REG - Genus - Interim Results <Origin Href="QuoteRef">GNS.L</Origin> - Part 3
23/02/2017 07:07
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60.5 1.9 21.0 3.6 87.0 96.7
At 30 June 2016 24.5 31.8 56.3 1.5 17.8 2.4 78.0 86.0
At 30 June 2015 26.3 30.0 56.3 2.1 11.1 0.3 69.8 73.9
In addition to the capitalised development expenses in respect of GSS, there is also £9.8m included within fixed assets
relating to GSS.
During the period, we completed the final payment to acquire a world-wide licence to use Caribou Biosciences, Inc.'s
leading CRISPR-Cas9 gene editing technology platform.
10. Biological assets
Fair value of biological assets Bovine Porcine Total
£m £m £m
Balance at 1 July 2016 146.3 184.7 331.0
Increases due to purchases 6.7 80.2 86.9
Acquisition (see note 18) 5.4 - 5.4
Decreases attributable to sales - (95.2) (95.2)
Decrease due to harvest (17.6) (9.9) (27.5)
Changes in fair value less estimated sale costs 1.4 32.8 34.2
Effect of movements in exchange rates 11.0 14.5 25.5
Balance at 31 December 2016 153.2 207.1 360.3
Non-current biological assets 153.2 136.5 289.7
Current biological assets - 70.6 70.6
Balance at 31 December 2016 153.2 207.1 360.3
Balance at 1 July 2015 144.8 148.1 292.9
Increases due to purchases 3.4 64.4 67.8
Decreases attributable to sales - (79.1) (79.1)
Decrease due to harvest (16.2) (8.9) (25.1)
Changes in fair value less estimated sale costs 1.1 30.2 31.3
Effect of movements in exchange rates 8.4 8.1 16.5
Balance at 31 December 2015 141.5 162.8 304.3
Non-current biological assets 141.5 111.4 252.9
Current biological assets - 51.4 51.4
Balance at 31 December 2015 141.5 162.8 304.3
Balance at 1 July 2015 144.8 148.1 292.9
Increases due to purchases 7.7 112.9 120.6
Acquisition 1.9 - 1.9
Decreases attributable to sales - (152.0) (152.0)
Decrease due to harvest (31.6) (18.0) (49.6)
Changes in fair value less estimated sale costs 2.1 67.7 69.8
Effect of movements in exchange rates 21.4 26.0 47.4
Balance at 30 June 2016 146.3 184.7 331.0
Non-current biological assets 146.3 118.3 264.6
Current biological assets - 66.4 66.4
Balance at 30 June 2016 146.3 184.7 331.0
Bovine biological assets include £7.7m (2015: £7.0m) 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% (2015: 8.0%).
Decreases due to harvest represent the semen extracted from the biological assets. Inventories of such semen are shown as
biological asset harvest.
Included in increases due to purchases is the aggregate increase arising during the period on initial recognition of
biological assets in respect of multiplier purchases, other than parent gilts, of £46.9m (2015: £23.1m).
Decreases attributable to sales during the period of £95.2m (2015: £79.1m) include £31.5m (2015: £21.0m) 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.
Porcine biological assets include £54.3m (2015: £32.6m) relating to the fair value of the retained interest in the genetics
in respect of animals, other than parent gilts, to customers under royalty contracts.
Total revenue in the period, including parent gilts, includes £77.8m (2015: £60.2m) in respect of these contracts,
comprising £26.0m (2015: £18.7m) on initial transfer of animals to customers and £51.8m (2015: £41.5m) 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% (2015: 11.0%). The number of future generations which have been taken into account is seven
(2015: seven) and their estimated useful lifespan is 1.4 years (2015: 1.3 years).
Six months ended 31 December 2016 Bovine Porcine Total
£m £m £m
Net valuation movement on biological assets*
Changes in fair value of biological assets 1.4 32.8 34.2
Inventory transferred to cost of sales at fair value (15.8) (9.9) (25.7)
Biological assets transferred to cost of sales at fair value - (13.1) (13.1)
(14.4) 9.8 (4.6)
Fair value movements in related financial derivative - (0.4) (0.4)
(14.4) 9.4 (5.0)
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
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) 5.9 (6.8)
Fair value movements in related financial derivative - (0.8) (0.8)
(12.7) 5.1 (7.6)
Year ended 30 June 2016 Bovine Porcine Total
£m £m £m
Net valuation movement on biological assets*
Changes in fair value of biological assets (2.9) 67.7 64.8
Inventory transferred to cost of sales at fair value (23.6) (18.0) (41.6)
Biological assets transferred to cost of sales at fair value - (39.7) (39.7)
(26.5) 10.0 (16.5)
Fair value movements in related financial derivative - (0.6) (0.6)
(26.5) 9.4 (17.1)
* 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 2016 was £3.1m
(2015: £5.4m).
31 December 2016£m 31 December 2015£m
Balance at 1 July 24.3 19.6
Share of post-tax retained profits of joint ventures and associates 3.1 5.4
Shareholder loan repayment (1.7) -
Addition - 0.2
Effect of other movements including exchange rates 1.1 (2.0)
Balance at 31 December 26.8 23.2
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 2016 14.9 0.5 (11.6) (0.7) 3.1
Six months ended 31 December 2015 11.0 2.8 (8.1) (0.3) 5.4
Year ended 30 June 2016 23.7 1.9 (17.3) (1.4) 6.9
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 2016 Six months ended 31 December2015 Yearended30 June2016 31 December 2016 31 December2015 30 June2016
£m £m £m £m £m £m
Purchase of goods and services to joint ventures and associates 2.3 0.6 2.0 (0.1) - (0.7)
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 December2016 Six months ended31 December2015 Yearended30 June2016
m m m
Weighted average number of ordinary shares (basic) 60.9 60.8 60.8
Dilutive effect of share options 0.7 0.7 0.6
Weighted average number of ordinary shares for the purpose of diluted earnings per share 61.6 61.5 61.4
Six monthsended31 December2016 Six months ended31 December2015 Yearended30 June2016
Earnings per share from continuing operations
Basic earnings per share 13.3p 17.4p 81.1p
Diluted earnings per share 13.1p 17.2p 80.3p
Adjusted earnings per share from continuing operations
Adjusted earnings per share 30.5p 28.8p 60.7p
Diluted adjusted earnings per share 30.2p 28.5p 60.1p
Earnings per share measures are calculated on the weighted average number of ordinary shares in issue during the period. As
in previous periods, 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 based on the net profit attributable to owners of the Company for
the period of £8.1m (six months ended 31 December 2015: £10.6m; year ended 30 June 2016: £49.3m) 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 IAS 41 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 £18.6m (six months ended 31 December 2015: £17.5m; year ended 30 June 2016:
£36.9m), which is calculated as follows:
Adjusted earnings from continuing operations Six monthsended31 December2016 Six monthsended31 December2015 Yearended30 June2016
£m £m £m
Profit before tax from continuing operations 11.4 12.9 60.9
Add/(deduct):
Net IAS 41 valuation movement on biological assets and commodity futures 5.0 7.6 17.1
Amortisation of acquired intangible assets 3.6 3.0 6.1
Share-based payment expense 1.7 0.8 3.8
Exceptional items 4.2 2.5 (36.3)
Net IAS 41 valuation movement on biological assets in joint ventures and associates (0.5) (2.8) (1.9)
Tax on joint ventures and associates 0.7 0.3 1.4
Attributable to non-controlling interest (1.0) (0.5) (1.4)
Adjusted profit before tax 25.1 23.8 49.7
Adjusted tax charge (6.5) (6.3) (12.8)
Adjusted profit after tax 18.6 17.5 36.9
Effective tax rate on adjusted profit 25.9% 26.5% 25.8%
14. Cash flow from operating activities
Six monthsended31 December2016 Six monthsended31 December2015 Yearended30 June2016
£m £m £m
Profit for the period 8.8 11.0 50.3
Adjustment for:
Net IAS 41 valuation movement on biological assets 5.0 7.6 17.1
Amortisation of acquired intangible assets 3.6 3.0 6.1
Share-based payment expense 1.7 0.8 3.8
Share of profit of joint ventures and associates (3.1) (5.4) (6.9)
Finance costs (net) 1.7 2.5 4.6
Income tax expense 2.6 1.9 10.6
Exceptional items 4.2 2.5 (36.3)
Adjusted operating profit from continuing operations 24.5 23.9 49.3
Depreciation of property, plant and equipment 4.3 4.1 7.9
Loss/(profit) on disposal of plant and equipment 0.2 0.2 (0.2)
Profit on sale of asset held for sale - (0.2) (0.2)
Amortisation of intangible assets 0.8 0.3 0.9
Adjusted earnings before interest, tax, depreciation and amortisation 29.8 28.3 57.7
Exceptional item cash (4.2) (2.8) (4.7)
Other movements in biological assets and harvested produce (3.0) (1.4) (3.8)
(Decrease)/increase in provisions (0.3) 0.5 (1.2)
Additional pension contribution in excess of pension charge (3.1) (3.2) (6.1)
Other 0.4 - 0.3
Operating cash flows before movement in working capital 19.6 21.4 42.2
Increase in inventories (3.7) (1.1) (0.7)
(Increase)/decrease in receivables (1.4) 1.5 2.6
Decrease in payables (1.0) (7.9) (0.8)
Cash generated by operations 13.5 13.9 43.3
Interest received 0.5 0.1 0.1
Interest and other finance costs paid (1.2) (0.9) (1.6)
Cash flow from derivative financial instruments 0.3 - 0.1
Income taxes paid (4.8) (7.5) (11.9)
Net cash from operating activities 8.3 5.6 30.0
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 2016. The aggregated position of defined benefit schemes are provided
below:
31 December2016 31 December2015 30 June
2016
£m £m £m
Present value of funded obligations 372.6 366.8 347.9
Present value of unfunded obligations 9.4 8.0 8.9
Total present value of obligations 382.0 374.8 356.8
Fair value of plan assets (361.8) (313.3) (334.0)
Restricted recognition of asset 9.5 6.2 6.8
Recognition of additional liability (MPF) 13.6 - 14.9
Recognised liability for defined benefit obligations 43.3 67.7 44.5
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 2016.
The principal actuarial assumptions (expressed as weighted averages) are:
31 December2016 31 December2015 30 June
2016
% % %
Discount rate 2.7 3.8 2.8
Retail Price Index (RPI) 3.2 3.0 2.7
Consumer Price Index (CPI) 2.1 1.9 1.6
16. Contingencies
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 Genus Annual Report 2016.
There have been no changes to any other contingent liabilities involving the Group in the six months ended 31 December 2016
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 2016.
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 13. 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 December2016 31December 2015 30June2016
£m £m £m
Financial assets
Derivative instruments in non-designated hedge accounting relationships 2 0.4 0.1 0.6
Derivative instruments in designated hedge accounting relationships 2 1.5 - -
Financial liabilities
Derivative instruments in designated hedge accounting relationships 2 - - (0.7)
Derivative instruments in non-designated hedge accounting relationships 2 (0.4) (0.3) (1.0)
Put option over non-controlling interest 2 (15.2) (8.3) (11.4)
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. Acquisition of subsidiary and related assets
On 1 September 2016, we formed De Novo Genetics, a 51% majority-owned Holstein breeding strategic partnership, with De-Su,
the world's leading independent Holstein breeder. De Novo will further accelerate the proportion of bulls Genus produces
internally by combining ABS's and De-Su's elite Holstein breeding programmes. This will gives us greater control of the
genetics we need in order to create differentiated solutions that help commercial dairy farmers increase profitability
through improved herd productivity, health and efficiency.
The preliminary amounts recognised in respect of the identifiable assets acquired/transferred and liabilities assumed are
as set out in the table below.
£m
Intangible assets identified 5.0
Biological assets (including asset transferred) 11.5
Financial assets 0.5
Financial liabilities (6.3)
Total identifiable assets 10.7
Assets attributable to non-controlling interest (5.3)
5.4
Goodwill 4.8
Total consideration 10.2
Satisfied by:
Net cash outflow arising on acquisition of subsidiary 2.3
Deferred cash consideration 3.5
Deferred contingent cash consideration 0.7
Biological assets transferred 3.7
10.2
The goodwill of £4.8m arising from the acquisition consists largely of future synergies expected from combining the
acquired operations with existing Genus operations. None of the goodwill recognised is expected to be deductible for income
tax purposes.
The fair value of the financial assets includes trade receivables with a fair value of £0.5m and a gross contractual value
of £0.5m.
Acquisition and integration related costs included within exceptional items amount to £0.2m.
On 29 September 2016, we increased our shareholding in PIC Italia S.r.l from 50% to 85%, for a cash consideration of
£0.6m.
19. Post balance sheet events
On 22 February 2017, we signed an agreement to enter into a strategic partnership, with Hermitage. PIC, Genus's porcine
division, will acquire the genetic rights and intellectual property of Hermitage and combine them within its own breeding
programme. Hermitage will become a strategic supply chain and distribution partner in Russia and certain European markets.
In addition, PIC will acquire select Hermitage customers in Russia and certain European markets. The partnership combines
PIC's leadership in genetics and Hermitage's supply chain network and operational excellence, benefiting both PIC and
Hermitage customers. The completion of the transaction is subject to a number of closing conditions, which are expected to
be fulfilled by the end of March 2017.
On 22 February 2017 the Group extended the majority of its banking facilities by an additional year to 22 February 2022.
GENUS PLC
RESPONSIBILITY STATEMENT
For the six months ended 31 December 2016
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 2017
This information is provided by RNS
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