REG - Genus - INTERIM RESULTS <Origin Href="QuoteRef">GENS.L</Origin> - Part 3
23/02/2016 07:12
- Part 3: For the preceding part double click ID:nRSW7986Pb
to harvest (34.8) (16.7) (51.5)
Changes in fair value less estimated sale costs 34.5 78.7 113.2
Effect of movements in exchange rates 9.6 8.4 18.0
Balance at 30 June 2015 144.8 148.1 292.9
Non-current biological assets 144.8 97.9 242.7
Current biological assets - 50.2 50.2
Balance at 30 June 2015 144.8 148.1 292.9
Bovine biological assets include £7.0m (2014: £3.8m) representing the fair value of bulls owned by third parties but
managed by the Group, net of expected future payments to such third parties and are therefore treated as assets held under
finance leases. There are no movements in the carrying value of the bovine biological assets in respect of sales or other
changes during the period. The current market determined post-tax rate used to discount expected future net cash flows from
the sale of bull semen is the Group's weighted average cost of capital. This has been assessed as 8.0% (2014: 8.0%).
Decreases due to harvest represent the semen extracted from the biological assets. Inventories of such semen are shown as
biological asset harvest.
Porcine biological assets include £32.6m (2014: £24.7m) relating to the fair value of the retained interest in the genetics
in respect of animals, other than parent gilts, transferred to customers under royalty contracts. Decreases attributable to
sales during the period of £79.1m (2014: £79.5m) include £21.0m (2014: £17.7m) in respect of the reduction in fair value of
the retained interest in the genetics of animals, other than parent gilts, transferred under royalty contracts. Total
revenue in the period includes £50.1m (2014: £43.9m) in respect of these contracts comprising £8.6m (2014: £7.6m) on
initial transfer of animals to customers and £41.5m (2014: £36.2m) in respect of royalties received.
For pure line porcine herds, the net cash flows from the expected output of the herds are discounted at the Group's
required rate of return adjusted for the greater risk implicit in including output from future generations. This adjusted
rate has been assessed as 11.0% (2014: 11.0%). The number of future generations which have been taken into account is seven
(2014: seven) and their estimated useful lifespan is 1.3 years (2014: 1.4 years).
Included in increases due to purchases is the aggregate gain arising during the period on initial recognition of biological
assets in respect of multiplier purchases £23.1m (2014: £13.2m).
Six months ended 31 December 2015 Bovine Porcine Total
£m £m £m
Net valuation movement on biological assets*
Changes in fair value of biological assets 1.1 30.2 31.3
Fair value movements in related financial derivative - (0.8) (0.8)
Inventory transferred to cost of sales at fair value (13.8) (8.9) (22.7)
Biological assets transferred to cost of sales at fair value - (15.4) (15.4)
(12.7) 5.1 (7.6)
Six months ended 31 December 2014 Bovine Porcine Total
£m £m £m
Net valuation movement on biological assets *
Changes in fair value of biological assets 16.9 30.7 47.6
Inventory transferred to cost of sales at fair value (14.8) (6.1) (20.9)
Biological assets transferred to cost of sales at fair value - (17.7) (17.7)
2.1 6.9 9.0
Year ended 30 June 2015 Bovine Porcine Total
£m £m £m
Net valuation movement on biological assets *
Changes in fair value of biological assets 34.5 78.7 113.2
Fair value movements in related financial derivative - 0.6 0.6
Inventory transferred to cost of sales at fair value (30.0) (16.7) (46.7)
Biological assets transferred to cost of sales at fair value - (42.2) (42.2)
4.5 20.4 24.9
* This represents the difference between operating profit including fair value movement on biological assets under IAS 41
and related financial derivative and operating profit prepared under historical cost accounting, which forms part of the
reconciliation to adjusted operating profit.
11. Equity accounted investees
The Group's share of profit after tax in its equity accounted investees for the six months ended 31 December 2015 was £5.4m
(2014: £2.4m).
2015£m 2014£m
Balance at 1 July 19.6 21.7
Share of post-tax retained profits of joint ventures and associates 5.4 2.4
Addition 0.2 0.2
Effect of other movements including exchange rates (2.0) (1.0)
Balance at 31 December 23.2 23.3
Summary financial information for equity accounted investees, adjusted for the percentage ownership held by the Group:
Revenue Net IAS 41 valuation movement on biological assets Expenses Taxation Profit after tax
Income statement £m £m £m £m £m
Six months ended 31 December 2015 11.0 2.8 (8.1) (0.3) 5.4
Six months ended 31 December 2014 12.7 0.3 (10.0) (0.6) 2.4
Year ended 30 June 2015 25.8 (1.0) (21.2) (0.7) 2.9
12. Related parties
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and
are not disclosed in this note. Transactions between the Group and its joint ventures and associates are described below:
Other related party transactions
Transaction value Balance outstanding
Six months ended 31 December 2015 Six months ended 31 December2014 Yearended30 June2015 31 December 2015 31 December2014 30 June2015
£m £m £m £m £m £m
Sale of goods and services to joint ventures and associates 0.6 1.6 3.6 - 0.2 0.1
All outstanding balances with joint ventures and associates are priced on an arm's length basis and are to be settled in
cash within six months of the reporting date. None of the balances are secured.
13. Earnings per share
Six monthsended31 December2015 Six months ended31 December2014 Yearended30 June2015
m m m
Weighted average number of ordinary shares (basic) 60.8 60.7 60.7
Dilutive effect of share options 0.7 0.5 0.8
Weighted average number of ordinary shares for the purpose of diluted earnings per share 61.5 61.2 61.5
Six monthsended31 December2015 Six months ended31 December2014 Yearended30 June2015
Earnings per share from continuing operations
Basic earnings per share 18.1p 33.0p 66.7p
Diluted earnings per share 17.9p 32.7p 65.9p
Adjusted earnings per share from continuing operations
Adjusted earnings per share 28.8p 29.7p 56.8p
Diluted adjusted earnings per share 28.5p 29.4p 56.1p
Earnings per share measures are calculated on the weighted average number of ordinary shares in issue during the period. As
in previous years, adjusted earnings per share have been shown, since the Directors consider that this alternative measure
gives a more comparable indication of the Group's underlying trading performance.
Continuing operations
Basic earnings per share from continuing operations is calculated on the profit for the period of £11.0m (six months ended
31 December 2014: £20.0m; year ended 30 June 2015: £40.5m) divided by weighted average number of ordinary shares (basic and
diluted) as calculated above.
Adjusted earnings per share is calculated on profit for the period before net valuation movement on biological assets,
amortisation of acquired intangible assets, share-based payment expense and exceptional items after charging taxation
associated with those profits, of £17.5m (six months ended 31 December 2014: £18.0m; year ended 30 June 2015: £34.5m), as
follows:
Adjusted earnings from continuing operations Six monthsended31 December2015 Six monthsended31 December2014 Yearended30 June2015
£m £m £m
Profit before tax from continuing operations 12.9 28.6 57.8
Add/(deduct):
Net valuation movement on biological assets and commodity futures 7.6 (9.0) (24.9)
Amortisation of acquired intangible assets 3.0 2.9 6.1
Share-based payment expense 0.8 0.7 1.4
Exceptional items 2.5 1.2 5.1
Net IAS 41 valuation movement on biological assets in joint ventures and associates (2.8) (0.3) 1.0
Tax on joint ventures and associates 0.3 0.6 0.7
Attributable to non-controlling interest (0.5) - (0.6)
Adjusted profit before tax 23.8 24.7 46.6
Adjusted tax charge (6.3) (6.7) (12.1)
Adjusted profit after taxation 17.5 18.0 34.5
Effective tax rate on adjusted profit 26.5% 27.1% 26.0%
14. Cash flow from operating activities
Six monthsended31 December2015 Six monthsended31 December2014 Yearended30 June2015
£m £m £m
Profit for the period 11.0 20.0 40.5
Adjustment for:
Net valuation movement on biological assets 7.6 (9.0) (24.9)
Amortisation of acquired intangible assets 3.0 2.9 6.1
Share-based payment expense 0.8 0.7 1.4
Share of profit of joint ventures and associates (5.4) (2.4) (2.9)
Finance costs (net) 2.5 2.3 4.6
Income tax expense 1.9 8.6 17.3
Exceptional items 2.5 1.2 5.1
Adjusted operating profit from continuing operations 23.9 24.3 47.2
Depreciation of property, plant and equipment 4.1 3.0 6.3
Loss/(gain) on disposal of plant and equipment 0.2 (0.1) 0.4
(Profit)/impairment on asset held for sale (0.2) - 0.3
Amortisation of intangible assets 0.3 0.3 0.6
Adjusted earnings before interest, tax, depreciation and amortisation 28.3 27.5 54.8
Exceptional item cash (2.8) (1.6) (4.7)
Other movements in biological assets and harvested produce (1.4) 1.9 1.9
Increase/(decrease) in provisions 0.5 (0.4) 1.0
Additional pension contribution in excess of pension charge (3.2) (3.1) (6.1)
Other - (0.3) (0.4)
Operating cash flows before movement in working capital 21.4 24.0 46.5
Increase in inventories (1.1) (1.2) (0.6)
Decrease/(increase) in receivables 1.5 (0.8) 0.6
(Decrease)/increase in payables (7.9) 5.2 4.2
Cash generated by operations 13.9 27.2 50.7
Interest received 0.1 0.1 0.2
Interest and other finance costs paid (0.9) (1.0) (2.2)
Cash flow from derivative financial instruments - (0.1) (1.2)
Income taxes paid (7.5) (6.6) (12.7)
Net cash from operating activities 5.6 19.6 34.8
15. Retirement benefit obligations
The Group has a number of defined contribution and defined benefit pension schemes covering many of its employees, further
details can be found in the Genus Annual Report 2015. The aggregated position of defined benefit schemes are provided
below:
31 December2015 31 December2014 30 June
2015
£m £m £m
Present value of funded obligations 366.8 389.5 378.3
Present value of unfunded obligations 8.0 7.8 7.8
Total present value of obligations 374.8 397.3 386.1
Fair value of plan assets (313.3) (326.1) (329.2)
Restricted recognition of asset 6.2 6.4 6.2
Recognised liability for defined benefit obligations 67.7 77.6 63.1
The Milk Pension Fund ('MPF')
The MPF was previously operated by the Milk Marketing Board, and was also open to staff working for Milk Marque Ltd (the
principal employer now known as Community Foods Group Limited), National Milk Records plc, First Milk Ltd, hauliers
associated to First Milk Ltd, Dairy Farmers of Britain Ltd (which went into receivership in June 2009) and Milk Link Ltd.
We have accounted for our section of the scheme and our share of any orphan assets and liabilities, which together
represent approximately 75% of the MPF. Although the MPF is managed on a sectionalised basis, it is a "last man standing
scheme", which means that all participating employers are joint and severally liable for all of the fund's liabilities.
Further details of the Milk Pension Fund can be found in the Genus Annual Report 2015.
The principal actuarial assumptions (expressed as weighted averages) are:
31 December2015 31 December2014 30 June
2015
% % %
Discount rate 3.8 3.6 3.8
Expected return on plan assets 6.3 6.6 6.3
Medical cost trend rate 7.1 7.2 7.1
Retail Price Index (RPI) 3.0 3.0 3.1
Consumer Price Index (CPI) 1.9 1.9 2.0
16. Contingencies
Other than the impact expected from a change of indexused for pension and deferred pension increases from RPI to CPI, see
note 18, there have been no material changes to the Group's contingent liabilities relating to the Group's ongoing joint
and several liability for the Milk Pension Fund, more fully described in the Annual Report 2015.
There have been no changes to any other contingent liabilities involving the Group in the six months ended 31 December 2015
which are expected to have, or have had, a material effect on the financial position or profitability of the Group.
17. Financial instruments fair value disclosures
The table below sets out the categorisation of the financial instruments held by the Group at 31 December 2015.
We have categorised financial instruments held at valuation into a three-level fair value hierarchy, based on the priority
of the inputs to the valuation technique in accordance with IFRS 7. The hierarchy gives the highest priority to quoted
prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs
(Level 3). Valuations categorised as Level 2 are obtained from third parties. If the inputs used to measure fair value fall
within different levels of the hierarchy, we base the category level on the lowest priority level input that is significant
to the fair value measurement of the instrument in its entirety.
Valuation level 31 December2015 31December 2014 30June2015
£m £m £m
Financial assets
Derivative instruments in non-designated hedge accounting relationships 2 0.1 - 0.7
Financial liabilities
Derivative instruments in designated hedge accounting relationships 2 - - (0.1)
Derivative instruments in non-designated hedge accounting relationships 2 (0.3) (0.3) (0.1)
Put option over non-controlling interest 2 (8.3) - (10.0)
The Directors consider that the carrying value amounts of financial assets and financial liabilities recorded at amortised
cost in the financial statements are approximately equal to their fair values.
18. Post balance sheet events
On 11 January 2016, the Trustee of the Milk Pension Fund ('MPF') agreed with a request from the employers to change the
index used for pension and deferred pension increases from RPI to CPI. The members of the scheme were informed of this
change on 17 February which is effective for increases starting in 2016. The decision to change index is expected to
materially reduce the MPF deficit which is in the process of being agreed as part of the triennial valuation process for
the scheme effective as of March 2015, and which will be reflected in the Group's results for the year to 30 June 2016. The
employers have agreed to maintain the current level of cash contributions to the fund until the remaining deficit is
cleared as part of the agreement with the Trustees to change the index to CPI. The change to CPI is expected to result in a
material exceptional credit to the full year results.
On 22 February 2016, Genus signed a new five year financing facility with five banks comprising a multi-currency £160m
revolving credit facility with an accordion option of £50m. The terms of the new facility are improved compared with the
previous facility.
GENUS PLC
RESPONSIBILITY STATEMENT
For the six months ended 31 December 2015
We confirm that to the best of our knowledge:
a) the Condensed Set of Financial Statements has been prepared in accordance with IAS 34;
b) the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of
important events during the first six months and description of the principal risks and uncertainties for the remaining six
months of the year); and
c) the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of
related party transactions and charges therein).
Neither the Company nor the Directors accept any liability to any person in relation to the half-yearly financial report
except to the extent that such liability could arise under English Law. Accordingly, any liability to a person who has
demonstrated reliance on any untrue or misleading statement or omission shall be determined in accordance with section 90A
of the Financial Services and Markets Act 2000.
By order of the Board
Chief Executive Group Finance Director
Karim Bitar Stephen Wilson
22 February 2016
This information is provided by RNS
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