Annual Report Annual and Accounts 2017 Origin Enterprises plc Annual Report and Accounts 2017 Origin Enterprises plc is a leading Agri-Services group, employing over 2,300 people across 136 operating locations* in five countries. 05 Chairman’s Statement A strong underlying performance in 2017 and continued progress of strategic initiatives. Dear Shareholder, Details of our financial performance are set out Board Strategic Report in the Financial Review on pages 33 to 38. Our Markets As a Board, we are committed to excellence in Performance governance practices to facilitate the effective I am pleased to report a solid set of results Strategy stewardship and long-term success of the for the year ended 31 July 2017. During the Our core strategic priority is to grow a Group. Full details of our approach are set out 01 Highlights year we had a strong underlying operational sustainable Agri-Services business which in the Corporate Governance Statement on and financial performance across the Group. optimises value for our stakeholders. pages 46 to 51. Details of the markets in which we While market conditions were highly competitive We will deliver this by focusing on our 02 Origin at a Glance The Board currently comprisesp05 six Non-Executive in 2017, the Group responded well and delivered key strategic priorities. These are: an improved underlying business performance Directors and three Executive Directors. Each of underpinned by good volume growth and higher > Application Research and Innovation. these Directors brings a wealth of knowledge, operate, both in Ireland and the UK margins. This performance more than offset > Operational Excellence. expertise and independence of mind to Board 05 Chairman’s Statement the currency translation impact of sterling > People Excellence. discussions. Board members meet frequently devaluation with total Group operating profit > Strategic Acquisitions and Business in Board Committees and at Board meetings. and Continental Europe, are set out increasing by 12.3 per cent on an underlying Expansion. Additionally, the Non-Executive Directors meet 06 Our Business basis at constant currency or 4.1 per cent on > Delivering Long-term Shareholder Value. as a group from time to time. All of these a reported basis. Adjusted diluted earnings meetings focus on what is best for Origin, with in this review. per share was 46.62 cent, an increase of Examples of this strategy being put into effect discussions predominantly centred on business 4.7 per cent or 14.7 per cent on an underlying during the year are demonstrated in the Strategy strategy, monitoring ongoing performance and 08 Our Markets basis at constant currency. in Action section of the Annual Report on pages evaluating proposed acquisitions. 22 to 25. I would like to thank the Board for its continued Read more on page 08 12 Chief Executive’s Review In the current year we continued our focus support for the business and its consistent hard on innovation with the establishment of a work and commitment to the success of Origin. dedicated digital, precision agriculture and 16 Strategy crop science collaborative research partnership Management and Employees with University College Dublin supported by Throughout the Group, it is the hard work, Science Foundation Ireland (‘SFI’). This is a dedication and innovation of our management five-year development programme which Business Model team and employees which allows us to focus 18 is being co-funded by Origin and SFI and relentlessly on serving our customers well and reflects the Group’s continued commitment to continually improve our performance. On to advancement and innovation in both the behalf of the Board, I would like to thank all 20 Key Performance Indicators crop science and technology transfer arenas. employees for their achievements this year and we look forward to their ongoing contributions In addition, we continued our strategic in the years ahead. acquisition programme with the acquisition 22 Strategy in Action of Resterra and the agreement to acquire Bunn Fertiliser. Resterra is a Digital Agricultural Outlook Services group which we acquired in March The business has continued to make 26 Sustainability and provides us with an exciting opportunity commercial and strategic progress over to further develop our digital technology the past year. While we anticipate a stable capabilities. The acquisition of Bunn Fertiliser p08 operating environment for primary producers was announced in March and completed in 2018, farm sentiment is expected to remain 28 Risk Report subsequent to the financial year end. Bunn cautious reflecting general volatility in output Fertiliser advances the Group’s capacity to markets. Our focus is on driving organic and manage supply chain complexities as well acquisition growth opportunities and the 33 Financial Review as providing complementary customer and Group is well placed to pursue these objectives. product channel access. I remain confident that we can meet the challenges that lie ahead and continue the 39 Our Progress Since Establishment Dividend Group’s successful long-term development. The Board is recommending a final dividend of On behalf of the Board, I would like to thank you, 17.85 cent per ordinary share which brings the our shareholders, for your continued support. total dividend per ordinary share for the year ended 31 July 2017 to 21.0 cent, equivalent to the previous year’s annual dividend. Governance Rose Hynes Rose Hynes Non-Executive Chairman Non-Executive Chairman 26 September 2017 40 Board of Directors Chairman’s Origin Enterprises plc Annual Report and Accounts 2017 42 Directors’ Report 45 Chairman’s Overview Statement 46 Corporate Governance Statement 52 Audit Committee Report The Chairman’s Statement details our 56 Remuneration Committee Report performance, strategy and outlook. 61 Annual Report on Remuneration Read more on page 05 66 Nomination Committee Report 13 Financial Statements 68 Statement of Directors’ Strategy Responsibilities Operational Review Ireland and the UK 69 Independent Auditors’ Report Change on prior year 2017 2016 Change Underlying (ii) Our objective is to grow €’m €’m % % 74 Consolidated Income Statement Revenue 955.0 1,023.6 (6.7)% 2.9% Operating profit (i) 53.4 52.7 1.3% 12.2% a sustainable Agri-Services Operating margin (i) 5.6% 5.1% 50bps – 75 Consolidated Statement Associates and joint venture (iii) 4.4 5.6 (21.4)% (14.3)% business which optimises of Comprehensive Income (i) Before amortisation of non-ERP intangible assets and exceptional items. (ii) Excluding currency movements and the impact of acquisitions. (iii) Profit after interest and tax before amortisation of non-ERP intangible assets and before exceptional items. value for our stakeholders. 76 Consolidated Statement Ireland and the UK delivered a satisfactory Agrii continues to extend the Group’s position performance recording a 12.2 per cent increase in the provision of systemised crop technology of Financial Position in underlying operating profit in a competitive transfer direct to farm. This is supported Read more on page 16 market environment. Operating margin by a comprehensive service offer, market increased 50 basis points to 5.6 per cent leading agronomic research and technical Consolidated Statement primarily driven by higher sales of value support, and strong software based decision 77 added technologies. support capabilities. of Changes in Equity The positive impact of sterling depreciation Digital Agricultural Services on crop output values, along with a favourable In March 2017 the Group completed the year-on-year backdrop to global dairy markets, acquisition of Resterra, the Digital Agricultural and lower unit costs for key macro inputs, were Services group. Resterra specialises in the delivery 78 Consolidated Statement the principal drivers of an improvement in farm of bespoke digital agronomy applications and incomes in the period. is a leading provider of agri-tech services to primary producers, input manufacturers and of Cash Flows Integrated Agronomy and On-Farm Services agri-services companies. The Group’s Integrated Agronomy and On-Farm Services business, Agrii, delivered a Strong progress on integration in the period has 79 Group Accounting Policies satisfactory performance following particularly complemented a very satisfactory financial difficult trading conditions in 2016. Higher performance from Digital Agricultural Services. output prices in local currency together with Priority focus areas since the acquisition of Tom O’Mahony lower than expected input cost inflation Resterra have included the development of new Chief Executive Officer Strategic Priorities 85 Notes to the Group supported increased agronomy services and agronomy applications, organisational design input demand. The business responded well and the launch of precision farming services to the more challenging market dynamic with across Origin’s Continental European footprint. Financial Statements a renewed focus on high service channels and value added technologies resulting in higher Business-to-Business Agri-Inputs p16 volumes and improved margins across all Business-to-Business Agri-Inputs delivered 123 Company Accounting Policies service and input portfolios. good growth in operating profits in the period with performance principally supported by higher volumes and margins in fertiliser. 125 Company Balance Sheet 126 Company Statement p12 of Changes in Equity 127 Notes to the Company Net Debt Full Year Dividend 3 Application Research Operational and