REG - Genus - Interim Results
23/02/2023 07:00
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RNS Number : 7740Q Genus PLC 23 February 2023
Immediate release 23 February 2023
Genus plc
Interim results for the six months ended 31 December 2022
GOOD FINANCIAL AND STRATEGIC PROGRESS ACHIEVED
Adjusted results(1) Statutory results
Actual currency Constant currency change(2) Actual currency
Six months ended 31 December 2022 2021 Change 2022 2021 Change
£m £m % % £m £m %
Revenue 350.2 281.2 25 13 350.2 281.2 25
Operating profit 41.2 35.0 18 6 14.7 23.9 (38)
Operating profit inc JVs 48.3 39.7 22 9 n/a n/a n/a
Operating profit inc JVs exc gene editing 56.0 43.3 29 15 n/a n/a n/a
Profit before tax 42.2 37.0 14 1 15.0 24.4 (39)
Free cash flow (3.3) (16.1) n/m(3) n/m(3)
Basic earnings per share (pence) 48.8 42.4 15 2 20.4 30.4 (33)
Dividend per share (pence) 10.3 10.3 -
Good Group performance
· Group revenue increased by 13% in constant currency (25% in actual
currency)
· Operating profit including joint ventures up 9% in constant currency
(22% in actual currency)
· R&D investment increased by 18%(2) as planned, including gene
editing spend which was up 86%(2) reflecting the PRRSv programme and continued
investment in other discovery projects
· Adjusted profit before tax (PBT) up 1% in constant currency (14% in
actual currency); net finance costs up 115%(2)
· Statutory PBT reduced by 39% to £15.0m with a reduction in the IAS41
valuation of the Group's biological assets, reflecting higher global interest
rates which impacted the valuation discount rates applied
Record half-year PIC performance, gradual recovery in China
· Strong demand for PIC's differentiated genetics, with both new and
existing customers, drove growth in volumes up 5%, revenue up 9%(2) and
strategically important royalty revenue growth across all regions, up 14%(2)
· Adjusted operating profit including joint ventures increased by
19%(2), to a new record half-year high
· Strong profit growth continued in North America, solid performances
in Latin America and Asia. Europe's performance impacted by challenging market
conditions in certain countries
· In China, PIC's volumes increased by 23%, with revenue up 11%(2),
royalty revenue up significantly by 102%(2) and much improved adjusted
operating profit of £8.8m (2021: £1.0m)
· The China pig price peaked at 28 RMB/kg in October before falling to
15 RMB/kg currently, due to African Swine Fever (ASF) and COVID-19 related
supply and demand volatility.
ABS volumes up 4%, revenue up 13%(2), despite particularly challenging markets
in Latin America
· Expansion of long-term partnerships with strategic accounts
underpinned by Sexcel and NuEra genetics drove strong profit growth in North
America and solid performances in Europe and Asia. Latin America's
performance impacted by very challenging market conditions, particularly in
Brazil where macroeconomics affected supply and demand
· Continued growth in sexed genetics, volumes up 14%, through Sexcel
and third party sales of IntelliGen sexed semen production in North America
and Europe
· Overall, ABS's adjusted operating profit declined by 7%(2) due to
Latin America's profit decrease, adverse production cost variances and planned
digital investment costs, partially offset by lower patent royalty payments
Improved cash flows, dividend maintained
· Free cash outflow(1) of £3.3m (2021: £16.1m outflow), reflecting
higher adjusted profit performance and lower capital expenditure. Cash
conversion of 62%(1) (2021: 63%) in line with seasonal half-year expectations
· Net debt(1) increased to £214.5m as expected, with a net debt to
EBITDA ratio of 1.8x(1), within 1.0x-2.0x targeted range
· Adjusted earnings per share 15% higher, interim dividend of 10.3p per
share, with 2.8x(1) adjusted earnings cover within 2.5x-3.0x targeted range
Good strategic progress achieved and continued investment for growth
· Good progress on three new world-class elite PIC farms; Atlas
(Canada) now fully operational; Ankang (China) has commenced stocking; Granja
Genesis (Brazil) is ready for stocking; positioning Genus well to capture
future growth opportunities
· GenusOne deployed throughout the UK in the period, implementation
underway in the rest of Europe
· Settlement of the 987 appeal, the fee award appeal and the Indian
patent litigation with STgenetics (ST), delivering lower patent royalty
payments for ABS
· Genus's PRRSv-resistant pigs programme continues to make progress
towards completing the US Food and Drug Administration (FDA) submissions by
December 2023, with an aim to secure approval in 2024, and we are engaging
with other international regulatory agencies
Commenting on the performance and outlook, Stephen Wilson, Chief Executive,
said:
"The Group achieved a good performance during the first half of the year,
despite challenging market conditions for producers in several markets. PIC
delivered a new record half year performance, with strong momentum in North
America in particular, and China's performance improved as the porcine market
began a gradual recovery from the cyclical downturn, as we had expected.
"The China porcine market has been on a path to recovery since June 2022, but
continues to be volatile. Since December the changes in China's COVID-19
polices and outbreaks of ASF have caused imbalances in supply and demand.
The pig price peaked at 28 RMB/kg in October, but has since unexpectedly
reduced to the current price of 15 RMB/kg. Industry projections suggest
prices will recover in Spring/Summer of 2023, with consumer demand expected to
improve following the reduction of COVID-19 restrictions and supply expected
to reduce. However, there is still uncertainty as to the shape and strength of
this recovery.
"Across the regions ABS has continued to expand business with strategic
accounts by building long-term partnerships and offering the leading
combination of Sexcel and NuEra beef genetics. This, along with robust price
increases to counter inflation, meant ABS achieved strong performances outside
Latin America, in particular in North America. Latin American beef and dairy
producers faced very challenging conditions during the period, as a result of
the inflationary effects on input costs and weak consumer demand. As a result,
ABS's volume in Latin America declined, despite growing market share in
Brazil. The political and economic uncertainties in the region are expected to
continue to weigh on beef and dairy producers across Latin America for the
remainder of the fiscal year.
"We also made good strategic progress with further investments in R&D,
with an increase of spend on gene editing as we move towards FDA and
international regulatory approval of our PRRSv-resistant pigs.
"The Board remains confident in the Group's strategy and the many
opportunities for Genus. Expectations for the 2023 fiscal year remain
unchanged.
"In a separate statement also made today, I have announced my intention to
retire on 30 September following ten years with Genus, the last four of which
I have served as the CEO. It has been a great privilege and pleasure to lead
such a talented group of people and help to develop Genus into the leading
global animal genetics business it is today.
"Genus has many strong growth opportunities, and I will remain fully focused
on the continued successful execution of our strategy while the Board
progresses the search for my successor, in order to achieve a smooth
transition."
Results presentation today
A pre-recorded analysts and bankers briefing to discuss the preliminary
results for the six months ended 31 December 2022 will be held via a video
webcast facility and will be accessible via the following link from 7:01am
today:
https://stream.buchanan.uk.com/broadcast/63cab28d777efd4a8b5137d0
This will be followed by a live Q&A session to be held by invitation via
Zoom at 10:30am. Please contact Verity Parker at Buchanan for details;
verityp@buchanan.uk.com
Enquiries:
Genus plc (Stephen Wilson, Chief Executive Officer / Alison Henriksen, Chief Tel: 01256 345970
Financial Officer)
Buchanan (Charles Ryland / Chris Lane / Verity Parker) Tel: 0207 4665000
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 75 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) Constant currency percentage movements are calculated by restating the
results for the six months ended 31 December 2022 at the average exchange
rates applied to adjusted operating profit for the year ended 30 June 2022.
(3) n/m = not meaningful
Group Performance
Genus achieved good progress in the first half of the year with volumes,
revenue and adjusted profits all increasing. PIC delivered a strong
performance, with North America continuing to gain share, and the expected
improving performance in China as the porcine market began to recover from
last year's cyclical downturn. ABS performance was mixed with strength in
North America offset by tough markets in Latin America, particularly in
Brazil. Finance costs rose, as expected, due to higher debt and rising
interest rates. Genus continued to make significant strategic progress and
increased investment in R&D, including an 86% increase in spend on gene
editing as we progress towards the regulatory approval of our PRRSv-resistant
pigs.
Revenue increased by 13% in constant currency (25% in actual currency) to
£350.2m (2021: £281.2m). PIC revenue increased by 12%, royalty revenue was
up 14%, while volumes grew by 5%. ABS increased revenue by 13% and grew
volumes by 4%, with strategically important sexed genetics up 14% and beef
volumes stable compared with the same period last year. ABS implemented robust
price increases to offset the effects of cost inflation, particularly in
Europe.
Adjusted operating profit, including joint ventures and excluding gene
editing, was £56.0m (2021: £43.3m), up 15% in constant currency. Within
this, Genus's share of adjusted joint venture operating profits was £6.9m
(2021: £4.9m), supported by growth in profit of PIC Agroceres in Brazil and
in our joint ventures in China. Net finance costs were higher at £6.1m (2021:
£2.7m), due to increased interest rates as well as higher debt levels
following the capital investments made during FY22.
Statutory profit before tax was £15.0m (2021: £24.4m), and reflected a
£17.2m non-cash decrease (2021: £6.8m decrease) in the net IAS 41 biological
assets fair value, reflecting an increase in discount rates applied in the
valuation calculation as well as offsetting movements in other key inputs. Net
exceptional items in the period were an expense of £2.2m which was primarily
legal fees related to the litigation disputes with ST, part of which has now
been settled. In the prior period there was an exceptional credit of £1.7m
that included a £3.6m non-refundable cash receipt for the assignment of
rights to a legacy legal claim in Brazil.
The tax charge on adjusted profits for the period was £10.2m (2021: £9.3m),
which represented a tax rate on adjusted profits of 24.2% (2021: 25.1%). The
statutory profit after tax was £12.0m (2021: £18.9m).
The effect of exchange rate movements on the translation of Genus's overseas
profits was a favourable impact of £4.8m compared with the prior period,
primarily from weaker Sterling against Latin American currencies.
Free cash outflow of £3.3m (2021: £16.1m outflow) reflected the higher
profit performance in the period along with a reduction in capital expenditure
following the prior year investment to expand our world class facilities. Cash
generated by operations, which is seasonally weaker in H1, of £25.7m (2021:
£22.2m) represented 62% conversion (2021: 63%) of adjusted operating profit
of £41.2m (2021: £35.0m) into cash. Our medium-term objective is to achieve
annual conversion of at least 90%, and we are on track to achieve it this
fiscal year.
Net debt increased to £214.5m (June 2022: £185.0m), reflecting the payment
of the final dividend, free cash outflow and foreign exchange movements. The
net debt to EBITDA ratio of 1.8x (June 2022: 1.7x) as defined in the debt
facility agreement reflects an increase in EBITDA compared with higher net
debt levels. This level of leverage is within our medium-term objective of
having a ratio of net debt to EBITDA of between 1.0 - 2.0 x.
The Board has declared an unchanged interim dividend of 10.3 pence per share,
which is payable on 30 March 2023 to shareholders on the register at 3 March
2023.
Strategic Progress
To maintain our leading industry position, Genus continued to invest in our
growth drivers: world-class genetics, global supply chains, long-term customer
relationships, pioneering technology and top talent around the world.
In porcine, we have strengthened our supply chains in North America, Brazil
and China. We are now fully operational in Atlas (Canada), have commenced
stocking in Ankang (China) and have animals ready for stocking at Granja
Genesis (Brazil), enhancing our ability to meet customer demand as this grows.
Our long-term genetics collaboration with Olymel is exceeding our
expectations, with PIC genetics gaining a larger share of the Canadian market.
Our PRRSv-resistant pigs programme has made continued progress towards
completing the US FDA submissions by December 2023, with an aim to secure
approval in 2024. We are engaging with the FDA on the design of the final
animal studies, and are also engaging with international regulatory agencies.
As we move closer to the commercialisation of our gene-edited animals we have
intensified our engagement with key porcine industry participants and
commentators and have expanded our production capacity for PRRSv-resistant
pigs.
In bovine, NuEra beef genetics are achieving positive results through
initiatives with beef supply chains. In North America and in the UK, we have
established arrangements to connect farmer networks with large meat processors
and retailers who offer premium prices for carcasses delivered, enabling ABS
and farmers, to share in the value created. In the period we expanded
IntelliGen third party production and signed an agreement with a leading
bovine co-operative to supply sexed semen processing as well as commenced
production of sexed semen for the Government of India as part of its ambition
to expand milk production and productivity significantly.
We continue to make steady progress on digitalisation. GENEadvance, our
complete solutions approach for dairy producers, gives customers access to a
unique application and complementary web portal that provide insight into
genetic progress within their herd. This has been successfully rolled out and
adopted by customers in our main bovine markets in North America, Europe and
Latin America. The rollout of our new enterprise system, GenusOne, continues
with the UK going live in the period with plans to complete implementation
across the rest of Europe this year.
Sustainability
Sustainability lies at the heart of what Genus does. We believe that animal
genetics play an important role in helping producers meet the increased
demands for affordable, nutritious food for all, using fewer resources of
water, energy and land.
Within the company, we also continue to reduce the environmental impact of our
operations, guided by our Climate Change Policy. During the period, we
continued to invest in advanced manure management solutions and to introduce
solar arrays at some of our largest sites, which are designed to meet around
half of the energy demand on those sites. We also continued to switch to lower
carbon fuel sources. Our longer-term aims are to reduce our primary intensity
ratio (against our 2019 baseline) by 25% by 2030 and to become a 'net zero'
greenhouse gas emissions business by 2050. We are making good progress and are
on track to achieve these objectives.
People
As a people-focused business, Genus encourages and enables employees at all
levels of the company to develop and broaden their skill base and build
fulfilling and successful careers. During the period, we continued to enhance
and expand the range of learning opportunities and development programmes we
offer, and won recognition for the intern program we have in the US, one of
several programs we have around the world where we are attracting the next
generation of talent. We continued to strengthen diversity and inclusion
across the company, with steps including the introduction of a global minimum
provision of family leave. We also introduced a new employee share scheme,
TakeStock, to give our people an opportunity to share in the success they
create. This is currently open to employees in the US and UK, with an
intention to expand over time to other countries.
Outlook
As stated above, conditions remain challenging for our customers in several
parts of the world. The most volatile conditions are currently being
experienced by Chinese pig producers and Brazilian beef producers, and whilst
there is some uncertainty as to when a sustained improvement will occur in
those markets, we are confident that Genus remains well-placed to take
advantage of a recovery. However, the performances of our business
elsewhere, in particular in North America, are a testament to the benefits of
Genus's geographic diversification and the strength of our strategy. More
broadly, our strong product portfolio and depth of talent in our company give
us confidence that we will continue to make strategic and financial progress.
Taking these factors into account, the Board's expectations for the 2023
fiscal year remain unchanged.
Genus PIC - Operating Review
Actual currency Constant currency change
Six months ended 31 December 2022 2021 Change
£m £m % %
Revenue 179.0 143.5 25 12
Adjusted operating profit exc JV 70.1 52.2 34 19
Adjusted operating profit inc JV 76.8 57.0 35 19
Adjusted operating margin exc JV 39.2% 36.4% 2.8pts 2.5pts
PIC increased adjusted profit by 19% in constant currency, compared with the
same period last year. This was driven by growth in North America, Latin
America (in particular Mexico) and Asia (in particular China). Volumes rose by
5%, revenue by 12% and royalty revenue by 14%.
The performance in China improved, particularly the growth from royalty
contracts as customers began recovering from the previous year's downturn.
Adjusted profit increased to £8.8m (2021: £1.0m), with the prospect of
further growth as producers replace and rebuild sow herds over time using
PIC's genetics, although current volatility in the market is creating
challenges for producers.
Although the business experienced more difficult conditions in Europe, its
focus on product differentiation, predictable customer experience and
world-class support services ensured further progress during this period. This
is reflected in the 14% growth in royalty revenue in the region.
North America
The size of the US breeding herd remained stable during the period, ending the
decline seen in the previous two years which saw an overall reduction of
around 5%. Domestic demand was stable while exports strengthened, due
particularly to demand from China, South Korea, Dominican Republic and Mexico.
Pig prices remained high for much of the period, and producers continued to
achieve positive margins despite higher input costs, but pig prices declined
at the end of the period due to backlogs at processors caused by
worse-than-normal winter weather, putting pressure on producer's current
margins.
Performance: A strong performance, with further increases in market share
through volume growth across both sireline and damline products (volumes up
10% and 12% respectively) was achieved. This was driven by growth of business
with strategic accounts, aided by the popularity of the PIC800 sire, as well
as from Olymel following the acquisition of its genetics programme in February
2022
· volumes +11%
· revenue +17% and royalty revenue +10%
· adjusted operating profit +14%
Latin America
In Brazil, lower feed prices helped to boost producer margins. Production
increased during the period and exports rose, due in particular to renewed
demand from China. Both production and exports are expected to grow again
during 2023, although at a slower pace than 2022. In Mexico, the region's
other major market, pork prices remained near record highs. This helped to
offset higher feed costs, which dipped during the period but remained around
50% above pre-pandemic levels. Production continued to rise gradually and is
expected to grow by a further 3% in 2023.
Performance: Lower sales of breeding stock meant a decline in volumes and
revenue, compared with strong sales the previous year, however all markets
achieved adjusted profit growth due to double-digit increases in royalty
revenue following the prior year's expansion of business with strategic
accounts.
· volumes -3%
· revenue -10% and royalty revenue +14%
· adjusted operating profit +12%
Europe
Pork production continued to contract during the period, particularly in UK,
Germany, Poland and Denmark. Prices rose as a result of tighter supply and
exports declined, despite a small increase in demand from China. These
factors, combined with the impact of ASF outbreaks, create an uncertain
outlook for producers and processors in 2023. Production is expected to
decline by a further 3-4% during the year.
Performance: Increases in volumes and revenue, primarily driven by strong
breeding stock sales through royalty contracts in Spain, supporting ongoing
expansion projects with key customers, and royalty growth in Russia. However,
adjusted profits declined as a result of lower volumes in Germany, following
herd health issues in the market, and in the UK due to the market factors
highlighted.
· volumes +4%
· revenue +13% and royalty revenue +5%
· adjusted operating profit -5%
Asia
China experienced significant volatility, as pig prices rose to 28 RMB/kg in
October before declining sharply to 17 RMB/kg through the end of the period,
and 15 RMB/kg currently. There was culling of animals amid seasonal ASF
outbreaks and reduced demand as COVID-19 infections rose following the removal
of restrictions in December. However, as this situation stabilises, prices are
expected to improve in the Spring/Summer of 2023. Elsewhere in the region, the
Philippines continued to be impacted by ASF, while economic growth stimulated
consumer demand in Vietnam.
Performance: Adjusted profit increased by over 150%, driven by profit growth
in China, from £1.0m to £8.8m, arising from higher royalty revenue and
improved by-product margins. In the prior period, China had also incurred a
one-time customer refund of £3.7 million. Outside China, performance was
affected by market conditions: in Japan and the Philippines market volatility,
driven by lower pig prices as production increases, impacted profitability,
whereas Vietnam grew profits slightly as economic conditions improved.
· volumes +10% (China +23%)
· revenue +4% and royalty revenue +58% (China +11% and +102%
respectively)
· adjusted operating profit +154% (China +642%)
Genus ABS - Operating Review
Actual currency Constant currency change
Six months ended 31 December 2022 2021 Change
£m £m % %
Revenue 160.8 130.9 23 13
Adjusted operating profit 22.5 22.1 2 (7)
Adjusted operating margin 14.0% 16.9% (2.9)pts (2.9)pts
Overall, ABS volumes rose by 4% compared with the same period last year. Dairy
customers continued to transition to Sexcel and NuEra beef genetics in their
herds, with sexed volumes rising by 14%, while beef volumes remained stable
against strong growth in the same period last year. Revenue rose by 13%, due
to the growing use of sexed genetics and robust price increases. Profits grew
strongly in North America, Europe and Asia. However, despite ABS increasing
its share of business across both beef and dairy in Latin America, volumes and
profit from the region declined by 3% and 18% respectively, due to
challenging market conditions. In addition, ABS invested to support its
digital strategy and experienced adverse production cost variances due to
lower units produced primarily related to the IT incident in June 2022. These
impacts were partially offset by lower patent royalty payments to ST following
the settlement of the 987 appeal, the fee award appeal, and the Indian patent
litigation. Other elements of the litigation remain ongoing (refer to note 3
of the financial statements).
North America
Dairy demand was resilient, with milk production and cow numbers both
increasing, and producers remained profitable. Production is expected to
increase in 2023, although higher feed costs may reduce margins. U.S. beef
production and exports reached record highs by the end of the period,
following the acceleration of cattle culling due to drought conditions, but
both are expected to be lower in 2023.
Performance: Double-digit growth in revenue and adjusted profit, driven from
growth with strategic accounts. Sales of Sexcel sexed genetics, provision of
udder care products and robust price increases were all contributory factors
and more than offset a small decline in beef volumes from the record
first-half performance in the prior period.
· total volumes +5%, sexed volumes +24%, beef volumes -4%
· revenue +18%
· adjusted operating profit +26%
Latin America
Producers in Latin America faced very challenging conditions during the
period, as a result of the effect of inflation on both input costs and
consumer demand, as well as drought in a large part of the region. Beef cattle
prices in Brazil declined, as supply exceeded weak domestic demand, despite
rising exports driven particularly by demand from China. Mexican beef
production continued to grow, reaching a record high in December. Following a
record fall in the first half of 2022, milk production in Brazil began to
recover. In 2023, it is expected that confidence in both the dairy and beef
industries will be affected by ongoing inflationary pressures and political
uncertainty across the region.
Performance: The increase in revenue and market share was aided by further
rises in digital sales (now representing 20% of volumes) and growth in
long-term partnerships with strategic accounts. However, the challenging
market conditions for producers led to a decline in demand for genetics,
particularly in the embryo business, while high business cost inflation also
had an adverse impact.
· total volumes -3%, sexed volumes +1%, beef volumes stable
· revenue +3%
· adjusted operating profit -18%
Europe
High beef and dairy prices generally offset rising costs faced by producers
during the period. However, the impact of inflation dampened consumer demand
and added to high levels of economic uncertainty across the region,
undermining producer confidence. For both dairy and beef, this situation is
expected to persist and increase pressure on margins further in 2023.
Performance: Increases in beef and sexed volumes, particularly across France,
Spain, Northern Ireland and Russia, were offset by the decline in conventional
semen volumes which led to the overall volume decrease. Rises in both revenue
and adjusted profit were aided by robust price increases and growth in
long-term partnerships with strategic accounts.
· total volumes -2%, sexed volumes +13%, beef volumes +6%
· revenue +10%
· adjusted operating profit +8%
Asia
In Australia, favourable climatic conditions continued to support strong beef
cattle prices, but excessive rainfall impacted milk production. In China, beef
prices remained stable while dairy producers continued to increase milk
production and build the domestic inventory, despite COVID-19 impacting the
demand for dairy products. Elsewhere in the region, outbreaks of disease had a
small impact on milk production in India, while rising inflation in Japan
dampened consumer demand.
Performance: Double digit growth in both volumes and adjusted profits, driven
by strong increases in dairy conventional and sexed volumes in China. There
was higher demand for sexed and beef genetics in Australia and growth in
business in India through the contract with the Indian Government secured in
the prior period, partially offset by declines in Japan.
· total volumes +15%, sexed volumes +12%, beef volumes -9%
· revenue +21%
· adjusted operating profit +11%
Research and Development - Operating Review
Actual currency Constant currency change
Six months ended 31 December 2022 2021 Change
£m £m % %
Porcine product development 13.0 10.3 26 12
Bovine product development 12.4 10.5 18 3
Gene editing 7.7 3.6 114 86
Other research and development 9.4 7.0 34 17
Net expenditure in R&D 42.5 31.4 35 18
Net investment in R&D expenditure rose by 18% during the period, as
planned, as we made further progress on the range of research programmes,
technologies and product development initiatives we are pursuing to deliver
additional value for customers in the coming years.
Porcine product development
Porcine product development delivered further improvements in genetic gain by
combining leading-edge scientific techniques, expanded genetic production and
the use of robust data. During the period, we continued to refine genomic
selection and explore digital tools for capturing new or novel traits. We also
continued to increase production of animals across our network of elite farms,
including our Atlas facility in Canada which is now fully operational and
reaching full capacity.
Bovine product development
We continued to strengthen our pipeline of proprietary dairy genetics through
De Novo Genetics, our joint venture with De-Su Holsteins. De Novo animals
represent more than half of our dairy line-up. In parallel, we continued to
invest in improving our proprietary technology for producing sexed semen.
We also continued to develop our proprietary offer for beef, NuEra Genetics,
which accounts for one third of our total beef volumes, and accelerated
product differentiation through robust testing. We increased the number of
product validation trials, which continued to demonstrate the superior
performance of NuEra Genetics compared with competitors.
Gene editing
We continued to make progress on our PRRSv resistance project, while
maintaining engagement with the US FDA as we seek regulatory approval for our
gene-edited animals. This engagement is enabling us to continue refining the
pathway for regulatory approval. More widely, beyond the US, we continued to
engage with regulatory bodies and agencies in other target markets around the
world. In parallel, we increased investment in preparations for the potential
commercialisation of PRRSv-resistant pigs, expanding our population of
gene-edited animals by over 50% during the period. We also continued to
advance projects evaluating the potential for responsible use of gene editing
to combat other porcine diseases.
Other research and development
Other research and development expenditure increased by 17%, supporting
further investment in areas such as genome science, bioinformatics and data
science. This investment also helped us further progress our research into the
field of reproductive biology, and to continue working with external partners
on other discovery projects.
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 2022 (a copy of which is available on the Genus plc website at
www.genusplc.com) sets out on pages 43-46 the principal 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 and the ongoing war in Ukraine,
along with global pandemics in animal and human healthcare that can have a
material impact on our business performance and markets. Additionally, we
monitor emerging risks such as changing consumption patterns, environmental
sustainability expectations and the evolution of alternative proteins such as
lab-based meat.
On 7 November 2022, Genus was granted a General Licence from UK Treasury in
relation to the UK sanctions regime (INT/2022/2349952). The licence permits
Genus to continue to trade in "agricultural commodities" including
reproductive materials, with Russian entities, consistent with terms of the
licence.
There has been no other material change to the principal risks in the current
financial year that might affect the performance of the Group.
GENUS PLC
CONDENSED CONSOLIDATED INCOME STATEMENT
For the six months ended 31 December 2022
Note Six months Six months Year
ended ended ended
31 December 2022 31 December 30 June
£m 2021 2022
£m
£m
REVENUE 2 350.2 281.2 593.4
Adjusted operating profit 2 41.2 35.0 68.8
Adjusting items:
- Net IAS 41 valuation movement on biological assets 8 (17.2) (6.8) (5.4)
- Amortisation of acquired intangible assets 7 (4.8) (3.8) (8.3)
- Share-based payment expense (2.3) (2.2) (3.7)
(24.3) (12.8) (17.4)
Exceptional items (net) 3 (2.2) 1.7 (2.0)
Total adjusting items (26.5) (11.1) (19.4)
OPERATING PROFIT 14.7 23.9 49.4
Share of post-tax profit of joint ventures and associates retained 10 6.4 3.2 5.2
Finance costs 4 (6.1) (2.8) (6.6)
Finance income 4 - 0.1 0.4
PROFIT BEFORE TAX 15.0 24.4 48.4
Taxation 5 (3.0) (5.5) (11.7)
PROFIT FOR THE PERIOD 12.0 18.9 36.7
ATTRIBUTABLE TO:
Owners of the Company 13.4 19.9 40.9
Non-controlling interest (1.4) (1.0) (4.2)
12.0 18.9 36.7
EARNINGS PER SHARE
Basic earnings per share 14 20.4p 30.4p 62.5p
Diluted earnings per share 14 20.3p 30.2p 62.2p
Alternative Performance Measures
Adjusted operating profit 41.2 35.0 68.8
Adjusted operating profit attributable to non-controlling interest 0.2 (0.2) (0.3)
Pre-tax share of profits from joint ventures and associates excluding net IAS 6.9 4.9 9.2
41 valuation movement
Gene editing costs 7.7 3.6 7.9
Adjusted operating profit including joint ventures and associates, excluding 56.0 43.3 85.6
gene editing costs
Gene editing costs (7.7) (3.6) (7.9)
Adjusted operating profit including joint ventures and associates 48.3 39.7 77.7
Net finance costs 4 (6.1) (2.7) (6.2)
Adjusted profit before tax 42.2 37.0 71.5
Adjusted earnings per share
Basic adjusted earnings per share 14 48.8p 42.4p 82.7p
Diluted adjusted earnings per share 14 48.5p 42.1p 82.3p
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.
GENUS PLC
CONDENSED CONSOLIDATED Statement of Comprehensive Income
For the six months ended 31 December 2022
( ) Year ended
Six months ended Six months ended 30 June 2022
31 December 2022 31 December 2021
£m £m £m £m £m £m
PROFIT FOR THE PERIOD 12.0 18.9 36.7
Items that may be reclassified subsequently to profit or loss
Foreign exchange translation differences (4.5) 4.6 66.6
Fair value movement on net investment hedges (0.9) 0.2 (0.7)
Fair value movement on cash flow hedges 0.6 - 1.9
Tax relating to components of other comprehensive expense 0.7 (1.3) (8.2)
(4.1) 3.5 59.6
Items that may not be reclassified subsequently to profit or loss
Actuarial (losses)/gains on retirement benefit obligations (36.4) 24.1 27.3
Movement on pension asset recognition restriction 36.9 (24.0) (69.8)
Release of additional pension liability - - 43.7
Gain/(loss) on equity instruments measured at fair value 1.1 - (6.1)
Tax relating to components of other comprehensive (expense)/income (0.3) - 1.1
1.3 0.1 (3.8)
OTHER COMPREHENSIVE (EXPENSE)/INCOME FOR THE PERIOD (2.8) 3.6 55.8
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 9.2 22.5 92.5
ATTRIBUTABLE TO:
Owners of the Company 10.9 23.7 97.3
Non-controlling interest (1.7) (1.2) (4.8)
9.2 22.5 92.5
GENUS PLC
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 31 December 2022
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 2021 6.6 179.1 (0.1) (7.9) - 320.4 498.1 (1.5) 496.6
Foreign exchange translation differences, net of tax - - - 59.4 - - 59.4 (0.6) 58.8
Fair value movement on net investment hedges, net of tax - - - (0.6) - - (0.6) - (0.6)
Fair value movement on cash flow hedges, net of tax - - - - 1.4 - 1.4 - 1.4
Loss on equity instruments measured at fair value, net of tax - - - - - (4.6) (4.6) - (4.6)
Actuarial gains on retirement benefit obligations, net of tax - - - - - 19.5 19.5 - 19.5
Movement on pension asset recognition restriction, net of tax - - - - - (49.7) (49.7) - (49.7)
Recognition of additional pension liability, net of tax - - - - - 31.0 31.0 - 31.0
Other comprehensive income for the year - - - 58.8 1.4 (3.8) 56.4 (0.6) 55.8
Profit/(loss) for the year - - - - - 40.9 40.9 (4.2) 36.7
Total comprehensive income for the year - - - 58.8 1.4 37.1 97.3 (4.8) 92.5
Recognition of share-based payments, net of tax - - - - - 4.0 4.0 - 4.0
Dividends 6 - - - - - (20.9) (20.9) - (20.9)
Adjustment arising from change in non-controlling interest and written put - - - - - - - (0.1) (0.1)
option
BALANCE AT 30 JUNE 2022 6.6 179.1 (0.1) 50.9 1.4 340.6 578.5 (6.4) 572.1
Foreign exchange translation differences, net of tax - - - (3.7) - - (3.7) (0.3) (4.0)
Fair value movement on net investment hedges, net of tax - - - (0.7) - - (0.7) - (0.7)
Fair value movement on cash flow hedges, net of tax - - - - 0.6 - 0.6 - 0.6
Gain on equity instruments measured at fair value, net of tax - - - - - 0.8 0.8 - 0.8
Actuarial losses on retirement benefit obligations, net of tax - - - - - (29.4) (29.4) - (29.4)
Movement on pension asset recognition restriction, net of tax - - - - - 29.9 29.9 - 29.9
Other comprehensive expense for the period - - - (4.4) 0.6 1.3 (2.5) (0.3) (2.8)
Profit/(loss) for the period - - - - - 13.4 13.4 (1.4) 12.0
Total comprehensive income for the period - - - (4.4) 0.6 14.7 10.9 (1.7) 9.2
Recognition of share-based payments, net of tax - - - - - 2.9 2.9 - 2.9
Dividends 6 - - - - - (14.2) (14.2) - (14.2)
Adjustment arising from change in non-controlling interest and written put - - - - - - - (0.1) (0.1)
option
BALANCE AT 31 DECEMBER 2022 6.6 179.1 (0.1) 46.5 2.0 344.0 578.1 (8.2) 569.9
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 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
GENUS PLC
CONDENSED CONSOLIDATED BALANCE SHEET
As at 31 December 2022
Note 31 December 31 December 30 June
2022 2021 2022
£m
£m
£m
ASSETS
Goodwill 111.7 102.2 111.0
Other intangible assets 7 68.4 55.4 72.0
Biological assets 8 322.7 288.2 333.7
Property, plant and equipment 9 168.3 142.2 171.4
Interests in joint ventures and associates 10 49.1 36.1 41.2
Other investments 11.7 15.9 10.2
Derivative financial assets 17 2.6 - 2.2
Other receivables 12 8.1 1.8 8.6
Deferred tax assets 10.1 5.1 10.1
TOTAL NON-CURRENT ASSETS 752.7 646.9 760.4
Inventories 11 59.2 44.3 50.9
Biological assets 8 30.9 36.6 33.1
Trade and other receivables 12 135.9 118.1 129.5
Cash and cash equivalents 42.3 45.9 38.8
Income tax receivable 2.0 3.6 4.0
Derivative financial assets 17 0.9 0.6 1.0
Asset held for sale 0.2 0.2 0.2
TOTAL CURRENT ASSETS 271.4 249.3 257.5
TOTAL ASSETS 1,024.1 896.2 1017.9
LIABILITIES
Trade and other payables 13 (110.8) (113.1) (124.7)
Interest-bearing loans and borrowings (7.3) (10.6) (7.1)
Provisions (2.1) (1.6) (1.9)
Deferred consideration - (1.3) (0.8)
Obligations under leases (9.9) (8.6) (10.1)
Tax liabilities (1.8) (4.3) (4.9)
Derivative financial liabilities 17 (1.7) (1.2) (1.8)
TOTAL CURRENT LIABILITIES (133.6) (140.7) (151.3)
Trade and other payables 13 - (1.3) (0.2)
Interest-bearing loans and borrowings (214.9) (151.0) (182.1)
Retirement benefit obligations 16 (7.3) (8.8) (8.3)
Provisions (11.0) (10.9) (12.0)
Deferred consideration (0.6) (0.6) (0.7)
Deferred tax liabilities (55.8) (50.9) (60.3)
Derivative financial liabilities 17 (6.3) (6.6) (6.4)
Obligations under leases (24.7) (19.0) (24.5)
TOTAL NON-CURRENT LIABILITIES (320.6) (249.1) (294.5)
TOTAL LIABILITIES (454.2) (389.8) (445.8)
NET ASSETS 569.9 506.4 572.1
EQUITY
Called up share capital 6.6 6.6 6.6
Share premium account 179.1 179.1 179.1
Own shares (0.1) (0.1) (0.1)
Translation reserve 46.5 (4.2) 50.9
Hedging reserve 2.0 - 1.4
Retained earnings 344.0 327.7 340.6
EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY 578.1 509.1 578.5
Non-controlling interest (2.5) 2.5 (0.7)
Put option over non-controlling interest (5.7) (5.2) (5.7)
TOTAL NON-CONTROLLING INTEREST (8.2) (2.7) (6.4)
TOTAL EQUITY 569.9 506.4 572.1
GENUS PLC
Condensed consolidated Group Statement of Cash Flows
For the six months ended 31 December 2022
Note Six months Year
Six months ended ended
ended 31 December 30 June
31 December 2021 2022
£m
£m
2022
£m
NET CASH FLOW FROM OPERATING ACTIVITIES 15 11.8 11.6 34.3
CASH FLOWS FROM INVESTING ACTIVITIES
Dividends received from joint ventures and associates - - 3.2
Acquisition of joint venture and associate (2.0) (1.1) (2.2)
Disposal of joint venture and associate - 0.1 -
Acquisition of trade and assets - (0.2) (0.8)
Acquisition of Olymel AlphaGene assets - - (14.5)
Acquisition of investments (0.4) (0.1) (1.0)
Payment of deferred consideration (0.8) (0.5) (1.0)
Purchase of property, plant and equipment (10.7) (24.1) (42.1)
Purchase of intangible assets (4.3) (3.7) (8.8)
Proceeds from sale of property, plant and equipment - 0.1 -
NET CASH OUTFLOW FROM INVESTING ACTIVITIES (18.2) (29.5) (67.2)
CASH FLOWS FROM FINANCING ACTIVITIES
Drawdown of borrowings 80.1 62.8 138.7
Repayment of borrowings (47.2) (25.4) (83.9)
Payment of lease liabilities (5.9) (5.2) (11.3)
Equity dividends paid (14.2) (14.2) (20.9)
Dividend to non-controlling interest (0.1) - (0.1)
Debt issue costs (1.1) (0.6) (0.6)
NET CASH INFLOW FROM FINANCING ACTIVITIES 11.6 17.4 21.9
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 5.2 (0.5) (11.0)
Cash and cash equivalents at start of period 38.8 46.0 46.0
Net increase/(decrease) in cash and cash equivalents 5.2 (0.5) (11.0)
Effect of exchange rate fluctuations on cash and cash equivalents (1.7) 0.4 3.8
TOTAL CASH AND CASH EQUIVALENTS AT END OF PERIOD 42.3 45.9 38.8
GENUS PLC
ANALYSIS OF NET DEBT
For the six months ended 31 December 2022
At 1 July Net Foreign exchange Non-cash movement At 31 December 2022
2022 cash flows
£m £m £m £m £m
Cash and cash equivalents 38.8 5.2 (1.7) - 42.3
Interest-bearing loans - current (7.1) 0.4 (0.1) (0.5) (7.3)
Lease liabilities - current (10.1) 5.9 0.1 (5.8) (9.9)
(17.2) 6.3 - (6.3) (17.2)
Interest-bearing loans - non-current (182.1) (32.2) (0.6) - (214.9)
Lease liabilities - non-current (24.5) - 0.3 (0.5) (24.7)
(206.6) (32.2) (0.3) (0.5) (239.6)
Total debt financing (223.8) (25.9) (0.3) (6.8) (256.8)
Net debt (185.0) (20.7) (2.0) (6.8) (214.5)
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)
Net debt is gross debt, made up of unsecured bank loans and overdrafts and
obligations under finance leases, with a deduction for cash and cash
equivalents.
GENUS PLC
NOTES TO THE CONDENSED SET OF FINANCIAL STATEMENTS
For the six months ended 31 December 2022
1. BASIS OF PREPARATION
The unaudited Condensed Set of Financial Statements for the six months ended
31 December 2022:
· 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 2022;
· 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 22 February 2023.
The information relating to the year ended 30 June 2022, with the exception of
one disclosure detailed in note 12 and note 17, 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 2022 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 2022. The Genus
plc Annual Report 2022 (a copy of which is available on the Genus plc website
at www.genusplc.com (file:///C%3A/Users/lucyl/Desktop/www.genusplc.com) ) sets
out on pages 43-46 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
2022 2021 2022 2022 2021 2022
US Dollar/£ 1.18 1.36 1.32 1.21 1.35 1.22
Euro/£ 1.16 1.17 1.18 1.13 1.19 1.16
Brazilian Real/£ 6.16 7.40 6.94 6.39 7.54 6.39
Mexican Peso/£ 23.38 27.90 26.97 23.57 27.76 24.45
Chinese Yuan/£ 8.24 8.73 8.55 8.35 8.60 8.15
Russian Rouble/£ 74.46 99.50 98.75 89.22 101.20 66.73
Impact of Russian Sanctions
The Group has two group operating companies that are incorporated in Russia -
Limited Liability Co. Genus ABS Russia and PIC Genetics LLC ('Russian
subsidiaries'). Following the sanctions that have been put in place by the UK
and other governments the Group implemented a comprehensive screening process
with external counsel to ensure that its Russian entities do not trade with
sanctioned individuals or entities controlled by them. The main impact of the
sanctions regime has been to categorise the banks in Russia into sanctioned
and non-sanctioned banks. When the Russian subsidiaries received money from
sanctioned banks they were unable to use the cash without a licence from His
Majesty's Treasury ('HMT'). Cash receipts from non-sanctioned banks into the
Russian subsidiaries' non-sanctioned banks are available for use in Russia for
day-to-day operations.
The Group applied for a licence to HMT on 25 April 2022 to allow the Russian
subsidiaries' use of cash receipts from sanctioned banks of non-sanctioned
Russian customers for the delivery of porcine and bovine genetics; use money
in a non-sanctioned Russian bank account in the name of the Russian
subsidiaries to pay Russian suppliers who continue to use sanctioned Russian
bank accounts, and to remit any excess money in the Russian subsidiaries
non-sanctioned Russian bank account (regardless of whether it was received
from a sanctioned or non-sanctioned Russian bank account) to other Genus Group
company UK bank accounts.
The HMT Office of Financial Sanctions Implementation (OFSI) issued a general
licence for trading in Agricultural Commodities in Russia effective on the 4
November 2022 and provides exemptions to the sanctions regime in connection
with the export, production and transport of Agricultural Commodities. This
definition includes Reproductive Materials such as are supplied by Genus.
Under this General Licence, receipts from non-sanctioned customers received
from and before 4 November 2022 from sanctioned banks no longer need to be
frozen and can be freely used. Also receipts from a sanctioned customer if
made through a non-sanctioned bank no longer need to be frozen and can be
freely used. If any customer is or becomes sanctioned and pays through a
sanctioned bank these funds would still need to be frozen even after 4
November 2022.
Under the requirements of IAS 7, disclosure is required of cash that is not
available to be used by the rest of the Group. As at 31 December 2022, the
Group had a cash balance of £4.9m in the Russian subsidiaries of which £0.2m
is not currently available to be used by the Group due to being received from
sanctioned customers and held in a sanctioned bank.
Management have reviewed the operations and cash flow over a period of 18
months from 31 December 2022 to 30 June 2024 based upon the 2023 and 2024
plans to determine whether the Russian subsidiaries have sufficient
non-sanctioned cash flow to enable them to continue day-to-day operations and
to meet liabilities as they fall due. The analysis indicates they do have
sufficient non-sanctioned cash flow to enable them to meet day-to-day
operational needs.
Critical accounting judgement - exercise of control
Management has assessed whether the actions of the UK and Russian Governments
have caused the Group to lose control of the Russian subsidiaries, and
concluded that the Group does have control for the half year ended 31 December
2022, as defined under IFRS 10 'Consolidated financial statements' over the
Russian subsidiaries and are still able to consolidate. Each of the asset
balances have been assessed for impairment. The material areas that could give
rise to impairment are:
> PIC Russia farm (£3.0m) - the value of the farm is predicated on the
future economic benefit of the animals that are being reared there. It is
necessary to assess if the open market price (less cost to sell) the property
would support the carrying value.
> Trade receivables (£3.0m) - the ongoing financial sanctions may affect
the ability of customers to pay the Russian subsidiaries for their products
and services. If it is determined that their customers are unlikely to repay
these amounts then for a provision is required.
> IAS 41 valuation (£3.0m) - the ongoing impacts of both the local
economic outlook and the Russian subsidiaries customers' ability to pay debts
as they fall due could result in a reversal of the fair value of the Russian
biological assets in the December valuation.
Management will continue to monitor the situation closely to see if any
further changes require additional analysis that may result in a different
conclusion.
In the event of changes in legislation, such as more restrictive sanctions
imposed by the UK Government or actions taken by the Russian Government,
management may determine that the Group does not exercise control, as defined
under IFRS 10 'Consolidated financial statements', over the assets and
operations of the Russian subsidiaries and therefore would not be able to
consolidate these companies into the financial statements of the Group. The
deconsolidation would mean that the Russian entities would be reclassified as
investments and would need to be assessed for impairment. A charge of up to
£13.7m may need to be recognised in the Income Statement representing the
total net assets of the two Russian subsidiaries. Dependent on the nature of
the events leading to the decision to deconsolidate the Russian subsidiaries
there may be additional expenses incurred which cannot be estimated at this
time. In addition, revenues would not be consolidated into the financial
statements of the Genus Group from the date of any deconsolidation. Revenues
from the Russian entities were £11.9m in the six months ended 31 December
2022.
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 2022 and have
been implemented with effect from 1 July 2022. These are:
> 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';
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 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';
> Amendments to IAS 8- ' Definition of Accounting Estimates'; and
> Amendments to IFRS 16- ' Lease Liability in a Sale and Leaseback'.
Going Concern
The Genus plc Annual Report 2022 (a copy of which is available on the Genus
plc website at www.genusplc.com) sets out on pages 44-46 several 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 fiscal year.
In assessing the appropriateness of adopting the going concern basis of
preparing the financial statements, the Board have considered: -
> Genus's Budget, Forecasts and Strategic Plan which forms
management's best estimate of the future performance and position of the Group
> Genus's 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 £190m
multi-currency RCF, a 150m US dollar RCF and a US 20m USD bond guarantee. The
term of the facility is for four years to August 2025 having already exercised
both extension options. Additionally, there is an uncommitted £40m accordion
option which can be requested a further two occasions over the remaining
lifetime of the facility; and
> The availability of mitigating actions that could be utilised
if needed; 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 viability 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 because of failing to
produce best genetics for our customers or to secure elite genetics;
> Ensuring biosecurity or continuity of supply, which is
modelled through one off impacts of disease outbreaks and border closures;
> Impact of the war in Ukraine, modelled through reduction in
profit expectations and cash restrictions;
> Financial and operational impact of cyber security incidents;
and
> Impact of increased pressures from changes global commodity
prices.
The Directors 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
2022 2021 2022
£m £m £m
Genus PIC 179.0 143.5 306.6
Genus ABS 160.8 130.9 272.0
Genus Research and Development
Porcine product development 9.0 6.0 12.4
Bovine product development 1.4 0.8 1.7
Gene editing - - 0.7
Other research and development - - -
10.4 6.8 14.8
350.2 281.2 593.4
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
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2022 2021 2022
£m £m £m
Genus PIC 70.1 52.2 112.3
Genus ABS 22.4 22.1 40.5
Genus Research and Development
Porcine product development (13.0) (10.3) (22.4)
Bovine product development (12.7) (10.4) (22.8)
Gene editing (7.7) (3.6) (7.9)
Other research and development (9.4) (7.0) (14.0)
(42.8) (31.3) (67.1)
Adjusted segment operating profit 49.7 43.0 85.7
Central (8.5) (8.0) (16.9)
Adjusted operating profit 41.2 35.0 68.8
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 £2.2m net expense (2021: £1.7m credit) relate to Genus
ABS (£2.0m net expense) and our central segment (£0.2m expense). 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
31 31 30 31 31 30
December December June December December June
2022 2021 2022 2022 2021 2022
£m
£m
£m
£m
£m
£m
Genus PIC 294.8 253.8 305.4 (65.4) (63.3) (73.4)
Genus ABS 278.4 232.9 261.4 (72.1) (77.7) (78.9)
Genus Research and Development
Research 15.8 18.3 14.7 (4.0) (5.0) (4.4)
Porcine product development 276.5 236.0 275.0 (53.5) (57.8) (57.7)
Bovine product development 112.2 119.0 119.6 (13.2) (21.5) (16.7)
404.5 373.3 409.3 (70.7) (84.3) (78.8)
Segment total 977.7 860.0 976.1 (208.2) (225.3) (231.1)
Central 46.4 36.2 41.8 (246.0) (164.5) (214.7)
Total 1,024.1 896.2 1,017.9 (454.2) (389.8) (445.8)
Revenue by type
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2022 2021 2022
£m
£m
£m
Genus PIC 90.1 77.4 158.4
Genus ABS 155.9 126.5 262.5
Genus Research and Development 10.4 6.8 14.8
Sale of animals, semen, embryos and ancillary products and services 256.4 210.7 435.7
Genus PIC 88.9 66.1 148.2
Genus ABS 0.5 0.5 1.1
Genus Research and Development - - -
Royalties 89.4 66.6 149.3
Genus PIC - - -
Genus ABS 4.4 3.9 8.4
Genus Research and Development - - -
Consulting services 4.4 3.9 8.4
Total revenue 350.2 281.2 593.4
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
2022 2021
2022
£m £m
£m
Genus PIC 176.5 142.0 303.2
Genus ABS 148.6 119.3 247.2
Genus Research and Development 10.4 6.8 14.1
Recognised at a point in time 335.5 268.1 564.5
Genus PIC 2.5 1.5 3.4
Genus ABS 12.2 11.6 24.8
Genus Research and Development - - 0.7
Recognised over time 14.7 13.1 28.9
Total revenue 350.2 281.2 593.4
3. EXCEPTIONAL ITEMS
Operating (expense)/credit Six months Six months Year
ended ended ended
31 31 30
December December June
2022 2021 2022
£m
£m
£m
Litigation, settlement and damages (net) (1.8) (1.8) (1.4)
Acquisition and integration - (0.1) (0.3)
Pension related - - (0.4)
Legacy legal claim - 3.6 3.3
ABS production restructuring (0.2) - (2.8)
Other (0.2) - (0.4)
(2.2) 1.7 (2.0)
Litigation and damages
Litigation includes legal fees, settlement and related costs of £1.8m (2021:
£1.8m) related to the actions between ABS Global, Inc. and certain affiliates
('ABS') and Inguran, LLC and certain affiliates (aka STgenetics ('ST')). The
net expense comprises £2.7m of legal costs and a £0.9m settlement credit
(see below for further details).
Material litigation activities during the period ended 31 December 2022
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 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.
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. 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 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 opposed this action.
On September 20, 2022 the USPTO issued patent 11,446,665 (the '665 patent) and
ST subsequently sought a third supplement of ABS III by adding a claim of
infringement of the '665 patent. ABS has opposed this action as well, and
sought dismissal of all infringement claims.
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, and the
hearing was completed on 2 February 2022. On 7 June 2021, PTAB declined to
institute the '210 patent IPR and on 28 April 2022, PTAB issued its decision
and declined to invalidate the claims of the '439 patent. ABS has appealed the
'439 patent decision (the "439 Appeal").
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 (the ''987 patent'), 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 in favour of ABS. ST has appealed this decision (the "ABS
III Appeal").
On 1 July 2022, the court reached a decision on the ABS II post-judgment
motions as well as the pending motions in ABS IV. The court deferred to the
jury's verdict in ABS II confirming the validity and infringement of US
patents 7,311,476, and 7,611,309 (the ''476 and '309 patents' respectively)
and the '987 patent, and further confirmed the award of costs to ABS of ~$5.3m
in connection with ABS I. In relation to ABS IV, the Court denied ABS' motion
to dismiss the '439 and '210 patent claims on the basis that the challenges
were too fact-based to be resolved at this stage. ABS filed counterclaims
alleging, among other things, anti-competitive conduct and infringement of
four ABS patents. A court scheduling conference confirmed a hearing date of
15 July 2024 for ABS IV hearing. Appeals have been filed by ABS on the
validity and infringement of the '987 patent (the "987 Appeal"), the '476 and
the '309 patents (the "ABS II Appeal") and ST has appealed the award of the
$5.3m costs (the "Fee Award Appeal").
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 476 and 309 patents 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 (the "Indian Patent
Proceedings"). In June 2021, ST appealed the decision of Competition
Commission of India ("CCI") which had confirmed that ABS India had not
breached the Indian Competition Act in relation to its participation in a
sexed semen tender offered by the Utter Pradesh Livestock Development Board
(the "CCI Appeal").
On 27 December 2022, ABS and ST settled the 987 Appeal, the Fee Award Appeal
and the Indian Patent Proceedings (along with related patent oppositions in
India), delivering lower patent royalty payments for ABS and a settlement
exceptional credit of £0.9m. The ABS II Appeal, the ABS III Appeal, the ABS
IV litigation, the 439 Appeal, and the CCI Appeal remain ongoing.
4. NET FINANCE COSTS
Six months Six months Year
ended ended ended
31 31 30
December December June
2022 2021 2022
£m
£m
£m
Interest payable on bank loans and overdrafts (4.7) (1.6) (4.1)
Amortisation of debt issue costs (0.5) (0.4) (0.9)
Other interest payable - - (0.1)
Unwinding of discount put options (0.2) (0.3) (0.2)
Net interest cost in respect of pension scheme liabilities (0.1) (0.1) (0.2)
Interest on lease liabilities (0.6) (0.4) (1.1)
Total interest expense (6.1) (2.8) (6.6)
Interest income on bank deposits - 0.1 0.4
Total interest income - 0.1 0.4
Net finance costs (6.1) (2.7) (6.2)
5. TAXATION AND DEFERRED TAXATION
Income tax expense
Six months Six months Year
ended ended ended
31 31 30
December December June
2022 2021 2022
£m
£m
£m
Current tax 7.3 6.6 15.4
Deferred tax (4.3) (1.1) (3.7)
Total income tax expense 3.0 5.5 11.7
The tax charge for the period of £3.0m (2021: £5.5m) on the statutory profit
represents an effective tax rate of 20.0% (2021: 22.5%). The reduction in the
statutory ETR of 2.5% results from the reduced deferred tax charge on
previously unrecognised losses as explained further below.
The tax charge on adjusted profits for the period is £10.2m (2021: £9.3m),
which represents a tax rate on adjusted profits of 24.2% (2021: 25.1%). The
Group tax rate has decreased by approximately 90 basis points due to a
reduction in the deferred tax charge on previously unrecognised losses in 2022
being a credit of £0.3m (2021: charge of £0.1m).
There is a deferred tax liability at the period end of £55.8m (2021: £50.9m)
which mainly relates to the recognition at fair value of biological assets and
intangible assets arising on acquisition and a deferred tax asset of £10.1m
(2021: £5.1m) 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
2022 2021 2022
£m
£m
£m
Final dividend
Final dividend for the year ended 30 June 2022 of 21.7 pence per share 14.2 - -
Final dividend for the year ended 30 June 2021 of 21.7 pence per share - 14.2 14.2
Interim dividend
Interim dividend for the year ended 30 June 2022 of 10.3 pence per share - - 6.7
14.2 14.2 20.9
The final dividend for the year ended 30 June 2022 was approved at the Company
Annual General Meeting on 23 November 2022 and paid on 08 December 2022.
On 22 February 2023, the Directors proposed an interim dividend of 10.3 pence
per share payable on 31 March 2023.
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 2021 51.7 81.6 133.3 20.0 2.7 23.6 4.3 183.9
Additions 4.2 10.3 14.5 0.2 8.6 - - 23.3
Acquisition - 0.4 0.4 - - - - 0.4
Transfers - - - 7.7 (7.7) - - -
Effect of movements in exchange rates 0.6 10.6 11.2 1.0 0.1 3.2 0.1 15.6
Balance at 30 June 2022 56.5 102.9 159.4 28.9 3.7 26.8 4.4 223.2
Additions - - - - 4.3 - - 4.3
Acquisition - - - - - - - -
Transfers - - - 2.3 (2.3) - - -
Effect of movements in exchange rates (0.1) 0.1 - - - 0.2 - 0.2
Balance at 31 December 2022 56.4 103.0 159.4 31.2 5.7 27.0 4.4 227.7
Amortisation and impairment losses
Balance at 1 July 2021 36.0 66.2 102.2 13.0 - 8.4 4.0 127.6
Amortisation for the year 3.0 5.3 8.3 1.7 - 2.5 0.1 12.6
Effect of movements in exchange rates 0.1 8.6 8.7 0.8 - 1.4 0.1 11.0
Balance at 30 June 2022 39.1 80.1 119.2 15.5 - 12.3 4.2 151.2
Disposals - - - - - - - -
Amortisation for the period 1.6 3.2 4.8 1.4 - 1.4 0.1 7.7
Effect of movements in exchange rates 0.1 0.3 0.4 - - - - 0.4
Balance at 31 December 2022 40.8 83.6 124.4 16.9 - 13.7 4.3 159.3
Carrying amounts
At 31 December 2022 15.6 19.4 35.0 14.3 5.7 13.3 0.1 68.4
At 30 June 2022 17.4 22.8 40.2 13.4 3.7 14.5 0.2 72.0
Included within brands, multiplier contracts and customer relationships are
carrying amounts for brands of £0.6m (30 June 2022: £0.5m), multiplier
contracts of £10.0m (30 June 2022: £11.1m) and customer relationships of
£8.8m (30 June 2022: £11.2m).
Included within the software class of assets is £8.6m (30 June 2022: £6.9m)
and included in assets in the course of construction is £2.0m (30 June 2022:
£2.7m) 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 2022 88.0 278.8 366.8
Increases due to purchases 10.7 75.7 86.4
Decreases attributable to sales - (160.8) (160.8)
Decrease due to harvest (6.9) (15.7) (22.6)
Changes in fair value less estimated sale costs (11.9) 97.4 85.5
Effect of movements in exchange rates 0.6 (2.3) (1.7)
Balance at 31 December 2022 80.5 273.1 353.6
Non-current biological assets 80.5 242.2 322.7
Current biological assets - 30.9 30.9
Balance at 31 December 2022 80.5 273.1 353.6
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 2021 92.0 227.5 319.5
Increases due to purchases 23.3 225.8 249.1
Decreases attributable to sales - (234.8) (234.8)
Decrease due to harvest (17.7) (26.3) (44.0)
Changes in fair value less estimated sale costs (19.6) 61.2 41.6
Effect of movements in exchange rates 10.0 25.4 35.4
Balance at 30 June 2022 88.0 278.8 366.8
Non-current biological assets 88.0 245.7 333.7
Current biological assets - 33.1 33.1
Balance at 30 June 2022 88.0 278.8 366.8
Bovine
Bovine biological assets include £6.3m (2021: £7.1m) 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 16.0% (June 2022: 12.5%) 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.
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 £28.6m (2021: £39.5m).
Decreases attributable to sales during the period of £160.8m (2021: £137.3m)
include £38.7m (2021: £38.0m) in respect of the reduction in fair value of
the retained interest in the genetics of animals, other than parent gilts,
transferred under royalty contracts.
Also included is £49.1m (2021: £58.2m) 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 £127.6m (2021:
£104.1m) in respect of these contracts, comprising £38.7m (2021: £38.0m) on
initial transfer of animals and semen to customers and £88.9m (2021: £66.1m)
in respect of royalties received.
A risk-adjusted rate of 12.5% (June 2022: 10.3%) 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
(2021: seven) and their estimated useful lifespan is 1.4 years (2021: 1.4
years).
Six months ended 31 December 2022
Bovine Porcine Total
£m £m £m
Changes in fair value of biological assets (11.9) 97.4 85.5
Inventory transferred to cost of sales at fair value (0.1) (15.7) (15.8)
Biological assets transferred to cost of sales at fair value - (87.0) (87.0)
(12.0) (5.3) (17.3)
Fair value movement in related financial derivative - 0.1 0.1
Net IAS 41 valuation movement on biological assets(1) (12.0) (5.2) (17.2)
Six months ended 31 December 2021
Bovine Porcine Total
£m £m £m
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 - - -
Net IAS 41 valuation movement on biological assets(1) (9.2) 2.4 (6.8)
Year ended 30 June 2022
Bovine Porcine Total
£m £m £m
Changes in fair value of biological assets (19.6) 61.2 41.6
Inventory transferred to cost of sales at fair value (10.3) (26.3) (36.6)
Biological assets transferred to cost of sales at fair value - (10.3) (10.3)
(29.9) 24.6 (5.3)
Fair value movement in related financial derivative - (0.1) (0.1)
Net IAS 41 valuation movement on biological assets(1) (29.9) 24.5 (5.4)
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 2021 66.6 88.0 22.1 176.7 20.7 26.0 46.7 223.4
Additions 0.2 3.9 40.3 44.4 9.2 6.1 15.3 59.7
Transfers 23.5 12.8 (36.3) - - - - -
Disposals (1.4) (2.0) - (3.4) (0.5) (6.0) (6.5) (9.9)
Effect of movements in exchange rates 11.3 10.9 3.5 25.7 2.1 2.3 4.4 30.1
Balance at 30 June 2022 100.2 113.6 29.6 243.4 31.5 28.4 59.9 303.3
Additions - 1.5 6.3 7.8 1.0 5.3 6.3 14.1
Transfers 16.3 3.3 (19.6) - - - - -
Disposals - (1.1) - (1.1) - (4.5) (4.5) (5.6)
Effect of movements in exchange rates (1.7) (0.8) (0.8) (3.3) (0.2) 1.0 0.8 (2.5)
Balance at 31 December 2022 114.8 116.5 15.5 246.8 32.3 30.2 62.5 309.3
Depreciation and impairment losses
Balance at 1 July 2021 24.5 56.9 - 81.4 6.5 12.5 19.0 100.4
Depreciation for the year 3.8 11.0 - 14.8 4.8 6.8 11.6 26.4
Disposals (1.3) (1.8) - (3.1) (0.5) (5.9) (6.4) (9.5)
Impairment 0.8 0.1 - 0.9 - - - 0.9
Effect of movements in exchange rates 4.4 7.1 - 11.5 0.6 1.6 2.2 13.7
Balance at 30 June 2022 32.2 73.3 - 105.5 11.4 15.0 26.4 131.9
Depreciation for the period 2.7 6.3 - 9.0 2.4 3.5 5.9 14.9
Disposals - (0.7) - (0.7) - (4.3) (4.3) (5.0)
Effect of movements in exchange rates (0.5) (0.5) - (1.0) (0.4) 0.6 0.2 (0.8)
Balance at 31 December 2022 34.4 78.4 - 112.8 13.4 14.8 28.2 141.0
Carrying amounts
At 31 December 2022 80.4 38.1 15.5 134.0 18.9 15.4 34.3 168.3
At 30 June 2022 68.0 40.3 29.6 137.9 20.1 13.4 33.5 171.4
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 2022 was £6.4m (2021: £3.2m).
The carrying value of the investment is reconciled as follows:
31
31 December
December 2021
2022 £m
£m
Balance at 1 July 41.2 34.1
Share of post-tax retained profits of joint ventures and associates 6.4 3.2
Additions 2.0 1.1
Disposal - (0.1)
Effect of other movements including exchange rates (0.5) (2.2)
Balance at 31 December 49.1 36.1
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 2022 24.4 0.9 (17.5) (1.4) 6.4
Six months ended 31 December 2021 19.6 (0.4) (14.7) (1.3) 3.2
Year ended 30 June 2022 39.9 (1.4) (30.7) (2.6) 5.2
11. INVENTORIES
31 December 31 December 30 June
2022 2021 2022
£m
£m
£m
Biological assets' harvest classed as inventories 21.8 19.8 20.9
Raw materials and consumables 5.1 3.3 3.6
Goods held for resale 32.3 21.2 26.4
59.2 44.3 50.9
Goods held for resale have increased since June 2022 as a result of increased
acquisition of components used to produce the 2nd Generation IntelliGen
technology platforms (Gen2.0). These platforms are used to process sexed
bovine semen for ABS and third-party customers.
12. TRADE AND OTHER RECEIVABLES
(restated*) (restated*)
31 December 31 December 30 June
2022 2021 2022
£m
£m
£m
Trade receivables (restated*) 94.4 82.4 95.7
Less expected credit loss allowance (3.8) (3.6) (4.3)
Trade receivables net of impairment 90.6 78.8 91.4
Other debtors 8.9 7.8 10.7
Prepayments 11.4 9.3 8.5
Contract assets (restated*) 21.3 18.3 17.3
Other taxes and social security 3.7 3.9 1.6
Current trade and other receivables 135.9 118.1 129.5
Other debtors 2.2 1.8 3.7
Contract assets 5.9 - 4.9
Non-current other receivables 8.1 1.8 8.6
144.0 119.9 138.1
*During the period it was identified that certain contract assets in a
particular component were incorrectly classified as current trade receivables.
The prior periods have been restated reducing current trade receivables by
£8.5m in December 2021 and £9.6m in June 2022, with a corresponding increase
in current contract assets.
Trade receivables
The average credit period our customers take on the sales of goods is 50 days
(30 June 2022 (restated*): 56 days). We do not charge interest on receivables
for the first 30 days from the date of the invoice.
The Group 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 2022: no more than 5%).
13. TRADE AND OTHER PAYABLES
31 December 31 December 30 June
2022 2021 2022
£m
£m
£m
Trade payables 31.5 29.5 36.0
Other payables 12.8 9.7 8.2
Accrued Expenses 51.0 54.3 61.4
Contract liabilities 7.1 12.1 10.1
Other taxes and social security 8.4 7.5 9.0
Current trade and other payables 110.8 113.1 124.7
Contract labilities - 1.3 0.2
Non-current trade and other payables - 1.3 0.2
110.8 114.4 124.9
The average credit period taken for trade purchases is 30 days (30 June 2022:
39 days).
14. EARNINGS PER SHARE
Weighted average number of ordinary shares (diluted)
Six months Six months Year
ended ended ended
31 31 30
December December June
2022 2021 2022
000s
000s
000s
Weighted average number of ordinary shares (basic) 65,540 65,390 65,395
Dilutive effect of share awards and options 441 430 319
Weighted average number of ordinary shares for the purpose of diluted earnings 65,981 65,820 65,714
per share
Six months Six months Year
ended ended ended
31 31 30
December December June
2022 2021 2022
(pence) (pence) (pence)
Earnings per share
Basic earnings per share 20.4 30.4 62.5
Diluted earnings per share 20.3 30.2 62.2
Adjusted earnings per share
Adjusted earnings per share 48.8 42.4 82.7
Diluted adjusted earnings per share 48.5 42.1 82.3
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 £13.4m (six months ended 31 December 2021:
£19.9m; year ended 30 June 2022: £40.9m) 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 £32.0m (six months ended
31 December 2021: £27.7m; year ended 30 June 2022: £54.1m), which is
calculated as follows:
Adjusted earnings
Year
Six months Six months ended
ended ended 30
31 31 June
December December 2022
2022 2021 £m
£m
£m
Profit before tax 15.0 24.4 48.4
Add/(deduct):
Net IAS 41 valuation movement on biological assets (note 8) 17.2 6.8 5.4
Amortisation of acquired intangible assets (note 7) 4.8 3.8 8.3
Share-based payment expense 2.3 2.2 3.7
Exceptional items (see note 3) 2.2 (1.7) 2.0
Net IAS 41 valuation movement on biological assets in joint ventures (note 10) (0.9) 0.4 1.4
Tax on joint ventures and associates (note 10) 1.4 1.3 2.6
Attributable to non-controlling interest 0.2 (0.2) (0.3)
Adjusted profit before tax 42.2 37.0 71.5
Adjusted tax charge (10.2) (9.3) (17.4)
Adjusted profit after tax 32.0 27.7 54.1
Effective tax rate on adjusted profit 24.2% 25.1% 24.3%
15. CASH FLOW FROM OPERATING ACTIVITIES
Six months Year
Six months ended ended
ended 31 30
31 December June
December 2021 2022
£m
£m
2022
£m
Profit for the period 12.0 18.9 36.7
Adjustment for:
Net IAS 41 valuation movement on biological assets 17.2 6.8 5.4
Amortisation of acquired intangible assets 4.8 3.8 8.3
Share-based payment expense 2.3 2.2 3.7
Share of profit of joint ventures and associates (6.4) (3.2) (5.2)
Finance costs (net) 6.1 2.7 6.2
Income tax expense 3.0 5.5 11.7
Exceptional items 2.2 (1.7) 2.0
Adjusted operating profit from continuing operations 41.2 35.0 68.8
Depreciation of property, plant and equipment 14.9 12.2 26.4
Loss/(profit) on disposal of plant and equipment 0.6 (0.1) 0.4
Amortisation and impairment of intangible assets 2.9 2.0 4.3
Adjusted earnings before interest, tax, depreciation and amortisation 59.6 49.1 99.9
Cash impact of exceptional items (3.0) 2.7 1.1
Other movements in biological assets and harvested produce (6.7) (5.8) (19.1)
Decrease in provisions and release in deferred consideration (0.8) (0.1) -
Additional pension contributions in excess of pension charge (0.6) (2.3) (3.1)
Other 0.6 (0.6) 0.2
Operating cash flows before movement in working capital 49.1 43.0 79.0
Increase in inventories (7.4) (8.2) (6.1)
Increase in receivables (7.1) (11.9) (18.5)
(Decrease)/Increase in payables (8.9) (0.7) 2.2
Cash generated by operations 25.7 22.2 56.6
Interest received - 0.1 0.4
Interest and other finance costs paid (4.4) (1.7) (4.0)
Interest on leased assets (0.6) (0.4) (1.1)
Cash flow from derivative financial instruments (0.2) (0.3) (0.1)
Income taxes paid (8.7) (8.3) (17.5)
Net cash from operating activities 11.8 11.6 34.3
16. 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 2022. The aggregated position of defined benefit
schemes are provided below:
31 December 31 December 30 June
2022 2021 2022
£m
£m
£m
Present value of funded obligations 778.1 1,100.2 857.6
Present value of unfunded obligations 7.7 9.0 8.4
Total present value of obligations 785.8 1,109.2 866.0
Fair value of plan assets (820.2) (1,176.1) (936.3)
Restricted recognition of asset (MPF and DPF) 41.7 75.7 78.6
Recognised liability for defined benefit obligations 7.3 8.8 8.3
The principal actuarial assumptions (expressed as weighted averages) are:
31 31 30
December December June
2022 2021 2022
Discount rate 4.85% 1.95% 3.90%
Consumer Price Index 2.55% 2.30% 2.40%
Retail Price Index 2.95% 3.05% 2.90%
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.
Further details of the Milk Pension Fund can be found in the Genus plc Annual
Report 2022.
17. Financial instruments fair value disclosures
The table below sets out the categorisation of the financial instruments held
by the Group at 31 December 2022.
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.
(restated*) (restated*)
31 December 2022 31 December 2021 30 June 2022
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 7.6 - 4.1 11.7 12.4 - 3.5 15.9 6.5 - 3.7 10.2
Trade receivables and other debtors, excluding prepayments and contract assets - 105.4 - 105.4 - 92.3 - 92.3 - 107.4 - 107.4
(see note 12) (restated*)
Cash and cash equivalents - 42.3 - 42.3 - 45.9 - 45.9 - 38.8 - 38.8
Derivative instruments in non-designated hedge accounting relationships - 0.9 - 0.9 - 0.6 - 0.6 - 1.0 - 1.0
Derivate instruments in designated hedge accounting relationships - 2.6 - 2.6 - - - - - 2.2 - 2.2
7.6 151.2 4.1 162.9 12.4 138.8 3.5 154.7 6.5 149.4 3.7 159.6
Financial liabilities
Trade and other payables, excluding other taxes and social security - (102.4) - (102.4) - (106.9) - (106.9) - (115.9) - (115.9)
Loans and overdrafts - (222.2) - (222.2) - (161.6) - (161.6) - (189.2) - (189.2)
Leasing obligations - (34.6) - (34.6) - (27.6) - (27.6) - (34.6) - (34.6)
Derivative instruments in non-designated hedge accounting relationships - (0.6) - (0.6) - (0.3) - (0.3) - (0.9) - (0.9)
Derivative instruments in designated hedge accounting relationships - - - - - - - - - (0.3) - (0.3)
Put options for purchase of share in an investment - - - - - (0.9) - (0.9) - - - -
Put option over non-controlling interest - (7.4) - (7.4) - (6.6) - (6.6) - (7.0) - (7.0)
Deferred consideration - - (0.6) (0.6) - (0.2) (1.7) (1.9) - - (1.5) (1.5)
- (367.2) (0.6) (367.8) - (304.1) (1.7) (305.8) - (347.9) (1.5) (349.4)
The Directors consider that the carrying value amounts of financial assets and
financial liabilities recorded at amortised cost in the financial statements
are approximately equal to their fair values.
*During the period it was identified that certain contract assets in a
particular component were incorrectly classified as current trade receivables.
The prior periods have been restated reducing current trade receivables by
£8.5m in December 2021 and £9.6m in June 2022, with a corresponding increase
in current contract assets.
18. 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 2022 amounted to £1.2m (2021: £0.1m). As at
31 December 2022, the balance owing to these entities was £0.1m (2021:
£nil), all amounts were settled in cash.
These related party transactions were made on terms equivalent to those that
prevail in arms' length transactions.
During the prior year, as part of an international secondment agreement with a
member of Genus's executive, Genus agreed to fund an amount of £0.4m in
respect of a personal taxation expense. A tax refund has been claimed and cash
is expected to be received in Financial Year 2023, which will be used to
settle the outstanding amount in full.
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
2022 2021 2022 2022 2021 2022
£m
£m
£m
£m
£m
£m
Sale of goods and services to joint ventures and associates - - - - - -
Purchase of goods and services from joint ventures and associates 1.5 2.8 6.5 (0.2) (0.3) (0.3)
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.
GENUS PLC
RESPONSIBILITY STATEMENT
For the six months ended 31 December 2022
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
22 February 2023
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
Including adjusted operating profit from JV and associate results. include estimates of future performance; and
See reconciliation below. > exceptional items - these are items which due to either their size or
Adjusted operating profit inc JVs
their 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 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 weighted basic average number On a per share basis, this allows the comparability of underlying financial
per share of shares. performance by excluding the impacts of adjusting items.
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
31 December 31 December 30 June
2021
2022 2022
£m £m £m £m £m £m Reference
Operating profit 14.7 23.9 49.4 Group Income Statement
Add back:
Net IAS 41 valuation movement on biological assets 17.2 6.8 5.4 Group Income Statement
Amortisation of acquired intangible assets 4.8 3.8 8.3 Group Income Statement
Share-based payment expense 2.3 2.2 3.7 Group Income Statement
Exceptional items 2.2 (1.7) 2.0 Group Income Statement
Adjusted operating profit exc JVs 41.2 35.0 68.8 Group Income Statement
Less: amounts attributable to non-controlling interest 0.2 (0.2) (0.3) Group Income Statement
Operating profit from joint ventures and associates 6.4 3.2 5.2 Group Income Statement
Tax on joint ventures and associates 1.4 1.3 2.6 Note 10 - Interests in joint ventures and associates
Net IAS 41 valuation movement attributable to joint ventures (0.9) 0.4 1.4 Note 10 - Interests in joint ventures and associates
Adjusted operating profit from JVs 6.9 4.9 9.2
Adjusted operating profit inc JVs 48.3 39.7 77.7
Gene editing costs 7.7 3.6 7.9 Note 2 - Segmental information
Adjusted operating profit inc JVs and exc gene editing costs 56.0 43.3 85.6
Adjusted profit inc JVs before tax
Adjusted profit inc JVs after tax
31 December 31 December 30 June
2021
2022 2022
£m £m £m Reference
Adjusted operating profit inc JVs 48.3 39.7 77.7 See APM
Less net finance costs (6.1) (2.7) (6.2) Note 4 - Net finance costs
Adjusted profit inc JVs before tax 42.2 37.0 71.5
Adjusted tax (10.2) (9.3) (17.4) Note 14 - Earnings per share
Adjusted profit inc JVs after tax 32.0 27.7 54.1
Adjusted effective tax £m/rate
31 December 31 December 30 June
2021
2022 2022
£m % £m % £m % Reference
Adjusted effective tax £m/rate 10.2 24.2 9.3 25.1 17.4 24.3 Note 14 - Earnings per share
Exceptional items (0.5) (22.7) 0.1 - (0.8) (40.0) No direct reference
Share-based payment expense (0.5) (21.7) (0.5) (22.7) (0.5) (13.5) No direct reference
Amortisation of acquired intangible assets (0.8) (16.7) (0.7) (18.4) (3.3) (39.8) No direct reference
Net IAS 41 valuation movement on biological assets (4.0) (23.3) (1.3) (19.1) 1.5 27.8 No direct reference
Effective tax £m/rate 4.4 26.8 6.9 21.2 14.3 28.0 No direct reference
Adjusted basic earnings per share
30 June Reference
31 December 31 December 2022
2022 2021
Adjusted profit inc JVs after tax (£m) 32.0 27.7 54.1 See APM
Weighted average number of ordinary shares ('000) 65.540 65.390 65.395 Note 14 - Earnings per share
Adjusted basic earnings per share (pence) 48.8 42.4 82.7
Adjusted diluted earnings per share
30 June Reference
31 December 31 December 2022
2022 2021
Adjusted profit inc JVs after tax (£m) 32.0 27.7 54.1 See APM
Weighted average number of diluted ordinary shares ('000) 65.981 65.820 65.714 Note 14 - Earnings per share
Adjusted diluted earnings per share (pence) 48.5 42.1 82.3
Rolling 12 month Adjusted Earnings cover
31 December 31 December 30 June
2021
2022 2022
Pence Times Pence Times Pence Times Reference
Adjusted Earnings per share 48.8 42.4 82.7 See APM
Add: Prior June Adjusted Earnings per share 82.7 100.9 N/a See APM
Deduct: Prior Interim Adjusted Earnings per share (42.4) (55.3) N/a See APM
Rolling 12 month adjusted Earnings per share 89.1 88.0 82.7
Dividend for the period 10.3 10.3 32.0 Note 6 - Dividends
Add: Dividend for prior June 32.0 32.0 N/a Note 6 - Dividends
Less: prior interim dividend (10.3) (10.3) N/a Note 6 - Dividends
Rolling 12-month dividend 32.0 32.0 32.0
Rolling 12 month Adjusted Earnings cover 2.8 2.8 2.6 No direct reference
Adjusted EBITDA - as calculated under our financing facilities
31 December 31 December 30 June
2021
2022 2022
£m £m £m £m £m £m Reference
Operating profit 14.7 23.9 49.4 Group Income Statement
Add back:
Net IAS 41 valuation movement on biological assets 17.2 6.8 5.4 Group Income Statement
Amortisation of acquired intangible assets 4.8 3.8 8.3 Group Income Statement
Share-based payment expense 2.3 2.2 3.7 Group Income Statement
Exceptional items 2.2 (1.7) 2.0 Group Income Statement
Adjusted operating profit exc JVs 41.2 35.0 68.8 Group Income Statement
Adjust for:
Cash received from JVs (dividend and loan repayment) - - 3.2 Group Statement of Cash Flows
Depreciation: property, plant and equipment 14.9 12.2 26.4 Note 9 - Property, plant and equipment
Operational lease payments (6.5) (5.6) (12.4) No direct reference
Depreciation: historical cost of biological assets 7.2 5.5 10.7 No direct reference
Amortisation and impairment (excluding separately identifiable acquired 2.9 2.0 4.3 Note 7 - Intangible assets
intangible assets)
Less amounts attributable to non-controlling interest 0.2 (0.2) (0.3) Group Income Statement
Adjusted EBITDA - as calculated under our financing facilities 59.9 48.9 100.7
Rolling 12 month Adjusted EBITDA - as calculated under our financing
facilities
31 December 31 December 30 June
2021
2022 2022
£m £m £m £m £m £m Reference
Operating profit
Adjusted EBITDA - as calculated under our financing facilities 59.9 48.9 100.7 See APM
Add: Prior June Adjusted EBITDA 100.7 106.1 N/a See APM
Deduct: Prior Interim Adjusted EBITDA (48.9) (57.1) N/a See APM
Rolling 12 month Adjusted EBITDA 111.7 97.9 100.7
Balance sheet measures
Net Debt
Net debt as calculated under our financing facilities
31 December 31 December 30 June
2021
2022 2022
£m £m £m £m £m £m Reference
Current unsecured bank loans and overdrafts 7.3 10.6 7.1
Non-current unsecured bank loans and overdrafts 214.9 151.0 182.1
Unsecured bank loans and overdrafts 222.2 161.6 189.2 Group Balance Sheet
Current obligations under finance leases 9.9 8.6 10.1
Non-current obligations under finance leases 24.7 19.0 24.5
Obligations under finance leases 34.6 27.6 34.6 Group Balance Sheet
Total debt financing 256.8 189.2 223.8
Deduct:
Cash and cash equivalents (42.3) (45.9) (38.8) Group Balance Sheet
Net debt 214.5 143.3 185.0
Deduct:
Lower of obligations under finance leases or £30m (30.0) (27.6) (30.0)
Add back:
Guarantees 13.7 19.1 20.2 No direct reference
Deferred purchase arrangements 1.4 1.1 - No direct reference
Net debt - as calculated under our financing facilities 199.6 135.9 175.2
Cash flow measures
Cash conversion
31 December 31 December 30 June
2021
2022 2022
£m £m £m £m £m £m Reference
Cash generated by operations 25.7 22.2 56.6 Note 15 - Notes to the cash flow statement
Operating profit 14.7 23.9 49.4 Group Income Statement
Add back:
Net IAS 41 valuation movement on biological assets 17.2 6.8 5.4 Group Income Statement
Amortisation of acquired intangible assets 4.8 3.8 8.3 Group Income Statement
Share-based payment expense 2.3 2.2 3.7 Group Income Statement
Exceptional items 2.2 (1.7) 2.0 Group Income Statement
Adjusted operating profit exc JVs 41.2 35.0 68.8 Group Income Statement
Cash conversion (%) 62% 63% 82%
Free cash flow
31 December 31 December 30 June
2021
2022 2022
£m £m £m Reference
Cash generated by operations 25.7 22.2 56.6 Note 15 - Notes to cash flow statement
Net interest and tax paid (13.9) (10.6) (22.3) Note 15 - Notes to cash flow statement
Capital expenditure (15.0) (27.8) (50.9) Group Statement of Cash flows
Dividend received from joint venture and associate - - 3.2 Group Statement of Cash flows
Joint venture and associate loan repayment - - - Group Statement of Cash flows
Proceeds from sale of property, plant and equipment - 0.1 - Group Statement of Cash flows
Dividend to non-controlling interest (0.1) - (0.1) Group Statement of Cash flows
Free cash flow (3.3) (16.1) (13.5)
Other measures
Ratio of net debt to adjusted EBITDA
31 December 31 December 30 June
2021
2022 2022
£m Times £m Times £m Times Reference
Net debt - as calculated under our financing facilities 199.6 135.9 175.2 See APM
Rolling 12 month Adjusted EBITDA - 111.7 97.9 100.7 See APM
as calculated under our financing facilities
Ratio of net debt to Adjusted EBITDA 1.8 1.4 1.7
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