focus consolidation growth Annual Report 2012

Transcription

1 focus consolidation growth Annual Report 2012

2 Overview Origin Enterprises plc Annual Report 2012 Origin at a Glance A year of integration Origin Enterprises plc ( Origin or the Group ) is a leading Agri-Services business with operations in Ireland, the UK and Poland. The Group s focus is to be the leading provider of value added services, technologies and strategic inputs that support sustainable and profitable food production solutions for primary food producers. Origin is listed on the ESM and AIM markets of the Irish and London Stock Exchanges respectively, is headquartered in Dublin, Ireland and currently employs over 1,450 people. Strategy Agrii Business Model We are a focused agri-services business. Masstock and UAP merge to form Agrii. Our business model explained. Research and Development A core focus of the Group. Read more on Read more on Read more on page 4 page 6 page 10 Read more on page 12

3 Origin Enterprises plc Annual Report Overview Our Business 2 Our Strategy 4 Our Performance (including Financial Highlights) 5 Agrii 6 Agronomy Explained 10 Research and Development 12 Chairman s Statement 14 Overview Business Review Financial Statements Business Review Review of Business Operations Overview 16 Agri-Services 17 Associates and Joint Ventures 19 Board of Directors 20 Financial Statements Financial Review 22 Directors Report 27 Statement of Directors Responsibilities 35 Independent Auditors Report 36 Consolidated Income Statement 38 Consolidated Statement of Comprehensive Income 39 Consolidated Statement of Financial Position 40 Consolidated Statement of Changes in Equity 42 Consolidated Statement of Cash Flows 43 Group Accounting Policies 44 Notes to the Group Financial Statements 51 Company Accounting Policies 83 Company Balance Sheet 85 Notes to the Company Balance Sheet 86 Company Information IBC

4 Overview 2 Origin Enterprises plc Annual Report 2012 Our Business Agri-Services Integrated Agronomy Services Business-to-Business Agri-Inputs Associates and joint ventures Provides specialist agronomy services directly to arable, fruit and vegetable growers in the UK and Poland. The service encompasses varietal selection, nutrition, crop protection and application techniques necessary to ensure high performing marketable crops, which adhere to the highest levels of safety, quality, sustainability and environmental requirements. Leading provider of blended fertiliser and animal feed ingredients in Ireland and the UK. The UK s leading advisory and inputs provider to the professional sports turf, landscaping and amenity sectors. Strategic investments principally in marine proteins and oils in Europe and in consumer foods in Ireland. Agri-Services operating profit* 65, % 69,679 Agri-Services operating profit %* 5.2% 5.2% Associates and joint ventures profit after interest and tax* 14,857 13, * Before intangible amortisation and exceptional items

5 Origin Enterprises plc Annual Report Our Locations is the UK s leading agronomy business IRELAND AND UK has over 50,000 trials plots Overview Business Review Financial Statements Premier provider of blended fertiliser in Ireland and the UK 24 demonstration farms 70 weather stations 4 technology centres Poland Integrated Agronomy Business-to-Business Agri-Inputs Dalgety Agra Polska is the leading provider of specialist agronomy services directly to farm enterprises in Poland Key advisory and inputs provider to the professional sports turf, landscaping and amenity sectors in the UK

6 Overview 4 Origin Enterprises plc Annual Report 2012 focus Our Strategy Origin s strategic priority is to be a leading provider of customised value added services, technologies and inputs supporting the primary sectors of the food industry. Since its establishment in 2006 Origin has repositioned its business and is now firmly focused on a capital light, advice centred and sustainable agri-services model. Having established market leading positions through acquisition and organic growth the Group is well advanced in building an integrated platform with a unique capability to support primary producers in the management of the complex and evolving requirements of modern farming. This will transform the scope and scale of the business, providing growth opportunity through an extended technological capability, delivering an enhanced range of value added services that meet the needs of primary producers for scale and complete crop solutions. Our Goal Create shareholder value Our Vision To become the market leader in the provision of integrated agronomy solutions and sustainable agricultural technologies. Strategic Priorities Sustainable growth Strong cash conversion Selective acquisitions Build on core competencies Deliver long-term shareholder value Strengths Leading market positions Long-term customer relationships Trusted brands Reputation for expertise and innovation excellence Strategically located and well invested infrastructure Strong cash flow generation

7 Origin Enterprises plc Annual Report Our Performance Group revenue ( ) 1.3bn +6.6% Revenue from Agri-Services was 1.3 billion for the year to 31 July 2012, an increase of 6.6% ,077 1,257 1,212 1,340 Overview Business Review Financial Statements Total Group operating profit* ( ) 82.8m +2.5% Total Group Operating Profit* for the year to 31 July of 82.8 million was 2.5% higher than last year Adjusted diluted EPS*** (cent) % Adjusted diluted eps*** for the year to 2011 increased 4.2% to 45.16c Financial highlights 2012 % change Revenue Continuing operations Agri-Services 1, , % Group Operating Profit* Agri-Services % Associates and joint ventures** (11.6%) % Financing cost (6.6) (10.5) (37.3%) Profit before tax* % Adjusted diluted EPS*** 45.16c 43.34c +4.2% Dividend per share 15.0c 11.0c +36.4% Net debt (26.4%) Group revenue and total Group operating profit excludes discontinued operations for all years. * Before intangible amortisation and exceptional items. ** Profit after interest and tax and before exceptional items. *** Before acquisition related intangible amortisation, net of related deferred tax (2012: 4.1m, 2011: 2.6m) and exceptional items, net of tax (2012: 15.5m, 2011: 11.6m.).

8 Overview 6 Origin Enterprises plc Annual Report 2012 consolidation We are Agrii In January 2012, Masstock and UAP combined under a new identity Agrii, with the aim of delivering the best support and technology to farmers across the UK. What s in a name? The name Agrii was chosen as it communicates simply and clearly the focus of our business, it includes a reference to Agri-intelligence and innovation and demonstrates our commitment to relationships with our customers. Our strengths and skills are embodied in the name. Our aim is to provide the most up-to-date agri-intelligence, research, information and technology to enable our agronomist to give the best advice and to help UK growers farm successfully and profitably. Agrii is the UK s leading agronomy-service provider Customers Agronomists Staff Sites 25, % of all practicing agronomists % of farms engaged in cereal production 22,000 54,000 33% of primary combinable crop advice 55% of primary fruit crop advice 19% of certified cereal seed market 1.4m ha 16k ha 63kt 4.2m ha 29k ha 337kt Scan code with your phone to take you to an introduction video on Agrii. 22% of certified OSR market 110k ha 500k ha 13.5% of fertiliser application market 460kt 3,425kt Agrii Total market We stand for: Innovation Independence Information Improvement Integrity Individuals We have 50,000 Trials plots Relationships: These are at the heart of Agrii. It is relationships between agronomists and their customers that make the difference. We don t take this responsibility for granted.

9 Origin Enterprises plc Annual Report Lawrence Hicks Agronomist & Regional Commercial Support Manager Agrii The relationship with our customers is we have to be part of the team, we have to work together we need to understand the whole business and what we are trying to achieve a completely integrated approach. Overview Business Review Financial Statements Michael Righton Customer Although UAP and Masstock are big players in the industry I would not want that to change. A lot of it is down to the trust of my agronomist so I d take on board any R&D they d bring to me.

10 Overview 8 Origin Enterprises plc Annual Report 2012 A-Z of agri-intelligence A Agronomy Comprehensive advice for successful crops b benchmarking Regional crop performance analysis c crop protection Detail advice and the latest technologies d demonstration Farms Local technical events to share best practice e energy support Helping you access new market opportunities f fertiliser A wide range of products backed by professional support g grassland expertise Optimising your forage crop hectares h horticulture services Agronomy and decision support for vegetable and fruit crops i input technologies Ensuring the best crop performance j just-in-time delivery Ensuring the right products at the optimum time k knowledge transfer Keeping you informed on the latest thinking l land drainage Advice and product solutions m market insight Impartial views to guide crop marketing decisions n nutrition expertise Improving soil potential for high performing crops o on-farm seed processing A professional approach to farm-saved seed p precision farming Connecting agronomy with precision farming q quality approach Professional, local and friendly support r research Investing in new solutions to improve results s seed technology Quality seeds to grow your business t turf and amenity Agronomy for the amenity sector u understanding bureaucracy Guidance on legislation and industry issues v vegetable expertise The authority on vegetable agronomy w weather stations A national network supporting the best decisions x x-compliance Guidance and support to achieve requirements y yield optimization Innovative techniques to drive up production potential z zone management Better targeting of inputs linked to precision farming

11 Origin Enterprises plc Annual Report Agronomy Plus Is how we describe our approach It goes beyond traditional agronomy we aim to support our customers with services and products that make a difference throughout your whole farm profit equation, not just in the field. Overview Business Review Financial Statements Relationships Are at the heart of Agrii It is the relationships between agronomists and their customers that make the difference. We don t take this responsibility for granted.

12 Overview 10 Origin Enterprises plc Annual Report 2012 growth Agronomy Explained How we equip customers with the knowledge, support and technology to farm more profitably. Step 1: Research & Analysis Innovative research Technology transfer via SMART farms Origin provides agronomy advice and solutions to over 27,000 farm businesses throughout the UK and Poland....crops inspected......farm is visited by an agronomist... This innovative approach delivers a fully integrated production system, based on leading edge research and detailed on-farm agronomic management....data analysed... The business combines an extensive research and development capability with a major sales, marketing and distribution focus, delivering a superior advisory and inputs offering to primary food producers. The service encompasses varietal seed selection, nutrition, crop protection, application and establishment techniques necessary to ensure high performing marketable crops, which adhere to the highest levels of safety, quality, sustainability and environmental requirements. Research We invest in leading edge research to develop unique growing systems to maximise crop productivity on a sustainable basis. Our trials teams manage over 50,000 replicated trial plots throughout the UK and Poland. Development of strategic partnerships with the leading global seed breeders and manufacturers of crop protection and nutrition input applications. Analysis Farms are visited regularly throughout the growing season. Crops are closely inspected and monitored for health and development. Soil and tissue analysis is conducted to verify deficiencies.

13 Origin Enterprises plc Annual Report Step 2: Prescription Growing systems Step 3: Application Overview Business Review Financial Statements Environmental stewardship Soil management Varietal selection Precision farming Nutrition application Crop protection Prescription Input programmes are recommended for achievement of yield and quality targets. Agronomists advise across all components of crop and field management. Environmental stewardship and compliance requirements are assured. Computerised treatment plans are communicated to farmer. Application Seed, fertiliser and crop protection technology is delivered to farm from our local distribution centres on same/next day service. Agronomists advise on precise timing of applications to achieve maximum results. Crops continue to be monitored through to harvest.

14 Overview 12 Origin Enterprises plc Annual Report 2012 Research and Development In Agrii we have a commitment to research and development, technology and technical innovation. It is at the heart of who we are and we are driven by this agri-intelligence to get the best results for our customers. We have a huge responsibility to ensure our customers can access the innovation required to meet the Food Production Challenge in a sustainable and profitable way. Hence we have put Research and Development, together with Information Technology, right at the heart of Agrii. Agricultural research that is independent and integrated. Seeds/ Varieties Crop Protection Fertilisers/ Nutrition Agronomy Advice Business Management Contracting Precision Services Innovative Research & Development COMPRISES: Replicated R&D + Agrii Technology sites + Data generation + Drives innovative product strategy + Interface with customers + Interface with agronomists + Plugs knowledge/data gaps IT Farming Platform COMPRISES: Farm recommendation software + Benchmarking (aggregated farm data) + Weather stations + Disease forecasting/alerts + Irrigation scheduling + Agronomy apps + SoilQuest Precision Agronomy AGRI SCIENCE CONNECTING WITH AGRONOMY AGRONOMY PORTAL CONNECTING CUSTOMER DATA

15 Origin Enterprises plc Annual Report Overview Business Review Financial Statements The future is ready

16 Overview 14 Origin Enterprises plc Annual Report 2012 Chairman s Statement An overview of this year s performance The challenge of feeding the world through the 21st century is compounded by many global issues. Chief among these is population growth and rising incomes in developing economies which is driving greater demand for food. Increased urbanisation will result in cities competing with agriculture for scarce resources such as water and soil which will place further pressure on an already fragile supply/demand balance. Climate change and the need to manage water and carbon will further challenge the agricultural sector to provide systems of food production whilst protecting fragile soil and water resources. Agricultural science, the agricultural supply industry and farming all recognise the urgent focus required to meet the food challenge. Combining research with agri-intelligence is critical to informing farmers decision making as they endeavor to optimise resources in the production of food. Farming is a vital, strategically important industry central to ensuring long term food security. Origin is well positioned to guide farming s strategic choices in the creation of sustainable food production systems. Origin is investing to position research at the heart of its business. Good progress was made during the past year in building an intelligence led agri-services platform. This will transform the scope of service support to primary food producers, thereby enabling farmers to better serve consumers. We are encouraged by the response of so many agronomists and farmers to this initiative which will greatly impact the long term efficiency, sustainability and viability of commercial food production. The Group reported an underlying increase of 11 per cent in adjusted diluted EPS to cents. Net Debt at year end was 67.8 million or 0.81 times EBITDA. I would like to take this opportunity to thank the entire management and staff at Origin for their commitment and dedication to their customers and shareholders during the year. Board changes There were a number of Board changes during the year. On 21 November 2011, Alan Gray retired as a Non-Executive Director and Hugh McCutcheon was appointed as a Non-Executive Director. On 18 May 2012, Hugh Cooney retired as a Non-Executive Director and Rose McHugh was appointed as a Non-Executive Director. I would like to welcome our new Board members and thank retiring members for their contribution over the past number of years. Annual General Meeting (AGM) The AGM will be held on Monday 26 November 2012 at 10.00am in the Westbury Hotel, Grafton Street, Dublin 2. Outlook The outlook for primary food production remains positive. Origin is well advanced in building a strong business platform and remains well positioned for further growth. Owen Killian Chairman 18 September 2012 Dividend The Board is recommending an increase in the dividend of 4.0 cent per ordinary share to 15.0 cent per ordinary share, an increase of 36.4 per cent. This represents a payout ratio of 35 per cent. Subject to shareholder approval at the Annual General Meeting, the dividend will be paid on 7 January 2013 to shareholders on the register on 14 December 2012.

17 Origin Enterprises plc Annual Report Overview Business Review Financial Statements Gordon Thornton Agronomist Agrii We are part of a multinational Origin however we work at a very local level. We have a good relationship with farmers adapting the agronomy to local conditions.

18 Business Review 16 Origin Enterprises plc Annual Report 2012 Review of Business Operations Overview 2012 was a year of significant business transformation and integration activity which will continue during Highlights Strong financial and operational performance in a year of significant business transformation and integration. 5.6 per cent increase in Agri-Services operating profit to 69.7 million reflecting positive volume and margin development in integrated on-farm agronomy services per cent decline in associates and joint ventures profit after tax (excluding exceptional items) to 13.1 million principally attributable to the anticipated lower marine proteins and oils profitability. 8.4 per cent increase in profit before tax from continuing operations per cent underlying increase in adjusted earnings per share to 45.16c million reduction in net debt to 67.8 million highlighting the continued strong cash generative nature of the business per cent increase in proposed dividend to 15.0 cent per ordinary share. Origin delivered a strong financial and operational performance in 2012 recording an 11 per cent increase in underlying adjusted earnings per share combined with excellent cash generation. Sales of agronomy services and strategic inputs during the key second half period were excellent reflecting the benefit of an extended service offering and favourable investment momentum at farm level. The establishment of Agrii as the vehicle to build a scalable and advisory focused farm services platform uniquely positions Origin as the premier provider of total crop management systems in the UK and we are now ideally placed to meet farming s increasing demand for agri-intelligence. Significant progress was also achieved through the integration of Carrs Fertiliser and Rigby Taylor with these businesses enhancing the Group s route-to-market profile for speciality input applications. Total Group operating profit* 63,593 65,270 80,820 82,817 The impact of unprecedented and challenging weather conditions in the year highlights the volatile nature of the planning environment for primary producers. This underscores the strategic role of agronomic innovation to meet the challenge of sustainable intensification and ever increasing production risk * Before intangible amortisation and exceptional items.

19 Origin Enterprises plc Annual Report Agri-Services Agri-Services comprises integrated on-farm agronomy services and businessto-business agri inputs (fertiliser, feed ingredients and amenity). These businesses provide customised solutions that address the efficiency, quality and output requirements of primary food producers in Ireland, the UK and Poland. Revenue increased by 6.6 per cent to 1,340.0 million with strong volume growth in on-farm agronomy services offsetting the impact of lower volumes in business-to-business agri inputs. Operating profit* increased by 5.6 per cent to 69.7 million or 6.9 per cent on a like-forlike basis (excluding the impact of the 2011 acquisitions, the impact of disposals (the full year impact of the transition of R&H Hall to associates and joint ventures and the Valeo transaction) and currency movements). Integrated On-Farm Agronomy United Kingdom Integrated on-farm agronomy services performed strongly recording higher revenues, profits and margins in the period. Organic growth in strategic and full agronomy applications was strong with margins benefiting from extended service offerings. Favourable investment momentum at primary producer level supported a 2.5 per cent and 8 per cent increase in the key winter wheat and oil seed rape planted areas respectively. Farm management plans were significantly impacted by particularly challenging weather conditions during the year with the UK experiencing one of the wettest late spring and early summer growing periods on record following a very dry start to the year when potential drought conditions were the primary concern. Adverse weather patterns require a rapid agronomy response and emphasise the central role of customised crop management programmes in securing grower profitability. Significant business transformation and integration activity was undertaken during the year following the acquisition of United Agri Products ( UAP ) in March In January 2012 Masstock and UAP were combined to form Agrii. Agrii, as a new identity, communicates clearly and simply the focus of the enlarged business which is to deliver superior agri-intelligence and innovation to UK farming as the essential components underpinning sustainable returns to primary producers. This approach brings together the most up-to-date agronomy capability, crop technologies and complementary expertise in specialist areas to deliver an Agronomy Plus proposition to growers. Agrii defines the strong relationship that exists between farming and agronomy. Internally Agrii establishes a renewed sense of relevance and acts as a strong unifying force for the enlarged organisation. The business is now operating under a single management team supported by a simplified and decentralised organisational structure which is focused on building regional leadership capabilities to drive an integrated approach to customer management. There has been significant progress relating to commercial, technical and business process integration. The roll out of the Group s new enterprise resource planning system was significantly advanced in the period and is on schedule to be completed by the end of this calendar year. The design of relevant production systems to meet growers requirements for the management of enterprise risk, crop yield and quality actively places agri-intelligence at the heart of Agrii s business proposition. This approach connects high visibility science and research application with agronomy, farm inputs, farming systems and economics, ensuring early access to the latest crop technologies driving innovative product strategies in combination with the development of best practice crop establishment techniques. The Group will make an investment of approximately 25 million over the next four years, expanding its applied agronomic research, development and technical support capability. The programme comprises expenditure on new research and development technology centres, satellite trials investigation units as well as a significant upscaling of the infrastructure supporting mobile on-farm information and decision support systems. The investment aims to meet the growing demand by primary producers for innovation to address the challenges of sustainable intensification and ever increasing production risk. Poland Dalgety Agra Polska ( Dalgety ) recorded a strong performance. Dalgety is primarily focused on supporting the larger scale intensive farming sector with exclusive input technologies together with a specialist grain marketing capability. Differentiated service offerings are provided to smaller farm units and local service providers. Demand for agronomy, certified seed and speciality nutrition applications benefitted from increased spring planting activity following the impact of significant winter crop losses resulting from a short but severe winter period. Dalgety s recently expanded grain procurement and marketing activities into neighbouring geographies provides an important extension to its service offering. Overview Business Review Financial Statements

20 Business Review 18 Origin Enterprises plc Annual Report 2012 Review of Business Operations (continued) Agri-Services (continued) Business-to-business agri inputs Ireland and the UK Operating profit from business-to-business agri inputs was marginally behind last year due to lower fertiliser consumption and greater competitive intensity within feed ingredients. The prioritisation of margin delivery within the Group s fertiliser activity remained a key focus point during the period. Underlying volumes for Ireland and the UK were lower than last year reflecting a combination of advance buying in 2011, increased price volatility in the period impacting the timing of customer commitments and unseasonably wet weather reducing consumption relative to a normal application year. Feed ingredients performed satisfactorily in a highly competitive market environment. Sales volumes were higher year-on-year reflecting increased demand as unseasonal weather required the housing of animals during normal summer grazing months. Challenging trading conditions resulted in lower margins as sustained price volatility throughout the year provided little incentive to the market to execute forward volume commitments. Increased demand for feed is expected in the coming year reflecting the depletion of winter fodder stocks due to weather. The integration of Carrs Fertilisers ( Carrs ) with the Group s existing fertiliser business in the UK was completed during the financial year. The enlarged business is managed under a unified sales, operations and technical organisation facilitating the optimisation of manufacturing, logistical and procurement efficiencies. Since 1 August 2012 the combined entity is now operating on a single enterprise resource planning platform. The Group s nutrition offering has been enhanced with the Carrs acquisition through technologies which facilitate the effective delivery of key trace elements enhancing the nutrient value of fertilisers for the benefit of primary producers. The Group s amenity business which delivers advice and input solutions to the professional sports turf, landscaping and amenity sectors performed well notwithstanding the backdrop of lower demand reflecting unseasonal weather conditions during the year. Overall business performance was supported by the successful integration of Rigby Taylor along with favourable margin development and product extension within the speciality and niche amenity channels. Delivering advice and input solutions to the professional, sports turf, landscaping and amenity sectors.

21 Origin Enterprises plc Annual Report Associates and Joint Ventures Welcon Invest AS ( Welcon ) Welcon, in which Origin has a 50 per cent shareholding, is Europe s largest manufacturer of marine proteins and oils servicing the aquaculture, pig and poultry feed sectors. In line with expectation Welcon recorded lower profits and margins in comparison to the very strong performance last year. This principally reflects the impact of quota adjustments for North Atlantic raw material which resulted in reduced volume intake in the period and increased production from South America. Performance improved during the year on the back of steadily increasing fishmeal and fish oil prices. Current sentiment in global marine protein markets is positive reflecting strong growth in aquaculture production in Norway and Chile combined with firm demand from China. Global unsold production remains limited due to lower than expected first season fishing quotas in South America with firm vegetable protein pricing also providing a positive influence to marine ingredients. In February 2012, Welcon completed the acquisition of a 50 per cent interest in Hordafor AS. Hordafor is a leading producer of fish oil and protein concentrate from salmon and pelagic trimmings. The acquisition provides Welcon with strategic access to alternative raw material processing technologies in addition to new market outlets for marine by-products. Continental Farmers Group Plc ( Continental ) Continental, in which Origin holds a 24 per cent interest, is a diversified agricultural producer of value added crops with large scale farming operations in Western Ukraine and Northern Poland. Continental s proven farming know-how together with the benefit of operational scale facilitates the application of diversified cropping plans that optimise yield and output price realisations. The business achieved strong operational progress in the year with major crop expansion and is on track to have over 26,000 hectares and 2,400 hectares under crop in Ukraine and Poland respectively in The outlook for the 2012 harvest remains positive notwithstanding some challenging weather conditions during the year. Continental announced its Interim Results for the six months ending 30 June 2012 on 17 September Conclusion During 2012 the Group made good progress in building an integrated, intelligence led and sustainable agricultural services business that is at the heart of influencing on-farm decision making. Origin is focused on growing its technological capability to transform the breadth and scope of service support to primary producers. We are confident of delivering earnings growth in Overview Business Review Financial Statements Valeo Foods Group Limited ( Valeo ) Valeo, in which Origin has a 32 per cent shareholding, is a leading consumer foods company with a portfolio of some of Ireland s most iconic food brands. The business performed satisfactorily in what continues to be an extremely competitive trading environment. The increasingly promoted nature of branded categories combined with a growing shift to private label consumption evidences consumers ongoing requirement for value. The business successfully expanded existing traditional categories in the period by introducing new innovative products which helped to improve category performance. Category and promotional support programmes remained a key focus for Valeo in maintaining market position. Following the completion of the acquisition of the Jacob Fruitfield Food Group in September 2011, its operations were successfully migrated to Valeo in the period and all operations are now centralised and operating under one management team. Tom O Mahony Chief Executive Officer 18 September 2012

22 Business Review 20 Origin Enterprises plc Annual Report 2012 Board of Directors The Board of Origin Enterprises plc ( Origin ) consists of a non-executive chairman, three executive directors, and three non-executive directors. Owen Killian (59) Non-Executive Chairman Owen Killian is CEO of ARYZTA AG and has been since its admission to trading in He was previously CEO of IAWS Group plc since Prior to this he held several executive positions within IAWS Group plc since it was listed in Tom O Mahony (50) Chief Executive Officer Tom O Mahony was appointed CEO of Origin on its formation in Prior to this he held the role of Chief Operations Officer of IAWS. Tom joined IAWS in 1985 and on its public flotation in 1988 to form IAWS Group plc he held a number of senior management positions and was involved in acquisitions, disposals, business integration and financial control within the Group, until his appointment as CEO of Origin. Brendan Fitzgerald (49) Chief Financial Officer Brendan Fitzgerald joined Origin in 2006 as Chief Financial Officer. A former director with NCB Corporate Finance he has held senior financial positions with Greencore Group plc and Waterford Foods plc. He qualified as a Chartered Accountant with Arthur Andersen. Declan Giblin (56) Executive Director Declan Giblin is Head of Corporate Development and Executive Chairman of Agrii. He was formerly Chief Executive of Masstock and has been the driving force behind the development of Agrii over a 20-year period. Hugh McCutcheon (58) Non-Executive Director Hugh McCutcheon is a Chartered Accountant and was formerly head of corporate finance at Davy. He joined Davy in 1989 from Pricewaterhouse, where he qualified as a Chartered Accountant in Hugh was appointed to the Board of Origin on 21 November Hugh is also a director of Petroceltic International plc. Patrick McEniff (44) Non-Executive Director Patrick McEniff joined IAWS Group plc after its listing on the Irish Stock Exchange in 1988 and has fulfilled various senior management roles, focused on finance and systems development. In 2004 he was appointed to the board of IAWS Group plc as its Group Finance Director. In 2008, upon the formation of ARYZTA AG, he was also appointed as CFO and member of the Board of Directors. Rose mchugh (48) Non-Executive Director Rose McHugh was appointed to the Origin board on 18 May Rose is head of Corporate Finance with Merrion Group. A fellow of the Institute of Chartered Accountants in Ireland, an Associate of the Institute of Taxation in Ireland, holding a law degree and an MBA from University College Cork.

23 Origin Enterprises plc Annual Report Financial Statements Financial Review 22 Directors Report 27 Statement of Directors Responsibilities 35 Independent Auditors Report 36 Consolidated Income Statement 38 Consolidated Statement of Comprehensive Income 39 Consolidated Statement of Financial Position 40 Consolidated Statement of Changes in Equity 42 Consolidated Statement of Cash Flows 43 Group Accounting Policies 44 Notes to the Group Financial Statements 51 Company Accounting Policies 83 Company Balance Sheet 85 Notes to the Company Balance Sheet 86 Company Information IBC Overview Business Review Financial Statements

24 Financial Statements 22 Origin Enterprises plc Annual Report 2012 Financial Review Accounting policies and basis of preparation The 2012 Group financial statements have been prepared in accordance with International Financial Reporting Standards ( IFRS s) and their interpretations issued by the International Accounting Standards Board ( IASB ) as adopted by the EU. Details of the significant accounting policies adopted by the Group are set out on pages 44 to 50. Analysis of results A comprehensive commentary on the Group s performance for 2012 is included in the review of business operations on pages 16 to 19. Revenue Revenue from Agri Services was 1,340.0 million compared to 1,257.5 million in the previous year, an increase of 6.6 per cent. On a like-for-like basis (excluding the impact of the 2011 acquisitions, the transition of R&H Hall to associates and joint ventures and currency movements) revenues increased by 92.6 million (7.4 per cent) principally reflecting higher global nutrition and feed prices offset by lower nutrition volumes. Operating profit* Operating profit* from Agri-Services amounted to 69.7 million compared to 66.0 million in the previous year an increase of 5.6 per cent. The following table shows the year on year movement: m m ( 0.6m) (0.9%) ( 1.6m) (2.4%) 1.3m 2.0% 4.6m 6.9% +5.6% 69.7m FY11 Acquisitions Disposals Currency Underlying FY12 As outlined last year, due to the seasonality of the acquired businesses we got the benefit of more than a full years operating profit from the acquisitions in Accordingly in the current year the three acquisitions in aggregate were dilutive at an operating profit level by 0.6 million, the transitioning of R&H Hall to associates and joint ventures was dilutive by 1.6 million and currency translation had a favourable impact of 1.3 million. Excluding these, operating profit* from Agri-Services increased by 4.6 million (6.9 per cent) on a like-for-like basis. The strategic repositioning of the Food business, the creation of the all Ireland grain and feed handling, logistics and trading business combined with the three acquisitions in the second half of 2011 significantly increased the seasonality profile of the business as is shown in the table below: FY2012 FY2011 Quarter Cumulative Quarter Cumulative Quarter Quarter 2 (5.7) Quarter Quarter million of operating profit* was generated in the seasonally more important second-half of the year an increase of 10.4 million (19.6 per cent) on the second half of During the current year, 92 per cent of operating profits* were earned in the second half of the year reflecting the nature of our business, up from 81 per cent in 2011.

25 Origin Enterprises plc Annual Report Associates and joint ventures Origin s share of the profit after interest and taxation (before exceptional items) from associates and joint ventures decreased by 1.7 million to 13.1 million. The decrease is principally attributable to a reduced share of profit from our 50 per cent interest in Welcon compared to very strong results from this business in the previous two years, offset by a full twelve months contribution from Valeo Foods (eight months in 2011). Finance costs and net debt Net finance costs amounted to 6.6 million, a decrease of 3.9 million (37.3 per cent) on the prior year reflecting reduced interest costs on Group borrowings and the cash generative nature of the business. Average net debt amounted to 214 million compared to 165 million last year principally reflecting the timing of corporate development activity last year (disposals in first half and acquisitions in second half), a higher investment in working capital in the current year and the impact of the strength of sterling. Net debt at 31 July 2012 was 67.8 million compared with 92.1 million at the end of the previous year a reduction of 24.3 million and is less than one times EBITDA**. A summary cashflow is presented below. Overview Business Review Financial Statements m m Cash flow from operating activities Change in working capital 14.1 (2.3) Interest and taxation (18.9) (25.3) Net cashflow from operating activities Dividends received Capital expenditure, net (11.6) (8.2) Strategic repositioning 74.6 Acquisition expenditure (7.7) (79.3) Contingent acquisition consideration (6.1) Pension restructuring (9.8) Dividends paid (14.6) (12.0) Other (0.9) (1.4) Net cash flow Opening net debt (92.1) (111.9) Translation (13.1) 1.4 Closing net debt reduction of 24.3 million (67.8) (92.1) The Origin businesses have a record of strong cash generation and 2012 continues the trend. Since the IPO in 2007 profits have been converted to cash. Net cashflow from operating activities was 68 million, an increase of 20.5 million. The net cashflow after acquisition spend (Valeo) and payment of the contingent acquisition consideration was 37.4 million. Capital Structure Bank facilities The financial structure of the Group is managed to maximise shareholder value while providing the Group with the flexibility to take advantage of opportunities to develop the business. The Group targets acquisition and investment opportunities that are value enhancing and the Group s policy is to fund these transactions in the most efficient manner. The Group has unsecured committed banking facilities of 330 million with a syndicate of five banks with 30 million due for repayment in March 2015 and the balance of 300 million in July 2016.

26 Financial Statements 24 Origin Enterprises plc Annual Report 2012 Financial Review (continued) Adjusted diluted earnings per share ( EPS )*** EPS amounted to cent per share, an increase of 4.2 per cent from The year on year increase of 1.82 cent per share can be summarised as follows: Cent per share Dilutive impact of 2011 acquisitions (1.33) Dilutive impact of Valeo and Halls transactions (2.44) Currency 0.82 Underlying 11 per cent The key drivers of the 11 per cent underlying increase was an excellent performance from the integrated agronomy business, lower interest and taxation offset by lower profits from business-to-business fertiliser in the year. * Operating Profit is stated before intangible amortisation and exceptional items. ** Earnings before interest, taxation, depreciation, amortisation and exceptional items. *** Before acquisition related intangible amortisation, net of related deferred tax (2012: 4.1 million, 2011: 2.6 million) and exceptional items, net of tax (2012: 15.5 million, 2011: 11.6 million). Exceptional items During the year, the Group recorded a net exceptional charge to the income statement of 15.5 million (2011: 11.6 million). Due to their size and nature these items have been classified as exceptional and shown separately on the face of the Consolidated Income Statement in the Group financial statements. Details of exceptional items are set out in Note 3 to the Group financial statements. Working capital Investment in working capital is a key area of focus for the Group given the funding costs and the related risks in the current environment. The year end represents the low point in the working capital cycle for the Group reflecting the seasonality of the business. Retirement benefits The Group operates a number of defined benefit pension schemes and defined contribution schemes with assets held in separate trustee administered funds. All of the defined benefit schemes have been closed to new members for a number of years. Under IAS 19, Employee Benefits the amounts recognised in the Consolidated Statement of Financial Position as at 31 July 2012 are as follows: m m Non-current Deficit in defined benefit schemes Provision to meet unfunded pensions Total The movement during the year can be summarised as follows: m Net liability at 1 August Current service costs 0.4 Contributions (3.1) Actuarial loss 6.0 Other finance expense 0.1 Other (0.1) Net liability at 31 July The actuarial loss principally arose due to a 75bps reduction in the discount rate.

27 Origin Enterprises plc Annual Report Our progress since establishment The following table summarises the financial performance of the Group since flotation in June Over the period the Group has more than doubled EBITA* and delivered compound annual growth in adjusted diluted EPS of 18.1 per cent. Cumulative cash flow over the period of almost million reflects the strong cash generative nature of the business and this cash flow has funded acquisition and development expenditure of million. Over the period the Group has delivered a return on investment of circa 20 per cent, well in excess of the Group s cost of capital. With year-end net debt of 67.8 million, committed banking facilities as outlined earlier and the cash generative nature of the businesses, Origin is well positioned to pursue future development opportunities m m m m m m CAGR Year ended 31 July EBITA* % Adjusted diluted EPS** (cent) % Acquisition expenditure (cumulative) Cashflow after Capex (cumulative) Year-end net debt Net debt/ebitda (times) Return on investment 16.9% 19.5% 20.6% 19.4% 19.8% 19.6% Overview Business Review Financial Statements * Earnings before interest, taxation, amortisation and exceptional items including our share of the profit before tax of associates and joint ventures. ** Before intangible amortisation, net of related deferred tax and exceptional items, net of tax adjusted to reflect the current capital structure of the Group Taxation The effective tax rate on ordinary activities relating to wholly owned businesses for the year ended 31 July 2012 was 20.5 per cent. Risk exposures The Group s international operations expose it to different financial risks that include currency risk, credit risk, liquidity risk and interest rate risk. The Group has a risk management programme in place which seeks to limit the impact of these risks on the financial performance of the Group. The Board has determined the policies for managing these risks. It is the policy of the Board to manage these risks in a non-speculative manner. Details of the Group s risk exposures and the controls in place to monitor such exposures are set out in Note 22 to the financial statements. The Group is focused on risk and its management. Accordingly, insurance is held for all significant insurable risks and against major catastrophes. Share Capital Following the achievement of targets under the 2006 Long-Term Incentive Plan 5,003,238 equity entitlements were converted on a one-for-one basis into ordinary shares in April Details are set out in Notes 9 and 26 of the Group financial statements. Dividends The Board is recommending a dividend of 15.0 cent per ordinary share, an increase of 36.4 per cent and a payout ratio of just over 35 per cent. The increase reflects confidence in the future performance of the Group and in particular the cash generative nature of the business. Subject to shareholder approval at the Annual General Meeting, the dividend will be paid on 7 January 2013 to shareholders on the register on 14 December 2012.

28 Financial Statements 26 Origin Enterprises plc Annual Report 2012 Financial Review (continued) Share price The Group s share price at 31 July 2012 was 3.65 (31 July 2011: 3.70). The Group s ordinary shares traded in the range of 2.95 to 4.00 during the period 1 August 2011 to 31 July 2012 as illustrated in the graph below. Euro 4.50 Origin Share Price FY Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul 12 Date Brendan Fitzgerald Chief Financial Officer 18 September 2012

29 Origin Enterprises plc Annual Report Directors Report The directors present their annual report together with the audited consolidated financial statements for the year ended 31 July 2012, which are prepared in accordance with International Financial Reporting Standards ( IFRSs ) as adopted by the EU. Principal activity and business review The Group s principal activities comprise the supply, distribution and manufacture of agri-service products as well as the holding of strategic investments in consumer foods and marine proteins and oils. Through its subsidiaries, joint ventures and associates, the Group currently has manufacturing, trading and distribution operations based in the Republic of Ireland, the United Kingdom, Norway, Poland and Ukraine. During the year under review, the Group continued to expand and develop its core activities. A comprehensive review of the performance of the Group is included in the Chairman s Statement and Chief Executive s review of business operations. The directors consider the state of affairs of the Company and the Group to be satisfactory. A list of the Company s principal subsidiaries, associates and joint ventures is set out in Note 35 to the Group financial statements. Principal risks and uncertainties Significant time and resources have been invested in identifying specific risks across the Group and in developing a culture of balanced risk minimisation. To facilitate this, the Group has formal risk assessment processes in place through which risks and mitigating controls are evaluated. These processes are driven by business unit management who are best placed to identify the significant ongoing and emerging risks facing their businesses. The outputs of these risk assessment processes are subject to review and the risks identified and associated mitigating controls are also subject to audit as part of health and safety and operational/financial audit programmes. Overview Business Review Financial Statements The risks identified fall broadly into three categories: strategic/commercial, operational and financial. Some of the most significant strategic/commercial risks facing the Group include: the availability of product, potential changes in the regulatory environment affecting this supply, the potential impact of competitor activity, exposure to fluctuations in the cost of raw materials and bad debts. The Group bears the risk of funding the deficit in the defined benefit pension schemes which it operates and holds investment properties which are carried at fair value. The value of these investment properties may fluctuate based on changes in the general economic environment. The Group closely monitors emerging changes to regulations and legislation on an ongoing basis. The Group also addresses these risks by developing diverse sources of supply and distribution capability to ensure that the Group continues to compete effectively and that customer requirements are being anticipated and met on a continuing basis. Origin faces risks and challenges associated with acquiring businesses. There is substantial experience within the Group in this regard together with strong project management capability in this area. Financial, commercial and operational due diligence is performed both by external consultants and in-house resources in advance of all acquisitions. A key operational risk facing the Group, in common with most companies, is the risk of failure to address the increasing compliance requirements particularly in the areas of emissions and effluent control and health and safety. These types of risks are mitigated through the establishment of environmental/ discharge controls, ensuring product traceability and thorough hygiene and health and safety systems. The loss of a significant manufacturing/operational site through natural catastrophe or act of vandalism represents another risk that could, potentially, have a material impact on the Group. As a result, emphasis is given to ensuring that site security measures at all Group locations are robust. In addition, the Board is satisfied that significant management attention is given to the development of comprehensive disaster recovery plans. Similarly, a significant IT system failure could adversely impact on operations. As a result, IT disaster recovery plans and system backup processes are implemented. While the Group has a track record of attracting and retaining high quality senior management and staff, it faces risks associated with the potential loss of key management personnel. The Board addresses these risks through incentivisation and retention initiatives in addition to robust succession planning. As a Group with operations and interests outside the euro zone, Origin is subject to the risk of adverse movements in foreign currency exchange rates. Exposures are managed through the use of foreign currency contracts. Financial risk management objectives and policies are identified in the Financial Review and in Note 22 to the Group financial statements. During the year the Group implemented a new ERP system, Microsoft Dynamics AX, across its Agri Services segment. The majority of the Groups Irish and UK businesses have been live on this new platform since November It is expected that the remainder of the businesses in there geographies will go live in November 2012 and early The effective implementation of AX will drive substantial business efficiencies and reduce costs to serve customers.