Saturday 19 October 2019

Origin keeps its capital on the sidelines pending Brexit clarity

Relaxed: Origin’s Tom O’Mahony suggests Brexit should be a low-risk event for the business. Photo: Damien Eagers
Relaxed: Origin’s Tom O’Mahony suggests Brexit should be a low-risk event for the business. Photo: Damien Eagers
John Mulligan

John Mulligan

Origin Enterprises is maintaining a "cautious" approach to capital allocation including acquisitions, until the final outcome of Brexit is known, according to chief executive Tom O'Mahony.

He added that the UK's departure from the European Union continues to be a low-risk event for the agri-services group, given that many of its imports to the United Kingdom already arrive under World Trade Organisation rules.

Continental Europe and Latin America remain the primary focuses for any potential acquisition activity, he said.

"We have signalled our commitment to grow organically and through acquisition," he said.

"I think when we use the word cautious, obviously Brexit is there, and we certainly should not be allocating a lot of capital to three, four or five acquisitions in the one year. I think it's sensible buy-and-build until we see how this whole thing plays out."

Last year, Origin Enterprises bought Brazil's Fortgreen, while during the summer, it finalised the purchase of a 20pc stake in Ferrari Zagatto, also in Brazil.

Mr O'Mahony was speaking as Origin Enterprises reported full-year results that benefited from a strong performance in the UK and Ireland that was boosted by the fodder crisis. The markets are expected to normalise in the current financial year.

Its revenue rose 10.5pc to €1.79bn in the year to the end of July. The figure was 7.2pc higher on an underlying basis. Operating profit was up 15.6pc at €82.3m, and was up 3.5pc on an underlying basis.

The performance in Ireland and the UK was offset by a challenging market in Ukraine, where Origin Enterprises has had a presence since 2014.

Mr O'Mahony said there were country-specific issues in Ukraine, with the market there characterised by lower liquidity and excess inventories.

Origin shouldered a €7.1m non-cash impairment charge on its Ukraine investment during the financial year.

Shares in the group jumped almost 6pc in early trading before easing later for a 4.8pc gain by the early afternoon.

Mr O'Mahony said that there is no sense on the ground in the UK that farmers there are concerned for now about Brexit, despite the significant challenges a 'hard' Brexit in particular could pose.

"They're not particularly focused today on the implications for Brexit," he said, adding that right now the priority is on completing harvests and getting new planting under way.

"I suspect that as we come closer to some sensibility on what the outcomes are looking (like), that's when they will focus, but it's very much an operational focus for now," he said.

The planned sale of 31 acres of land in Cork's docklands by Origin to O'Callaghan Properties is continuing to progress, said Mr O'Mahony.

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