Origin Enterprises plc Enterprises Origin Annual Report and Accounts 2018 Report Accounts and Annual Origin Enterprises plc Annual Report and Accounts 2018 About Us Strategic Report Origin Enterprises plc 1 Highlights 2 Origin at a Glance 4 Chairman’s Statement is a leading Agri-Services 6 Our Business 8 Market Review 12 Chief Executive’s Review group, employing over 2,400 16 Strategy 18 Business Model 20 Key Performance Indicators people across six countries. 22 Strategy in Action 28 Sustainability Report 34 Risk Report The Group has leading market positions in Ireland, the UK, 40 Financial Review 47 Our Progress Since Establishment Belgium, Poland, Romania and Ukraine. Origin is listed on the ESM and AIM markets of the Irish and London Governance 48 Board of Directors Stock Exchanges. 50 Directors’ Report 53 Chairman’s Overview 54 Corporate Governance Statement 61 Audit Committee Report 65 Remuneration Committee Report The Group operates in six countries across 71 Annual Report on Remuneration Ireland, the UK and Continental Europe. 76 Nomination Committee Report Find out more about Our Businesses on page 3 Financial Statements 79 Statement of Directors’ Responsibilities 80 Independent Auditors’ Report 85 Consolidated Income Statement 86 Consolidated Statement Details of the markets in which we operate, of Comprehensive Income are set out in this review. 87 Consolidated Statement of Financial Position Find out more about our Market Review on pages 8 to 11 88 Consolidated Statement of Changes in Equity 89 Consolidated Statement of Cash Flows 90 Group Accounting Policies 98 Notes to the Group Our objective is to grow a sustainable Agri- Financial Statements Services business which optimises value for 137 Company Accounting Policies 139 Company Balance Sheet our stakeholders. 140 Company Statement of Changes in Equity Find out more about Strategy on pages 16 and 17 141 Notes to the Company Financial Statements 148 Company Information Find out more on originenterprises.com Strategic Report Highlights Resilient trading performance in a challenging year Origin delivered a strong financial result during the year ended 31 July 2018 as follows: • Adjusted diluted earnings per share2 up 4.7% to 48.80 cent • Strong free cash flow generation of €56.6 million and up 7.6% on a constant currency basis. (2017: €32.5 million). • Operating profit1 of €71.2 million, an increase of 1.7% • Group operating margin1 of 4.4%, a decrease of and up 4.6% on a constant currency basis. 20 basis points. • Acquisitions contributed 5.0% to sales growth and 3.6% • Agreement to acquire interests in two Brazil-based agri-service to operating profit growth in the year. businesses, Fortgreen and Ferrari Zagatto. • Proposed final dividend of 17.85 cent, giving a total dividend of 21.0 cent (2017: 21.0 cent). Revenue Operating Profit 1 Adjusted Diluted EPS 2 €1.6bn €71.2m 48.80 cent +6.5% +1.7% +4.7% Constant currency 3 increase: Constant currency 3 increase: Constant currency 3 increase: +9.0% +4.6% +7.6% Free Cash Flow ROCE Dividend per Share €56.6m 13.5% 21.0 cent (2017: €32.5m) (2017: 13.7%) (2017: 21.0 cent) 1. Before amortisation of non-ERP intangible assets and exceptional items, and before the Group’s share of profits of associates and joint venture. 2. Before amortisation of non-ERP intangible assets, net of related deferred tax (2018: €4.9 million, 2017: €3.9 million) and exceptional items, net of tax (2018: €Nil, 2017: €9.3 million). 3. Excluding currency movements. Note: All references to constant currency in this Annual Report are due to the fact that the translation of non-euro denominated earnings are impacted by movements in local currency rates versus the euro, the Group’s presentation currency. In order to reflect underlying performance more accurately in the period, the Group calculates results on a constant currency basis by retranslating non-euro denominated current year earnings at prior year exchange rates. Annual Report and Accounts 2018 1 Origin at a Glance A focused Agri-Services group providing services and technology Our businesses specialise in the provision of independent and innovative advice, inputs and related services to farmers to help them optimise crop yield and economic returns on a sustainable basis. Business-to-Business Integrated Agronomy Digital Agricultural Agri-Inputs and On-Farm Services Services Provides procurement and supply chain Provides agronomy advice, services and inputs Provides bespoke digital agronomy applications solutions to the Irish, UK and Belgian primary directly to arable, fruit and vegetable growers and agri-tech services to primary producers, input food production sectors covering the in the UK, Poland, Romania and Ukraine. Our manufacturers and agri-service companies. macro inputs that drive on-farm efficiency, customised solutions ensure the delivery of i.e. prescription blended fertilisers and animal crop production systems that adhere to the feed ingredients. In addition, Origin is a market highest safety, quality, environmental and leader in advisory, service and input provision sustainability standards. to the professional sports turf, landscaping and amenity sectors in the UK. Revenue Operating Profit 23% 36% 48% €1.63bn €71.2m €71.2m 52% 64% 77% Ireland & the UK Ireland & the UK Direct Farm Continental Europe Continental Europe Business-to-Business >2 , 4 0 0 700 112 73 Employees Sales Force Distribution Demonstration Points Farms Note: Stated statistics are as at 31 July 2018 and exclude the impact of the acquisition of Fortgreen in Brazil which was completed subsequent to the year end. 2 Origin Enterprises plc Strategic Report Our Businesses Continental Europe c.19,000 Customers Ukraine The Continental Europe segment Belgium includes the Group’s operations in Belgium, Poland, Romania and Ukraine. Poland Find out more on pages 10 and 11 Romania Technology Centres Demonstration Farms iFarms Ireland and the UK B2B sites Technology Centres c.30,000 United Kingdom Customers Ireland The Ireland and UK segment includes the Group’s Business-to-Business Agri-Inputs operations, Integrated Agronomy and On-Farm Services operations and Digital Agricultural Services business in Ireland and the UK. Find out more on pages 8 and 9 32 12.7m ha 60,000 Input Formulation and Direct Farm Customer Trial Units Processing Facilities Footprint Annual Report and Accounts 2018 3 Chairman’s Statement Strong operational performance in 2018 with progress on key strategic priorities Dear Shareholder Group Performance Bunn Fertiliser extends the Group’s UK fertiliser Board and Governance Origin delivered a strong performance in 2018, capacity and capability and has now been The Board views high standards of corporate against a market backdrop that was impacted successfully integrated into the Group. Pillaert governance as a vital element of how we conduct by challenging operating and growing conditions strongly complements our prescription fertiliser our business and achieve long-term success for for primary producers. Through this difficult and speciality nutrition business and provides the Group. Following the recent change to AIM trading environment, the Group continued an important expansion into a new market in Rule 26, the Board has committed to apply the to demonstrate the ability to support our Continental Europe. principles of the Quoted Company Alliance customers while producing robust operational Corporate Governance Code. Full details of results and achieving underlying volume growth The recent investment in Brazil represents an our approach to governance are set out in the across all our primary business channels. Group important first step for Origin into the world’s Corporate Governance Statement on pages operating profit amounted to €71.2 million, an second largest agricultural export market. 54 to 60 and, as a Board, we continue to be increase of 4.6% on a constant currency basis The Brazilian business Fortgreen is focused on committed to excellence in governance practices. or 1.7% on a reported basis. Adjusted diluted the development of value added crop nutrition earnings per share was 48.80 cent, an increase and speciality inputs while Ferrari Zagatto During the year Imelda Hurley resigned as of 7.6% on a constant currency basis or 4.7% is a leading provider of agronomy services, Chief Financial Officer and Company Secretary, on a reported basis. crop inputs and crop marketing services. having spent almost four years with the Group. Together they will provide us with a platform Imelda provided strong financial leadership Details of our financial performance are set out to address our strategic requirements for during a period of significant change and in the Financial Review of the Annual Report on meaningful geographical diversification transition for the Group. I would like to thank pages 40 to 46. and seasonality balance. Imelda for her invaluable contribution to the development of Origin throughout her tenure Strategy Further examples of our strategic priorities being and to wish her well in her future endeavours. Significant progress was made during the implemented during the year are included in the year in advancing our key strategic priorities. Strategy in Action section of the Annual Report Rose McHugh retired from the Board during We continued our strategic acquisition on pages 22 to 27. the year following the completion of a second programme with the completion of the three-year term as a Non-Executive Director. acquisition of Bunn Fertiliser in the UK, the Sustainability During this time, Rose was a dedicated member acquisition of Pillaert-Mekoson (‘Pillaert’) Sustainability is key to the achievement of of the Board and of the Risk Committee. I would in Belgium and the agreement to acquire the Group’s strategic priorities. Considerable like to thank Rose for her dedication and Fortgreen and Ferrari Zagatto in Brazil. progress was made on the delivery of the commitment to the Board of Origin during her Group’s sustainability objectives during the tenure and to wish her every success in the future.