Financial Review - Summary

 

	2021 €'000		2020 €'000
Group revenue	1,658,367		1,589,142
Operating profit1	61,007		44,099
Associates and joint venture, net2	2,841		6,154
Group operating profit1	63,848		50,253
Finance costs, net	(8,552)		(11,250)
Profit before tax1	55,296		39,003
Income tax	(9,657)		(6,157)
Adjusted net profit	45,639		32,846
Adjusted diluted EPS (cent)3	35.50c		25.69c
Adjusted net profit reconciliation
Reported net profit	38,232		19,859
Amortisation of non-ERP intangible assets	8,577		9,381
Tax on amortisation of non-ERP related intangible assets	55		(1,638)
Exceptional items (net of tax)	(1,225)		5,244
Adjusted net profit	45,639		32,846
Adjusted diluted EPS (cent)3	35.50c		25.69c
Operating margin1	3.7%		2.8%
Return on capital employed	9.3%		7.3%
Free cash flow	€49.2m		€64.3m

 

Adjusted diluted earnings per share³ increased by 38.2% to 35.50 cent. On a constant currency basis, adjusted diluted earnings per share increased by 44.6% when compared to the prior year.

 

 

Group revenue

 

Group revenue increased by 4.4% from €1,589.1 million in the prior year to €1,658.4 million. On an underlying basis revenue increased by 6.6% driven by increased demand for fertiliser, crop protection and seed, and global price movements in fertiliser.

 

The underlying increase in agronomy services and crop input volumes, excluding crop marketing volumes, was 4.9% for FY21.

 

 

Operating profit¹

 

Operating profit¹ increased by 38.3% to €61.0 million compared to €44.1 million in the previous year. On an underlying basis, operating profit¹ increased by €18.6 million (42.1%), primarily driven by recovering volumes and margins in Ireland and the UK.

 

Group operating margin increased from 2.8% to 3.7% in FY21. This was principally driven by the Ireland and UK segment, which saw its operating margin increase from 2.4% in FY20 to 3.7% in FY21.

 

Associates and joint venture²

 

Origin's share of the profit after taxation from associates and joint venture amounted to €2.8 million in the period (2020: €6.2 million). This performance reflects the challenging trading and operating conditions in the year. The FY20 figure included a contribution of €0.4m from our 20% stake in Ferrari Zagatto which was disposed of prior to the FY20 year end.

 

 

Finance costs and net bank debt⁴

 

Net bank debt⁴ at 31 July 2021 was €14.4 million (€60.5 million including IFRS 16 lease debt) compared to net bank debt of €53.2 million (€93.9 million including IFRS 16 lease debt) at the end of the prior year, a reduction of €38.8 million. The reduction in net bank debt year-on-year reflects continued strong cash generation across the Group.

 

Net finance costs amounted to €8.6 million, which represents a significant decrease of €2.7 million on the prior year. Excluding the impact of IFRS 16, there was a reduction in net finance costs of €2.8 million reflecting lower local debt levels in our businesses and lower interest rates, year-on-year, across the Group.

 

At 31 July 2021, the Group had unsecured committed banking facilities of €430 million (2020: €430 million), of which €30 million is scheduled to expire in September 2021, €100 million in May 2022, €34 million in June 2024 and €266 million in June 2025. Subsequent to year end, the Group extended the €100 million facility due to expire in May 2022 to June 2025. Consequent on this, the Group holds €400 million of committed banking facilities with pricing linked to ESG performance, of which €34 million will expire in 2024 and €366 million in 2025.

 

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

 

	Banking Covenant	2021	2020
Net debt to EBITDA	Maximum 3.5	0.13	1.18
EBITDA to net interest	Minimum 3.0	10.36	5.76

 

 

Working capital

 

For the year ended 31 July 2021, there was a working capital outflow of €4.0 million, driven by the increased level of sales during the fourth quarter. Working capital management remains a key priority for the Group. 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

 

Adjusted diluted EPS³ amounted to 35.50 cent per share, an increase of 38.2% from FY20. This was driven by an increase in like-for-like underlying profits of 44.0%, along with the positive impact of acquisitions of 2.0% and a reduction of 6.4% and 1.4% as a result of foreign currency translation and disposals respectively.

 

 

Free cash flow

	2021 €'m	2020 €'m
Free cash flow	49.2	64.3
Free cash flow conversion ratio	114.9%	240.9%

The Group generated free cash flow in the year of €49.2 million (2020: €64.3 million).

 

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

	2021	2020
Return on capital employed	9.3%	7.3%

 

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; and
(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 a credit of €1.2 million in the year (FY20: expense of €5.2 million). These principally relate to the gain on disposal of our Belgian fertiliser business, rationalisation costs related to the closure of a UK seed plant, pension-related costs in our associates and joint venture and acquisition-related costs. Exceptional items are summarised in the table below: 

 

 

 

 

Exceptional items	2021 €'m		2020 €'m
Gain on disposal of Belgian fertiliser business	(2.6)		-
Pension and rationalisation related costs	0.7		0.2
Arising in associates and joint venture	0.4		-
Transaction, other related costs and movements in contingent consideration, net	0.3		(0.5)
Write down of intangible assets due to rebranding	-		5.7
Arising on disposal of associates and joint venture	-		0.5
Fair value adjustment and related costs on investment properties	-		(0.7)
Total exceptional items, net of tax	(1.2)		5.2

 

Dividends

 

In FY20, in light of market conditions and uncertainty relating to the COVID-19 pandemic, the Board determined that it would be prudent to suspend the final dividend for FY20. During the year, the Group's improved performance allowed dividend payments to resume, with an interim dividend of 3.15 cent paid to shareholders in April 2021. The Directors are proposing a final dividend of 7.85 cent per ordinary share for approval at the AGM in November 2021, bringing the total dividend payment to 11.00 cent. Subject to shareholder approval at the AGM, this final dividend will be paid on 4 February 2022 to shareholders on the register on 14 January 2022.

 

 

Sustainability

 

The role of agriculture and food production in our society and its associated impacts on the environment are in sharp focus globally. The Group continues to progress its sustainability agenda and will shortly publish its inaugural Sustainability Report - 'Nurturing Growth', where we will outline our vision to be the trusted partner of choice to achieve shared economic, social and environmental ambitions across our value chain partnerships.

 

 

Investor relations

 

Our strategy aims to create long-term shareholder value and we support this strategy through regular and open communication with all capital market participants. We engage with institutional investors in numerous one-on-one meetings, as well as at roadshows and conferences worldwide. Throughout the financial year, all engagement was facilitated remotely through the use of virtual conferences and video calls.

 

Contact with institutional shareholders is the responsibility of the executive management team including the Chief Executive Officer, the Chief Financial Officer and the Head of Investor Relations.

 

During the year there were 152 meetings / conference calls with institutional investors.

 

 

COVID-19

 

COVID-19 and its impact in the markets in which the Group operate continues to be a significant area of focus for the Board and senior management teams. The Group implements the advice and guidance of governments and health authorities across our markets, with ongoing audits at all our operating facilities to ensure we adhere to safe social distancing and all other health and safety guidance.

 

The Group continues to monitor developments closely across our locations and is taking appropriate actions to ensure we provide the safest environment we can for our stakeholders, while continuing to serve the needs of the agricultural community in a responsible manner.

 

 

Annual General Meeting (AGM)

 

The AGM is scheduled to be held on 25 November 2021 at 11.00am (UK/Ireland time) in the Merrion Hotel, Upper Merrion Street, Dublin 2. Any updates to the AGM required to reflect the evolving COVID-19 situation will be published in advance.

 

 

 

1	Before amortisation of non-ERP intangible assets and exceptional items
2	Profit after interest and tax before exceptional items
3	Before amortisation of non-ERP intangible assets, net of related deferred tax (2021: €8.6m, 2020: €7.7m) and exceptional items, net of tax (2021: credit of €1.2m, 2020: expense of €5.2m)
4	Group net bank debt before impact of IFRS 16 Leases

 

 

 

 

Review of Operations

Group Overview

 

			Change on prior year
	2021 €'m	2020 €'m	Change %	Underlying3 %	Constant Currency4  %
Revenue	1,658.4	1,589.1	4.4%	6.6%	7.2%
Operating profit1	61.0	44.1	38.3%	42.1%	44.2%
Operating margin1	3.7%	2.8%	90bps	90bps	100bps
Adjusted diluted EPS (cent)2	35.50	25.69	38.2%	44.0%	44.6%

 

 

1	Before amortisation of non-ERP intangible assets and exceptional items
2	Before amortisation of non-ERP intangible assets, net of related deferred tax (2021: €8.6m, 2020: €7.7m) and exceptional items, net of tax (2021: credit of €1.2m, 2020: expense of €5.2m)
3	Excluding currency movements and the impact of acquisitions and disposals
4	Excluding currency movements

 

FY21 was an improved year for Origin with increases in Group revenue, operating profit and adjusted fully diluted earnings per share of 7.2%, 44.2% and 44.6% respectively on a constant currency basis. Operating margin increased to 3.7% from 2.8% primarily due to improved performance in the Ireland and UK segment following the impact of adverse weather conditions and the COVID-19 pandemic in FY20.

 

The underlying increase in agronomy services and crop input volumes, excluding crop marketing volumes, was 4.9% for FY21.   

 

 

Ireland and the United Kingdom

 

			Change on prior year
	2021 €'m	2020 €'m	Change %	Underlying3 %	Constant Currency4 %
Revenue	1,049.3	967.9	8.4%	7.8%	8.8%
Operating profit1	39.1	23.3	67.5%	64.3%	68.2%
Operating margin1	3.7%	2.4%	130bps	130bps	130bps
Associates and joint venture2	2.8	5.8	(51.1%)	(50.9%)	(50.9%)

 

 

1	Before amortisation of non-ERP intangible assets and exceptional items
2	Profit after interest and tax before exceptional items
3	Excluding currency movements and the impact of acquisitions
4	Excluding currency movements

 

Ireland and the UK delivered an improved performance in FY21 compared to a prior year which had been impacted by highly challenging weather conditions. Underlying revenue increased 7.8% while underlying operating profit increased 64.3%.

 

The underlying volume growth for agronomy services and crop inputs was 5.3% in the period.

 

FY20 was impacted by prolonged unseasonal weather conditions in Ireland and the UK resulting in lower volumes and margins across the segment. In FY21, volume development in the UK was supported by a return to more normalised cropping levels with a 6.5% increase in total plantings. The improved result was delivered despite delayed in-field activities as a result of persistent cold weather continuing into Q3. Favourable on-farm conditions in Q4 allowed for significant catch-up activity with a 5.5% increase in crop protection volumes year-on-year.

 

Operating margin increased to 3.7% from 2.4% driven by a higher intensity of crop input spend by farmers and growers following a more normalised cropping mix.

 

 

Integrated Agronomy and On-Farm Services

 

Integrated Agronomy and On-Farm Services delivered an improved result during the year, recording higher volumes, revenues and margins across its service and input portfolios.

 

Demand for agronomy services and inputs improved in FY21 following a return to a more normalised cropping profile but was impacted by persistent cold conditions in Q3. Catch-up activity in Q4 was supported by improved on-farm sentiment and more favourable weather conditions resulting in an improved contribution year-on-year. Volumes delivered in Q4 continue to demonstrate the robustness of the Group's operational capabilities.

 

Agrii launched a sustainable seed rating offering during the year which assists farmers in choosing the best seed variety to cope with ever-changing weather demands and soil conditions.  Integrated Agronomy and On-Farm Services continues to deliver an excellent operational performance despite the backdrop of COVID-19 related constraints and has successfully implemented a range of measures to ensure continuity of service to farmers and growers.  

 

Digital Agricultural Services

 

The development and roll-out of Origin's digital offering continued during the year, with over 1.7 million (FY20: 1.4 million) active hectares on-boarded to date, including growth in Continental Europe.

 

Enhancement of functionality remains a key priority for RHIZA, the Group's digital agronomy and precision farming operation, and we continue to embed our digital decision support services across the Group's established routes-to-market, to optimise crop performance and input utilisation for farmers and growers. 

 

Business-to-Business Agri-Inputs

 

Business-to-Business Agri-Inputs had a strong financial year, recording increased volumes and an overall improved contribution.  

 

Fertiliser

 

Fertiliser delivered a strong financial and operating performance in FY21, recording higher volumes and recovering margins in the period. The result was supported by the more normalised cropping profile in the UK with positive volume momentum continuing well into Q4 influenced by raw material price increases.

 

The division rolled out its Fertile Future sustainability manifesto during the year and the development and promotion of enhanced efficiency fertiliser and bespoke nutrition ranges will continue to be a significant focus in FY22. 

 

Amenity

 

The Group's Amenity business delivered an improved performance in the period, benefitting from the easing of COVID-19 restrictions in the first quarter, which had severely impacted operations in FY20.

 

In March 2021, Origin acquired Greentech Limited ('Green-tech') the UK's leading manufacturer and distributor of landscaping, forestry and ground maintenance equipment. Green-tech strengthens Origin's Amenity business offering with potential in the area of environmental land management and biodiversity enhancement for the Group's agri-focused businesses. Since acquisition, Green-tech has performed in line with expectations and the integration of the business into the wider Amenity division is proceeding to plan.  

 

Feed Ingredients

 

The Feed Ingredients result reflects a challenging trading and operating environment impacted by a fire in our animal feed business facility in R&H Hall, at the Port of Cork, Ireland and logistical challenges arising from commodity supply constraints.

 

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

 

			Change on prior year
	2021 €'m	2020 €'m	Change %	Underlying3 %	Constant Currency4 %
Revenue	415.7	417.5	(0.4%)	5.9%	5.9%
Operating profit2	15.7	13.2	18.3%	21.6%	21.6%
Operating margin2	3.8%	3.2%	60bps	50bps	50bps

 

1	Excluding crop marketing. While crop marketing has a significant impact on revenue, its impact on operating profit is insignificant. For the year ending 31 July 2021 crop marketing revenues and losses attributable to Continental Europe amounted to €154.4 million and €0.1 million respectively (2020: €172.7 million and €0.4 million profit respectively).  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
4	Excluding currency movements

 

Continental Europe delivered a good performance in FY21 with improved performances in all territories.

 

Underlying business volumes increased by 1.0% in the period, with an improved operating margin of 3.8% (FY20: 3.2%). Working capital investment levels reduced further in FY21 following continued management focus on ensuring the cash conversion cycle is optimised and an improving mix of cash sales.  

 

During the year, the Group disposed of its Belgian fertiliser business, Pillaert. With the lack of scalable opportunities and consolidation options in the Belgian market, the Group decided to exit this market and redeploy capital in the Group's core operations.

 

 

Poland

 

Poland delivered an improved performance on the prior year.

 

The improved overall result was supported by a cropping area in line with the prior year and performance benefitted from the ongoing focus on cost efficiencies and the further volume growth in Origin's seed and speciality nutrition portfolios. During FY21, the nutrition portfolio continued to develop with a more favourable mix of speciality and strategic products positively impacting margin. The excellent operational performance delivered improved overall operating margin and reduced working capital investment.

 

 

Romania

 

Romania delivered a satisfactory result during the year, in line with the performance of FY20.

 

Despite a slow start to the year as a result of dry conditions delaying in-field operations, more favourable conditions in the second half of the year were sufficient to allow catch-up activity on-farm, with a focus on improving the mix of higher margin speciality and strategic products. Working capital management continued to be an area of focus during the year, resulting in a working capital inflow year-on-year.

 

 

Ukraine

 

While Ukraine delivered an improved contribution in FY21 and a further significant reduction in working capital levels, the operating profit delivered was disappointing.

 

We continue to see improved performance in our strategic crop protection portfolio; however, the market remains highly challenging. With the backdrop of this highly challenging market, the Group continues to prioritise the development of improved margin and higher service agronomy channels, together with delivering further operational and working capital efficiencies.

 

 

Latin America

 

				Change on prior period
		2021 €'m	2020 €'m		Change %	Underlying3 %	Constant Currency4  %
Revenue		39.0	31.1	25.4%		58.1%	58.1%
Operating profit1		6.3	7.1	(11.4%)		16.9%	16.9%
Operating margin1		16.1%	22.9%	(680bps)		(600bps)	(600bps)
Associates and Joint venture2		-	0.4	(100.0%)		-	(100.0%)

 

 

1	Before amortisation of non-ERP intangible assets and exceptional items
2	Profit after interest and tax before exceptional items
3	Excluding currency movements and the impact of acquisitions and disposals
4	Excluding currency movements

 

The Latin American ('LATAM') reporting segment incorporates the Group's operations in Brazil.

 

LATAM delivered a strong underlying performance year-on-year with volume development and underlying growth driven by a double-digit percentage increase in our core product range, a more significant increase in controlled release fertiliser sales, together with a 3.5% increase in the total cropping area dedicated to soya.

 

Underlying business volumes increased by 45.7% in the period with revenues increasing by 58.1% on an underlying basis at constant currency. The impact of foreign currency translation has significantly impacted LATAM's contribution in the period following the weakening of the Brazilian Real. Reported operating profit has decreased by 11.4% despite an increase in operating profit of 16.9% on a constant currency basis.

 

The result was supported by the completion of our new controlled release fertiliser plant in Minas Gerais which became operational in the second half of the financial year.

 

 

Outlook

 

The Group has a strong and experienced leadership team in place. Our integrated crop services business model with scalable and diversified market positions, continues to demonstrate its resilience. We are confident we will progress our growth ambitions successfully in FY22 and beyond.

 

 

Consistent with prior years, the Group will provide a Q1 Trading Update for FY22 on 25 November 2021.

 

 

ENDS