Wednesday, April 24, 2024

Oritain asked to disclose earnings

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Successful funding round raises anomaly: earnings of Dunedin firm that is all about traceability remain opaque.
Grant Cochrane says the new funding will be used to strengthen Oritain’s technology offering and expand into new markets and industries.
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Dunedin company Oritain, which specialises in origin tracing and is valued at $558 million, may have to disclose its earnings.

Last week, the biotech firm completed a US$57 million ($90m) raise, in a series C round led by London venture capital firm Highland Europe, which valued it at just over half a billion dollars.

But while its foundation is about traceability, the firm’s earnings remain opaque. It doesn’t report its financials in New Zealand, despite “officially” being overseas owned from December 2021. 

Under the Companies Act 1993, large overseas-owned companies are required to register financial statements with the registrar. 

National manager business registries Bolen Ng said that’s defined as having total assets exceeding $66m or total revenue of more than $33m in a financial year. 

Ng said the registrar has now asked Oritain to provide that information, for prospective disclosure of its March 2023 financial statements.

But the company’s recent valuation is a significant jump from its $45m book value in January 2020, when London stock exchange-listed investment company Agronomics picked up a 1.1% equity stake for $500,000.

Last week’s raise saw Highland acquire just over 1 million shares, representing a 16.13% stake in a business focused on the fast-expanding global “proof of origin” market.  

Highland Europe principal Jacob Bernstein has joined Oritain’s board, which includes its chief executive Grant Cochrane, former Spotify revenue officer Jeff Levick and former New Zealand prime minister John Key, who joined the board in December.

The latest capital injection follows a $58m series B round in September 2021, in which New York-based Long Ridge Equity Partners took an initial 14.1% stake in the business.

Long Ridge upped its ante in the latest raise and now holds 19.52% in Oritain across two funds, while Madrid-based Asua Inversiones has a 6.2% stake, according to the Companies Register.

Cochrane, a former currency derivative trader who has been involved with the firm since 2011, said the funding will be used to strengthen Oritain’s technology offering and expand into new markets and industries.

He indicated compound annual growth of about 90% over the past six years and a client retention rate at the same percentage. 

The company was founded in late 2007 as an offshoot from the University of Otago’s isotrace research unit headed by Helen Darling and Professor Russell Frew. 

Frew, who was appointed Oritain’s chief scientist in January 2020, provided key forensic evidence to the police in 2016 proving the source of 1080 pesticide in milk powder in letters sent to Fonterra and Federated Farmers.

The company now counts about 100 customers, Cochrane said, which makes it the global leader in the space, with global customers Lacoste, Patagonia, Ralph Lauren and Nescafe. 

Locally, it’s worked with a2 Milk, fishing company Sanford and Silver Fern Farms. Its trademark has appeared on Pams’ free range-eggs and the produce of Ireland’s biggest egg producer, Margaret Eggs, as an assurance of origin. 

The firm’s 170-plus staff roster is spread between Dunedin, London, Sydney, Washington, DC and Cochrane’s home of Zug, Switzerland. 

Its chief marketing officer is Lewis Road Creamery founder Peter Cullinane, who’s based in Auckland. About half the team is in Dunedin. It manages the company’s massive database and sample library, described as its “biggest intellectual asset”.

Board member Key said it was an attractive offering in addressing a counterfeiting industry that is said to cost the global economy more than $500 billion every year and on the strength of shifting consumer demand and the investment market’s focus on good environmental, social and governance credentials.

In that context, being able to back up your claims for both customers and investors is massively important, he said.

Oritain has, for example, confirmed eligibility for “Product of USA” labelling for meat derived from animals born, raised, slaughtered and processed in the United States. 

Another emerging issue has been counterfeit cotton and labour issues particularly out of China’s Xinjiang region, responsible for almost a fifth of the world’s cotton, which has elicited consumer concerns that the raw material is ethically sourced prior to purchase.

The US’s Uyghur Forced Labor Prevention Act (UFLPA), in place for just over a year, designates cotton as a “high priority” for US enforcement. That has implications for the fashion industry – notoriously cagey about its supply chains – as inadequate certification as to origin for importers into the country can result in substantial fines.

More recently, Oritain has been linked with reforms to the NZ medicinal cannabis industry, proposed as the manager and overseer of an industry-regulated national cannabis registry.

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