TIDMOGN
RNS Number : 1635Q
Origin Enterprises Plc
17 June 2020
Origin Enterprises plc
Q3 Trading Update
Highly challenging operating conditions reduce in-year demand
for agronomy services and crop inputs
Full year guidance in adjusted fully diluted earnings per share
of between 23 and 26 cent
Dublin, London, 17 June 2020 . Origin Enterprises plc ('Origin'
or 'the Group'), the international Agri-Services group, providing
specialist agronomy advice, crop inputs and digital agricultural
solutions to farmers, growers and amenity professionals, today
issues its FY20 Trading Update for the three and nine months ended
30 April 2020.
Overview
Group revenues, for the nine-months ended 30 April 2020,
decreased by 6.7% to EUR1,209.7 million (7.7% on an underlying
basis). Revenue development in the period reflects the in-year
impact of reduced market demand for agronomy services and crop
inputs, principally in Ireland and the UK, due to a lower level of
intensive autumn and winter crop plantings as a consequence of the
wettest autumn winter planting season in 30 years. Our markets
experienced extremely dry conditions in the third quarter which
persisted into June, leading to significant soil moisture deficits
which negatively impacted overall crop potential for farmers and
growers, thereby resulting in a lower intensity of crop input
investment spend.
During the quarter COVID-19 was declared a global pandemic, with
operating restrictions implemented across all our operating
geographies. In line with government and health authority
guidelines, the Group has implemented a range of extensive measures
to ensure continuity of service to the agricultural community .
Revenues for the third quarter ('Q3') were 1.6% higher at EUR604.8
million, with an underlying increase of 1.5% demonstrating the
operational robustness of the Group's operations.
Group revenue for the third quarter and year-to-date, compared
to the prior period is as follows:
Group Revenue - Q3
Constant
Currency(2)
Q3 FY20 Q3 FY19 Variance Underlying(1) %
EUR'm EUR'm % %
------------------------ ---------- ---------- ---------- --------------- -------------
Ireland / UK 372.1 405.5 (8.2%) (8.3%) (8.2%)
Continental Europe 196.9 157.9 24.7% 22.8% 22.8%
Latin America 1.6 3.8 (57.8%) (17.3%) (17.3%)
Total Agronomy and
Inputs 570.6 567.2 0.6% 0.3% 0.3%
Crop Marketing 34.2 28.2 21.3% 25.3% 25.3%
Total Group 604.8 595.4 1.6% 1.5% 1.5%
(1) Excluding currency movements and
the contribution of acquisitions
(2) Excluding currency movements
------------------------------------------------ ---------- ---------------
Group Revenue - YTD
Constant
Currency(2)
YTD FY20 YTD FY19 Variance Underlying(1) %
EUR'm EUR'm % %
---------------------- ----------- ---------- ---------- --------------- -------------
Ireland / UK 709.5 839.4 (15.5%) (16.4%) (16.2%)
Continental Europe 338.9 305.8 10.8% 8.7% 8.7%
Latin America 23.5 25.2 (6.7%) 0.2% 1.7%
Total Agronomy and
Inputs 1,071.9 1,170.4 (8.4%) (9.5%) (9.3%)
Crop Marketing 137.8 126.6 8.8% 9.3% 9.3%
Total Group 1,209.7 1,297.0 (6.7%) (7.7%) (7.5%)
(1) Excluding currency movements and
the contribution of acquisitions
(2) Excluding currency movements
----------------------------------------------- ---------- ---------------
Ireland and the UK recorded a reduction in underlying agronomy
services and crop input volumes of 1.5% and 13.9% in the third
quarter and year-to-date respectively. Volume performance in the
quarter was robust, with the business delivering a strong operating
performance, with consideration for the challenges resulting from
COVID-19. Total autumn and winter plantings for the principal crops
were 40.4%, or 1.1 million hectares, behind last year at 1.7
million hectares. Approximately 55% of the 1.1 million autumn and
winter cropping shortfall has transferred to spring planting, with
the balance remaining as fallow or unplanted hectares.
Total autumn, winter and spring plantings for the 2020 growing
season are expected to be 10.7% behind last year, at 4.0 million
hectares. Despite spring planting progressing as expected, a
prolonged dry period from March to early June has resulted in
reduced crop yield expectations, in addition to limited pest and
disease pressure, contributing to an expected 25% reduction in crop
protection volumes.
Despite a solid operating performance in the quarter,
Business-to-Business Agri-Inputs has had a challenging financial
year-to-date, with the prolonged unseasonal weather conditions
resulting in lower volumes and margins for fertiliser and animal
feed ingredients, set against a strong comparative period last
year.
The Group's Amenity business recorded lower volumes and revenues
in the quarter. Demand was significantly curtailed during the
seasonally significant third quarter due to COVID-19 restrictions,
which led to the closure of all sporting venues along with
significantly reduced activity levels across landscaping and local
authority customer channels.
The Group's Digital offering has continued to add increased
functionality to farmers with over 1.3 million active hectares
under the platform, including significant growth in our Continental
European markets.
Continental Europe recorded an underlying volume increase in
agronomy services and crop inputs (excluding crop marketing
volumes) of 33.1% and 15.4% in the quarter and year-to-date
respectively. The favourable volume performance is supported by a
positive planting profile across our CE markets. Persistent dry
conditions for much of April and May reduced yield potential and
resulting farm spend. The Group's Belgian fertiliser business
performed in line with expectations.
In Poland , combined autumn, winter and spring plantings for the
2020 growing season are estimated to be in line with last year at
8.1 million hectares. There was a marginal reduction in spring
plantings, primarily driven by an increase in the area of winter
cereals sown. Dry conditions have persisted for much of the
year-to-date which threatens the yield potential of cereals and
oilseed rape, however improved growing conditions have been
experienced following rainfall in late May.
In Romania , the total sown area for autumn, winter and spring
plantings is estimated to be in line with the prior year at 8.3
million hectares, with an increase of 3.6% in winter plantings
offset by a reduction in spring cropping. Romania has also
encountered periods of sustained dry weather, which has impacted
crop establishment and yield potential for the season.
In Ukraine , total autumn, winter and spring plantings are
anticipated to be 3.6% ahead of last year at 23.3 million hectares,
primarily due to a 6.1% increase in spring cropping. In common with
our other CE markets, dry weather conditions have impacted crop
development and yield potential, however in Ukraine this is
confined to the south and east of the country.
Latin America recorded a reduction in underlying business
volumes in the quarter of 10.2%, albeit in the seasonally quieter
second half. Year-to-date underlying business volumes are in line
with the prior year after recovering from a delayed start to
in-field operations for Brazil's principal crop, soya. Plantings of
Brazil's secondary crop, maize, is complete despite delays and the
area dedicated to cropping has increased in the current year by
2.3% to 13.2 million hectares. The weakening of the Brazilian Real
in recent months will have a consequent impact on reported earnings
from our LATAM segment.
COVID-19
Since the announcement of our Interim Results on 5 March 2020,
the rapid outbreak of COVID-19 has required prompt planning,
communication and implementation of safety protocols across the
Group's operations to drive the actions necessary to mitigate the
risk of the virus spreading and to ensure that we continued to
serve our customers. Agriculture has been identified as a key
sector and the services we provide are deemed essential to the
maintenance and continuity of the food supply chain.
Our number one priority is the health of our people, trading
partners, customers and the communities where we operate. The Group
continuously monitors 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.
Thanks to the professionalism and dedication of our team, k ey
logistics and warehousing activities have been maintained and
agronomy advice delivered, despite farm visits being limited in
accordance with social distancing protocols. All employees in a
position to work from home have been supported to do so. We are
grateful to all our colleagues for their efforts in maintaining our
operational capability which is enabling us to deliver continuity
of service to the agricultural community during this crisis.
While our agricultural supply chain businesses are essential to
food production, our amenity business faced the challenge of a
large proportion of its customer base having to temporarily close.
Consequently, our amenity businesses furloughed members of the
team, on a rotating basis, from late March onwards. Availing of
that support and acknowledging the impact of COVID-19 on our
stakeholders, the Board and Executive Directors considered it
appropriate to take a voluntary 20% reduction in respective fees
and base salaries, for the period 1 April to 31 July 2020.
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 responsibly serve the needs of the agricultural
community.
The Group continues to be in a solid financial position, with
net debt broadly in line with last year's levels. We continue to
operate within our banking covenants, with in excess of EUR125m in
undrawn lines of credit available. Interest costs are expected to
be in line with that previously guided for the full year, as
falling interest rates offset the cost of additional facilities
drawn down by the Group as a precautionary measure from mid-March
onwards.
Dividend
In light of market conditions and uncertainty relating to
COVID-19, the Board has determined that it is prudent to suspend
the final dividend for FY20. Acknowledging the decision to suspend
the final dividend, the Executive Directors have voluntarily waived
their entitlement to any unvested share options .
Management Changes
On 11 June 2020 the Group announced the retirement of Tom
O'Mahony after 35 years of service, including 13 years as CEO. He
will be succeeded by Sean Coyle and a search for Sean's successor
as CFO has commenced.
Full Year Outlook for FY20
With persistent and prolonged dry conditions across our Ireland
& UK and Continental European markets through spring, expected
yields are lower and, in turn, there is reduced intensity of crop
input investment spend. We expect demand will be lower than had
been expected at the time of our half year trading update in early
March. In what has been a challenging year due to extreme weather
conditions and the operational challenges presented by COVID-19,
the Group expects to deliver a resilient financial performance for
FY20, with full year adjusted fully diluted earnings per share of
between 23 to 26 cent.
This statement contains inside information.
ENDS
Enquiries
Origin Enterprises plc
Sean Coyle
Chief Financial Officer Tel: +353 (0)1 563 4959
Brendan Corcoran
Head of Investor Relations and Group
Planning Tel: +353 (0)1 563 4900
Goodbody (Euronext Growth (Dublin)
Adviser)
Finbarr Griffin Tel: +353 (0)1 641 9278
Davy (Nominated Adviser)
Anthony Farrell Tel: +353 (0)1 614 9993
Numis Securities (Stockbroker)
Stuart Skinner Tel: +44 (0)20 7260 1314
FTI Consulting (Financial Communications
Advisers)
Jonathan Neilan/ Patrick Berkery Tel: +353 (0)1 765 0884
About Origin Enterprises plc
Origin Enterprises plc is an international Agri-Services group,
providing specialist agronomy advice, crop inputs and digital
agricultural solutions to farmers, growers and amenity
professionals. The Group has leading market positions in Ireland,
the United Kingdom, Belgium, Brazil, Poland, Romania and Ukraine.
Origin is listed on the Euronext Growth (Dublin) and AIM markets of
the Irish and London Stock Exchanges.
Euronext Growth (Dublin) OIZ
ticker symbol:
AIM ticker symbol OGN
Website: www.originenterprises.com
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END
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