Origin Enterprise increased profits by 4.1% to €70m last year

Dublin-listed agri-services group Origin Enterprise increased profits by 4.1 per cent to €70 million for the year ended July 31st.

The company said adjusted diluted earnings per share were up 4.7 per cent to 46.62 cent, ahead of guidance, and up 14.7 per cent on an underlying basis at constant currency.

The operating profit of €70 million represented a 12.3 per cent increase on an underlying basis at constant currency. Group operating margin rose 20 basis points to 4.6 per cent.

Origin said a dedicated research partnership with University College Dublin and the acquisition of Digital Agricultural Services group Resterra had provided "complementary extension in crop technology transfer".

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The results also noted the completion of the acquisition of the fertiliser blending and nutrition business of Bunn Fertiliser in the UK in August 2017.

The company is proposing a final dividend of 17.85 cent, giving a total dividend of 21 cent, which is unchanged from last year.

Origin chief executive Tom O’Mahony said the company had delivered a “solid financial result” in 2017.

“While market conditions were highly competitive, a combination of sustained volume growth and higher margins underpinned a strong underlying business performance which more than offset the adverse currency translation impact of sterling depreciation,” he said.

“Demand for agronomy services and inputs was positively influenced by a more stable near term planning environment for primary producers together with the benefit of generally settled weather leading to good crop planting and growing conditions.

“We continue to prioritise growth opportunity in agri-services while also focusing on operational and commercial effectiveness. The acquisition development and innovation investments made during the year will broaden the group’s service offer and capabilities in systemised crop technology transfer.

“The group is well positioned to capitalise on its scalable business platforms, development opportunities and strong balance sheet.”

In a note, analyst Davy said Origin had reported a “solid” result with earnings per share “modestly ahead of our expectations and company guidance”.

“The base effect and merger and acquisition contribution will allow us to nudge up our full year 2018 forecasts by circa 2-3 per cent,” it said. “The business retains ample financial flexibility to fulfil its stated ambitions.”

Investec also said the results were “ahead of expectations”, and that while farm sentiment is expected to “remain cautious”, Origin is “well positioned” given its business platforms, development opportunities and strong balance sheet.

“We believe that at first glance there will only be marginal uplift to forecasts over the short-term until the 2017/18 season starts to unfold in terms of farmer confidence, winter plantings, commodity prices and the weather,” it said.

“We re-iterate that having successfully weathered the two-year externally-driven downturns, we believe that Origin is now well placed to benefit as the business and climatic environment improves and the company expands its geographic footprint and service offering.

“As such, we believe that it does not deserve to trade at a discount to its agri-services peers and re-iterate our ‘buy’ recommendation.”