Eleven months ago, Devenish executive chairman Owen Brennan and I were standing on the breathtaking Dowth farm in Co Meath, where the agribusiness conducts its research. His interview for The Currency at the time detailed how the animal nutrition group, in which he owns a 74 per cent stake, had grown from revenues of £5 million a year to £5 million a week in 20 years – “with the intention of scaling that up again four to five-fold in the next three to five years”. 

We are back walking the land on the bank of the river Boyne and there have been a number of changes since my last visit, in the fields and behind the scenes. The one that brought me here this time is that the entire farm has just been mortgaged. Meanwhile, annual accounts published in March have shown that exponential growth in Devenish’s revenue and profits over previous years plateaued in 2019. I have also noticed a series of corporate changes in the group’s structure, with new companies appearing and disappearing on both sides of the border. There is industry talk of a deep restructure encompassing operations in the US.

Should we be worried for the privately-held business and its 750 employees worldwide? “I would never describe myself as unconcerned about financial aspects, but I’m very optimistic,” Brennan tells me. Through successive conversations with him and members of his team over the past few weeks, I’ve found out that deep changes are under way at Devenish as it negotiates shifting markets, Covid-19, Brexit, and the transition from selling high-tech feed ingredients to what Brennan describes as “a whole-system approach”.

The company is, quite literally, betting the farm. 

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Cattle and sheep are grazing side-by-side in a field of knee-deep sward combining up to 12 types of grasses, herbs and legumes. “Most visitors ask why all the weeds!” says Jane Shackleton, a farmer from neighbouring Co Cavan and one of five PhD students who embarked on the two-year Heartland research project in Dowth last October. One is Nigerian, one Belgian, one Brazilian and one Argentinian. 

Some are based in Wageningen University in the Netherlands, one of the world’s most renowned centres for cutting-edge agricultural research, which has put Dowth on its list of “lighthouse farms” previewing what sustainable agriculture will look like in 2050. They will all end up converging here as programme requirements and Covid-19 restrictions dictate. UC Davis, another leading agricultural and medical academic institution in the US, is due to join the programme, too.

Together, the researchers will analyse the impact of a different way of farming on 36 hectares – a real-life scale. The mixed-species pastures have received half the fertiliser spread on more traditional grass paddocks on the farm, yet early figures show that they have so far yielded more forage, while livestock grazing them have grown faster and been less vulnerable to parasite infestations. More research will determine whether this is confirmed in the long term, how the quality of the resulting beef and lamb might affect human health, and what impact the system has on the soil and the environment.

“From next summer, we will measure methane emissions,” says Shackleton. The potent greenhouse gas is just one aspect of the climate change parameters monitored here. Brennan says researchers will measure how much carbon is stored in the soil and plant trees in some fields to study so-called silvopasture. The objective is to find a “road to zero”, producing carbon-neutral beef and dairy by 2025 on the research farm. 

“Heartland is the initial big programme,” Shackleton says. More research of this kind is taking place at other Devenish sites and partner farms in Northern Ireland and in Co Sligo. The €1.4 million in public funding secured from the European Commission’s Marie Curie programme for the Heartland project is only a drop in the volume of research and development spending at Devenish. 

We retreat from the pouring rain into the adjacent Netterville Institute, recently reunited with the rest of the historic estate by Devenish to house its global research and development centre. The red brick house, built in Victorian times as a charity institution next to a neolithic cairn and a Norman tower, is currently flanked by a Versailles-inspired patio. Its high ceilings are covered in multi-coloured stucco patterns taken straight from Arabian Nights.

In the planning file compiled by Meath County Council prior to granting permission to Devenish for the building’s conversion into offices and labs last year, an “aghast” conservation officer wrote: “This building would have been a simple institutional building, with simple, perhaps austere interiors. Sadly it has been plundered into a pastiche Gothic/Americanised/Moroccan 20th century faux architecture stage set by the previous owners. The maltreatment of this building is very sad and I acknowledge that the current owners have inherited a history of previous unauthorised developments.”

All these will go, says Brennan. Minor works have started on access roadways. Last September, he told me that property purchases and redevelopments at Dowth would cost a total of €15 to €20 million. 

“Disappointing in the short term”

On May 22, Devenish companies on both sides of the border registered new charges against their assets. The 178 hectares of farmland surrounding the listed Dowth Hall and Netterville Institute are now security for debt the company owes to NatWest bank in the UK. The same applies to manufacturing equipment valued at over £3 million at the company’s historic feed mill in Belfast.

Brennan says that the charges do not represent new borrowings. Devenish’s chief financial officer Gerard Finnegan explains: “Our financial partners wish to secure debt on physical assets rather than future revenue streams for the business. We did a refinancing deal two years ago – this is to secure that in a different way.”

The 2018 deal saw banks extend €118 million in long-term finance to Devenish, including €40 million from the European Investment Bank. At the time, revenue as consolidated by its main holding company, Devenish (NI) Ltd, had been growing by an average of more than 20 per cent annually for the previous three years to hit £225 million in 2018. Operating profit, too, was on an upward trend, topping £3 million for the first time – though rising interest payments had begun to eat into the bottom line, highlighting the need to refinance.

In March, the group released accounts to the end of May 2019 showing that growth had stalled. Turnover grew only marginally, by £4 million. Operating profit stagnated and pre-tax profit halved from nearly £1.7 million to just under £757,000. Bank borrowings rose from £31 million to nearly £42 million, including €15 million drawn down from the EIB facility at that stage.

Aside from the research centre I’m visiting, the funding fuelled continued investment in North America, where Brennan says the number of manufacturing plants has grown from two to four and a new one in Mexico will open late this year or early next year. Some 25 hectares of additional land in Meath is being allocated to arable farming research. 

Commenting in the filing, Devenish directors acknowledged that performance was “disappointing in the short term,” but saw “great potential for the future”.

“Two to three years ago, being headquartered in Belfast was seen as the best of both worlds.”

Owen Brennan

“It’s fair to say that the strong growth trajectory that we had over previous years has paused a little bit last year and this year,” says Finnegan. “There’s a Brexit component in that,” he adds, with associated uncertainty and poor market sentiment cited multiple times in company filings. “We see being an Irish company north and south as a strength rather than a challenge, though in recent times it has been more of a challenge.”

“Two to three years ago, being headquartered in Belfast was seen as the best of both worlds,” echoes Brennan, with negotiations offering the promise of keeping Northern Ireland at the intersection of reasonable future trade arrangements between the EU and the UK. Since then, Brexit has required “more effort than expected”, Brennan says. “It has been so prolonged and so hard to manage.” 

Discussions with the EIB, which started before the UK referendum, have led Devenish to anchor more of its corporate structure in the Republic. While Devenish (NI) remains the group’s main consolidating company in Belfast, it now owns all trading subsidiaries through Devenish Dowth RoI Ltd, the Irish-based intermediary holding to which the EIB has been disbursing loan tranches.

While it faces the immediate twin challenges of Brexit and Covid-19 market disruption, Devenish needs to negotiate a deeper shift in its core business. Until now, the company has built its success on chemical and biological innovations and their commercialisation through feed sales and other solutions such as additives to treat slurry. Markets wise, Finnegan explains that Devenish was historically reliant on the UK and Ireland as well as Minnesota and Iowa in the US. “In recent years, the UK and Ireland have become very competitive. Ireland is at saturation,” he says.

The company has responded with geographical diversification elsewhere in North America, with Canada now due to follow Mexico. It has also entered multiple emerging markets, making acquisition or joint-venture deals in the Middle East, Africa, southern Europe and Australia.

Devenish’s innovation focus, too, has shifted. This is illustrated in new corporates slogans, “Beyond nutrition” and “One health from soil to society” – what Brennan terms a “whole-system approach” helping its customers produce food intensively while taking measurable care of their soils, crops, livestock, environment and final consumers. In the future, the company’s revenue will come less from products sold in bags and more from the type of contract it has signed with Bandon dairy-co-op in Co Cork. There, it provides farmers with a suite of advisory services and slurry additives to manage their soils and the way they spread the farm effluent on their land.

The Holy Grail: carbon-neutral livestock

Achieving carbon-neutral livestock production, as Devenish targets to do in Dowth by 2025, would represent the 21st century agricultural equivalent of the Holy Grail. The potential market for advisory services, farm inputs and data collection and management systems to help others replicate and substantiate this claim is enormous. “It’s all very well for Sainsbury’s to say they will be carbon neutral by 2040,” says Brennan. The stores and logistics operated by the British retailer cover only part of the supply chain. “You need to go beyond that,” he adds, highlighting that 40 per cent of greenhouse gas emissions from food production occur on farms. 

Beyond the €40 million raised from the EIB, Brennan is convinced that EU policy will require more and more of these services. He points to the European Green Deal and the Farm to Fork strategy pushed by the European Commission since last year’s European election. This includes estimates by Brussels officials that the EU will need to invest 2 per cent of its GDP into the transition to a low-carbon economy until 2050 while increasing agricultural production – not only to feed an expanding global population, but also to produce feedstocks for the materials that will replace those based on fossil fuels.

“We’re hoping to increase our collaboration with the EIB in the future,” says Finnegan.

This broader geographical and innovation approach comes at a hefty cost. Devenish invested nearly £10 million in tangible assets last year – mostly buildings and equipment – compared with £ 2.2 million in 2018. Current spending on development costs jumped from £4.8 million to £6.4 million. The group also doubled its investments in joint ventures and partner companies to £3 million after the acquisition of a 42 per cent stake in progressive Kenyan farm inputs and advisory firm Sidai for $2.25 million.

The change of scale and the increasing weight of research and development in the business also means different corporate structures. The Netterville Institute is now the home of Devenish Research Development and Innovation, a new Irish subsidiary controlling this activity for the entire group.

“All our innovation outgoings and incomings now track back to this centre,” says Brennan. “A system that was effective but informal now has had formalisation added to it.” This includes functions such as product registration and licensing. Intellectual property is becoming increasingly important to Devenish as it patents new technologies. Brennan says this is now located in the Republic as part of the agreement with the EIB.

Resulting commercial arrangements, too, are now managed out of Co Meath. Brennan cites the example of Carribean Broilers, a Jamaican-based poultry producer with a new ten-year contract to implement Devenish technologies. Poultry has been a major area for the company to develop its soil-to-society approach. It has partnered with academics to demonstrate that feed enriched with ingredients such as seaweed led to a decrease in omega 3 deficiencies among people consuming the resulting chicken or eggs. Medical research associates adequate omega 3 intake with healthier hearts and possibly brains, especially when the fatty acids are consumed through food rather than supplements.

“The increased rigour from working with European partners has helped us.”

Gerard Finnegan

New, more efficient company structures intend to shorten the market return from innovation – including through the parallel development of early-phase commercial applications while research continues in parallel. “Some of these projects, we hope to commercialise soon, but some projects planned for six months may take two years,” says Brennan. With a greater focus on their completion, “I expect growth of the business to be very significant again,” he adds.

The face of the company is changing as a result. Geographically, it is organised in three business units – north-western Europe, North America and an international division covering the rest of the world. Finnegan says they operate semi-autonomously, but all their innovation activities are now channelled through Ireland.

While it is clear from discussions with Devenish management that the trigger for the group’s restructure lay in demands from the EIB, they don’t appear to resent it.“Now is a good time for this reorganisation to happen,” says Brennan. “In the past five to ten years it would have been hard to justify. But to proceed any further without this platform would be difficult.” Finnegan adds: “The increased rigour from working with European partners has helped us.”

The company’s targets to hit £1 billion revenue around the same time as it produces zero-carbon meat and milk in 2025 now depend on its corporate machinery’s ability to seamlessly connect the two.