Genus (LSE:GNS), a leading global animal genetics company, today announces its interim results for the six months ended 31 December 2021. The full report has been made available on the investors section of the Genus plc website. The Company will discuss its corporate, operational and financial highlights in a pre-recorded webcast at 7:01 AM GMT, 2.01 EST.

Commenting on the interim results, Stephen Wilson, Chief Executive, said:

“As expected, the Group performed strongly other than in the porcine business in China and continued to make good strategic progress while investing for the future. Our strategic collaboration with Olymel announced today will further strengthen PIC’s North America business.

“Building on record volume growth in the first half of last year, ABS continued to grow volumes and expand margins, driven by the success of Sexcel, strong growth across all regions of our proprietary NuEra beef genetics and continued operating leverage.

“PIC’s adjusted operating profits (excluding PIC China) achieved strong growth, underpinned by market share gains in key customers in North America and Latin America. However, as previously announced in November 2021, the current porcine market in China has had an adverse impact on our trading in China during the first half of the 2022 fiscal year. Since November, the live pig price in China has remained below the cost of production and declined further to below 13RMB/kg since the beginning of January. The significant impact of PIC China’s trading has consequently decreased PIC’s and the Group’s adjusted operating profit.

“China live pig prices need to improve and be sustained for producer confidence to return and lead to improved demand for porcine genetics. Industry expectations are that prices will improve later in the year, however there is uncertainty on the timing and extent of a recovery. Consequently, we expect the China porcine market will continue to impact on the Group’s performance in the second half of the 2022 fiscal year. Importantly, following the investments in our porcine elite supply chain, Genus is well placed to support Chinese producers needs when market conditions improve, and we remain confident in the future growth prospects of PIC China.

“The Board remains confident in the Group's strategy, the many opportunities for Genus and medium-term growth expectations remain unchanged.”

Results presentation today

A pre-recorded analysts and bankers briefing to discuss the interim results for the six months ended 31 December 2021 will be held via a video webcast facility and will be accessible via the following link from 7:01am GMT today:

https://webcasting.buchanan.uk.com/broadcast/61f900ee12956e448c9972f7

An archived recording of the webcast will also be available on the Investors section of the Company’s website.

Corporate Highlights

 

Adjusted results[1]

 

Statutory results

 

Actual currency

 

Constant
currency
change2

 

Actual currency

Six months ended 31 December

2021

20203

Change

 

 

2021

20203

Change

 

£m

£m

%

 

%

 

£m

£m

%

Revenue

281.2

285.7

(2)

 

1

 

281.2

285.7

(2)

Operating profit exc JVs

35.0

43.8

(20)

 

(18)

 

23.9

34.2

(30)

Operating profit inc JVs exc gene editing

43.3

53.4

(19)

 

(17)

 

 

 

 

Profit before tax

37.0

47.1

(21)

 

(19)

 

24.4

37.4

(35)

Free cash flow

(16.1)

26.6

n/m4

 

n/m4

 

 

 

 

Basic earnings per share (pence)

42.4

55.3

(23)

 

(21)

 

30.4

46.4

(34)

Dividend per share (pence)

 

 

 

 

 

 

10.3

10.3

-

Group performance impacted by PIC China; strong progress in the rest of the business

  • Total Group revenue up 1% in constant currency (2% lower in actual currency), adjusted profit before tax (‘PBT’)1 down 19% in constant currency (21% in actual currency)
  • Excluding PIC China; Group adjusted PBT up 28% in constant currency (25% in actual currency), and revenue up 7% in constant currency (4% in actual currency)
  • R&D investment increased 10%2 as planned
  • Statutory PBT decreased by 35% to £24.4m, due to the lower adjusted profit and net IAS 41 biological asset valuation decrease

Challenging market conditions for PIC in China as expected, strong PIC performance elsewhere

  • China pig prices currently under 13RMB/kg, down from 35RMB/kg in December 2020
  • PIC volumes 2% lower, revenue 4%2 lower. Royalty revenue 1%2 lower excluding a customer refund in China5. Consequently, PIC’s Adjusted operating profit declined 15%2
  • Strong market share gains in North America and Latin America; PIC’s volumes up 7% excluding China
  • Excluding China, PIC’s revenue up 8%2, royalty revenue up 4%2, adjusted operating profit up 13%2

Good revenue growth of 4%2 and volume growth of 4% in ABS, building on a very strong prior year

  • Continued Sexcel® success with sexed volumes up 24% and NuEra® beef with volumes up 13%
  • Continued shift in ABS’s product mix with 24% of global volumes sexed genetics and 32% beef
  • Strong growth in Brazil, India and China
  • ABS’s adjusted operating profit up 21%2

Lower cash generation and earnings than prior year, dividends maintained

  • Free cash outflow1 of £16.1m, reflecting expected higher working capital outflows and planned capital investment
  • Net debt1 increased to £143.3m, net debt to EBITDA1 ratio of 1.4x, within 1.0x-2.0x targeted range
  • Adjusted earnings per share1 down 21%2
  • Recommended interim dividend maintained at 10.3p with 2.8x adjusted earnings cover6

Good strategic progress

  • With our leading porcine and bovine genetics, Genus continued to win customers globally
  • Accelerating genetic improvement and supply availability in our porcine elite farms. Investments include a new elite genetics farm, Ankang, in China and Atlas, in Canada, where the first animals have arrived
  • New third party IntelliGen technology customer wins, including a significant government tender win in India
  • Investments in our new industry leading bull facilities delivering strong efficiency gains
  • PRRSv resistant pigs programme is progressing to plan with hundreds of third generation gene-edited animals today
  • On 22 February 2022 PIC entered a strategic collaboration with Olymel, the largest porcine producer in Canada, to acquire their elite porcine genetics for CAD$25m (£14.5m), and for the long-term provision of products and services through their AlphaGene genetics programme

Outlook

As expected, the Group performed strongly other than in the porcine business in China and continues to make good strategic progress while investing for the future. The board is monitoring closely the potential risks to Genus and its employees of the geopolitical situation in Russia and the Ukraine. We are taking risk management actions where appropriate.

As referenced in the November 2021 AGM Trading Update, the current porcine market in China has had an adverse impact on our trading in China during the first half of the 2022 fiscal year. Since November, the live pig price in China has remained below the cost of production and declined further to below 13RMB/kg since the beginning of January. The impact of PIC China’s trading has consequently decreased PIC’s and the Group’s adjusted operating profit, despite robust performance from the rest of the Group.

China live pig prices need to improve and be sustained for producer confidence to return and lead to improved demand for porcine genetics. Industry expectations are that prices will improve later in the year, however there is uncertainty as to the timing and extent of recovery. Consequently, we expect the China porcine market will continue to impact on the Group’s performance in the second half of the 2022 fiscal year. Importantly, following the investments in our porcine elite supply chain, Genus is well placed to support Chinese producers needs when market conditions improve, and we are confident in the future growth prospects of PIC China.

The Board remains confident in the Group's strategy, the many opportunities for Genus and medium-term growth expectations remain unchanged.

About Genus

Genus advances animal breeding and genetic improvement by applying biotechnology and sells added value products for livestock farming and food producers. Its technology is applicable across livestock species and is currently commercialised by Genus in the dairy, beef and pork food production sectors.

Genus's worldwide sales are made in over 80 countries under the trademarks 'ABS' (dairy and beef cattle) and 'PIC' (pigs) and comprise semen, embryos and breeding animals with superior genetics to those animals currently in farms. Genus's customers' animals produce offspring with greater production efficiency and quality, and our customers use them to supply the global dairy and meat supply chains.

Genus’s competitive edge comes from the ownership and control of proprietary lines of breeding animals, the biotechnology used to improve them and its global supply chain, technical service and sales and distribution network.

Headquartered in Basingstoke, United Kingdom, Genus companies operate in over 24 countries on six continents, with research laboratories located in Madison, Wisconsin, USA.

Forward-looking Statements

This Announcement may contain, and the Company may make verbal statements containing “forward-looking statements” with respect to certain of the Company’s plans and its current goals and expectations relating to its future financial condition, performance, strategic initiatives, objectives and results. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Announcement. Forward-looking statements sometimes use words such as “aim”, “anticipate”, “target”, “expect”, “estimate”, “intend”, “plan”, “goal”, “believe”, “seek”, “may”, “could”, “outlook”, “will” or other words of similar meaning. By their nature, all forward-looking statements involve risk and uncertainty because they relate to future events and circumstances which are beyond the control of the Company, including amongst other things, diverse factors such as domestic and global economic business conditions, market-related risks such as fluctuations in commodity prices, interest rates and exchange rates, the policies and actions of governmental and regulatory authorities, the effect of competition, inflation, deflation, the timing effect and other uncertainties of future acquisitions or combinations within relevant industries, the rate of on-going porcine re-stocking in China after African Swine Fever, the continued development and improvement of our IntelliGen® technology, the development and registration of our innovative new products, such as our gene edited porcine reproductive and respiratory syndrome virus resistant pigs, the continued growth in emerging markets, the effect of tax and other legislation and other regulations in the jurisdictions in which the Company and its respective affiliates operate, the effect of volatility in the equity, capital and credit markets on the Company’s profitability and ability to access capital and credit, a decline in the Company’s credit ratings; the effect of operational risks; and the loss of key personnel. As a result, the actual future financial condition, performance and results of the Company may differ materially from the plans, goals and expectations set forth in any forward-looking statements. Except as required by applicable law or regulation, the Company expressly disclaims any obligation or undertaking to publish any updates or revisions to any forward-looking statements contained in this Announcement to reflect any changes in the Company’s expectations with regard thereto or any changes in events, conditions or circumstances on which any such statement is based.

No statement in this Announcement is intended to be a profit forecast, and no statement in this Announcement should be interpreted to mean that earnings per share of the Company for the current or future financial years would necessarily match or exceed the historical published earnings per share of the Company. Information contained in this Announcement should not be relied upon as a guide to the Company’s future performance.

This announcement is available on the Genus website www.genusplc.com.

1 Adjusted results are the Alternative Performance Measures (‘APMs’) used by the Board to monitor underlying performance at a Group and operating segment level, which are applied consistently throughout. These APMs should be considered in addition to, and not as a substitute for or as superior to statutory measures.
2 All growth/decline rates quoted are in constant currency unless otherwise stated. Constant currency percentage movements are calculated by restating the results for the six months ended 31 December 2021 at the average exchange rates applied to adjusted operating profit for the year ended 30 June 2021.
3 Results restated following an April 2021 IFRIC Interpretation Committee agenda decision that resulted in previously capitalised software assets being expensed lowering profit by £1.3m in FY21 H1.
4 n/m = not meaningful
5 Commercial terms with a customer changed in the period to align with long term interests resulting in a one-time £3.7m refund related to historic royalties.
6 Calculated on a rolling 12-month basis.