Preliminary Results September 2015

Transcription

1 Preliminary Results September 2015

2 Forward-Looking Statements This presentation contains forward-looking statements. These statements have been made by the Directors in good faith based on the information available to them up to the time of the preparation of this presentation. Due to the inherent uncertainties, including both economic and business risk factors underlying such forward-looking information, actual results may differ materially from those expressed or implied by these forward-looking statements. The Directors undertake no obligation to update any forwardlooking statements contained in this presentation, whether as a result of new information, future events or otherwise. 2

3 Table of Contents Our Business Highlights Agri-Services Trading Review Financial Review Central and Eastern Europe ( CEE ) Development Strategic Priorities and 2016 Focus Points Summary and Outlook Appendix

4 Our Business 4

5 Our Business Premier provider of agronomy services, inputs and crop technologies Market leading positions in Ireland, UK, Poland, Ukraine and Romania * Focus on delivery of customised crop management systems Addressing efficiency, quality and output requirements of primary producers Maximising value-add through technology transfer on farm Integrating advice with input prescriptions Influencing on-farm decision making and product specification * The acquisition of Redoxim completed on 17 September 2015 subsequent to the year end. 5

6 Agri-Services 2015 Overview Revenue Geography* Customer Channel* Application* Services Operating Profit Ireland 11% Agronomy 1.46bn UK 67% Eastern Europe 22% Direct Farm (Integrated Agronomy & Services) 53% Business-tobusiness (Agri-Inputs) 47% Combinable Crops 55% Grassland 22% Roots & Veg 4% Amenity 7% Crop Marketing / Feed / Other 12% Crop and variety selection Cultivation systems Nutrition management Decision support and precision applications Soil health and field inspections Origination, traceability, logistics and handling Prescription input formulation Environmental stewardship 78.9m Total crop management systems Optimising crop productivity through on-farm knowledge transfer and integrated technology packages Risk management and supply chain Customisation * Geography and Customer Channel breakdowns are based on actual reported revenues and operating profits, respectively. Application percentage breakdowns are based on operating profit best estimates using internal information and are approximate. 6

7 2015 Highlights 7

8 2015 Financial Highlights 3.3% underlying reduction in Agri-Services operating profit Group Revenue 1.46bn +3.0% Agri-Services Operating Profit 78.9m -0.8% Group Operating Margin 5.4% -20bps Adjusted EPS 60.10c +4.5% Net Cash 88.8m* ROCE** 20.5% Proposed Annual Dividend 21.0c +5% Full year result in line with guidance Resilient performance from Agri-Services in challenging market conditions Bearish crop cycle and reduced seasonal intensity resulting in lower market demand for services and inputs Value added applications supporting performance Robust cash generation during the year 5% increase in full year annual dividend to 21.0c * Includes restricted cash of 29.4m ** Capital employed metric used in this calculation is based on average working capital for the Group 8

9 2015 Development Highlights Scale expansion of Agri-Services in Eastern Europe Capital re-allocation supporting Eastern European development Divestment of interest in Valeo Foods 86.6m Romanian Agri-Services expansion Agreement reached to acquire Redoxim SRL* and Comfert SRL ( 54.4m) Polish Agri-Services expansion** ( 76.8m) Agreement reached to acquire Kazgod Group ( 22.4m) * Acquisition completed on 17 September 2015 ** Agreement announced post year end on 18 August

10 Agri-Services Trading Review 10

11 2015 Market Overview Highly challenging farming backdrop Record global supply impacting primary output markets Price and currency volatility exerting pressure on incomes and cash flow of primary producers Limited near term visibility on new output price direction before mid calendar year 2016 Heightened competitive intensity in consumption markets Agri-service providers counter strategies Service portfolios positioned to meet farmers' requirements for flexible production systems Tailored financing solutions supporting growers' investment decisions Continued development of integrated technology platform delivering value added solutions Cost improvement programmes aligned with current market backdrop 11

12 Integrated On-Farm Agronomy Review United Kingdom UK Agrii Resilient performance in year against backdrop of lower demand Combined winter and spring plantings down 1.2% on 2014 levels Reduced service and input investment by growers in Q4 Highly competitive trading conditions across input portfolios Repositioned service offer and cost improvement positively influencing performance Further agronomisation of product portfolios supporting improved sales margins Knowledge transfer focused on soil science application and total disease management High output variety management 12

13 Integrated On-Farm Agronomy Review Central and Eastern Europe Poland Dalgety Good trading performance with higher margins and profits Sustained demand in year due to early spring season and favourable cropping profile Integrated product offers supporting margin improvement Lower crop marketing volumes Reorganisation and a differentiated channel focus contributing to business performance Deeper client engagement through expanded service provision Focus on yield performance per hectare aligned with increasing farming professionalisation Ukraine Agroscope Strong result with higher revenues and profits Favourable sales and customer development with offers promoting technology intensification Farm sentiment influenced by currency weakness and liquidity Lower underlying input and service spend with farmers adopting cheaper investment alternatives Prioritising of risk focus against uncertain political and economic backdrop Rigorous currency and credit risk management Input financing solutions through strong partner programmes Development Crop technology centres facilitating established knowledge transfer platform Service extension with precision agronomy and satellite monitoring applications 13

14 B2B Agri-Inputs Review Business-to-business Agri-Inputs Fertiliser Stable volume performance underpinning satisfactory result in year Strong supply chain execution supporting higher volumes in UK against lower total market demand Reduced application in UK livestock sector Bespoke and specialist nutrition applications maintain solid momentum Amenity Good full year performance Growth in professional and niche agri sectors offsetting lower demand within amenity channel Operational efficiencies and business process alignment positively influencing result Innovation and product formulation capability core to business development Feed Ingredients Satisfactory performance on back of lower volumes Reduced spot demand reflecting strong recovery in grass production Pronounced price volatility impacting customer buying decisions Increasing focus on least cost feed formulations 14

15 Financial Review 15

16 2015 Financial Highlights Revenue July 2015 m July 2014 m % Change Agri-Services 1, , % Group Operating Profit* Agri-Services (0.8%) Associates and joint ventures** % % Financing cost, net (4.8) (5.5) (13.1%) Profit before tax* % Adjusted diluted EPS*** 60.10c 57.51c 4.5% Dividend per share 21.00c 20.00c 5.0% Net cash/(debt) **** 88.8 (11.9) 100.7m *Before amortisation of non-erp intangible assets and exceptional items **Profit after interest and tax before amortisation of non-erp intangible assets and before exceptional items *** Before amortisation of non-erp intangible assets, net of related deferred tax (2015: 10.2m, 2014: 6.4m) and exceptional items, net of tax (2015: 12.0m credit, 2014: 5.1m charge) **** Includes restricted cash of 29.4m 16

17 Revenue Agri-Services 1, , m +4.2% ( 34.6m) (2.4%) m +3.0% m +1.2% 1,458.1m m 1, ,415.2m 1, ,200.0 FY14 Acquisitions Currency Underlying FY15 17

18 Operating Profit Agri-Services m +4.1% ( 2.6m) (3.3%) ( 1.3m) (1.6%) m m ( 0.6m) (0.8%) 78.9m FY14 Acquisitions Currency Underlying FY15 18

19 EPS Year-on-year Increase of 4.5% c +3.9% (0.71c) (1.2%) +2.59c +4.5% c +3.7% 60.10c (1.10c) (1.9%) cent Per Share c FY14 Acquisitions Currency Tender Offer Underlying FY15 19

20 Cash Flow/Net Cash Continued strong cash generation m reduction in debt Year Ended 31 July Cashflow from operating activities Change in working capital (9.7) 11.5 Interest and tax (16.2) (11.8) Net cash flow from operating activities Dividends received Capital expenditure, net - routine - investment (7.9) (3.1) (7.1) (7.6) Acquisition expenditure - (13.4) Return of capital to shareholders - (100.2) Cash consideration on disposal of associate/joint venture Dividends paid (25.0) (23.9) Other (0.5) (0.6) Decrease in debt Opening net debt (11.9) (29.6) Translation (7.7) (1.1) Closing net cash/(debt) * 88.8 (11.9) * Includes restricted cash of 29.4m Reduction of 100.7m 2015 m 2014 m 20

21 Banking Facilities and Covenants Committed banking facilities of 430 million Weighted average debt maturity in years 2015: 3.73 years July 2015 July 2014 Net Debt to EBITDA * Covenant < 3.50 < 3.50 EBITDA to Net Interest Covenant >3.00 >3.00 All terms as defined for bank covenant testing purposes * Group is in a net cash position at 31 July

22 Balance Sheet July 2015 m July 2014 m Tangible assets Intangibles / goodwill Associates and joint ventures Working capital (32.5) (46.0) Put option liability (16.5) (16.4) Provisions for liabilities, including pension (18.8) (8.0) Net cash / (debt)* 88.8 (11.9) Taxation - incl. deferred tax (34.4) (31.8) Other (10.1) (8.8) Shareholders funds * Includes restricted cash of 29.4m 22

23 Central and Eastern Europe ( CEE ) - Development 23

24 Farm Services 2015 Expanding Footprint Post Development Poland Ukraine Pre Development Romania Poland Ukraine 24

25 Farm Services Comparative market analysis Central & Eastern Europe ( CEE ) UK Poland Romania Ukraine Total Farm Units (No.) 187,000 1,507,000 3,859,000 43,000 Total Cropping Area 4.7m Ha 10.8m Ha 8.3m Ha 21.5m Ha Average Farm size 81 Ha 10 Ha 3 Ha 500 Ha % of Agriculture Area for Farm Units > 50 Ha 88% 30% 53% 85% Average Wheat Yield / Ha 8.0 tn 4.0 tn 3.0 tn 4.0 tn Grain and Oil Seeds Production 24.5m tn 32.0m tn 22.4m tn 65.0m tn Data sourced from Eurostat, Defra ( & the State Statistical Service of Ukraine ( 25

26 2015 CEE Development Business Overview Farming Footprint 0.55m Ha 1.05m Ha 1.20m Ha Customers (No.) 2,000 1,900 2,600 Focus Advisory and crop input provision Advisory, crop input and crop marketing service provision Advisory, crop input and crop marketing service provision Positioning Leader in micro packaged seed dressings and crop protection Leader in retail nutrition distribution Leading service provider in Eastern Poland Customer Focus Small and medium farm units Large and intensive farm units Small, medium and large farm units Applications Arable, horticulture and vegetable Principally arable Arable, horticulture and vegetable Distribution Direct farm and branded retail Direct farm Direct farm and branded retail Other Extended distribution reach through partner franchise Complementary customer and product profile with Redoxim Specialist micro-nutrition formulation capability 26

27 CEE CEE Development Transaction Summary summary Total Enterprise Valuation 35.0m 19.4m 22.4m 76.8m EBIT 5.6m 3.2m 1.2m 10.0m EBIT multiple Acquisition Announcement 28 Jul Jul Aug 2015 Completion Date 17 Sept 2015 H H

28 2015 Development Investment rationale Consistent with Origin's strategic priority to scale its crop management systems, services and technology sets Strong on-farm brand positioning Target geographies offering market leading positions and long term market potential Intensification and farm consolidation driving increased yield potential and growth in serviced agronomy Multiple route-to-farm channels Entry return on capital employed comfortably ahead of cost of capital with target to achieve Group average within three years Expected to be earnings enhancing in 2016 financial year 28

29 Farm Services Summary UK Poland Romania Ukraine Agronomy/Sales Force (No.) Customers (No.) 20,000 6,100 3,900 1,250 Farming Footprint 1.4m Ha* 3.0m Ha** 1.6m Ha** 4.0m Ha** Principal Farm Size Range 100 2,000 Ha 100 1,000 Ha Ha 5,000 50,000 Ha Sector Profile Competitive Fragmented Fragmented Fragmented Origin Positioning * Represents the total serviced agronomy footprint of the Group s UK customers ** Represents the total overall farming footprint of the Group s customers in Poland, Romania and Ukraine 29

30 Strategic Priorities and 2016 Focus Points 30

31 Strategic Priorities Aligned to core capabilities and market opportunities Focus Prioritise value added solutions approach and customisation Organisation Simplification unlocking scale benefits and improving customer and channel performance Strengthening management resources and deployment of new capability to drive growth Development Extension leveraging current service offer and knowledge transfer systems Investment supporting further development of core product portfolios Research & Technology Transfer Focused application of soil science and knowledge transfer of seed technologies to drive crop performance Emphasis on the integration of digital technologies and product solutions Strategic Alliances Partnerships providing enhanced knowledge transfer capability with improved decision making and product specification on farm 31

32 2016 Key Priorities and Focus Points Performance Management Manage business through current more challenging backdrop for primary producers Improved insight and organisation creating more focused selling strategies Drive performance through managed led sales teams CEE Platform - Integration Initial emphasis on simplification, cultural integration and process alignment Introduction of new and devolved capability Development Target further consolidation opportunity 32

33 Summary and Outlook 33

34 Summary Well invested and focused business with established capability sets Trusted brands and farming relationships underpinning excellent customer franchise Clear priorities for on-farm technology transfer Expanded farm services footprint with strong sector positions providing meaningful future development potential Origin positioning Attractive cash flow, dividend and ROI profile Strong capacity to fund development opportunity Global agricultural fundamentals remain valid with positive long term outlook for primary food production 34

35 2016 Outlook Primary output markets remain under sustained pressure with near term visibility on new price direction unlikely before mid 2016 Weaker backdrop impacting farm sentiment in the short term Lower demand profile for services and inputs anticipated in 2016 Business is well positioned to respond to current market conditions and to benefit from sustained improvement in primary producer returns We will provide a further update on the 2016 financial year following an assessment of autumn crop plantings at the time of our first quarter trading update on 27 Nov

36 Preliminary Results September 2015