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ISEQ lower-Origin Enterprises examined

Wednesday, March 06 09:15:12

The ISEQ is lower this morning at 3,866, down 18 points from yesterday's record levels as European markets began by marking time but have turned slightly positive on acquisition enthusiasm.

The results from Origin Enterprises are examined by NCB Stockbrokers:

Origin Enterprises released H1 results this morning. It reported revenue of E567.7m (+11.9pc yoy), representing like-for-like growth of 5.4pc vs. 3.4pc in Q1, and adjusted operating profit of E2.4m, down E3.9m yoy on a like-for-like basis. Adjusted EPS of 7.59c was up 16.2pc yoy, or +c.4pc excluding a tax credit.

Seasonality in the business means only c.15pc of profits occurs in H1.

Analysis: Sales - Like-for-like revenue in the Agri-services business increased 5.4pc reflecting higher feed and grain marketing volumes and higher feed prices, offset by lower fertiliser and crop protection sales. This was due to adverse weather conditions during a key planting period. The 3.4pc like-for-like growth in Q1 implies that growth accelerated in Q2.

Operating profit - Like-for-like operating profit reduced c.E3.9m to E2.4m, due to the well flagged impact of adverse weather on autumn harvest and winter plantings.

JVs and Associates- JVs and associates contributed E10.9m in H1 up from E7.1m in H1 FY12. The increase is primarily due to increased share of profit at Welcon due to favourable global fish meal markets and recovery in Valeo Foods.

Net debt -net debt increased to E178.7m from E67.8m at year-end primarily reflecting seasonal outflows and declined c.E15m yoy. The seasonal increase is expected to fully reverse and year end net debt is expected to be c.E45m representing c.0.5x EBITDA.

Conclusion & Action: On outlook the company states it remains comfortable with current consensus expectations of adjusted fully diluted EPS of c.48.5c (NCB: 47.9c) +7.5pc yoy.

Overall the results appear in line with the lighter yoy performance by AgriServices well flagged and offset by a strong JV & Associates contribution. The transformation of Agri-Services is proceeding well and will position Origin strongly for the future. Reiteration of FY13 guidance reflects management confidence that H2 Agri performance will be satisfactory. We don't expect there to be any significant changes to consensus following these results according to NCB Stockbrokers.