Financial Review - Summary

 

	2023 €'000		2022 €'000
Group revenue	2,456,168		2,342,102
Operating profit1	90,791		119,740
Associates and joint venture, net2	4,040		6,845
Group operating profit1	94,831		126,585
Finance costs, net	(12,963)		(11,057)
Profit before tax1	81,868		115,528
Income tax	(19,230)		(25,509)
Adjusted net profit	62,638		90,019
Adjusted diluted EPS (cent)3	53.16c		71.53c
Adjusted net profit reconciliation
Reported net profit	51,032		79,899
Amortisation of non-ERP intangible assets	13,435		15,236
Tax on amortisation of non-ERP related intangible assets	(2,460)		(2,269)
Exceptional items (net of tax)	631		(2,847)
Adjusted net profit	62,638		90,019
Adjusted diluted EPS (cent)3	53.16c		71.53c
Operating margin1	3.7%		5.1%
Return on capital employed	12.6%		18.3%
Free cash flow	€104.4m		€108.5m

  

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. 

 

 

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:

 

	Banking Covenant	2023	2022
Net debt to EBITDA	Maximum 3.5	-	-
EBITDA to net interest	Minimum 3.0	8.57	13.83

 

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.

 

 

Free cash flow

	2023 €'m	2022 €'m
Free cash flow	104.4	108.5
Free cash flow conversion ratio	178.2%	130.5%

 

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
Return on capital employed ('ROCE')	12.6%	18.3%

 

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:

 

(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 charge of €0.6 million in the year (FY22: credit of €2.8 million), and are summarised in the table below:

 

	2023 €'m		2022 €'m
Acquisition and disposal related costs	2.3		-
Ukraine related costs	2.0		-
Arising in associates and joint venture	(3.7)		-
Gain on the disposal of investment properties	-		(2.7)
Other	-		(0.1)
Total exceptional items, net of tax	0.6		(2.8)

 

 

Dividends

 

The Directors are proposing a final dividend of 13.65 cent per ordinary share for approval at the AGM in November 2023, bringing the total dividend payment for FY23 to 16.80 cent, an increase of 5.0%. Subject to shareholder approval at the AGM, this final dividend will be paid on 9 February 2024 to shareholders on the register on 19 January 2024.

 

Board changes

 

Rose Hynes resigned as a Director of the Company with effect from the conclusion of the 2022 AGM in November 2022 and was succeeded by Gary Britton as Chairman as planned. Also during the year Mr. Alan Ralph and Ms. Pam Powell were appointed as independent Non-Executive Directors.

 

 

Share buyback programme

 

On 28 September 2022 the Group commenced a share buyback programme to repurchase up to €20 million of ordinary shares. The programme was completed on 29 March 2023, with the average price paid per share of €4.0583.

 

 

Sustainability

 

Origin made significant progress on its Environmental, Social and Governance ("ESG") agenda in FY23. During the year the Group continued the implementation of its environmental sustainability strategy, 'Nurturing Growth' and its associated targets. Origin is focused on actions in the areas that are most important to stakeholders and has prioritised work in the evolution of a more sustainable product portfolio.

 

The Group also implemented its carbon transition plan and has committed to a 54.9% reduction in Scope 1 and 2 emissions, and a 32.5% reduction in Scope 3 emissions by 2032 from a 2019 base. These targets have been submitted for validation to the Science Based Target initiative ("SBTi").

 

The Group's efforts have been acknowledged with improved ESG ratings: Sustainalytics (Low Risk), MSCI (A rating), and CDP (B rating). This achievement has resulted in Origin attaining the top end of its ESG targets within its sustainability-linked revolving credit facility.

 

 

On the social agenda, Origin has also made progress on Diversity and Inclusion during the year with good engagement across the organisation culminating in achieving a 25% female representation in leadership and management positions (7% increase since 2018) and 33% female representation on the Origin Board. The Group also increased resourcing within its environmental compliance team and launched a series of actions across education, talent acquisition and engagement to further embed our progress.

 

Corporate development 

 

During the year, the Group continued to strengthen its offering in its Amenity, Environmental and Ecology business with the acquisitions of Keystone Environmental, Neo Environmental, Agrigem and British Hardwood Tree Nursery. Subsequent to the year end, the Group acquired the business and operating assets of Suregreen Limited ('Suregreen'), a UK based landscape and gardening products supplier for trade professionals and DIY customers from its Administrators. These acquisitions complement the Group's organic growth strategy, are EPS enhancing and broaden its expertise and capabilities in the growing market for ecological and environmental products and services which will continue to play an important role in sustainable land use to help tackle climate change, restore biodiversity, and create recreational spaces to promote social wellbeing.

 

The Group also continues the rollout of Dynamics 365 ERP solution across its UK and Ireland businesses, with the solution being deployed to the remaining key business units over FY24. 

 

 

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. 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. 

 

We engage with institutional investors in numerous one-on-one meetings, as well as at roadshows and equity conferences. During FY23, meetings were held with 142 institutional investors. Engagement was facilitated through a combination of in-person meetings and remotely using virtual conferences and video calls. 

 

Annual General Meeting (AGM)

 

The AGM is scheduled to be held on 16 November 2023 at 11.00am (UK/Ireland time) in the Merrion Hotel, Upper Merrion Street, Dublin 2. 

 

Cautionary statement

 

This Preliminary Results Statement 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 document. 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 document, whether as a result of new information, future events or otherwise.