North-west agricultural investor Donegal Investment Group (DIG) announced its financial results for the six months ending February 28, 2018, earlier this morning (Thursday, April 19).
In a statement, the group’s board has lauded “significant progress” which has been made in bringing the group’s non-core asset disposal programme to fruition.
As a result of this, the company has seen its net cash position increase substantially by €62.5 million over the past 12 months, according to DIG.
What is DIG
Donegal Investment Group is a firm which manages a portfolio of companies focusing on agricultural production. It has operations in Ireland, the UK, the Netherlands, France and Brazil.
- Produce – incorporating the growth, sales and distribution of seed potatoes and organic produce;
- Food-agri – looking after the manufacturing, sale and distribution of farm inputs and dairy products, along with the rental and sale of food-agri property assets; and
- Associates – comprising of investments in Monaghan Middlebrook Mushrooms and North Western Livestock Holdings.
The company is based in Letterkenny.
Results
The group’s cash position (net of overdraft) was €51.2 million by the end of February, notwithstanding the fact that the six months recorded represents a near peak point in working capital requirements – due to the seasonal nature of both its animal feed and seed potato businesses.
The board has expressed its satisfaction with the first-half performance of all businesses, with the produce seed potato business impacted by the availability of seed for sale into key markets in the first quarter of the financial year.
The food-agri businesses, Nomadic and Smyth’s, continued to perform very well for the group over the first half of the year, according to DIG.
However, group revenue decreased by €2.2 million – while adjusted operating profit decreased by €0.7 million to €2.8 million during the six months in comparison with the first half of 2017, reflecting the reduction in the volume of seed available to its seed potato business.
Produce
Revenue decreased to €18.9 million – with profit decreasing by €0.7m to €1.8 million – in comparison with the first half of 2017, the company reports.
This resulted in volumes sold being marginally lower than planned in some key markets. However, some of the volume losses were offset by improved trading margins, the statement revealed.
The business also experienced difficult trading conditions in its South American market, with the seed potato industry in Brazil experiencing a significant downturn in demand due to the economic climate.
The majority of sales occur in the months of October to December and have a material impact on the bottom line performance of the produce segment in any 12-month period.
Food-agri and property
Revenue from operations increased by €0.5 million to €25.3 million. The segmental result for the period was a profit of €1.4 million, an increase of €0.5 million on the first half of 2017.
DIG’s speciality dairy business continues to experience good volume growth, with a number of additional listings being achieved with key customers in the UK, according to the firm.
DIG’s animal feeds business, Smyth’s, again performed “satisfactorily” during the first half of the year, with tonnage sold marginally ahead of the same period in 2017.
In addition, property located in Donegal was disposed of during the period resulting in net sales proceeds of €1.1 million.
Mushroom associate investment
Meanwhile, under the terms of a settlement with the majority owner of the Monaghan Middlebrook Mushrooms business – an associate of DIG – cash proceeds of €41.5 million were received on February 15 in accordance with the settlement agreement reached.
Under the terms of the settlement agreement, two non-conditional deferred payments are to be received by the company – with a sum of €2 million due to DIG by February 15 for the next two years. This will bring the total proceeds receivable under the agreement to €45.5 million.
Return of capital
The board of DIG is proposing a return of capital to shareholders of up to €47.5 million by the conversion of ordinary shares into redeemable ordinary shares and subsequent redemption of the redeemable ordinary shares.
Outlook
The majority of sales generated by the group occur in the first half of the financial year due to the seasonal nature of its seed potato business, and to a lesser extent its animal feeds business. Therefore, the group’s first-half performance will continue to represent a materially significant element of the group’s full year performance.
The board has noted that the market has responded positively to the significant changes in DIG’s portfolio of assets in the last six months.
The board is optimistic that all businesses will remain on target for the remainder of the year and it will continue to progress its non-core asset disposal programme during the second half of the year, particularly in respect of its remaining property assets.