the UK.

Group operating margin reduced from 5.1% to 3.7% in FY23, principally driven by the Ireland and UK segment, which saw its operating margin reduce from 5.9% in FY22 to 3.5% in FY23.

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Associates and joint venture2

Origin's share of the profit after taxation from associates and joint venture amounted to €4.0 million in the period (FY22: €6.8 million). The FY23 performance reflects a weaker feed commodity market in the second half of the year compared to the stronger operating and trading conditions experienced in FY22.

Finance costs and net bank debt4

Net cash4 at 31 July 2023 was €53.2 million (net debt4 of €1.7 million including IFRS 16 lease debt) compared to net cash4 of €43.4 million (net debt4 €5.1 million including IFRS 16 lease debt) at the end of the prior year, an increase of €9.8 million. The movement is primarily driven by the strong FY23 operating performance and a net working capital inflow during the year, as described below.

Net finance costs amounted to €13.0 million, which represents an increase of €1.9 million on the prior year. Excluding the impact of IFRS 16, there was an increase in net finance costs of €1.8 million reflecting increased interest rates, year-on-year, across the Group.

At 31 July 2023, the Group had unsecured committed banking facilities of €400.0 million (2022: €400.0 million), with pricing linked to ESG performance, of which €33.8 million will expire in 2024 and €366.2 million in 2026.

At year end the Group's key banking covenants were as follows:

Working capital

For the year ended 31 July 2023, there was a working capital inflow of €43.9 million reflecting the continued focus on working capital optimisation across the Group. While the year-end represents the low point in the working capital cycle for the Group reflecting the seasonality of the business, working capital performance was positively impacted by lower fertiliser raw material and feed pricing, the favourable timing impact of purchases and sales offtakes during H2 and the net benefit of trade payables which have been suspended in accordance with international sanctions imposed in response to the Russian invasion of Ukraine in 2022. We continue to monitor the situation regarding sanctions and work very closely with the relevant National Competent Authorities and will continue to act in accordance with their guidance.

Adjusted diluted earnings per share ('EPS')3

Adjusted diluted EPS3 amounted to 53.16 cent per share (FY22: 71.53 cent), a decrease of 25.7% on a reported basis and 25.9% on a constant currency basis.

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The Group generated free cash flow in the year of €104.4 million (2022: €108.5 million). This strong cash flow performance delivered a net cash position of €53.2 million at year end. This was due to a continued focus on working capital optimisation, falling feed and fertiliser raw material prices and disciplined cash management across the Group.

Free cash flow means the total of earnings before interest, tax, depreciation (excluding depreciation of IFRS 16 Right of Use leased assets), amortisation of non-ERP related intangible assets and exceptional items of wholly owned businesses ('EBITDA') adjusted to take account of interest, tax, routine capital expenditure, working capital cash flows and dividends received.

Free cash flow conversion ratio means free cash flow as a percentage of profit after tax of wholly owned businesses, excluding exceptional items and amortisation of non-ERP related intangible assets.

Return on capital employed

2023 2022

The Group's strong operating performance delivered a ROCE of 12.6%, within our targeted range. 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:

1. 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; and
2. 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.

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