REG - Genus - Interim Results
24/02/2022 07:00
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RNS Number : 6357C Genus PLC 24 February 2022
Immediate 24 February 2022
Genus plc
Unaudited half year results for the six months ended 31 December 2021
GOOD STRATEGIC PROGRESS and INVESTING FOR GROWTH
Adjusted results 1 Statutory results
Actual currency Constant currency change2 Actual currency
Six months ended 31 December 2021 20203 Change 2021 2020(3) 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/m(4) 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 China(5). 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 outflow(1) of £16.1m, reflecting expected higher working
capital outflows and planned capital investment
· Net debt(1) increased to £143.3m, net debt to EBITDA(1) ratio of
1.4x, within 1.0x-2.0x targeted range
· Adjusted earnings per share(1) 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
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 today:
https://webcasting.buchanan.uk.com/broadcast/61f900ee12956e448c9972f7
This will be followed by a live Q&A session to be held by invitation via
Zoom Webinar at 10:30am.
Enquiries:
Genus plc (Stephen Wilson, Chief Executive Officer / Alison Henriksen, Chief Tel: 01256 345970
Financial Officer)
Buchanan (Charles Ryland / Chris Lane / Sophie Wills) Tel: 0207 466 5000
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.
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. For more information on APMs, see APM Glossary.
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.
Group Performance
As expected, tough porcine market conditions in China resulted in a decrease
in PIC China's performance, which had an impact on the overall performance of
the Group in the first half of the year, with adjusted profit before tax
declining by 19% in constant currency (21% in actual currency) to £37.0m.
Without PIC China, adjusted profit before tax would have grown by 28% in
constant currency, due to robust growth across the rest of the Group and
prudent cost management.
Revenue increased by 1% in constant currency (down 2% in actual currency) to
£281.2m (2020: £285.7m). PIC revenue declined by 4% and, excluding a
customer refund in China, royalty revenue was down 1% year on year. When all
of PIC China's results are excluded, the rest of PIC's business achieved, in
constant currency, revenue growth of 8% and royalty revenue growth of 4%
reflecting further market share gains, particularly in North America and Latin
America. ABS revenue grew by 4% in constant currency and achieved volume
growth of 4%, with the strategically important sexed genetics and beef
genetics up 24% and 13% respectively.
Adjusted operating profit, including joint ventures and excluding gene
editing, was £43.3m (2020: £53.4m), down 17% (in constant currency), but was
up by 26% when the PIC China results are excluded. Our medium-term objective
continues to be to achieve 10% CAGR growth in this measure, noting that 37%
growth was achieved in FY21. Adjusted operating profit, including joint
ventures and after the costs of gene editing, fell by 18% in constant
currency. Within this, Genus's share of adjusted joint venture operating
profits was £4.9m (2020: £5.9m), with a strong performance from the PIC
Agroceres joint venture in Brazil not enough to offset the decline in profits
from our joint ventures in China. Net finance costs were £2.7m (2020:
£2.6m).
Statutory profit before tax was £24.4m (2020 restated: £37.4m), reflecting
the adjusted profit decline during the period and a £6.8m non-cash decrease
(2020: £3.5m increase) in the net IAS 41 biological asset fair value. This
was partially offset by lower share-based expense and an exceptional net
credit balance of £1.7m (2020: £5.1m expense) that includes a £3.6m
non-refundable cash receipt for the assignment of rights to a legacy legal
claim in Brazil. In the prior year, a non-cash Guaranteed Minimum Pension
('GMP') equalisation charge of £3.3m in respect of legacy pension schemes had
been recognised due to a High Court ruling in 2020.
The tax charge on adjusted profits for the period was £9.3m (2020: £11.1m),
which represented a tax rate on adjusted profits of 25.1% (2020: 23.6%). The
Group tax rate increased by 150 basis points, due to the reduced share of
Group profits arising from China where there is a benefit from the
availability of tax relief on owned production agricultural activities. The
statutory profit after tax was £18.9m (2020 restated: £29.0m).
The effect of exchange rate movements on the translation of Genus's overseas
profits was an adverse impact of £0.6m compared with the prior period,
primarily from stronger Sterling against the Brazilian Real and Euro.
Free cash outflow of £16.1m (2020: £26.6m inflow) reflected lower operating
cashflows from expected increases in working capital and high planned capital
expenditure in the six months. Cash generated by operations of £22.2m (2020
restated: £42.8m) represented 63% conversion (2020 restated: 98%) of adjusted
operating profit of £35.0m (2020 restated: £43.8m) into cash. This was
impacted by expected working capital outflows, including performance related
payments to employees in the period relating to the strong prior year results
and the employee special COVID-19 bonus paid in July 2021. Our medium-term
objective is to achieve annual conversion of at least 90%, and we remain
committed to this target. Capital expenditure of £27.8m (2020 restated:
£9.7m) included continued investment in the ABS supply chain with
state-of-the-art new bull housing in Wisconsin and expansion of PIC supply
chain capacity through construction work on a new elite genetics farm in
Canada.
Net debt increased to £143.3m (June 2021: £105.6m), reflecting the increase
in capital expenditure and expected working capital outflows. The net debt to
EBITDA ratio of 1.4x (June 2021: 0.9x) as defined in the debt facility
agreement reflects a decline in EBITDA and higher net debt levels. This
level of leverage is comfortably within our medium-term objective of having a
ratio of net debt to EBITDA of between 1.0 - 2.0 times.
The Board has declared an interim dividend of 10.3 pence per share, the same
as last year's interim dividend, which is payable on 31 March 2022 to
shareholders on the register at 4 March 2022.
Strategic Progress
Genus continued to make good strategic progress. We have sustained our genetic
leadership in all species, we are winning share with leading pork, dairy and
beef farmers globally, and our supply chain investments are increasing supply
and resilience, to position us for further growth.
Our porcine business continues to deliver rapid genetic improvement as
investments in genomic selection, expanding nucleus populations and other
initiatives have further improved the quality of animals selectively bred in
our proprietary herds. We are in the process of implementing digital
phenotyping technologies, which increase the volume and accuracy of data used
in breeding selection to accelerate the rate of genetic progress delivered to
customers.
In China, where the porcine industry has experienced severe volatility, we
remain well positioned for the opportunity and currently serve over one third
of leading Chinese pig producers. We have a local team of over 170 people,
including technical services teams that are supporting customers through these
challenging times. Our focus on making China a home market includes joint
US-China product development projects, engagement with Chinese academic
institutions and our Porcine Reproductive and Respiratory Syndrome virus
(PRRSv) resistant development collaboration with BCA, which is progressing as
planned.
We are growing and strengthening our porcine supply chain and by FY23 will
have increased our elite genetics capacity by over 80% compared with FY19. We
are building a new elite genetics farm, Ankang, in China which will increase
in-country access to our most elite lines. These lines will be multiplied and
disseminated through our growing supply network in China, which has grown
fivefold to over 130,000 sows in the past three years. Atlas, our new elite
genetics farm in Canada to support global customer growth, is now being
stocked and will be completed in 2022, and in Brazil, our joint venture with
Agroceres is building a new elite genetics farm to support local growth, with
the potential to serve as an export facility in the future. In February 2022
PIC strengthened further its position in North America through entering a
strategic collaboration with Olymel, the largest porcine producer in Canada,
to acquire their elite porcine genetics and for the long-term provision of
products and services through their AlphaGene genetics programme.
Genetic progress in our proprietary dairy herds has sustained our strong
global position in dairy genetics. Our proprietary beef-on-dairy genetics
are also achieving strong trial and field results, proving the economic
difference our genetics can achieve. We are making progress in changing the
way we engage with and support dairies with comprehensive, multi-annual
product and service packages that include tailored technical and genetic
services. The uptake in key markets is encouraging, and in EMEA over 25% of
our sales volumes in direct markets are contracted.
We continue to invest in R&D and made good progress in a number of
portfolio initiatives in gene editing, reproductive biology and biosystems
engineering. In the period we achieved new IntelliGen third-party customer
wins and extensions in New Zealand, North America and Europe, which includes
the first deal for our second generation IntelliGen instruments. Subsequent to
the reporting close, we have also won a significant national tender in India.
Our PRRSv resistant programme continues to progress well, consistent with the
timelines we have previously communicated. We now have hundreds of third
generation animals on which data is being collected for the next phase of our
regulatory submissions. Matings of this generation are planned in the summer,
with fourth generation births expected by the end of the 2022 calendar year.
Sustainability Focus
Our primary focus is the use of animal genetic improvement to drive increased
animal efficiency through the reduction of production inputs which result in
lower use of carbon, energy, water and land in animal protein production.
Our vision is 'Pioneering animal genetic improvement to help nourish the
world': the use of our genetics directly helps our customers in their
transition to lower-carbon production. To further this objective Genus became
a founder member of the Greener Cattle Initiative announced at COP26 to
conduct research into ways of reducing methane from cattle.
As a responsible business, we are targeting carbon reduction within internal
operations which are aligned with international (COP26) climate goals: Genus
will reduce its carbon emissions by 25% (per tonne animal weight from 2019
levels) by 2030 and aims to be a carbon 'net zero' business by 2050. We have
established a carbon reduction trajectory and contributory reduction
opportunities as part of our 'Delta C' programme. We are targeting 'least
cost mitigation' measures for emissions from manures and have enhanced our
measurement and reporting of our emissions and 'sinks' (including soils which
we are targeting for carbon sequestration in South Dakota, Saskatchewan and
Yorkshire). We have commissioned a new solar farm to power almost all our
electricity needs in our Leeds and Dekorra operations in the US and are
reviewing new opportunities in other countries. We have commenced conservation
management of soils on our estate and are further targeting greenhouse gas
reduction using among other things, methane capture and renewable natural gas
power generation and electric vehicles.
People
To achieve our vision of 'Pioneering animal genetic improvement to help
nourish the world', we need to attract, retain and develop outstanding
people. We completed our biennial all-employee engagement survey during the
second half of 2021 and engagement remains high, with 83% of employees
completing the survey, 82% (2019: 79%) agreeing with the statement "I would
recommend to a friend to work at Genus" and 89% (2019: 85%) agreeing with the
statement "I enjoy working at Genus". We also saw good progress against some
of the themes we focused on from the 2019 survey, which included the
development of people managers and the areas of reward and recognition. It was
encouraging that our people remain highly committed to Genus despite it being
a very challenging period during the COVID-19 pandemic.
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.
Genus PIC - Operating Review
Actual currency Constant currency change
Six months ended 31 December 2021 2020 Change
£m £m % %
Revenue 143.5 152.9 (6) (4)
Adjusted operating profit exc JV 52.2 63.0 (17) (15)
Adjusted operating profit inc JV 57.0 68.9 (17) (15)
Adjusted operating margin exc JV 36.4% 41.2% (4.8)pts (4.8)pts
Market
Global pork markets were negatively impacted throughout the period due to
oversupply in China leading to low prices and the continued impact of African
Swine Fever (ASF) and COVID-19, resulting in challenges both in relation to
supply and demand.
This was particularly evident in China's porcine market, where there was a 63%
decline in live pork prices in the first half of 2021, from 35RMB/kg in
December 2020 to 13RMB/kg in mid-June. Prices remained suppressed throughout
the remainder of the year, ranging between 10RMB/kg and 18RMB/kg and are
currently below 13RMB/kg. These prices are below the cost of production when
combined with the high feed costs also incurred throughout the period. After
posting losses for much of the second half of 2021, producers sought to reduce
their sow herds or exit the market entirely. Investments in new and
replacement breeding animals declined and will continue to be depressed over
the coming months until a sustained price rise is achieved, and market
confidence returns. The emergence of the Delta and Omicron variants of
COVID-19 in China caused a further slowdown in the industry as localised
transport restrictions were implemented. Consumer demand for pork has also
been affected by lower spending due to lockdowns, a less buoyant economy and
some shift in consumer consumption to other proteins. Chinese imports of
pork dropped 9% compared with the same prior year period and the expectation
is that imports will remain depressed through the early part of 2022. ASF
continued to be a major challenge for producers in China and across southeast
Asia, with eradication proving challenging.
In Europe, further waves of the COVID-19 pandemic, the latest being the
Omicron variant, and localised ASF outbreaks had a disruptive and negative
impact on the market. The impact of the pandemic caused supply chain
constraints with significant labour shortfalls in both live production and
processing facilities. Average slaughter prices dropped to their lowest in
nine years, due to oversupply caused in part by the loss of key exports to
China following reduced demand and ASF outbreaks in Eastern Germany and across
parts of Eastern Europe. ASF has also recently been found in Italy. Moreover,
increasing commodity prices across grain and oil markets, along with inflation
in other costs of production, also had a negative impact on production margins
for most European pig producers, resulting in a small reduction of the
European sow herd through 2021 which is expected to continue into 2022.
In the United States, 2021 was a profitable year for pork producers,
notwithstanding uncertainty and volatility in the industry. Lean hog and
primal pork prices peaked near record highs during the summer of 2021 due to
robust demand and lower pig numbers, before reducing slightly in late Autumn.
Current lean hog futures indicate another profitable year for US pork
production in 2022, with prices over $100/cwt for the summer months.
Furthermore, the United States Department of Agriculture is forecasting stable
production volumes through the year, while exports are projected to grow by
4%.
In Latin America, key markets experienced a mixed year. In Mexico, a sharp
increase in pig prices to 45MXN/kg in the early part of 2021 following supply
disruptions was followed by a decline to 35MXN/kg, which, when combined with
high imported feed costs, left Mexican producers under margin pressure. In
Brazil, exports remained a key driver of the pork market, supporting strong
production growth in the period. Large inventory supplies and favourable
exchange rates further boosted Brazilian competitiveness. However, the reduced
demand from China has recently caused a supply-demand imbalance and through
the month of January pig prices have declined by 20%, causing producers to
delay breeding projects.
Performance
Genus PIC's adjusted operating profit for the period was £52.2m, down 15% in
constant currency on the first half of FY21. Global volumes declined by 2%,
revenue by 4% and royalty revenue by 1%, excluding a China customer refund, in
constant currencies. However, when all of China's results are excluded, the
business achieved a strong performance with revenue and royalty revenue up 8%
and 4% respectively. Global volumes, excluding China, rose by 7% and operating
profit grew by 13% in constant currency, due to strong performances across the
North and Latin American regions and prudent cost management.
In North America, market share gains and positive market conditions
contributed to adjusted operating profit growth of 6% in constant currency.
Growth in PIC's share of the sireline market during the period contributed to
7% volume growth, while royalty revenue also increased by 5% in constant
currency. Key account wins involving damline products and strong sales growth
for the PIC800 boar continued to build momentum across the US and Canada. On
22 February 2022, we entered a long-term strategic collaboration with Olymel,
the largest porcine producer in Canada, to acquire all intellectual property
in Olymel's elite porcine genetics for CAD$25m (£14.5m) and for the provision
of genetic products and services. This will provide significant benefit to
customers of Olymel's AlphaGene genetics through their porcine production
pyramid.
Latin America's adjusted operating profit grew by 13% in constant currency,
with all key trading countries generating double-digit growth. Volumes
increased by 10% and royalty revenue rose by 16% in constant currency. Solid
revenue and profit growth, despite the varying market conditions discussed
earlier, reflected strong product performance and robust customer demand
across the region. Initiatives to increase supply, including a new elite
genetic farm in Brazil and multiple imports of elite genetics, are underway
during FY22.
In Europe, following a very strong performance in the prior year, volatile
market conditions caused by the localised ASF outbreaks mentioned earlier
resulted in a mixed trading picture. The prior year performance was supported
by large key account expansion projects in Russia. These projects continued in
the period, however a planned mix shift from gilt sales to boar sales
contributed to a revenue decline of 11%, while supporting a volume increase of
1% in Europe. Royalty revenue rose by 5% in constant currency, driven by
growth in countries such as Spain, not impacted by ASF and the China import
ban, while adjusted operating profit declined 2%. The ongoing expansion
projects in Russia and in Spain will support long-term growth with pork
producers in these important markets.
Adjusted operating profit in Asia was 78% lower in constant currency than the
prior year, while volumes decreased by 36% and royalty revenue declined by 33%
in constant currency, excluding a customer refund in China discussed below.
The region's results predominantly reflect the performance in China, where
sharp declines in pig prices during 2021 resulted in significant losses for
producers in the period and a reduction in demand for genetics. This was
further exacerbated by disease challenges across the industry and restrictions
in the ability to move animals due to COVID-19 lockdowns being imposed in
certain regions. PIC China experienced a 51% decline in volumes, and 27% of
volumes were under royalty contracts. Commercial terms with a large customer
were changed in the period to more closely align the economic interests of a
unique outcome-based royalty contract in place. This resulted in a one-time
refund of £3.7m, related to historic royalties. PIC China's operating
profit decreased by 94% in constant currency due to the reduction in revenues,
the customer refund, lower by-product margins, and investments in the local
supply chain. Investment in PIC's supply chain in China continued
throughout the period with the expansion and refurbishment of one farm and the
new construction of the Ankang farm to replace a smaller ageing facility, with
the aim of supporting the rapid recovery of sales when market conditions
improve.
In Asia more widely, the industry in the Philippines started to show signs of
recovery from ASF and demand for PIC's genetics improved, with operating
profits increasing by 144% in constant currency compared with the same period
in FY21. There were also positive signs from Asian franchises, with operating
profit increasing by 22%.
Overall, in the first half of FY22, very weak conditions in China led to lower
results for PIC. However, Genus's proven strategy focused on developing
product differentiation, ensuring a predictable customer experience and
delivering high value through a world-class team positions PIC very well to
gain further market share in China and other geographies.
Genus ABS - Operating Review
Actual currency Constant currency change
Six months ended 31 December 2021 2020 Change
£m £m % %
Revenue 130.9 129.0 1 4
Adjusted operating profit 22.1 18.7 18 21
Adjusted operating margin 16.9% 14.5% 2.4pts 2.4pts
Market
After nine consecutive quarters of increases, growth in milk supply from the
"Big Seven" exporting regions (the EU, USA, New Zealand, Australia, Brazil,
Argentina and Uruguay) came to an end in the third quarter of 2021 and
contracted in the fourth quarter. This was primarily driven by reductions in
production across New Zealand, Australia and the EU. The cost of milk
production grew sharply during the second half of 2021, due to rising labour
costs and increases in the price of feed. Dairy demand grew during the year
and the Global Dairy Trade Whole Milk Powder auction price increased by 17%,
with China's dairy imports alone rising by 29% during the first three quarters
of 2021, before tapering off in the final part of the year as economic
uncertainty rose, and regional COVID-19 lockdowns were enforced. In North
America, dairy production declined through the period due to margin pressure
from increasing feed costs. This is expected to continue into 2022, with the
likelihood that it will impact the global dairy market due to its high degree
of influence.
In the second half of 2021, downstream parts of the supply chain were affected
by several factors, including increases in on-farm commodity costs relating to
production, restrictions on movements due to COVID-19, inflationary pressures
and a squeeze on margins for food manufacturers, driven by increasing feed and
labour costs. These factors are expected to drive dairy price increases in
2022 as producers look to pass on the higher costs to customers. Given these
factors dairy producers should benefit from higher prices in 2022, however
they will be cautious to increase production whilst input costs rise.
The COVID-19 pandemic continued to affect beef consumption as the emergence of
the Omicron variant impacted the hospitality industry, with many consumers
continuing to eat at home rather than dine out. A slowdown in US beef
production caused some constriction of the global beef market in 2021 leading
to an increase in beef prices of around 10% through the year. This
constriction looks likely to continue through 2022, with drought in parts of
North America leading to reductions in herd size, potentially creating
opportunities for beef imports. Brazil remained the world's largest beef
exporter through 2021, over half of which was exported to China. Export prices
peaked in June 2021 at $5,500/metric ton, but due to a suspension imposed by
China on Brazil imports after two atypical BSE cases were detected, declined
during the second half of the year to $5,000/metric ton. Trading has now
resumed.
Globally, we continued to see genetic suppliers increase investments in
R&D and breeding programmes. Further consolidation is expected as
suppliers seek to leverage these investments more widely, although few mergers
have yet been completed. Nonetheless, we continue to see a ramp up in
collaborations between industry players, including on the sourcing of elite
genetics, so that they can continue to offer commercially relevant products to
their customer base.
Performance
Despite challenging market conditions in some regions, overall demand for ABS
products remained strong. Volumes increased by a further 4% against a very
strong comparative period in the prior year, revenue by 4% and adjusted
operating profit by 21% in constant currencies. Demand from dairy customers
for sexed and beef genetics remained high, with sexed volumes up 24% and
strong beef volume growth of 13%. This reflects the continued success of
Sexcel and the increasing adoption of our NuEra beef genetics in dairy herds.
In Europe, volumes and revenue were marginally lower, by 2% and 1% in constant
currency respectively. Operating profit was 15% lower compared with a strong
first half in FY21 that benefited from the opening of a new IntelliGen
production facility at an external customer site. This production facility
continues to operate effectively, and the contract was extended in the period.
COVID-19 related lockdowns and restrictions continued to reduce access to
customers and create considerable uncertainty within the region. However,
sexed volumes rose by 22%, with particularly strong growth in our UK business
and with European distributors. Good progress was also made on migrating our
customers to partnership-based contracts and we continued to strengthen our
service offerings. More than 25% of volumes in direct European markets are
now sold under annual or multi-annual partnership contracts, where customers
commit to acquiring most/all of their product from ABS under a fee per cow
arrangement, for which ABS also provides technical services.
In North America, volumes rose by 2%, while revenue declined by 2% and
operating profit by 20% in constant currencies. NuEra beef-on-dairy volumes
grew by a record 37% as customers shifted from dairy semen, particularly
conventional, due to the buoyant beef market. Customers also continued to
adopt Sexcel, driving sexed volume growth of 9%, while conventional volumes
declined by 31%. Embryo volumes declined by 20% as a large key account made a
short-term tactical change to its breeding strategy to use Sexcel, however
this is likely to revert in the future. We invested in strengthening our team
in the region, both key account and technical services personnel. This
investment will help to further differentiate ABS as the genetics partner of
choice for our customers and progress is being made in developing
relationships through the strategic account programme.
After record performances in FY21, Latin America continued to grow, delivering
an 8% increase in revenue and a 22% rise in operating profit in constant
currencies. Performance in Brazil was particularly encouraging, delivering 3%
growth in semen volumes, following record volume growth of 31% in the prior
year period and despite the temporary Chinese ban on Brazilian beef. This was
driven particularly by a series of innovative digital sales campaigns. There
was also a 7% rise in embryo volumes, aided by the increasing adoption of
advanced reproduction techniques.
In Asia, total revenues in the period rose by 36%, driving operating profit
growth of 35% in constant currencies. The region delivered strong growth in
sexed volumes, up 37%, as well as increases in dairy conventional and beef
volumes (up 1% and 58% respectively). This growth was underpinned by strong
demand in China, where volumes rose by 25%, with strong growth across dairy,
beef and sexed segments, driving revenue growth of 43% and operating profit
growth of 37%. In Australia, volumes also grew sharply by 31%, due to the
continuing industry rebound following the intense period of drought and
bushfires in 2019/20, as well as strong growth of Sexcel, up 75%, and beef
sales, up 59%. Performance in India was stable, with encouraging momentum on
new wins with a Government of India tender for sexed semen being secured
subsequent to the reporting close.
Research and Development - Operating Review
Actual currency Constant currency change
Six months ended 31 December 2021 2020 Change
£m £m % %
Porcine product development 10.3 10.3 0 2
Bovine product development 10.5 9.3 13 16
Gene editing 3.6 3.7 (3) 0
Other research and development 7.0 5.7 23 23
Net expenditure in R&D(7) 31.4 29.0 8 10
Performance
Net research and development investment increased as planned by 10% in
constant currency, as we invested to further strengthen our proprietary
differentiated offerings and to take advantage of market opportunities. In the
second half of the year, we will make further investments in gene editing,
IntelliGen production capacity and elite porcine farm nuclei, while continuing
to strengthen the research and development pipeline.
During the period, we accelerated differentiation in porcine product
development through pioneering scientific techniques. By using genotyping
across more of our global elite farm network, we were able to achieve our
highest ever rate of global genetic gain. To build on this progress, we are
now enhancing genomic evaluation by expanding our phenotyping capabilities
through precision digital tools and capturing data that best predicts profit
potential for our customers. To meet growing global sales demand, we have also
added a new elite contract boar stud in Minnesota to our network and are
starting to stock a further elite facility in Canada which will be completed
during 2022. Bovine product development delivered a highly competitive dairy
and beef germplasm pipeline, which contributed to continued volume growth in
ABS. De Novo Genetics, our joint venture with De-Su Holsteins, produced around
50% of new Holstein bulls introduced to market in the period and its strong
pipeline of young bulls will help sustain our industry leading position.
Global demand for our proprietary NuEra genetics continued to grow and these
genetics represented around one third of our total beef volumes in the first
six months of FY22. Further validation trials in customers' systems reinforced
NuEra's superior performance when compared with competitor genetics.
We continued to expand our sexed production capacity by introducing the second
generation of our proprietary sexing technology, opening another production
facility in North America at our new Leeds bull stud, increasing bull housing
and production capacity, and delivering production efficiency gains. Our new
technology and the expansion of capacity is helping us meet increasing global
demand for Sexcel and our third party IntelliGen products and services.
We maintained our expenditure on gene editing, primarily through ongoing
investment in the PRRSv resistance project. This project progressed as planned
and we continued to engage with the Food and Drug Administration in the United
States, with whom we continue to have positive engagement. We also held
further conversations on regulatory and market acceptance in other key global
markets including China and Japan, both directly and through local partners.
Other research and development expenditure increased by 23% as planned. This
investment was for research in the field of reproductive biology and to expand
data science capabilities, while maintaining work on genome science and the
development of our bioinformatics platform. We also continued to collaborate
with external partners in a variety of discovery areas. These collaborations
are gathering pace as academic institutions begin to move away from focusing
on COVID-19 research.
(7) Excluding profit attributable to non-controlling interest
Principal risks and uncertainties
Genus's approach to risk management is to identify, evaluate and prioritise
risks and uncertainties so we can take action to mitigate them. The Genus plc
Annual Report 2021 (a copy of which is available on the Genus plc website at
www.genusplc.com) sets out on pages 46-48 a number of risks and uncertainties
that might impact the performance of the Group.
Some of these risks relate to current business operations in global
agricultural markets, while others relate to future commercialisation of our
leading-edge R&D programmes. We are also exposed to global economic and
political risks such as trade restrictions. Additionally, we monitor emerging
risks such as changing consumption patterns, environmental sustainability
expectations and the evolution of alternative proteins such as lab-based meat.
Other than the risk of conflict in Ukraine and sanctions on Russia increasing
existing risks, there has been no material change to the principal risks in
the current financial year that might affect the performance of the Group. The
Group has a strong market-leading porcine business in Russia with a largely
local supply chain, and bovine businesses in both Russia and Ukraine.
GENUS PLC
CONDENSED CONSOLIDATED INCOME STATEMENT
For the six months ended 31 December 2021
Note (restated)(1) Year
Six months Six months ended
ended ended 30 June
31 December 2021 31 December 2021
£m
£m 2020
£m
REVENUE 2 281.2 285.7 574.3
Adjusted operating profit 2 35.0 43.8 76.9
Adjusting items:
- Net IAS 41 valuation movement on biological assets 8 (6.8) 3.5 (10.8)
- Amortisation of acquired intangible assets 7 (3.8) (3.7) (7.4)
- Share-based payment expense (2.2) (4.3) (7.7)
(12.8) (4.5) (25.9)
- Exceptional items: 3
- Litigation (1.8) (1.7) (2.5)
- Acquisition and integration (0.1) (0.1) (0.3)
- Pension related - (3.3) (2.3)
- Other 3.6 - 1.8
Total exceptional items 1.7 (5.1) (3.3)
Total adjusting items (11.1) (9.6) (29.2)
OPERATING PROFIT 23.9 34.2 47.7
Share of post-tax profit of joint ventures and associates retained 10 3.2 5.8 13.1
Finance costs 4 (2.8) (2.8) (5.4)
Finance income 4 0.1 0.2 0.4
PROFIT BEFORE TAX 24.4 37.4 55.8
Taxation 5 (5.5) (8.4) (9.0)
PROFIT FOR THE PERIOD 18.9 29.0 46.8
ATTRIBUTABLE TO:
Owners of the Company 19.9 30.2 47.3
Non-controlling interest (1.0) (1.2) (0.5)
18.9 29.0 46.8
EARNINGS PER SHARE
Basic earnings per share 12 30.4p 46.4p 72.6p
Diluted earnings per share 12 30.2p 46.0p 72.0p
Alternative Performance Measures
Adjusted operating profit 35.0 43.8 76.9
Adjusted operating profit attributable to non-controlling interest (0.2) - (0.1)
Pre-tax share of profits from joint ventures and associates excluding net IAS 4.9 5.9 13.0
41 valuation movement
Gene editing costs 3.6 3.7 7.6
Adjusted operating profit including joint ventures and associates, excluding 43.3 53.4 97.4
gene editing costs
Gene editing costs (3.6) (3.7) (7.6)
Adjusted operating profit including joint ventures and associates 39.7 49.7 89.8
Net finance costs 4 (2.7) (2.6) (5.0)
Adjusted profit before tax 37.0 47.1 84.8
Adjusted earnings per share
Basic adjusted earnings per share 12 42.4p 55.3p 100.9p
Diluted adjusted earnings per share 12 42.1p 54.9p 100.1p
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 statutory measures, and not as a substitute for or
as superior to them. For more information on APMs, see APM Glossary.
1 See note 1 for details of the prior period restatement.
GENUS PLC
CONDENSED CONSOLIDATED Statement of Comprehensive Income
For the six months ended 31 December 2021
(restated)(1) Year ended
Six months ended Six months ended 30 June 2021
31 December 2021 31 December 2020
£m £m £m £m £m £m
PROFIT FOR THE PERIOD 18.9 29.0 46.8
Items that may be reclassified subsequently to profit or loss
Foreign exchange translation differences 4.6 (39.4) (45.2)
Fair value movement on net investment hedges 0.2 - 0.4
Fair value movement on cash flow hedges - 0.1 0.2
Tax relating to components of other comprehensive expense (1.3) 6.2 7.6
3.5 (33.1) (37.0)
Items that may not be reclassified subsequently to profit or loss
Actuarial gain on retirement benefit obligations 24.1 0.2 22.3
Movement on pension asset recognition restriction (24.0) 0.6 (0.1)
Release/(recognition) of additional pension liability - 1.8 (19.9)
Gain on equity instruments measured at fair value - - 6.7
Tax relating to components of other comprehensive income/(expense) - (0.5) (2.0)
0.1 2.1 7.0
OTHER COMPREHENSIVE INCOME/(EXPENSE) FOR THE PERIOD 3.6 (31.0) (30.0)
TOTAL COMPREHENSIVE INCOME/(EXPENSE) FOR THE PERIOD 22.5 (2.0) 16.8
ATTRIBUTABLE TO:
Owners of the Company 23.7 (0.9) 17.1
Non-controlling interest (1.2) (1.1) (0.3)
22.5 (2.0) 16.8
1 See note 1 for details of the prior period restatement.
GENUS PLC
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 31 December 2021
Note Called up Share premium account £m Own shares Translation reserve Hedging reserve Retained earnings £m Total Non- Total equity
share capital
£m
£m
£m
£m
controlling interest
£m
£m
£m
BALANCE AT 30 JUNE 2020 6.5 179.1 (0.1) 29.5 (0.2) 280.7 495.5 (1.0) 494.5
Foreign exchange translation differences, net of tax - - - (37.7) - - (37.7) 0.2 (37.5)
Fair value movement on net investment hedges, net of tax - - - 0.3 - - 0.3 - 0.3
Fair value movement on cash flow hedges, net of tax - - - - 0.2 - 0.2 - 0.2
Gain on equity instruments measured at fair value, net of tax - - - - - 5.0 5.0 - 5.0
Actuarial gain on retirement benefit obligations, net of tax - - - - - 19.8 19.8 - 19.8
Movement on pension asset recognition restriction, net of tax - - - - - (0.1) (0.1) - (0.1)
Recognition of additional pension liability, net of tax - - - - - (17.7) (17.7) - (17.7)
Other comprehensive (expense)/income for the year - - - (37.4) 0.2 7.0 (30.2) 0.2 (30.0)
Profit/(loss) for the year - - - - - 47.3 47.3 (0.5) 46.8
Total comprehensive (expense)/income for the year - - - (37.4) 0.2 54.3 17.1 (0.3) 16.8
Recognition of share-based payments, net of tax - - - - - 4.9 4.9 - 4.9
Dividends 6 - - - - - (19.5) (19.5) - (19.5)
Adjustment arising from change in non-controlling interest and written put - - - - - - - (0.2) (0.2)
option
Issue of ordinary shares 0.1 - - - - - 0.1 - 0.1
BALANCE AT 30 JUNE 2021 6.6 179.1 (0.1) (7.9) - 320.4 498.1 (1.5) 496.6
Foreign exchange translation differences, net of tax - - - 3.5 - - 3.5 (0.2) 3.3
Fair value movement on net investment hedges, net of tax - - - 0.2 - - 0.2 - 0.2
Actuarial gains on retirement benefit obligations, net of tax - - - - - 18.8 18.8 - 18.8
Movement on pension asset recognition restriction, net of tax - - - - - (18.7) (18.7) - (18.7)
Other comprehensive income for the period - - - 3.7 - 0.1 3.8 (0.2) 3.6
Profit/(loss) for the period - - - - - 19.9 19.9 (1.0) 18.9
Total comprehensive income/(expense) for the period - - - 3.7 - 20.0 23.7 (1.2) 22.5
Recognition of share-based payments, net of tax - - - - - 1.5 1.5 - 1.5
Dividends 6 - - - - - (14.2) (14.2) - (14.2)
BALANCE AT 31 DECEMBER 2021 6.6 179.1 (0.1) (4.2) - 327.7 509.1 (2.7) 506.4
Note Called up Share premium account £m Own shares Translation reserve Hedging reserve Retained earnings £m Total Non- Total equity
share capital
£m
£m
£m
£m
controlling interest
£m
£m
£m
BALANCE AT 30 JUNE 2020 6.5 179.1 (0.1) 29.5 (0.2) 280.7 495.5 (1.0) 494.5
Foreign exchange translation differences, net of tax - - - (33.3) - - (33.3) 0.1 (33.2)
Fair value movement on net investment hedges, net of tax - - - - - - - - -
Fair value movement on cash flow hedges, net of tax - - - - 0.1 - 0.1 - 0.1
Actuarial gain on retirement benefit obligations, net of tax - - - - - 0.2 0.2 - 0.2
Movement on pension asset recognition restriction, net of tax - - - - - 0.5 0.5 - 0.5
Recognition of additional pension liability, net of tax - - - - - 1.4 1.4 - 1.4
Other comprehensive (expense)/income for the year - - - (33.3) 0.1 2.1 (31.1) 0.1 (31.0)
Profit/(loss) for the year (restated)(1) - - - - - 30.2 30.2 (1.2) 29.0
Total comprehensive (expense)/income for the year - - - (33.3) 0.1 32.3 (0.9) (1.1) (2.0)
Recognition of share-based payments, net of tax - - - - - 4.0 4.0 - 4.0
Dividends 6 - - - - - (12.8) (12.8) - (12.8)
Adjustment arising from change in non-controlling interest and written put - - - - - - - (0.2) (0.2)
option
BALANCE AT 31 DECEMBER 2020 6.5 179.1 (0.1) (3.8) (0.1) 304.2 485.8 (2.3) 483.5
1 See note 1 for details of the prior period restatement.
GENUS PLC
CONDENSED CONSOLIDATED BALANCE SHEET
As at 31 December 2021
Note 31 December (restated)(1) 30 June
2021 31 December 2021
£m
£m
2020
£m
ASSETS
Goodwill 102.2 99.4 101.5
Other intangible assets 7 55.4 54.1 56.3
Biological assets 8 288.2 294.2 279.9
Property, plant and equipment 9 142.2 110.0 123.0
Interests in joint ventures and associates 10 36.1 28.4 34.1
Other investments 15.9 6.8 14.7
Other receivables 11 1.8 2.0 1.8
Deferred tax assets 5.1 3.3 8.0
TOTAL NON-CURRENT ASSETS 646.9 598.2 619.3
Inventories 44.3 35.0 37.0
Biological assets 8 36.6 38.2 39.6
Trade and other receivables 11 118.1 101.5 106.2
Cash and cash equivalents 45.9 50.2 46.0
Income tax receivable 3.6 2.9 2.6
Derivative financial assets 15 0.6 0.9 0.1
Asset held for sale 0.2 0.2 0.2
TOTAL CURRENT ASSETS 249.3 228.9 231.7
TOTAL ASSETS 896.2 827.1 851.0
LIABILITIES
Trade and other payables (113.1) (92.5) (110.3)
Interest-bearing loans and borrowings (10.6) (9.8) (13.9)
Provisions (1.6) (3.7) (1.3)
Deferred consideration (1.3) (1.0) (1.6)
Obligations under leases (8.6) (9.0) (9.0)
Tax liabilities (4.3) (6.5) (6.4)
Derivative financial liabilities 15 (1.2) (0.4) -
TOTAL CURRENT LIABILITIES (140.7) (122.9) (142.5)
Trade and other payables (1.3) (4.8) (1.4)
Interest-bearing loans and borrowings (151.0) (105.0) (109.4)
Retirement benefit obligations 14 (8.8) (15.0) (11.1)
Provisions (10.9) (10.9) (11.1)
Deferred consideration (0.6) (0.4) (0.5)
Deferred tax liabilities (50.9) (60.1) (53.0)
Derivative financial liabilities 15 (6.6) (5.9) (6.1)
Obligations under leases (19.0) (18.6) (19.3)
TOTAL NON-CURRENT LIABILITIES (249.1) (220.7) (211.9)
TOTAL LIABILITIES (389.8) (343.6) (354.4)
NET ASSETS 506.4 483.5 496.6
EQUITY
Called up share capital 6.6 6.5 6.6
Share premium account 179.1 179.1 179.1
Own shares (0.1) (0.1) (0.1)
Translation reserve (4.2) (3.8) (7.9)
Hedging reserve - (0.1) -
Retained earnings 327.7 304.2 320.4
EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY 509.1 485.8 498.1
Non-controlling interest 2.5 2.8 3.6
Put option over non-controlling interest (5.2) (5.1) (5.1)
TOTAL NON-CONTROLLING INTEREST (2.7) (2.3) (1.5)
TOTAL EQUITY 506.4 483.5 496.6
1 See note 1 for details of the prior period restatement.
GENUS PLC
Condensed consolidated Group Statement of Cash Flows
For the six months ended 31 December 2021
Note (restated)(1) Year
Six months Six months ended
ended ended 30 June
31 December 31 December 2021
£m
2021 2020
£m
£m
NET CASH FLOW FROM OPERATING ACTIVITIES 13 11.6 35.9 67.5
CASH FLOWS FROM INVESTING ACTIVITIES
Dividends received from joint ventures and associates - - 4.1
Joint venture loan payment - - (0.4)
Investment in joint venture and associate (1.1) (0.4) (2.4)
Disposal of joint venture and associate 0.1 - -
Acquisition of trade and assets (0.2) - (6.9)
Acquisition of investments (0.1) - (0.9)
Payment of deferred consideration (0.5) (6.6) (6.7)
Purchase of property, plant and equipment (24.1) (9.5) (28.7)
Purchase of intangible assets (3.7) (0.2) (5.1)
Proceeds from sale of property, plant and equipment 0.1 0.6 0.3
NET CASH USED IN INVESTING ACTIVITIES (29.5) (16.1) (46.7)
CASH FLOWS FROM FINANCING ACTIVITIES
Drawdown of borrowings 62.8 148.3 195.1
Repayment of borrowings (25.4) (138.0) (176.1)
Payment of lease liabilities (5.2) (5.0) (11.7)
Equity dividends paid (14.2) (12.8) (19.5)
Dividend to non-controlling interest - (0.2) (0.2)
Debt issue costs (0.6) (1.9) (1.9)
Issue of ordinary shares - - 0.1
NET CASH FROM/(USED IN) FINANCING ACTIVITIES 17.4 (9.6) (14.2)
NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (0.5) 10.2 6.6
Cash and cash equivalents at beginning of period 46.0 41.3 41.3
Net (decrease)/increase in cash and cash equivalents (0.5) 10.2 6.6
Effect of exchange rate fluctuations on cash and cash equivalents 0.4 (1.3) (1.9)
TOTAL CASH AND CASH EQUIVALENTS AT END OF PERIOD 45.9 50.2 46.0
1 See note 1 for details of the prior period restatement.
GENUS PLC
ANALYSIS OF NET DEBT
For the six months ended 31 December 2021
At 1 July Net Foreign exchange Non-cash movement At 31 December 2021
2021 cash flows
£m £m £m £m £m
Cash and cash equivalents 46.0 (0.5) 0.4 - 45.9
Interest-bearing loans - current (13.9) 3.8 (0.1) (0.4) (10.6)
Lease liabilities - current (9.0) 5.2 (0.1) (4.7) (8.6)
(22.9) 9.0 (0.2) (5.1) (19.2)
Interest-bearing loans - non-current (109.4) (40.6) (1.0) - (151.0)
Lease liabilities - non-current (19.3) - (0.2) 0.5 (19.0)
(128.7) (40.6) (1.2) 0.5 (170.0)
Total debt financing (151.6) (31.6) (1.4) (4.6) (189.2)
Net debt (105.6) (32.1) (1.0) (4.6) (143.3)
At 1 July Net Foreign exchange Non-cash movement At 31 December 2020
2020 cash flows
£m £m £m £m £m
Cash and cash equivalents 41.3 10.2 (1.3) - 50.2
Interest-bearing loans - current (9.2) (0.7) 0.6 (0.5) (9.8)
Lease liabilities - current (10.0) 5.0 0.5 (4.5) (9.0)
(19.2) 4.3 1.1 (5.0) (18.8)
Interest-bearing loans - non-current (103.6) (7.7) 6.3 - (105.0)
Lease liabilities - non-current (21.1) - 1.0 1.5 (18.6)
(124.7) (7.7) 7.3 1.5 (123.6)
Total debt financing (143.9) (3.4) 8.4 (3.5) (142.4)
Net debt (102.6) 6.8 7.1 (3.5) (92.2)
Net debt is defined as the total of cash and cash equivalents,
interest-bearing loans, unamortised debt issue costs and lease obligations.
GENUS PLC
NOTES TO THE CONDENSED SET OF FINANCIAL STATEMENTS
For the six months ended 31 December 2021
1. BASIS OF PREPARATION
The unaudited Condensed Set of Financial Statements for the six months ended
31 December 2021:
· were prepared in accordance with International Accounting Standard
34 'Interim Financial Reporting' ('IAS 34') and thereby have been prepared in
conformity with the requirements of the Companies Act 2006 and the
International Financial Reporting Standards ('IFRSs') adopted in the United
Kingdom;
· are presented on a condensed basis as permitted by IAS 34 and
therefore do not include all disclosures that would otherwise be required in a
full set of financial statements; these should be read, therefore, in
conjunction with the Genus plc Annual Report 2021;
· includes all adjustments, consisting of normal recurring
adjustments, necessary for a fair statement of the results for the periods
presented;
· do not constitute statutory accounts within the meaning of section
435 of the Companies Act 2006; and
· were approved by the Board of Directors on 23 February 2022.
The information relating to the year ended 30 June 2021 is an extract from the
published financial statements for that year, which have been delivered to the
Registrar of Companies. The auditor's report on those financial statements was
not qualified and did not contain statements under section 498(2) or (3) of
the Companies Act 2006.
The unaudited Condensed Set of Financial Statements for the six months ended
31 December 2021 has not been reviewed by our Auditor.
The unaudited condensed set of financial statements have been prepared on the
basis of the accounting policies set out in the Annual Report 2021. The Genus
plc Annual Report 2021 (a copy of which is available on the Genus plc website
at www.genusplc.com (file:///C:/Users/lucyl/Desktop/www.genusplc.com) ) sets
out on pages 46-48 a number of risks and uncertainties that might impact upon
the performance of the Group. There has been no material change to the
principal risks that might affect the performance of the Group in the current
financial period.
The preparation of the Condensed Set of Financial Statements requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the balance sheet date, and the reported amounts of revenue and expenses
during the period. Actual results could vary from these estimates. The
estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period or in the period
of revision and future periods if the revision affects both current and future
periods.
Functional and presentational currency
The principal exchange rates were as follows:
Average Closing
Six months Six months Year
ended 31 ended 31 ended 31 31 30
December December 30 June December December June
2021 2020 2021 2021 2020 2021
US Dollar/£ 1.36 1.32 1.36 1.35 1.37 1.38
Euro/£ 1.17 1.11 1.13 1.19 1.12 1.17
Brazilian Real/£ 7.40 7.18 7.33 7.54 7.10 6.87
Mexican Peso/£ 27.90 28.07 28.15 27.76 27.16 27.57
Chinese Yuan/£ 8.73 8.90 8.94 8.60 8.92 8.93
Russian Rouble/£ 99.50 100.37 102.04 101.20 101.11 101.10
Change in accounting policy - Software-as-a-service (SaaS) arrangements
During 2021, the Company changed its accounting policy related to the
capitalisation of certain software costs; following the IFRIC Interpretation
Committee's agenda decision published in April 2021 and relating to the
capitalisation of costs of configuring or customising application software
under 'Software as a Service' (SaaS) arrangements.
The Group's accounting policy was historically to capitalise costs directly
attributable to the configuration and customisation of SaaS arrangements as
intangible assets in the Balance Sheet, irrespective of whether the services
were performed by the SaaS supplier or third party. Following the adoption of
the above IFRIC agenda guidance, current SaaS arrangements were identified and
assessed to determine if the Group has control of the software. For those
arrangements where we did not have control of the developed software, to the
extent that the services were performed by third parties, the Group
derecognised the intangible asset previously capitalised. Amounts paid to the
supplier in advance of the commencement of the service period, including for
configuration or customisation, were treated as a prepayment.
Accordingly, in the FY21 Annual report the prior period Balance Sheets at 30
June 2020 and 30 June 2019 were restated in accordance with IAS 8, and, in
accordance with IAS 1 (revised). The full impact of the change in accounting
policy is detailed in note 2 - basis of preparation in the Genus plc Annual
Report 2021.
For the six months ended 31 December 2020, this change in accounting policy
has led to a £1.3m increase in operating expenses within administrative
expenses, impacting the reported operating profit, basic and diluted earnings
per share, statutory and effective tax rate and statutory cashflow, reducing
operating cashflow and reducing cash outflow in respect of investing
activities. No impact on the overall increase in cash and cash equivalent for
the period.
New standards and interpretations
In the current period, the Group has applied a number of amendments to IFRS
issued by the International Accounting Standards Board that are mandatorily
effective for an accounting period that begins after 1 January 2021 and have
been implemented with effect from 1 July 2021. These are:
> Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 -' Interest
Rate Benchmark Reform - Phase 2'; and
> Amendment to IFRS 16 - ' COVID-19-Related Rent Concessions beyond 30
June 2021'.
Their addition has not had any material impact on the disclosures, or amounts
reported in the Group Financial Statements.
New standards and interpretations not yet adopted
At the date of the interim report, the following standards and interpretations
which have not been applied in the report were in issue but not yet effective
(and in some cases had not yet been adopted by the UK). The Group will
continue to assess the impact of these amendments prior to their adoption.
These are:
> Amendments to IAS 1 - ' Classification of Liabilities as Current or
Non-Current';
> Amendments to IAS 16 - ' Property, Plant and Equipment - Proceeds
before Intended Use';
> Annual Improvements 2018-2020 Cycle;
> Amendments to IAS 37 - ' Onerous Contracts - Cost of Fulfilling a
Contract';
> Amendments to IAS 1 and IFRS Practice Statement 2 - ' Disclosure of
Accounting Policies';
> Amendments to IAS 12 - ' Deferred Tax related to Assets and
Liabilities arising from a Single Transaction'; and
> Amendments to IAS 8- ' Definition of Accounting Estimates'.
Going Concern
In assessing the appropriateness of adopting the going concern basis of
preparing the financial statements, the Board have considered:
> Genus's Budget and Strategic Plan which forms management's best
estimate of the future performance and position of the Group.
> Genus's credit facility agreement which consists of a £150m
multi-currency RCF, a 125m US dollar RCF and a 20m US dollar bond and
guarantee facility. The term of the facility is for four years to August '24
having already exercised the first extension option in August '21. The
facility also includes a second extension option to August '25.
> The facility also includes an uncommitted £100m accordion option
which can be requested on a maximum of three occasions over the lifetime of
the facility to fund the Group's business development plans, and
> The potential use of mitigating actions including reduction in
dividends and postponing certain capital spend and investments.
As part of the Directors' consideration of the appropriateness of adopting the
going concern basis in preparing the financial statements, the Board
considered several key factors, including our business model and our strategic
framework. In addition, all principal risks identified by the Group were
considered in a downside scenario within the going concern assessment with
specific focus paid to those that could reasonably have a material impact
within our outlook period, including:
> Growing in emerging markets, which we have modelled through
reductions to short term growth expectations, particularly in China.
> Developing products with competitive advantage, modelled through
reductions to short term growth expectations as a result of failing to produce
best genetics for our customers or to secure elite genetics.
> Managing agricultural market and commodity prices volatility;
modelled through reductions in price expectations, particularly in China; and
> Ensuring biosecurity or continuity of supply, which is modelled
through one off impacts of disease outbreaks and border closures.
We have considered the position if each of the identified principal risks
materialised individually and where multiple risks occur in parallel. In
addition, we have overlaid this downside scenario, net of mitigating actions.
Based on this assessment our headroom under these sensitivities, including our
mitigating actions, remain adequate and the Directors have a reasonable
expectation that the Group has adequate resources to continue its operational
existence for the foreseeable future and for a period of at least 12 months
from the date of this report. Accordingly, the Directors continue to adopt and
consider appropriate the going concern basis in preparing the half-yearly
report and the Condensed Set of Financial Statements.
Alternative Performance Measures ('APMs')
In reporting financial information, the Group presents APMs, which are not
defined or specified under the requirements of IFRS and which are not
considered to be a substitute for, or superior to, IFRS measures.
The Group believes that these APMs provide stakeholders with additional
helpful information on the performance of the business. The APMs are
consistent with how we plan our business performance and report on it in our
internal management reporting to the Board and GELT. Some of these measures
are also used for the purpose of setting remuneration targets.
For a full list of all APMs please see the Alternative Performance Measures
Glossary section at the end of this release.
2. SEGMENTAL INFORMATION
IFRS 8 'Operating Segments' requires operating segments to be identified on
the basis of internal reports about components of the Group that are regularly
reviewed by the Chief Executive and the Board, to allocate resources to the
segments and to assess their performance. The Group's operating and reporting
structure comprises three operating segments: Genus PIC, Genus ABS and Genus
Research and Development. These segments are the basis on which the Group
reports its segmental information. The principal activities of each segment
are as follows:
> Genus PIC - our global porcine sales business;
> Genus ABS - our global bovine sales business; and
> Genus Research and Development - our global spend on research and
development.
A segmental analysis of revenue, operating profit, segment assets and
liabilities and is provided below. We do not include our adjusting items in
the income statement segments, as we believe these do not reflect the
underlying performance of the segments. The accounting policies of the
reportable segments are the same as the Group's accounting policies, as
described in the Financial Statements.
Revenue
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2021 2020 2021
£m £m £m
Genus PIC 143.5 152.9 315.6
Genus ABS 130.9 129.0 250.1
Genus Research and Development
Porcine product development 6.0 3.0 7.3
Bovine product development 0.8 0.8 1.3
Gene editing - - -
Other research and development - - -
6.8 3.8 8.6
281.2 285.7 574.3
Adjusted operating profit by segment is set out below and reconciled to the
Group's adjusted operating profit. A reconciliation of adjusted operating
profit to profit for the period is shown on the face of the Condensed
Consolidated Income Statement.
Adjusted operating profit (restated)(1)
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2021 2020 2021
£m £m £m
Genus PIC 52.2 63.0 122.9
Genus ABS 22.1 18.7 36.4
Genus Research and Development
Porcine product development (10.3) (10.3) (21.9)
Bovine product development (10.4) (9.3) (19.6)
Gene editing (3.6) (3.7) (7.6)
Other research and development (7.0) (5.7) (13.3)
(31.3) (29.0) (62.4)
Adjusted segment operating profit 43.0 52.7 96.9
Central (8.0) (8.9) (20.0)
Adjusted operating profit 35.0 43.8 76.9
1 See note 1 for details of the prior period restatement.
Our business is not highly seasonal and our customer base is diversified, with
no individual customer generating more than 2% of revenue.
Exceptional items of £1.7m credit (2020: £5.1m expense) relate to Genus ABS
(£1.9m expense) and our central segment (£3.6m credit). Note 3 provides
details of these exceptional items.
We consider share-based payment expenses on a Group-wide basis and do not
allocate them to reportable segments.
Other segment information
Segment assets Segment liabilities
(restated)(1)
31 31 30 31 31 30
December December June December December June
2021 2020 2021 2021 2020 2021
£m
£m
£m
£m
£m
£m
Genus PIC 253.8 253.9 261.5 (63.3) (52.7) (57.4)
Genus ABS 232.9 198.5 203.1 (77.7) (57.3) (56.0)
Genus Research and Development
Research 18.3 6.4 17.8 (5.0) (3.7) (6.1)
Porcine product development 236.0 216.7 213.6 (57.8) (51.9) (55.0)
Bovine product development 119.0 130.9 125.0 (21.5) (28.9) (25.5)
373.3 354.0 356.4 (84.3) (84.5) (86.6)
Segment total 860.0 806.4 821.0 (225.3) (194.5) (200.0)
Central 36.2 20.7 30.0 (164.5) (149.1) (154.4)
Total 896.2 827.1 851.0 (389.8) (343.6) (354.4)
1 See note 1 for details of the prior period restatement.
Revenue by type
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2021 2020 2021
£m
£m
£m
Genus PIC 77.4 82.7 172.6
Genus ABS 126.5 125.5 242.2
Genus Research and Development 6.8 3.8 8.6
Sale of animals, semen, embryos and ancillary products and services 210.7 212.0 423.4
Genus PIC 66.1 70.2 143.0
Genus ABS 0.5 - 0.6
Genus Research and Development - - -
Royalties 66.6 70.2 143.6
Genus PIC - - -
Genus ABS 3.9 3.5 7.3
Genus Research and Development - - -
Consulting services 3.9 3.5 7.3
Total revenue 281.2 285.7 574.3
Revenue from contracts with customers
The Group's revenue is analysed below by the timing at which it is recognised.
Six months Six months Year
ended
ended
ended
31 December 31 December
30 June
2021 2020
2021
£m £m
£m
Genus PIC 142.0 151.5 312.8
Genus ABS 119.3 119.1 229.1
Genus Research and Development 6.8 3.8 8.6
Recognised at a point in time 268.1 274.4 550.5
Genus PIC 1.5 1.4 2.8
Genus ABS 11.6 9.9 21.0
Genus Research and Development - - -
Recognised over time 13.1 11.3 23.8
Total revenue 281.2 285.7 574.3
3. EXCEPTIONAL ITEMS
Operating credit/(expense) Six months Six months Year
ended ended ended
31 31 30
December December June
2021 2020 2021
£m
£m
£m
Litigation and damages (1.8) (1.7) (2.5)
Acquisition and integration (0.1) (0.1) (0.3)
Pension related - (3.3) (2.3)
Other 3.6 - 1.8
1.7 (5.1) (3.3)
Litigation and damages
Litigation includes legal fees and related costs of £1.8m (2020: £1.7m)
related to the actions between ABS Global, Inc. and certain affiliates ('ABS')
and Inguran, LLC and certain affiliates (aka STGenetics ('ST')).
Material litigation activities during the period ended 31 December 2021
In July 2014, ABS launched a legal action against ST in the US District Court
for the Western District of Wisconsin and initiated anti-trust proceedings
which ultimately enabled the launch of ABS's IntelliGen sexing technology in
the US market ('ABS I'). In June 2017, ST filed proceedings against ABS in the
same District Court, where ST alleged that ABS infringed seven patents and
asserted trade secret and breach of contract claims ('ABS II'). The ABS I and
ABS II proceedings in the periods before the year ended 30 June 2021 are more
fully described in the Notes to the Financial Statements in previous Annual
Reports. ABS has sought judgments as a matter of law ('JMOL') in relation to
the invalidity of all three of the patents considered in ABS II, JMOLs in
relation to the non-infringement of two of those patents, and a reduction in
damages awarded by the jury. The parties await the court's decision.
On 29 January 2020, ST filed a new US complaint against ABS ('ABS III'). ABS
has prepared and filed a response to the ABS III complaint, including a motion
to dismiss, on the basis that all these issues were fully resolved in either
the ABS I or ABS II litigations.
On 10 March 2020, the USPTO issued patent 10,583,439 (the ''439 patent'), and
subsequently ST asked the court for permission to file a supplemental
complaint in ABS III asserting infringement of the '439 patent. ABS believes
that ST's claim for infringement falls short and has filed an opposition to
ST's request. On 15 April 2020, ST filed a new complaint ('ABS IV'), asserting
the same claim of infringement of the '439 patent alleged in its supplemental
complaint and then moved to consolidate the ABS IV and ABS III litigation. ABS
has opposed this action and has filed a motion for summary dismissal. On 23
June 2020, the USPTO issued patent 10,689,210 (the ''210 patent'), and on 6
July 2020, ST sought a second supplement of ABS III by adding a claim of '210
patent infringement. ABS has opposed this action. The parties await the
court's decision.
On 26 October 2020 and 10 December 2020, ABS filed Inter Partes Reviews
('IPR') against the '439 and '210 patents with the USPTO. On 4 May 2021, the
Patent Trial and Appeal Board ('PTAB') instituted the '439 patent IPR, finding
a likelihood of success on all challenged claims. The hearing in the '439
patent IPR was completed on 2 February 2022 and the parties await the Board's
decision. On 7 June 2021, PTAB declined to institute the '210 patent IPR
without examining the merits of the case. PTAB's decision was based on its
exercise of its discretion, concluding that the prior art referenced in the
IPR was cited during the initial examination, therefore ABS could not
demonstrate the examiner made a material error, notwithstanding that the
relevant prior art was not addressed by the examiner. A rehearing
application was rejected by PTAB.
On 20 December 2021, the Wisconsin Federal Court reached a decision on the ABS
III and IV motions, granting ABS's motion to dismiss all claims relating to US
patent 8,206,987 and denying ST's motion to amend ABS III to add the '439 and
'210 patents. The court dismissed ABS III in its entirety and entered
judgment favour of ABS. In relation to ABS IV, the court stayed the case
pending completion of the '439 IPR and granted ST leave to amend ABS IV to add
the '210 patent. ST has appealed this decision.
Indian Litigation: In September 2019, ST also filed parallel patent
infringement proceedings against ABS in India, alleging infringement of the
Indian patent 240790 (''790 patent'). The '790 patent is the equivalent of
the US patent 7,311,476 asserted in ABS II. ABS had already sought the
revocation of the '790 patent in April 2017 before the Indian Patent Office
and has now consolidated the revocation petition as a counterclaim in the
Indian court proceedings. Progress of these proceedings has been delayed due
to the impact of the pandemic.
Acquisitions and integration
During the period, £0.1m (2020: £0.1m) of expenses were incurred in relation
to acquisitions during the period.
Other
Included within Other is a £3.6m credit relating to non-refundable cash
received for the assignment of rights to a legacy legal claim against the
Instituto Brasileiro de Café (IBC) in Brazil. The claim was for reimbursement
of unpaid amounts plus interest in respect of coffee shipments made by a group
subsidiary to the IBC in the 1990s, when the subsidiary was part of the
Dalgety Group. Under the assignment agreement, the subsidiary has assigned any
future receipt from the legal claim to an Investment Fund in Brazil, in
exchange for an immediate cash amount and a sliding scale earn out payment
which decreases over the duration of the period to the eventual receipt of
proceeds by the assignee. No amount has been recognised in respect of the earn
out payment, as the duration to the eventual settlement of the legal claim
cannot be estimated with any certainty.
Included in the prior year was a £2.0m credit resulting from a share
forfeiture exercise, in accordance with the Articles of Association. As a
three-year liability period ended during the year, the related provision was
no longer needed and was therefore released.
Pension related
In the prior year, on 20 November 2020, the High Court ruled that individual
transfer payments made since 17 May 1990 would need to be equalised for the
effects of Guaranteed Minimum Pension ('GMP'). This judgment followed on from
the previous judgment on 26 October 2018, where the High Court ruled that
schemes had a legal obligation to pay benefits allowing for GMP equalisation,
resulting in an additional liability being recognised. The previous judgment
had not considered historic transfer values. Genus's pension schemes were also
affected by this ruling, resulting in an aggregate past service charge of
£2.3m in the prior period, being £0.9m for the Dalgety Pension Fund ('DPF')
and £1.4m for the Milk Pension Fund ('MPF').
4. NET FINANCE COSTS
Six months Six months Year
ended ended ended
31 31 30
December December June
2021 2020 2021
£m
£m
£m
Interest payable on bank loans and overdrafts (1.6) (1.4) (2.8)
Amortisation of debt issue costs (0.4) (0.5) (0.9)
Unwinding of discount put options (0.3) (0.3) (0.6)
Net interest cost in respect of pension scheme liabilities (0.1) (0.2) (0.3)
Interest on lease liabilities (0.4) (0.4) (0.8)
Total interest expense (2.8) (2.8) (5.4)
Interest income on bank deposits 0.1 0.2 0.4
Total interest income 0.1 0.2 0.4
Net finance costs (2.7) (2.6) (5.0)
5. TAXATION AND DEFERRED TAXATION
Income tax expense
Six months Six months Year
ended ended ended
31 31 30
December December June
2021 2020 2021
£m
£m
£m
Current tax 6.6 8.2 19.6
Deferred tax (1.1) 0.2 (10.6)
Total income tax expense 5.5 8.4 9.0
The tax charge for the period of £5.5m (2020: £8.4m) on the statutory profit
represents an effective tax rate of 22.5% (2020: 22.5%), including a tax
benefit from the exceptional credit receipt of £3.6m which is taxed at a
lower tax rate of 14%, offset by the reduced agricultural relief available in
China as explained further below.
The tax charge on adjusted profits for the period is £9.3m (2020: £11.1m),
which represents a tax rate on adjusted profits of 25.1% (2020: 23.6%). The
Group tax rate has increased by approximately 150 basis points due to the
reduced share of Group profits arising in China which benefit from the
availability of tax relief on owned production agricultural activities. The
lower proportion of Group profits arising in China has resulted from a
decrease in PIC China's operating profit due to a decrease in demand for
breeding animals following the downturn in the Chinese porcine market.
There is a deferred tax liability at the period end of £50.9m (2020: £60.1m)
which mainly relates to the recognition at fair value of biological assets and
intangible assets arising on acquisition and a deferred tax asset of £5.1m
(2020: £3.3m) which mainly relates to future tax deductions in respect of
pension scheme liabilities, losses and share scheme awards.
6. DIVIDENDS
Amounts recognised as distributions to equity holders in the period
Six months Six months Year
ended ended ended
31 31 30
December December June
2021 2020 2021
£m
£m
£m
Final dividend
Final dividend for the year ended 30 June 2021 of 21.7 pence per share 14.2 - -
Final dividend for the year ended 30 June 2020 of 19.7 pence per share - 12.8 12.8
Interim dividend
Interim dividend for the year ended 30 June 2021 of 10.3 pence per share - - 6.7
14.2 12.8 19.5
The final dividend for the year ended 30 June 2021 was approved at the Company
Annual General Meeting on 24 November 2021 and paid on 10 December 2021.
On 23 February 2022, the Directors proposed an interim dividend of 10.3 pence
per share payable on 31 March 2022.
7. OTHER INTANGIBLE ASSETS
Porcine Brands, multiplier contracts and customer relationships Separately identified acquired intangible assets IntelliGen Patents, licences and other
and bovine genetics technology £m £m Software Assets under construction £m £m Total
£m £m £m £m
Cost
Balance at 1 July 2020 52.0 85.9 137.9 18.4 2.0 25.4 4.4 188.1
Additions - - - 0.4 3.8 0.9 - 5.1
Acquisition - 3.7 3.7 - - - - 3.7
Disposals - - - (1.1) - - - (1.1)
Transfers - - - 3.1 (3.1) - - -
Effect of movements in exchange rates (0.3) (8.0) (8.3) (0.8) - (2.7) (0.1) (11.9)
Balance at 30 June 2021 51.7 81.6 133.3 20.0 2.7 23.6 4.3 183.9
Additions - - - 0.1 4.1 - - 4.2
Acquisition - 0.3 0.3 - - - - 0.3
Transfers - - - 2.5 (2.5) - - -
Effect of movements in exchange rates (0.3) 1.1 0.8 0.1 - 0.5 - 1.4
Balance at 30 December 2021 51.4 83.0 134.4 22.7 4.3 24.1 4.3 189.8
Amortisation and impairment losses
Balance at 1 July 2020 33.2 68.2 101.4 13.0 - 6.9 3.9 125.2
Disposals - - - (0.6) - - - (0.6)
Amortisation for the period 2.8 4.6 7.4 1.4 - 2.2 0.1 11.1
Effect of movements in exchange rates - (6.6) (6.6) (0.8) - (0.7) - (8.1)
Balance at 30 June 2021 36.0 66.2 102.2 13.0 - 8.4 4.0 127.6
Disposals - - - - - - - -
Amortisation for the period 1.4 2.4 3.8 0.7 - 1.2 0.1 5.8
Effect of movements in exchange rates (0.2) 0.9 0.7 0.1 - 0.2 - 1.0
Balance at 31 December 2021 37.2 69.5 106.7 13.8 - 9.8 4.1 134.4
Carrying amounts
At 31 December 2021 14.2 13.5 27.7 8.9 4.3 14.3 0.2 55.4
At 30 June 2021 15.7 15.4 31.1 7.0 2.7 15.2 0.3 56.3
Included within brands, multiplier contracts and customer relationships are
carrying amounts for brands of £0.6m (30 June 2021: £0.7m), multiplier
contracts of £0.2m (30 June 2021: £0.3m) and customer relationships of
£12.7m (30 June 2021: £14.4m).
Included within the software class of assets is £7.3m (30 June 2021: £5.4m)
and included in assets in the course of construction is £0.7m (30 June 2021:
£1.1m) that relate to the ongoing development costs of GenusOne, our single
global enterprise system.
8. BIOLOGICAL ASSETS
Fair value of biological assets Bovine Porcine Total
£m £m £m
Balance at 1 July 2021 92.0 227.5 319.5
Increases due to purchases 10.1 76.5 86.6
Decreases attributable to sales - (137.3) (137.3)
Decrease due to harvest (9.4) (12.7) (22.1)
Changes in fair value less estimated sale costs (5.0) 76.8 71.8
Effect of movements in exchange rates 1.6 4.7 6.3
Balance at 31 December 2021 89.3 235.5 324.8
Non-current biological assets 89.3 198.9 288.2
Current biological assets - 36.6 36.6
Balance at 31 December 2021 89.3 235.5 324.8
Balance at 1 July 2020 107.2 242.7 349.9
Increases due to purchases 5.9 57.4 63.3
Decreases attributable to sales - (111.6) (111.6)
Decrease due to harvest (11.1) (10.7) (21.8)
Changes in fair value less estimated sale costs 3.9 77.4 81.3
Effect of movements in exchange rates (9.0) (19.7) (28.7)
Balance at 31 December 2020 96.9 235.5 332.4
Non-current biological assets 96.9 197.3 294.2
Current biological assets - 38.2 38.2
Balance at 31 December 2020 96.9 235.5 332.4
Balance at 1 July 2020 107.2 242.7 349.9
Increases due to purchases 15.2 134.8 150.0
Decreases attributable to sales - (223.0) (223.0)
Decrease due to harvest (24.4) (21.4) (45.8)
Business combination - 0.3 0.3
Changes in fair value less estimated sale costs 3.9 118.4 122.3
Effect of movements in exchange rates (9.9) (24.3) (34.2)
Balance at 30 June 2021 92.0 227.5 319.5
Non-current biological assets 92.0 187.9 279.9
Current biological assets - 39.6 39.6
Balance at 30 June 2021 92.0 227.5 319.5
Bovine biological assets include £7.1m (2020: £8.2m) representing the fair
value of bulls owned by third parties but managed by the Group, net of
expected future payments to such third parties, which are therefore treated as
assets held under finance leases.
There were no movements in the carrying value of the bovine biological assets
in respect of sales or other changes during the period.
A risk-adjusted rate of 9.5% (2020: 8.8%) has been used to discount future net
cash flows from the sale of bull semen.
Decreases due to harvest represent the semen extracted from the biological
assets. Inventories of such semen are shown as biological asset harvest.
In porcine, 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 £39.5m (2020:
£23.4m).
Decreases attributable to sales during the period of £137.3m (2020: £111.6m)
include £38.0m (2020: £34.7m) 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.
Also included is £58.2m (2020: £46.0m) relating to the fair value of the
retained interest in the genetics in respect of animals, other than parent
gilts, sold to customers under royalty contracts in the period.
Total revenue in the period, including parent gilts, includes £104.1m (2020:
£109.1m) in respect of these contracts, comprising £38.0m (2020: £38.9m) on
initial transfer of animals and semen to customers and £66.1m (2020: £70.2m)
in respect of royalties received.
A risk-adjusted rate of 9.3% (2020: 8.8%) has been used to discount future net
cash flows from the expected output of the pure line porcine herds. The number
of future generations which have been taken into account is seven (2020:
seven) and their estimated useful lifespan is 1.4 years (2020: 1.4 years).
Six months ended 31 December 2021
Bovine Porcine Total
£m £m £m
Net IAS 41 valuation movement on biological assets(1)
Changes in fair value of biological assets (5.0) 76.8 71.8
Inventory transferred to cost of sales at fair value (4.2) (12.7) (16.9)
Biological assets transferred to cost of sales at fair value - (61.7) (61.7)
(9.2) 2.4 (6.8)
Fair value movement in related financial derivative - - -
(9.2) 2.4 (6.8)
Six months ended 31 December 2020
Bovine Porcine Total
£m £m £m
Net IAS 41 valuation movement on biological assets(1)
Changes in fair value of biological assets 3.9 77.4 81.3
Inventory transferred to cost of sales at fair value (10.5) (10.7) (21.2)
Biological assets transferred to cost of sales at fair value - (56.4) (56.4)
(6.6) 10.3 3.7
Fair value movement in related financial derivative - (0.2) (0.2)
(6.6) 10.1 3.5
Year ended 30 June 2021
Bovine Porcine Total
£m £m £m
Net IAS 41 valuation movement on biological assets(1)
Changes in fair value of biological assets 3.9 118.4 122.3
Inventory transferred to cost of sales at fair value (21.1) (21.4) (42.5)
Biological assets transferred to cost of sales at fair value - (90.0) (90.0)
(17.2) 7.0 (10.2)
Fair value movement in related financial derivative - (0.6) (0.6)
(17.2) 6.4 (10.8)
1 This represents the difference between operating profit
prepared under IAS 41 and operating profit prepared under historical cost
accounting, which forms part of the reconciliation to adjusted
operating profit (see
APMs).
9. PROPERTY, PLANT AND EQUIPMENT
Land and buildings Plant, motor vehicles and equipment Assets under construction Total Land and buildings Plant, motor vehicles and equipment Total Total
owned
right-of-use
£m £m £m
assets £m £m
£m
assets
£m
£m
Cost or deemed cost
Balance at 1 July 2020 67.9 87.8 8.2 163.9 21.9 24.0 45.9 209.8
Additions 1.1 5.9 22.3 29.3 2.3 8.1 10.4 39.7
Business combination - 0.2 - 0.2 - - - 0.2
Transfers 4.3 3.5 (7.8) - - - - -
Disposals (0.3) (2.1) - (2.4) (1.9) (4.7) (6.6) (9.0)
Effect of movements in exchange rates (6.4) (7.3) (0.6) (14.3) (1.6) (1.4) (3.0) (17.3)
Balance at 30 June 2021 66.6 88.0 22.1 176.7 20.7 26.0 46.7 223.4
Additions - 1.5 24.5 26.0 1.7 2.5 4.2 30.2
Transfers 11.5 8.1 (19.6) - - - - -
Disposals (0.5) (0.5) - (1.0) (0.2) (6.1) (6.3) (7.3)
Effect of movements in exchange rates 1.2 1.1 (0.2) 2.1 0.2 0.2 0.4 2.5
Balance at 31 December 2021 78.8 98.2 26.8 203.8 22.4 22.6 45.0 248.8
Depreciation and impairment losses
Balance at 1 July 2020 24.3 53.1 - 77.4 4.4 10.1 14.5 91.9
Depreciation for the year 3.2 9.8 - 13.0 3.7 7.3 11.0 24.0
Disposals (0.3) (1.5) - (1.8) (1.3) (4.2) (5.5) (7.3)
Effect of movements in exchange rates (2.7) (4.5) - (7.2) (0.3) (0.7) (1.0) (8.2)
Balance at 30 June 2021 24.5 56.9 - 81.4 6.5 12.5 19.0 100.4
Depreciation for the period 1.8 5.3 - 7.1 1.8 3.3 5.1 12.2
Disposals (0.5) (0.4) - (0.9) (0.2) (6.0) (6.2) (7.1)
Effect of movements in exchange rates 0.3 0.8 - 1.1 (0.1) 0.1 - 1.1
Balance at 31 December 2021 26.1 62.6 - 88.7 8.0 9.9 17.9 106.6
Carrying amounts
At 31 December 2021 52.7 35.6 26.8 115.1 14.4 12.7 27.1 142.2
At 30 June 2021 42.1 31.1 22.1 95.3 14.2 13.5 27.7 123.0
10. Interests in joint ventures and associates
The Group's share of profit after tax in its equity accounted investees for
the six months ended 31 December 2021 was £3.2m (2020: £5.8m).
The carrying value of the investment is reconciled as follows:
31
31 December
December 2020
2021 £m
£m
Balance at 1 July 34.1 22.7
Share of post-tax retained profits of joint ventures and associates 3.2 5.8
Additions 1.1 0.4
Disposal (0.1) -
Effect of other movements including exchange rates (2.2) (0.5)
Balance at 31 December 36.1 28.4
Summary unaudited financial information for equity accounted investees,
adjusted for the Group's percentage ownership, is shown below:
Net IAS 41
valuation Profit after
movement tax
on biological £m
Revenue assets Expenses Taxation
Income Statement £m £m £m £m
Six months ended 31 December 2021 19.6 (0.4) (14.7) (1.3) 3.2
Six months ended 31 December 2020 20.6 2.1 (14.7) (2.2) 5.8
Year ended 30 June 2021 38.9 3.1 (25.9) (3.0) 13.1
11. TRADE AND OTHER RECEIVABLES
31 December 31 December 30 June
2021 2020 2021
£m
£m
£m
Trade receivables 90.9 86.0 87.2
Less expected credit loss allowance (3.6) (4.8) (5.0)
Trade receivables net of impairment 87.3 81.2 82.2
Other debtors 7.8 6.5 6.4
Prepayments 9.3 6.6 6.6
Contract assets 9.8 4.8 7.7
Other taxes and social security 3.9 2.4 3.3
Current trade and other receivables 118.1 101.5 106.2
Non-current other receivables 1.8 2.0 1.8
119.9 103.5 108.0
Trade receivables
The average credit period our customers take on the sales of goods is 53 days
(30 June 2021: 53 days). We do not charge interest on receivables for the
first 30 days from the date of the invoice.
The Group always measures the loss allowance for trade receivables at an
amount equal to lifetime expected credit losses ('ECLs'). The ECLs on trade
receivables are estimated using a provision matrix by reference to past
default experience of the debtor and an analysis of the debtor's current
financial position, adjusted for factors that are specific to the general
economic conditions of the industry and country in which the debtor operates
and an assessment of both the current and the forecast direction of conditions
at the reporting date. The Group writes off a trade receivable when there is
information indicating that the debtor is in severe financial difficulty and
there is no realistic prospect of recovery, such as when the debtor has been
placed under liquidation or has entered into bankruptcy proceedings.
No customer represents more than 5% of the total balance of trade receivables
(30 June 2021: no more than 5%).
12. EARNINGS PER SHARE
Weighted average number of ordinary shares (diluted)
Six months Six months Year
ended ended ended
31 31 30
December December June
2021 2020 2021
000s
000s
000s
Weighted average number of ordinary shares (basic) 65,390 65,056 65,108
Dilutive effect of share options and awards 430 554 554
Weighted average number of ordinary shares for the purpose of diluted earnings 65,820 65,610 65,662
per share
(restated)(1)
Six months Six months Year
ended ended ended
31 31 30
December December June
2021 2020 2021
(pence) (pence) (pence)
Earnings per share
Basic earnings per share 30.4 46.4 72.6
Diluted earnings per share 30.2 46.0 72.0
Adjusted earnings per share
Adjusted earnings per share 42.4 55.3 100.9
Diluted adjusted earnings per share 42.1 54.9 100.1
1 See note 1 for details of the prior period restatement.
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 trading
performance.
Basic earnings per share is based on the net profit attributable to owners of
the Company for the period of £19.9m (six months ended 31 December 2020:
£30.2m; year ended 30 June 2021: £47.3m) 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 £27.7m (six months ended
31 December 2020: £36.0m; year ended 30 June 2021: £65.7m), which is
calculated as follows:
Adjusted earnings
(restated)(1) Year
Six months Six months ended
ended ended 30
31 31 June
December December 2021
2021 2020 £m
£m
£m
Profit before tax 24.4 37.4 55.8
Add/(deduct):
Net IAS 41 valuation movement on biological assets 6.8 (3.5) 10.8
Amortisation of acquired intangible assets 3.8 3.7 7.4
Share-based payment expense 2.2 4.3 7.7
Exceptional items (see note 3) (1.7) 5.1 3.3
Net IAS 41 valuation movement on biological assets in joint ventures 0.4 (2.1) (3.1)
Tax on joint ventures and associates 1.3 2.2 3.0
Attributable to non-controlling interest (0.2) - (0.1)
Adjusted profit before tax 37.0 47.1 84.8
Adjusted tax charge (9.3) (11.1) (19.1)
Adjusted profit after tax 27.7 36.0 65.7
Effective tax rate on adjusted profit 25.1% 23.6% 22.5%
1 See note 1 for details of the prior period restatement.
13. CASH FLOW FROM OPERATING ACTIVITIES
(restated)(1) Year
Six months Six months ended
ended ended 30
31 31 June
December December 2021
£m
2021 2020
£m
£m
Profit for the period 18.9 29.0 46.8
Adjustment for:
Net IAS 41 valuation movement on biological assets 6.8 (3.5) 10.8
Amortisation of acquired intangible assets 3.8 3.7 7.4
Share-based payment expense 2.2 4.3 7.7
Share of profit of joint ventures and associates (3.2) (5.8) (13.1)
Finance costs (net) 2.7 2.6 5.0
Income tax expense 5.5 8.4 9.0
Exceptional items (1.7) 5.1 3.3
Adjusted operating profit from continuing operations 35.0 43.8 76.9
Depreciation of property, plant and equipment 12.2 11.9 24.0
(Profit)/loss on disposal of plant and equipment (0.1) - 0.4
Loss on disposal of intangible assets - 0.4 0.5
Amortisation and impairment of intangible assets 2.0 1.6 3.7
Adjusted earnings before interest, tax, depreciation and amortisation 49.1 57.7 105.5
Cash impact of exceptional items 2.7 (1.8) (3.0)
Other movements in biological assets and harvested produce (5.8) (7.7) (12.8)
Decrease in provisions and release in deferred consideration (0.1) (0.4) (0.4)
Additional pension contributions in excess of pension charge (2.3) (3.2) (7.0)
Other (0.6) (0.6) (1.3)
Operating cash flows before movement in working capital 43.0 44.0 81.0
(Increase)/decrease in inventories (8.2) 0.6 (1.3)
Increase in receivables (11.9) (5.7) (11.0)
(Decrease)/Increase in payables (0.7) 3.9 17.9
Cash generated by operations 22.2 42.8 86.6
Interest received 0.1 0.2 0.4
Interest and other finance costs paid (1.7) (1.4) (2.8)
Interest on leased assets (0.4) (0.4) (0.8)
Cash flow from derivative financial instruments (0.3) - 0.2
Income taxes paid (8.3) (5.3) (16.1)
Net cash from operating activities 11.6 35.9 67.5
1 See note 1 for details of the prior period restatement.
14. 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 plc Annual Report 2021. The aggregated position of defined benefit
schemes are provided below:
31 December 31 December 30 June
2021 2020 2021
£m
£m
£m
Present value of funded obligations 1,100.2 1,166.1 1,097.7
Present value of unfunded obligations 9.0 9.0 8.9
Total present value of obligations 1,109.2 1,175.1 1,106.6
Fair value of plan assets (1,176.1) (1,189.0) (1,147.2)
Restricted recognition of asset (DPF) 9.6 8.1 8.8
Restricted recognition of asset (MPF) 66.1 20.8 42.9
Recognised liability for defined benefit obligations 8.8 15.0 11.1
The principal actuarial assumptions (expressed as weighted averages) are:
31 31 30
December December June
2021 2020 2021
Discount rate 1.95% 1.45% 1.90%
Consumer Price Index 2.30% 2.10% 2.10%
Retail Price Index 3.05% 2.60% 2.85%
The Milk Pension Fund
We have accounted for our section of the scheme and our share of any orphan
assets and liabilities, which together represent approximately 86% 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.
On 23 September 2021, a formal actuarial valuation with an effective date of
31 March 2021 was completed by the scheme's actuary Aon Solutions UK Limited.
The market value of the available assets at 31 March 2021 was £492m. The
value of those assets represented approximately 103% of the value of the
uninsured liabilities, which were £480m at the 31 March 2021. Reflecting the
improvement in the funding position and with effect from 1 September 2021, no
deficit repair contributions are payable but funding the scheme's operating
expenses of £1.1m per annum was agreed to be paid, rising thereafter by 3.4%
per annum until 30 September 2026.
Further details of the Milk Pension Fund can be found in the Genus plc Annual
Report 2021.
15. Financial instruments fair value disclosures
The table below sets out the categorisation of the financial instruments held
by the Group at 31 December 2021.
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.
31 December 2021 31 December 2020 30 June 2021
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
£m £m £m £m £m £m £m £m £m £m £m £m
Financial assets
Other investments 12.4 - 3.5 15.9 1.8 - 5.0 6.8 2.0 10.4 2.3 14.7
Trade receivables and other debtors, excluding prepayments and contract assets - 100.8 - 100.8 - 90.1 - 90.1 - 91.9 - 91.9
(see note 11)
Cash and cash equivalents - 45.9 - 45.9 - 50.2 - 50.2 - 46.0 - 46.0
Derivative instruments in non-designated hedge accounting relationships - 0.6 - 0.6 - 0.9 - 0.9 - 0.1 - 0.1
12.4 147.3 3.5 163.2 1.8 141.2 5.0 148.0 2.0 148.4 2.3 152.7
Financial liabilities
Trade and other payables, excluding other taxes and social security - (106.9) - (106.9) - (89.7) - (89.7) - (102.1) - (102.1)
Loans and overdrafts - (161.6) - (161.6) - (114.8) - (114.8) - (123.3) - (123.3)
Leasing obligations - (27.6) - (27.6) - (27.6) - (27.6) - (28.3) - (28.3)
Derivative instruments in non-designated hedge accounting relationships - (0.3) - (0.3) - (0.3) - (0.3) - - - -
Derivative instruments in designated hedge accounting relationships - - - - - (0.1) - (0.1) - - - -
Put options for purchase of share in an investment - (0.9) - (0.9) - - - - - - - -
Put option over non-controlling interest - (6.6) - (6.6) - (5.9) - (5.9) - (6.1) - (6.1)
Deferred consideration - (0.2) (1.7) (1.9) - (0.4) (1.0) (1.4) - (0.4) (1.7) (2.1)
- (304.1) (1.7) (305.8) - (238.8) (1.0) (239.8) - (260.2) (1.7) (261.9)
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.
16. RELATED PARTY TRANSACTIONS
Transactions between the Company and its subsidiaries, which are related
parties, have been eliminated on consolidation and are not disclosed in this
note.
Bomaz, Inc. and Bogz Dairy, LLC, are well recognised breeders in the industry,
and are related parties to the Group as these entities are under the control
of relatives of Nate Zwald, our ABS Dairy COO.
We transact with Bomaz, Inc. and Bogz Dairy, LLC as part of our bull product
development effort, under a variety of contracts and agreements. Payments in
the six months ended 31 December 2021 amounted to £0.1m (2020: £0.4m). As at
31 December 2021, the balance owing to these entities was £nil (2020: £nil),
all amounts were settled in cash.
These related party transactions were made on terms equivalent to those that
prevail in arms' length transactions.
Other related party transactions
Transactions between the Group and its joint ventures and associates are
described below:
Transaction value Balance outstanding
Six months Six months Year Six months Six months Year
ended ended ended ended ended ended
31 31 30 31 31 30
December December June December December June
2021 2020 2021 2021 2020 2021
£m
£m
£m
£m
£m
£m
Sale of goods and services to joint ventures and associates - - (1.8) - - 0.4
Purchase of goods and services from joint ventures and associates 2.8 3.3 5.0 (0.3) (1.0) (0.4)
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.
17. Post Balance sheet event
On 22 February 2022, PIC has entered into an agreement with Olymel LP, a
leader in the Canadian agrifood industry, for provision of genetic products
and services in connection with the Olymel's AlphaGene porcine genetic
improvement program. Under the transaction, PIC has acquired all intellectual
property in Olymel's elite porcine genetics for a total cash consideration of
CAD$ 25.0m (£14.5m). The parties have also entered into an exclusive long
term genetics collaboration agreement, where PIC will supply elite germplasm
and manage the ongoing genetic improvement of Olymel's AlphaGene genetics.
Due to the timing of the acquisition the initial accounting for the business
combination is incomplete and the associated disclosures cannot currently be
made. Those disclosures will be made in our financial statements for the year
ended 30 June 2022.
GENUS PLC
RESPONSIBILITY STATEMENT
For the six months ended 31 December 2021
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 Chief Financial Officer
Stephen Wilson Alison Henriksen
23 February 2022
Alternative Performance Measures GLOSSARY
The Group tracks a number of APMs in managing its business, which are not
defined or specified under the requirements of IFRS because they exclude
amounts that are included in, or include amounts that are excluded from, the
most directly comparable measure calculated and presented in accordance with
IFRS, or are calculated using financial measures that are not calculated in
accordance with IFRS.
The Group believes that these APMs, which are not considered to be a
substitute for or superior to IFRS measures, provide stakeholders with
additional helpful information on the performance of the business. These APMs
are consistent with how the business performance is planned and reported
within the internal management reporting to the Board and GELT. Some of these
APMs are also used for the purpose of setting remuneration targets.
These APMs should be viewed as supplemental to, but not as a substitute for,
measures presented in the consolidated financial information relating to the
Group, which are prepared in accordance with IFRS. The Group believes that
these APMs are useful indicators of its performance. However, they may not be
comparable to similarly-titled measures reported by other companies, due to
differences in the way they are calculated.
The key APMs that the Group uses include:
Alternative Performance Measures Calculation methodology and closest equivalent IFRS measure (where applicable) Reasons why we believe the
APMs are useful
Income statement measures
Adjusted operating profit exc JVs Adjusted operating profit is operating profit with the net IAS 41 valuation Allows the comparison of underlying financial performance by excluding the
movement on biological assets, amortisation of acquired intangible assets, impacts of exceptional items and is a performance indicator against which
share-based payment expense and exceptional items added back and excludes JV short-term and long-term incentive outcomes for our senior executives are
and associate results. measured:
net IAS 41 valuation movements on biological assets - these movements can be
materially volatile and do not directly correlate to the underlying trading
Closest equivalent IFRS measure: Operating profit(1) performance in the period. Furthermore, the movement is non-cash related and
many assumptions used in the valuation model are based on projections rather
than current trading;
See reconciliation below. amortisation of acquired intangible assets - excluding this improves the
comparability between acquired and organically grown operations, as the latter
cannot recognise internally generated intangible assets. Adjusting for
amortisation provides a more consistent basis for comparison between the two;
share-based payments - this expense is considered to be relatively volatile
and not fully reflective of the current period trading, as the performance
criteria are based on EPS performance over a three-year period and include
Including adjusted operating profit from JV and associate results. estimates of future performance; and
See reconciliation below. exceptional items - these are items which due to either their size or their
Adjusted operating profit inc JVs
nature are excluded, to improve the understanding of the Group's underlying
performance.
Adjusted operating profit inc JVs exc gene editing costs
Including adjusted operating profit from JV and associate results but
excluding gene editing costs.
See reconciliation below.
Adjusted operating profit including JV less adjusted effective tax.
Adjusted operating profit inc JVs after tax See reconciliation below.
Adjusted operating profit including JVs less net finance costs.
Adjusted profit inc JVs before tax
See reconciliation below.
Adjusted profit including JVs before tax less adjusted effective tax.
See reconciliation below.
Adjusted profit inc JVs
after tax
Adjusted profit inc JVs before tax exc SaaS impact Adjusted operating profit before tax, excluding the impact of the change in This measure is presented only this year to demonstrate the impact of our
accounting policy related to the accounting for Software as a service ('SaaS') change in accounting policy, and will not be presented in future periods. We
(See note 1) present this measure to allow comparability of financial performance with the
expectations of the year, which were based on our pre-existing accounting
See reconciliation below policy
Adjusted effective tax rate Total income tax charge for the Group excluding the tax impact of adjusting Provides an underlying tax rate to allow comparability of underlying financial
items, divided by the adjusted profit before tax. performance, by excluding the impacts of net IAS 41 valuation movement on
biological assets, amortisation of acquired intangible assets, share-based
payment expense and exceptional items.
Closest equivalent IFRS measure: Effective tax rate
See reconciliation below.
Adjusted basic earnings Adjusted profit after tax profit divided by the On a per share basis, this allows the comparability of underlying financial
per share
performance by excluding the impacts of adjusting items.
weighted basic average number of shares.
Closest equivalent IFRS measure: Earnings per share
See calculation below.
Adjusted diluted earnings per share
Underlying attributable profit divided by the diluted weighted basic average
number of shares.
Closest equivalent IFRS measure: Diluted earnings per share
See calculation below.
Adjusted earnings cover Adjusted earnings per share divided by the expected dividend for the preceding The Board dividend policy targets the adjusted earning cover to be between
12 months. 2.5-3 times.
See calculation below.
Adjusted EBITDA - calculated in accordance with the definitions used in our This is adjusted operating profit, adding back cash received from our joint This APM is presented because it is used in calculating our ratio of net debt
financing facilities ventures, depreciation of property, plant and equipment, depreciation of the to EBITDA and our interest cover, which we report to our banks to ensure
historical cost of biological assets, operational amortisation (i.e. excluding compliance with our bank covenants.
amortisation of acquired intangibles) and deducting the amount attributable to
minority interest.
Closest equivalent IFRS measure: Operating profit(1)
See reconciliation below.
Adjusted operating margin Adjusted operating profit (including JVs) divided by revenue. Allows for the comparability of underlying financial performance by excluding
the impacts of exceptional items.
Adjusted operating margin (exc JVs) Adjusted operating profit divided by revenue.
Constant currency basis The Group reports certain financial measures, on both a reported and constant The Group's business operates in multiple countries worldwide and its trading
currency basis and re-translates the current year's results at the average results are translated back into the Group's functional currency of Sterling.
actual exchange rates used in the previous financial year. This measure eliminates the effects of exchange rate fluctuations when
comparing year-on-year reported results.
Balance sheet measures
Net debt Net debt is gross debt, made up of unsecured bank loans and overdrafts and This allows the Group to monitor its levels of debt.
obligations under finance leases, with a deduction for cash and cash
equivalents.
See reconciliation below.
Net debt - calculated in accordance with the definitions used in our financing Net debt excluding the impact of adopting IFRS 16 and adding back guarantees This is a key metric that we report to our banks to ensure compliance with our
facilities and deferred purchase arrangements. bank covenants.
See reconciliation below.
Cash flow measures
Cash conversion Cash generated by operations as a percentage of adjusted operating profit This is used to measure how much operating cash flow we are generating and how
excluding JVs. efficient we are at converting our operating profit into cash.
See calculation below.
Free cash flow Cash generated by the Group before debt repayments, acquisitions and Shows the cash retained by the Group in the year.
investments, dividends and proceeds from share issues.
Closest IFRS measure: Net cash flow from operating activities
See reconciliation below.
Other measures
Ratio of net debt to adjusted EBITDA The ratio of net debt, calculated in accordance with the definitions used in This APM is used as a measurement of our leverage and is also a key metric
our financing facilities, is gross debt, made up of unsecured bank loans and that we report to our banks to ensure compliance with our bank covenants.
overdrafts and obligations under finance leases, with a deduction for cash and
cash equivalents and adding back amounts related to guarantees and deferred
purchase arrangements, to adjusted EBITDA.
Closest equivalent IFRS components for the ratio: The equivalent IFRS
components are gross debt, cash and cash equivalents and operating profit.
See calculation below.
1 Operating profit is not defined per IFRS. It is presented in the
Group Income Statement and is shown as profit before tax, finance income/costs
and share of post-tax profit of joint ventures and associates retained.
The tables below reconcile the closest equivalent Ifrs measure to the apm or
outline the calculation of the apm
Income statement measures
Adjusted operating profit exc JVs
Adjusted operating profit inc JVs
Adjusted operating profit inc JVs and exc gene editing costs
(restated)(1)
31 December 31 December 30 June
2020
2021 2021
£m £m £m £m £m £m Reference
Operating profit 23.9 34.2 47.7 Group Income Statement
Add back:
Net IAS 41 valuation movement on biological assets 6.8 (3.5) 10.8 Group Income Statement
Amortisation of acquired intangible assets 3.8 3.7 7.4 Group Income Statement
Share-based payment expense 2.2 4.3 7.7 Group Income Statement
Exceptional items (1.7) 5.1 3.3 Group Income Statement
Adjusted operating profit exc JVs 35.0 43.8 76.9 Group Income Statement
Less: amounts attributable to non-controlling interest (0.2) - (0.1) Group Income Statement
Operating profit from joint ventures and associates 3.2 5.8 13.1 Group Income Statement
Tax on joint ventures and associates 1.3 2.2 3.0 Note 10 - Interests in joint ventures and associates
Net IAS 41 valuation movement 0.4 (2.1) (3.1) Note 10 - Interests in joint ventures and associates
Adjusted operating profit from JVs 4.9 5.9 13.0
Adjusted operating profit inc JVs 39.7 49.7 89.8
Gene editing costs 3.6 3.7 7.6 Note 2 - Segmental information
Adjusted operating profit inc JVs and exc gene editing costs 43.3 53.4 97.4
Adjusted profit inc JVs before tax
Adjusted profit inc JVs after tax
(restated)(1)
31 December 31 December 30 June
2020
2021 2021
£m £m £m Reference
Adjusted operating profit inc JVs 39.7 49.7 89.8 See APM
Less net finance costs (2.7) (2.6) (5.0) Note 4 - Net finance costs
Adjusted profit inc JVs before tax 37.0 47.1 84.8
Adjusted tax (9.3) (11.1) (19.1) Note 12 - Earnings per share
Adjusted profit inc JVs after tax 27.7 36.0 65.7
Adjusted profit inc JVs before tax exc SaaS impact
(restated)(1)
31 December 31 December 30 June
2020
2021 2021
£m £m £m Reference
Adjusted profit inc JVs before tax 37.0 47.1 84.8 See APM
Impact of change in accounting policy - 1.3 2.7 No direct reference
Adjusted profit inc JVs before tax exc SaaS impact 37.0 48.4 87.5
1 See note 1 for details of the prior period restatement.
Adjusted effective tax £m/rate
(restated)(1)
31 December 31 December 30 June
2020
2021 2021
£m % £m % £m % Reference
Adjusted effective tax £m/rate 9.3 25.1 11.1 23.6 19.1 22.5 Note 12 - Earnings per share
Exceptional items 0.1 - (1.0) (19.6) (1.1) (33.3) No direct reference
Share-based payment expense (0.5) (22.7) (0.8) (18.9) (1.6) (20.8) No direct reference
Amortisation of acquired intangible assets (0.7) (18.4) (0.8) (21.6) (1.5) (20.3) No direct reference
Net IAS 41 valuation movement on biological assets (1.3) (19.1) 1.3 37.1 (2.9) (26.9) No direct reference
Effective tax £m/rate 6.9 21.2 9.8 19.9 12.0 20.4 No direct reference
Adjusted basic earnings per share
(restated)(1) 30 June Reference
31 December 31 December 2021
2021 2020
Adjusted profit inc JVs after tax (£m) 27.7 36.0 65.7 See APM
Weighted average number of ordinary shares ('000) 65.390 65.056 65.108 Note 12 - Earnings per share
Adjusted basic earnings per share (pence) 42.4 55.3 100.9
Adjusted diluted earnings per share
(restated)(1) 30 June Reference
31 December 31 December 2021
2021 2020
Adjusted profit inc JVs after tax (£m) 27.7 36.0 65.7 See APM
Weighted average number of diluted ordinary shares ('000) 65.820 65.610 65.662 Note 12 - Earnings per share
Adjusted diluted earnings per share (pence) 42.1 54.9 100.1
Rolling 12 month Adjusted Earnings cover
(restated)(1)
31 December 31 December 30 June
2020
2021 2021
Pence Times Pence Times Pence Times Reference
Adjusted Earnings per share 42.4 55.3 100.9 See APM
Add: Prior June Adjusted Earnings per share 100.9 77.3 N/a See APM
Deduct: Prior Interim Adjusted Earnings per share (55.3) (43.0) N/a See APM
Rolling 12 month adjusted Earnings per share 88.0 89.6 100.9
Dividend for the period 10.3 10.3 32.0 Note 6 - Dividends
Add: Dividend for prior June 32.0 29.1 N/a Note 6 - Dividends
Less: prior interim dividend (10.3) (9.4) N/a Note 6 - Dividends
Rolling 12-month dividend 32.0 30.0 32.0
Rolling 12 month Adjusted Earnings cover 2.8 3.0 3.2 No direct reference
1 See note 1 for details of the prior period restatement.
Adjusted EBITDA - as calculated under our financing facilities
(restated)(1,2)
31 December 31 December 30 June
2020
2021 2021
£m £m £m £m £m £m Reference
Operating profit 23.9 34.2 47.7 Group Income Statement
Add back:
Net IAS 41 valuation movement on biological assets 6.8 (3.5) 10.8 Group Income Statement
Amortisation of acquired intangible assets 3.8 3.7 7.4 Group Income Statement
Share-based payment expense 2.2 4.3 7.7 Group Income Statement
Exceptional items (1.7) 5.1 3.3 Group Income Statement
Adjusted operating profit exc JVs 35.0 43.8 76.9 Group Income Statement
Adjust for:
Cash received from JVs (dividend and loan repayment) - - 4.1 Group Statement of Cash Flows
Depreciation: property, plant and equipment 12.2 11.9 24.0 Note 9 - Property, plant and equipment
Operational lease payments (5.6) (5.4) (12.5) No direct reference
Depreciation: historical cost of biological assets 5.5 5.2 10.0 No direct reference
Amortisation and impairment (excluding separately identifiable acquired 2.0 1.6 3.7 Note 7 - Intangible assets
intangible assets)
Less amounts attributable to non-controlling interest (0.2) - (0.1) Group Income Statement
Adjusted EBITDA - as calculated under our financing facilities 48.9 57.1 106.1
Rolling 12 month Adjusted EBITDA - as calculated under our financing
facilities
(restated)(1,2)
31 December 31 December 30 June
2020
2021 2021
£m £m £m £m £m £m Reference
Operating profit
Adjusted EBITDA - as calculated under our financing facilities 48.9 57.1 106.1 See APM
Add: Prior June Adjusted EBITDA 106.1 96.4 N/a See APM
Deduct: Prior Interim Adjusted EBITDA (57.1) (42.8) N/a See APM
Rolling 12 month Adjusted EBITDA 97.9 110.7 106.1
1 See note 1 for details of the prior period restatement.
2 Following Genus entering a new credit facility the definitions of
EBITDA, Borrowings and Net Debt were amended. Consequently, the comparative
values have been restated to reflect the amended definitions as reported to
the banks.
Balance sheet measures
Net Debt
Net debt as calculated under our financing facilities
31 December 31 December 30 June
2020
2021 2021
£m £m £m £m £m £m Reference
Current unsecured bank loans and overdrafts 10.6 9.8 13.9
Non-current unsecured bank loans and overdrafts 151.0 105.0 109.4
Unsecured bank loans and overdrafts 161.6 114.8 123.3 Group Balance Sheet
Current obligations under finance leases 8.6 9.0 9.0
Non-current obligations under finance leases 19.0 18.6 19.3
Obligations under finance leases 27.6 27.6 28.3 Group Balance Sheet
Total debt financing 189.2 142.4 151.6
Deduct:
Cash and cash equivalents (45.9) (50.2) (46.0) Group Balance Sheet
Net debt 143.3 92.2 105.6
Deduct:
Lower of obligations under finance leases or £30m(2) (27.6) (27.6) (28.3)
Add back:
Guarantees 19.1 19.6 19.1 No direct reference
Deferred purchase arrangements 1.1 1.2 0.1 No direct reference
Net debt - as calculated under our financing facilities 135.9 85.4 96.5
Cash flow measures
Cash conversion
(restated)(1,2)
31 December 31 December 30 June
2020
2021 2021
£m £m £m £m £m £m Reference
Cash generated by operations 22.2 42.8 86.6 Note 13 - Notes to the cash flow statement
Operating profit 23.9 34.2 47.7 Group Income Statement
Add back:
Net IAS 41 valuation movement on biological assets 6.8 (3.5) 10.8 Group Income Statement
Amortisation of acquired intangible assets 3.8 3.7 7.4 Group Income Statement
Share-based payment expense 2.2 4.3 7.7 Group Income Statement
Exceptional items (1.7) 5.1 3.3 Group Income Statement
Adjusted operating profit exc JVs 35.0 43.8 76.9 Group Income Statement
Cash conversion (%) 63% 98% 113%
Free cash flow
(restated)(1,2)
31 December 31 December 30 June
2020
2021 2021
£m £m £m Reference
Cash generated by operations 22.2 42.8 86.6 Note 13 - Notes to cash flow statement
Interest and tax paid (10.6) (6.9) (19.1) Note 13 - Notes to cash flow statement
Capital expenditure (27.8) (9.7) (33.8) Group Statement of Cash flows
Dividend received from joint venture and associate - - 4.1 Group Statement of Cash flows
Joint venture and associate loan repayment - - (0.4) Group Statement of Cash flows
Proceeds from sale of property, plant and equipment 0.1 0.6 0.3 Group Statement of Cash flows
Dividend to non-controlling interest - (0.2) (0.2) Group Statement of Cash flows
Free cash flow (16.1) 26.6 37.5
1 See note 1 for details of the prior period restatement.
2 Following Genus entering a new credit facility the definitions of
EBITDA, Borrowings and Net Debt were amended. Consequently, the comparative
values have been restated to reflect the amended definitions as reported to
the banks.
Other measures
Ratio of net debt to adjusted EBITDA
(restated)(1,2)
31 December 31 December 30 June
2020
2021 2021
£m Times £m Times Reference
Net debt - as calculated under our financing facilities 135.9 85.4 96.5 See APM
Rolling 12 month Adjusted EBITDA - 97.9 110.7 106.1 See APM
as calculated under our financing facilities
Ratio of net debt to Adjusted EBITDA 1.4 0.8 0.9
1 See note 1 for details of the prior period restatement.
2 Following Genus entering a new credit facility the definitions of
EBITDA, Borrowings and Net Debt were amended. Consequently, the comparative
values have been restated to reflect the amended definitions as reported to
the banks.
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