REG - Genus - Interim Results
22/02/2024 07:00
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RNS Number : 0058E Genus PLC 22 February 2024
For immediate release 22 February 2024
Genus plc
Interim results for the six months ended 31 December 2023
CHALLENGING MARKETS - MANAGEMENT ACTIONS TAKEN
Adjusted results(1) Statutory results
Actual currency Constant currency change(2) Actual currency
Six months ended 31 December 2023 2022 Change 2023 2022 Change
£m £m % % £m £m %
Revenue 333.6 350.2 (5) 1 333.6 350.2 (5)
Operating profit 33.0 41.2 (20) (14) 21.3 14.7 45
Operating profit inc JVs 38.1 48.3 (21) (17) n/a n/a n/a
Profit before tax 29.2 42.2 (31) (26) 14.3 15.0 (5)
Free cash flow (3.3) (3.3) - n/m(3)
Basic earnings per share (pence) 33.3 48.8 (32) (27) 20.6 20.4 1
Dividend per share (pence) 10.3 10.3 -
Resilient revenue delivery amidst challenging markets
· Low growth and prices in protein production across several markets,
China the most impactful
· Decisive management actions taken:
o Value Acceleration Programme underway in ABS to improve profitability and
returns from investments
o R&D strategic review completed to sharpen alignment to strategic and
commercial goals
· Commercialisation of the PRP (PRRS Resistant Pig) remains on track;
US FDA regulatory progress, genotypic and phenotypic durability submissions
accepted. Engagement has shifted to the post-product approval compliance
procedures with PRP approval now expected in fiscal year 2025
As expected, first half adjusted profit performance lower year on year
· Group revenue increased by +1%(2) in constant currency (5% decrease
in actual currency)
· Adjusted operating profit including joint ventures decreased 17%(2)
in constant currency (21% decrease in actual currency)
· Adjusted profit before tax (PBT) decreased 26%(2) (31% decrease in
actual currency) as lower profit performances in China of PIC and ABS, and
higher net finance costs were partially offset by profit growth in the rest of
the Group
· Statutory PBT 5% lower at £14.3m, with a £2.6m increase in the
non-cash fair value IAS41 valuation of biological assets of the Group, offset
by exceptional expenses of £7.5m
· Stable free cash outflow(1) of £3.3m (2022: £3.3m outflow) as lower
adjusted profit performance, higher exceptional expenses and interest costs
were offset by positive working capital management
· Cash conversion increased to 69%(1) (2022: 62%), in line with
expectations
· Net debt(1) increased to £250.1m, as expected, with a net debt to
EBITDA ratio of 2.1x(1)
· Adjusted earnings per share 32% lower and interim dividend of 10.3p
per share unchanged, with 2.2x(1) adjusted earnings cover
Reporting format change
Product Development costs now being allocated to PIC and ABS, having
previously been reported within the R&D division; management has
determined that this better aligns the costs as well as the opportunities of
this activity with the businesses; no change to group adjusted operating
profit.
Divisional headlines
· PIC - Resilient trading ex-China continuing to gain market share,
ongoing challenging environment in China
o Strategically important royalty revenue growth of 2%(2) with volumes also
growing 2% demonstrating the strength of the royalty model
o Adjusted operating profit including joint ventures decreased by 10%(2);
PIC trading regions ex-China grew adjusted operating profit by 5%, but was
impacted primarily by China's decrease in adjusted operating profit, PRP
commercialisation costs and higher product development costs due to expansion
into PIC's Atlas farm
o Enhanced commercial focus in China gaining traction; new royalty customers
won in the period demonstrating the attractiveness of PIC's royalty model and
genetics
· ABS - Challenging trading across all regions; significant action
taken to improve performance
o Volumes decreased 6% (ABS ex-China down 2%) with sexed volumes up 2% and
beef volumes down 5%
o Revenue increased 3% in constant currency supported by robust price
increases and product mix
o Adjusted operating profit decreased 15%, due to lower trading volumes in
all regions except Europe partially offset by growth in IntelliGen third party
contracts and management's mitigating price and cost actions
o Comprehensive Value Acceleration Programme; leadership change and targeted
restructuring. Focused price action, production rationalisation and other cost
efficiencies delivered £1.3m in FY24 H1 with a further £5m of savings
expected in FY24 H2, resulting in £10m annualised savings expected for FY25.
Exceptional restructuring costs of £2.9m recognised through the FY24 H1
condensed income statement. Further ABS restructuring to continue in the
second half and additional exceptional restructuring costs are anticipated in
FY24 H2
o In January 2024, US and NZ litigations with ST were settled outside the
courts, details in the condensed financial statements.
· R&D - Investment decreased by 8%(2) as planned
o Sharpened focus on key priorities that aligns to our strategy, has a
compelling commercial opportunity, is deliverable, and leads to a portfolio
that is balanced overall
o Strategic review completed and expected to give rise to annual cost
savings of £5m in FY25. We expect to recognise c£1m of associated
exceptional cost in FY24 H2.
Commenting on the performance and outlook, Jorgen Kokke, Chief Executive,
said:
"Genus faced challenging markets which impacted performance in the first half
of the year. We have taken rapid action including initiating a comprehensive
programme to accelerate the value delivery from our bovine operations. We have
also completed a strategic review of R&D activities. The Company is
benefitting from savings achieved in the first half and will benefit further
in the second half of the year and into FY25, as we optimise resource
allocation to best deliver our growth objectives.
In North America, Europe and Latin America PIC continued to achieve growth in
royalty revenues and operating profit, illustrating the strength of PIC's
business model. China continues to be a challenging porcine market, however
enhanced commercial focus is delivering results. New royalty customers were
signed in the first half which gives us more confidence that our sales
approach is effective. The opportunity in China remains significant and given
the success of the relationship with our local partner, BCA, we are jointly
exploring ways to accelerate our collaboration going forward.
ABS saw weakness across most markets. China dairy was particularly
challenging; not only did conventional volumes suffer from a double-digit
decline in the dairy herd, but mix was also impacted as demand for sexed
genetics reduced.
As described in our recent trading update, taking into account management
actions taken, and assuming that present market conditions persist for the
balance of the fiscal year, management expects fiscal year 2024 adjusted
profit before tax to be not less than £58m in actual currency. We are seeing
the positive impact of our actions to accelerate value delivery which will
deliver further benefit in the second half and in subsequent years."
Results presentation today
A pre-recorded analysts and bankers briefing to discuss the interim results
for the six months ended 31 December 2023 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/65a7b66cc5ec665c02ecf7b9
(https://stream.buchanan.uk.com/broadcast/65a7b66cc5ec665c02ecf7b9)
This will be followed by a live face to face Q&A session to be held at
Buchanan at 10:30am. A Zoom alternative will also be available. Please contact
Verity Parker at Buchanan for details: verityp@buchanan.uk.com
Enquiries:
Genus plc (Jorgen Kokke, Chief Executive Officer; Alison Henriksen, Chief Tel: 01256 345970
Financial Officer / Anand Date, Investor Relations Director)
Buchanan (Charles Ryland / Toto Berger / Sophie Wills / 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 85 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 2023 at the average exchange
rates applied to adjusted operating profit for the year ended 30 June 2023.
Percentages are calculated on prior period restated figures. Please see Note 1
on the notes to the condensed set of Financial Statements changes of
reportable segments
(3) n/m = not meaningful
Group Performance
Genus had a challenging first half of the year with a number of markets, most
notably China, proving to be difficult. PIC ex-China performed resiliently,
with North America, Latin America and Europe achieving adjusted operating
profit growth in constant currency. PIC adjusted operating profit from Asia,
however, halved due to weak trading in China as well as higher supply chain
costs and lower by-product revenue. ABS, faced into a number of difficult
markets, which led to volumes decreasing 6% in the period.
During the period the Group initiated a comprehensive Value Acceleration
Programme at ABS and completed a strategic review of R&D activities. These
actions have delivered £1.3m of efficiencies in FY24 H1, a further £5m of
benefit expected in FY24 H2, and full year combined benefits of £15m in FY25
across both programmes. Exceptional costs of £2.9m have been recognised
through the FY24 H1 condensed income statement in respect of ABS
restructuring.
Group revenue increased by 1% in constant currency (5% decrease in actual
currency) to £333.6m (FY23 H1: £350.2m). PIC revenue decreased by 1%(2) but
strategically important royalty revenue increased 2%(2) and volumes grew by
2%. ABS revenue increased by 3%(2) despite volumes decreasing 6%. Sexed
genetic volumes continued to grow, up 2%, albeit beef volumes fell 5%.
Adjusted operating profit, including joint ventures, was £38.1m (FY23 H1:
£48.3m), down 17% in constant currency. Within this, Genus's share of
adjusted joint venture operating profits was £4.7m (FY23 H1: £6.9m) with
profits from PIC Agroceres impacted by hyperinflation in Argentina. Net
finance costs were higher at £8.9m (FY23 H1: £6.1m), due predominantly to
higher interest rates year on year.
Statutory profit before tax was £14.3m (FY23 H1: £15.0m), and reflected a
£2.6m non-cash increase (FY23 H1: £17.2m decrease) in the net IAS 41
biological assets fair value. Porcine biological assets increased by £30.6m
principally due to the restocking of Aurora, our genetic nucleus farm in
Canada, following an upgrade to the farm facilities and health status, along
with stocking of the Ankang and LuoDian farms in China. Bovine biological
assets reduced by £28.0m primarily reflecting lower forecast sales volumes
and rationalisation of bulls. Exceptional items in the period were an expense
of £7.5m which was primarily legal fees related to the litigation disputes
with ST and ABS restructuring charges. In January 2024, US and NZ litigations
with ST were settled outside the courts. Further details are provided in
note 21 of the condensed financial statements.
The tax charge on adjusted profits for the period was £7.3m (2022: £10.2m),
which represented a tax rate on adjusted profits of 25.0% (2022: 24.2%). The
adjusted tax rate increased due to the full year impact of the UK tax rate
increase to 25%, that took effect from April 2023, and a change in profit mix
to higher tax rate jurisdictions. The statutory profit after tax was £10.3m
(2022: £12.0m).
The effect of exchange rate movements on the translation of Genus's overseas
profits was a negative impact of £2.7m compared with the prior period,
primarily from weaker Sterling against Latin American currencies.
Free cash outflow of £3.3m (2022: £3.3m outflow) reflected the lower profit
performance in the period offset by improved working capital. Cash generated
by operations of £22.8m (2022: £25.7m), which is seasonally weaker in H1,
represented a 69% conversion (2022: 62%) of adjusted operating profit of
£33.0m (2022: £41.2m) into cash. Our medium-term objective is to achieve an
annual conversion of at least 90%, and we are on track to achieve it this
fiscal year.
Net debt increased to £250.1m (June 2023: £195.8m), as expected, reflecting
the payment of the final dividend, free cash outflow, new farm leases in China
and foreign exchange movements. The net debt to EBITDA ratio increased to 2.1x
(June 2023: 1.6x), reflecting the higher net debt, and we expect our leverage
ratio to be similar at June 2024.
The Board has declared an unchanged interim dividend of 10.3 pence per share,
which is payable on 28 March 2024 to shareholders on the register at 1 March
2024.
Strategic Priorities
Genus is a leading genetics player with a long track record of investing
behind its businesses. Amongst others, these investments span Product
Development, R&D, supply chain and talent. We are resolute in our
commitment to deliver the resources our businesses need to prosper in the
medium-term, in-line with our strategic and commercial goals.
Our strategic priorities are to:
1) Continue growing in porcine, with more stable growth in China
2) Deliver successful commercialisation of PRP, the PRRS gene edited pig
3) Deliver greater value from bovine; and
4) Continue to generate returns from R&D investments
In porcine, North America, Latin America and Europe continue to grow. Asia
trading, however, was weak, driven by the challenging Chinese porcine market.
Here, we have enhanced our commercial focus which is already bearing fruit
with new royalty customers signed in FY24 H1. Financial performance from
royalty customers takes time to build but our experience shows that a greater
mix of royalty business will deliver more stability over the longer-term. Our
relationship with local Chinese partner, BCA, is close and collaborative.
Given the success of the partnership to date, we are jointly exploring ways to
accelerate our collaboration going forward.
With regards to our PRP gene edit, progress has been made with the US FDA's
acceptance of our animal characterisation submissions in respect to phenotypic
and genotypic durability. Recent engagement with the FDA has shifted to the
post-product approval compliance procedures. This has clarified the data
submissions and monitoring that will be required on an ongoing basis post PRP
approval. Validation of our procedures to comply with these monitoring
requirements is expected to take several months. We therefore now expect FDA
PRP approval in FY25. Our dialogue shifting to the post-product approval
compliance procedures reinforces our view that product approval will be
forthcoming. There are no changes to our commercialisation timeline or
financial projections.
To drive greater value from bovine we initiated a comprehensive Value
Acceleration programme. These actions have delivered commercial and efficiency
benefits in the first half. We have taken targeted action to increase cost
recovery on our value-added services through price increases. We have
rationalised our production and integrated our beef, dairy and IntelliGen
leadership to drive efficiencies in supply chain and resource allocation. We
will go further in the second half with additional action being taken to
improve structural profitability in the future.
During the period we completed a strategic review of our R&D activities
and portfolio. The goal was to ensure that all early-stage projects align to
our strategy, have a compelling commercial opportunity, are deliverable, and
lead to a portfolio that is balanced overall. Through this review, we have
sharpened our focus on key workstreams and improved our innovation processes
and governance. There were some projects that did not meet our criteria, and
we have stopped further work. We expect this to result in £5m of ongoing
annualised savings from FY25.
Aqua
During the period, we exercised our option to take full ownership of Xelect,
the leading global aquaculture genetic services company, following the
purchase of a minority stake in 2021. Xelect's small team of specialists are
helping us explore opportunities for accelerating genetic improvement within
aqua.
People
We foster an inclusive and ethical culture that challenges, inspires and
supports our people to perform to their best and fulfil their potential.
During the period, we began a project to explore key components of that
culture and ensure they are embedded consistently across the company. This has
included work to refresh our core values, which have been in place for more
than 12 years, to better reflect the business we are now. This process has
involved gaining input from colleagues across the company and the refreshed
values will be introduced later this year.
We also ran our latest global employee engagement survey, which attracted a
record number of responses. This gave us positive feedback on our culture and
helped us identify areas for improvement, which leaders and managers are
currently working on with their teams.
In February 2024, ABS Chief Operating Officer Dr Nate Zwald left the business.
After a comprehensive search process, Jim Low has been appointed as the new
Chief Operating Officer of ABS and will join the business on 15 April 2024.
He has spent 25 years in the nutrition and food industries, most recently as
Chief Commercial Officer for Glanbia's $1 billion global, dairy based,
nutritional solution business.
Outlook
Conditions remain challenging for our customers in several parts of the world
and we have driven acceleration of our value delivery initiatives to improve
performance in the first half, with further action being taken in the second
half. Our focus is on driving commercial excellence and efficiency
improvements at ABS as well as concentrating our R&D efforts on projects
with the most attractive commercial outcomes.
With management actions taken, and assuming that present market conditions
persist for the balance of the fiscal year, management expects fiscal year
2024 adjusted profit before tax to be not less than £58m in actual
currency(1). Management remains committed to strong profit growth in the
medium-term.
(1) This is a forward looking statement. Although Genus believes that the
expectations reflected in this forward-looking statement are reasonable, it
can give no assurance that these expectations will prove to be correct.
Because these statements involve risks and uncertainties, actual results may
differ materially from those expressed or implied by these forward-looking
statements. Adjusted profit before tax is as defined in our Alternative
Performance Measures glossary.
Genus PIC - Operating Review
Actual currency Constant currency change
Six months ended 31 December 2023 2022(1) Change
£m £m % %
Revenue 175.8 188.0 (6) (1)
Porcine product development (19.9) (17.0) 17 31
Adjusted operating profit exc JV 46.9 53.1 (12) (7)
Adjusted operating profit inc JV 51.4 59.8 (14) (10)
Adjusted operating margin exc JV 26.7% 28.2% (1.5)pts (1.8)pts
(1) Prior year period restated. Please see Note 1 of the notes to the
condensed set of Financial Statements changes of reportable segments
Pork producers were faced with contrasting market conditions in different
parts of the world over the period. In North America, pork producers are
suffering their worst period of financial losses since the 2008-2010 financial
crisis. Weak market prices in China, caused by weaker demand and the slow exit
of inefficient supply, are also causing significant producer financial losses
in the region. Meanwhile in Europe, producers generally operated at positive
margins as a significant contraction of the sow herd over the last few years
supported prices.
Against this mixed producer profitability backdrop, PIC delivered a 1%
decrease in constant currency revenue (6% decrease in actual currency)
compared with the same period last year but a 2% increase in constant currency
strategically important royalty revenue (2% decrease in actual currency) as it
continued to gain market share. Volumes increased 2% across the business.
Adjusted operating profit including JVs decreased 14% year on year (10%
decrease in constant currency) albeit this was due to PIC Asia's performance
as North America, Latin America and Europe all reported growth in adjusted
operating profit in constant currency.
Adjusted Operating Profit
Revenue Royalty Revenue Volumes (MPEs)
Actual Currency
PIC Total £175.8m (-6%) £87.1m (-2%) 99.0m (+2%) £51.4m (-14%)
Constant Currency
NAM -14% +2% -2% +1%
LATAM +15% +6% +4% +1%
EMEA +14% +13% +12% +26%
ASIA 0% -13% -9% -50%
Asia ex-China -5% +5% +1% +5%
NB: Growth rates compared to the same period last year
Regional Trading Commentary
North America: The U.S. breeding herd declined slightly, but stable health and
higher productivity drove a net increase in production. Low prices throughout
2023, as well as rising input costs, have seen producers suffering some of
their worst financial losses in 15 years. Against this backdrop, PIC North
America performed resiliently due to its high penetration of royalty volumes.
Adjusted operating profit increased 1% in constant currency compared with the
same period last year, supported by a 2% increase in strategically important
royalty revenues. Total revenue decreased 14% year on year in constant
currency due to a decrease in low margin breeding stock sales.
Latin America: In Brazil, declining feed costs drove further increases in
production and enhanced margins for producers. Pork faced competition from
other proteins in the domestic market but benefitted from lower prices.
Exports continued to grow strongly, particularly shipments to China, although
these showed signs of slowing down towards the end of the period. In Mexico,
feed costs also declined but increasing domestic production, rising imports
and slowing domestic consumption all put pressure on prices and impacted
producer margins. The strength of the Mexican peso undermined exports, with
volumes to all major markets declining. Argentinian currency instability and
hyperinflation resulted in a £1.0m decrease in income year on year from our
Agroceres JV. In aggregate, Latin America's performance in the period was
resilient with a 1% increase in adjusted operating profit compared with the
same period last year on royalty revenue growth of 6% in constant currency.
Europe: Pork production contracted sharply, with the resultant lower supply
combined with growing consumer demand leading to increased prices across the
region. Producers generally operated at positive margins, leading to a slowing
rate of decline in the breeding herd towards the end of the period. High
prices relative to other regions meant that exports to most countries
declined. PIC Europe performed strongly during the period with royalty
revenues growing particularly strongly in Spain and Germany. PIC Europe
adjusted operating profit increased 26% compared with the same period last
year with royalty revenues growing 13% in constant currency.
Asia: Pig prices in China remained low over the period, averaging 15 RMB/kg,
as demand continued to lag behind expectations. Pressure on prices was further
exacerbated by the relatively slow exit of inefficient supply. Most Chinese
producers made significant losses in the period, resulting in slow herd
replenishment. ASF continued to be the greatest challenge for producers in the
Philippines, although PIC's business there performed well. PIC Asia's adjusted
operating profit decreased 50% compared with the same period last year in
constant currency, impacted by the aforementioned difficult trading in China
as well as higher supply chain costs as our by-product revenues reduced and
the business absorbed costs from two additional farms (Ankang and LuoDian)
which PIC took on during the period. Excluding China, the rest of Asia
performed resiliently with adjusted operating profits increasing 5% on royalty
revenue growth of 5% in constant currency.
Porcine product development
Porcine product development costs increased to £19.9m in the first half (2023
H1: £17.0m), an increase of 17% compared with the same period last year (31%
increase in constant currency). Within this, PRP commercialisation costs
increased to £5.1m (2023 H1: £4.0m) as marketing and supply chain activity
increased. In conventional product development, we continued to strengthen our
genomic selection and accelerated progress on target traits for our customers.
We also took further steps to embed digital phenotyping tools across our
facilities. Production costs also rose as a result of costs at our new elite
farm, Atlas.
Genus ABS - Operating Review
Actual currency Constant currency change
Six months ended 31 December 2023 2022(1) Change
£m £m % %
Revenue 157.8 162.2 (3) 3
Bovine Product Development (11.7) (12.4) (6) (3)
Adjusted operating profit(2) 7.3 10.1 (28) (15)
Adjusted operating margin 4.6% 6.2% (1.6)pts (1.1)pts
(1) Prior year period restated. Please see Note 1 of the notes to the
condensed set of Financial Statements changes of reportable segments
(2) Excluding loss attributable to non-controlling interest
Bovine producers experienced a challenging period across all regions, leading
to lower demand for genetics and a 6% decline in ABS's volumes compared with
the same period last year. Low milk prices were a challenge across most
regions with beef prices proving more robust.
Against this backdrop, management took significant action to accelerate value
creation. Targeted price increases were aimed at driving greater recovery
rates on our value-added service provisions and resulted in minimal customer
attrition. Cost efficiency programmes were completed including production
rationalization, operating model changes and the delivery of other cost
savings. In total, these actions delivered a £1.3m benefit in the first half
with a further £5m expected in the second half. A full year benefit of £10m
is expected in FY25. Exceptional costs of £2.9m have been recognised through
the FY24 H1 condensed income statement in respect of ABS restructuring.
Further ABS restructuring will continue in the second half and additional
exceptional restructuring costs are anticipated in FY24 H2.
The impact of challenging markets saw ABS revenue decrease 3% compared with
the same period last year (3% increase in constant currency) and adjusted
operating profit decrease 28% year on year (15% decrease in constant
currency). Every region, except Latin America, saw adjusting operating profit
decrease. Asia was particularly challenging, driven by a sharp double-digit
decline in the Chinese dairy herd. IntelliGen third party sexing performed
well, with strong growth in India and Thailand, but this was insufficient to
offset declines elsewhere in the business.
Adjusted Operating Profit
Revenue Volume (m straws)
Actual Currency
ABS Total £157.8m (-3%) 12.7m (-6%) £7.3m (-28%)
Constant Currency
NAM +4% -6% -2%
LATAM +6% -7% +4%
EMEA +5% +4% -6%
ASIA -11% -12% -11%
NB: Growth rates compared to the same period last year
Regional Trading Commentary
North America: Milk production contracted, as low milk prices early in the
period forced producers to cut costs and cull herds. Prices subsequently rose
and profitability improved, but the dairy recovery is still tenuous with
producer profits being aided by high beef prices and alternative revenue
streams. Market prices for beef cattle and calves remained considerably higher
than the previous period following a significant herd reduction. Beef retail
prices reached record levels as a result of strong consumer demand. Constant
currency revenue increased 4% compared with the same period last year but
adjusted operating profit decreased 2% as lower volumes were only partially
offset by growth in IntelliGen third party business. Mitigating management
action included implementing price rises to increase service cost recovery as
well as cost reductions.
Latin America: Milk production in Brazil continued to recover, aided by stable
input costs and favourable weather conditions, helping producer margins to
improve despite lower milk prices. Weaker export demand from China and reduced
internal consumption meant that an increased Brazilian beef supply led to
lower prices. Beef production in Mexico reached record levels and the beef
herd is now more than 30% larger than 10 years ago. Latin America delivered
year on year constant currency revenue growth of 6% driven by an 11% increase
in sexed volumes. Adjusted operating profit increased 4% compared with the
same period last year in constant currency; management action in the region
included a turnaround of the embryo business in Brazil with embryo production
costs decreasing 15% through a combination of cost control and volume
increases.
Europe: Milk production was undermined by challenging weather conditions in
parts of the region and milk prices declined faster than input costs, putting
pressure on producer margins. However, milk prices started to rise towards the
end of the period. Beef production continued to decline in most major
producing countries and the beef herd contracted, but carcass prices held firm
due to limited supply. Overall beef exports from the region declined. Revenue
growth was 5% compared with the same period last year but adjusted operating
profit decreased 6% reflecting phasing of IntelliGen upgrades with third party
customers. Within Europe, the UK has been a pioneer market in terms of driving
better commercial excellence. Service cost recovery actions in the UK
contributed to a 15% improvement in the UK's adjusted operating profit.
Asia: Milk prices in China fell below breakeven costs for most producers,
driving a double-digit reduction of the dairy herd. Sexed semen volumes were
particularly impacted as Chinese dairy farmers tend to source sexed semen
foremostly for expansion. As a result, ABS China adjusted operating profit
decreased £2.6m compared with the same period last year. In Australia, milk
production improved but high prices relative to other markets hindered
competitiveness, contributing to a double-digit decline in exports. Australia
and New Zealand dairies were also impacted by the rapid decline of heifer
exports to China which negatively impacted product mix. Australian beef
production increased with competitive prices helping to significantly increase
exports to the US and China. In India and Thailand, new IntelliGen business
contributed very positively albeit outweighed by China's challenging trading
overall. Asia revenues over the period decreased 11% compared with the same
period last year and adjusted operating profit decreased 11% year on year in
constant currency.
Bovine product development
We continued to develop our proprietary beef and dairy genetics. Our polled
and beef-on-dairy genetics continue to have a leading market position. Ongoing
advancements in our IntelliGen technology continue to be made.
Research and Development - Operating Review
Actual currency Constant currency change
Six months ended 31 December 2023 2022(1) Change
£m £m % %
Gene editing 3.2 3.7 (14) (5)
Other research and development 8.1 9.4 (14) (9)
Net expenditure in R&D 11.3 13.1 (14) (8)
(1) Prior year period restated. Please see Note 1 of the notes to the
condensed set of Financial Statements changes of reportable segments
During the period, we completed a strategic review of our R&D activities.
The goal was to ensure that all early-stage projects align to our strategy,
have a compelling commercial opportunity, are deliverable, and lead to a
balanced portfolio overall. Through this review, we have sharpened our focus
on key workstreams and improved our innovation processes and governance. There
were some projects that did not meet our criteria, and we have stopped further
work. We expect this to result in £5m of ongoing annualised savings in FY25
and expect to recognise approximately £1m of associated exceptional cost in
FY24 H2.
We made further progress across our research programmes. Net expenditure in
R&D decreased by 8% compared with the same period last year in constant
currency, as planned, to support this work.
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 2023 (a copy of which is available on the Genus plc website at
www.genusplc.com) sets out on pages 61-64 the principal risks and
uncertainties that might impact the performance of the Group.
Some of these risks relate to our business operations, while others relate to
future commercial exploitation of our leading-edge R&D programmes. We are
also exposed to global economic and political risks such as trade restrictions
attributed to the ongoing Russia-Ukraine conflict and slow economic recovery
in China post COVID-19. Additionally, we monitor evolving risks such as the
continued impact of the Russia-Ukraine conflict, geopolitical tensions across
the globe, macro-economic conditions, impacts of climate change, carbon
pricing and cyber security.
There has been no material change to the principal risks that might affect the
performance of the Group in the current financial year.
GENUS PLC
CONDENSED CONSOLIDATED INCOME STATEMENT
For the six months ended 31 December 2023
Note Six months Six months Year
ended ended ended
31 December 2023 31 December 30 June
£m 2022 2023
£m
£m
REVENUE 2 333.6 350.2 689.7
Adjusted operating profit 2 33.0 41.2 74.6
Adjusting items:
- Net IAS 41 valuation movement on biological assets 8 2.6 (17.2) (16.9)
- Amortisation of acquired intangible assets 7 (2.9) (4.8) (7.7)
- Share-based payment expense (3.9) (2.3) (6.0)
(4.2) (24.3) (30.6)
Exceptional items (net) 3 (7.5) (2.2) (3.5)
Total adjusting items (11.7) (26.5) (34.1)
OPERATING PROFIT 21.3 14.7 40.5
Share of post-tax profit of joint ventures and associates retained 10 5.3 6.4 10.5
Other gains and losses 17 (3.4) - 2.7
Finance costs 4 (11.0) (6.1) (15.4)
Finance income 4 2.1 - 1.1
PROFIT BEFORE TAX 14.3 15.0 39.4
Taxation 5 (4.0) (3.0) (7.6)
PROFIT FOR THE PERIOD 10.3 12.0 31.8
ATTRIBUTABLE TO:
Owners of the Company 13.5 13.4 33.3
Non-controlling interest 20 (3.2) (1.4) (1.5)
10.3 12.0 31.8
EARNINGS PER SHARE
Basic earnings per share 14 20.6p 20.4p 50.8p
Diluted earnings per share 14 20.4p 20.3p 50.5p
Alternative Performance Measures
Adjusted operating profit 33.0 41.2 74.6
Adjusted operating loss attributable to non-controlling interest 0.4 0.2 0.4
Pre-tax share of profits from joint ventures and associates excluding net IAS 4.7 6.9 10.8
41 valuation movement
Adjusted operating profit including joint ventures and associates 38.1 48.3 85.8
Net finance costs 4 (8.9) (6.1) (14.3)
Adjusted profit before tax 29.2 42.2 71.5
Adjusted earnings per share
Basic adjusted earnings per share 14 33.3p 48.8p 84.8p
Diluted adjusted earnings per share 14 33.1p 48.5p 84.2p
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 2023
( ) Year ended
Six months ended Six months ended 30 June 2023
31 December 2023 31 December 2022
£m £m £m £m £m £m
PROFIT FOR THE PERIOD 10.3 12.0 31.8
Items that may be reclassified subsequently to profit or loss
Foreign exchange translation differences (2.1) (4.5) (27.2)
Fair value movement on net investment hedges (0.4) (0.9) -
Fair value movement on cash flow hedges (1.3) 0.6 0.8
Tax relating to components of other comprehensive expense 0.3 0.7 3.1
(3.5) (4.1) (23.3)
Items that may not be reclassified subsequently to profit or loss
Actuarial losses on retirement benefit obligations (9.0) (36.4) (40.4)
Movement on pension asset recognition restriction 9.1 36.9 38.3
Release of additional pension liability - - 3.0
Gain on equity instruments measured at fair value 0.2 1.1 1.7
Tax relating to components of other comprehensive expense/(income) - (0.3) (1.2)
0.3 1.3 1.4
OTHER COMPREHENSIVE EXPENSE FOR THE PERIOD (3.2) (2.8) (21.9)
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 7.1 9.2 9.9
ATTRIBUTABLE TO:
Owners of the Company 10.3 10.9 11.1
Non-controlling interest (3.2) (1.7) (1.2)
7.1 9.2 9.9
GENUS PLC
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 31 December 2023
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 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 - - - (24.2) - - (24.2) 0.3 (23.9)
Fair value movement on net investment hedges, net of tax - - - - - - - - -
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 - - - - - 0.7 0.7 - 0.7
Actuarial loss on retirement benefit obligations, net of tax - - - - - (30.3) (30.3) - (30.3)
Movement on pension asset recognition restriction, net of tax - - - - - 28.7 28.7 - 28.7
Recognition of additional pension liability, net of tax - - - - - 2.3 2.3 - 2.3
Other comprehensive (expense)/income for the year - - - (24.2) 0.6 1.4 (22.2) 0.3 (21.9)
Profit/(loss) for the year - - - - - 33.3 33.3 (1.5) 31.8
Total comprehensive income/(expense) for the year - - - (24.2) 0.6 34.7 11.1 (1.2) 9.9
Recognition of share-based payments, net of tax - - - - - 6.3 6.3 - 6.3
Dividends 6 - - - - - (21.0) (21.0) - (21.0)
Adjustment arising from change in non-controlling interest and written put - - - - - - - (0.1) (0.1)
option
BALANCE AT 30 JUNE 2023 6.6 179.1 (0.1) 26.7 2.0 360.6 574.9 (7.7) 567.2
Foreign exchange translation differences, net of tax - - - (2.3) - - (2.3) 0.1 (2.2)
Fair value movement on net investment hedges, net of tax - - - (0.3) - - (0.3) - (0.3)
Fair value movement on cash flow hedges, net of tax - - - - (1.0) - (1.0) - (1.0)
Gain on equity instruments measured at fair value, net of tax - - - - - 0.2 0.2 - 0.2
Actuarial losses on retirement benefit obligations, net of tax - - - - - (6.8) (6.8) - (6.8)
Movement on pension asset recognition restriction, net of tax - - - - - 6.9 6.9 - 6.9
Other comprehensive expense for the period - - - (2.6) (1.0) 0.3 (3.3) 0.1 (3.2)
Profit/(loss) for the period - - - - - 13.5 13.5 (3.2) 10.3
Total comprehensive income for the period - - - (2.6) (1.0) 13.8 10.2 (3.1) 7.1
Recognition of share-based payments, net of tax - - - - - 3.9 3.9 - 3.9
Dividends 6 - - - - - (14.2) (14.2) - (14.2)
Adjustment arising from change in non-controlling interest and written put 20 - - - - - - - 8.9 8.9
option
BALANCE AT 31 DECEMBER 2023 6.6 179.1 (0.1) 24.1 1.0 364.1 574.8 (1.9) 572.9
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 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 20 - - - - - - - (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
GENUS PLC
CONDENSED CONSOLIDATED BALANCE SHEET
As at 31 December 2023
Note 31 December 31 December 30 June
2023 2022 2023
£m
£m
£m
ASSETS
Goodwill 111.9 111.7 107.8
Other intangible assets 7 67.5 68.4 66.2
Biological assets 8 319.3 322.7 318.2
Property, plant and equipment 9 190.2 168.3 164.4
Interests in joint ventures and associates 10 53.1 49.1 53.5
Other investments 4.2 11.7 8.8
Derivative financial assets 17 1.1 2.6 4.9
Other receivables 12 10.2 8.1 8.2
Deferred tax assets 19.0 10.1 16.5
TOTAL NON-CURRENT ASSETS 776.5 752.7 748.5
Inventories 11 65.6 59.2 61.3
Biological assets 8 31.0 30.9 23.8
Trade and other receivables 12 134.4 135.9 132.1
Cash and cash equivalents 42.0 42.3 36.3
Income tax receivable 3.2 2.0 4.0
Derivative financial assets 17 1.2 0.9 1.5
Asset held for sale - 0.2 -
TOTAL CURRENT ASSETS 277.4 271.4 259.0
TOTAL ASSETS 1,053.9 1,024.1 1,007.5
LIABILITIES
Trade and other payables 13 (105.3) (110.8) (122.0)
Interest-bearing loans and borrowings (7.0) (7.3) (4.2)
Provisions (1.9) (2.1) (1.8)
Deferred consideration (0.6) - -
Obligations under leases (11.5) (9.9) (10.0)
Tax liabilities (1.0) (1.8) (7.4)
Derivative financial liabilities 17 (1.6) (1.7) (1.8)
TOTAL CURRENT LIABILITIES (128.9) (133.6) (147.2)
Interest-bearing loans and borrowings (226.2) (214.9) (196.0)
Retirement benefit obligations 16 (6.6) (7.3) (6.9)
Provisions (10.3) (11.0) (10.3)
Deferred consideration (0.6) (0.6) (0.6)
Deferred tax liabilities (54.2) (55.8) (51.2)
Derivative financial liabilities 17 (6.8) (6.3) (6.2)
Obligations under leases (47.4) (24.7) (21.9)
TOTAL NON-CURRENT LIABILITIES (352.1) (320.6) (293.1)
TOTAL LIABILITIES (481.0) (454.2) (440.3)
NET ASSETS 572.9 569.9 567.2
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 24.1 46.5 26.7
Hedging reserve 1.0 2.0 2.0
Retained earnings 364.1 344.0 360.6
EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY 574.8 578.1 574.9
Non-controlling interest 3.6 (2.5) (2.2)
Put option over non-controlling interest (5.5) (5.7) (5.5)
TOTAL NON-CONTROLLING INTEREST 20 (1.9) (8.2) (7.7)
TOTAL EQUITY 572.9 569.9 567.2
GENUS PLC
Condensed consolidated Group Statement of Cash Flows
For the six months ended 31 December 2023
Note Six months Year
Six months ended ended
ended 31 December 30 June
31 December 2022 2023
£m
£m
2023
£m
NET CASH FLOW FROM OPERATING ACTIVITIES 15 6.0 11.8 50.4
CASH FLOWS FROM INVESTING ACTIVITIES
Dividends received from joint ventures and associates 4.5 - 2.6
Joint venture and associate loan investment - - (1.9)
Acquisition of joint venture and associate (1.2) (2.0) (1.0)
Acquisition of controlling interest in Xelect Limited (see note 19) (2.9) - -
Sale of other investments 4.7 - 3.4
Acquisition of investments - (0.4) (0.4)
Payment of deferred consideration - (0.8) (0.8)
Purchase of property, plant and equipment (9.0) (10.7) (25.9)
Purchase of intangible assets (5.4) (4.3) (9.3)
Proceeds from sale of property, plant and equipment 0.6 - 2.4
NET CASH OUTFLOW FROM INVESTING ACTIVITIES (8.7) (18.2) (30.9)
CASH FLOWS FROM FINANCING ACTIVITIES
Drawdown of borrowings 90.2 80.1 126.8
Repayment of borrowings (57.8) (47.2) (111.7)
Payment of lease liabilities (8.9) (5.9) (11.1)
Equity dividends paid (14.2) (14.2) (21.0)
Dividend to non-controlling interest - (0.1) (0.1)
Debt issue costs - (1.1) (1.1)
NET CASH INFLOW/(OUTFLOW) FROM FINANCING ACTIVITIES 9.3 11.6 (18.2)
NET INCREASE IN CASH AND CASH EQUIVALENTS 6.6 5.2 1.3
Cash and cash equivalents at start of period 36.3 38.8 38.8
Net increase in cash and cash equivalents 6.6 5.2 1.3
Effect of exchange rate fluctuations on cash and cash equivalents (0.9) (1.7) (3.8)
TOTAL CASH AND CASH EQUIVALENTS AT END OF PERIOD 42.0 42.3 36.3
GENUS PLC
ANALYSIS OF NET DEBT
For the six months ended 31 December 2023
At 1 July Net Foreign exchange Non-cash movement At 31 December 2023
2023 cash flows
£m £m £m £m £m
Cash and cash equivalents 36.3 6.6 (0.9) - 42.0
Interest-bearing loans - current (4.2) (2.3) - (0.5) (7.0)
Lease liabilities - current (10.0) 8.9 - (10.4) (11.5)
(14.2) 6.6 - (10.9) (18.5)
Interest-bearing loans - non-current (196.0) (30.1) (0.1) - (226.2)
Lease liabilities - non-current (21.9) - 0.1 (25.6) (47.4)
(217.9) (30.1) - (25.6) (273.6)
Total debt financing (232.1) (23.5) - (36.5) (292.1)
Net debt (195.8) (16.9) (0.9) (36.5) (250.1)
Included within non-cash movements is £36.0m in relation to net new leases
and £0.5m in the unwinding of debt issue cost.
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)
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 2023
1. BASIS OF PREPARATION
The unaudited Condensed Set of Financial Statements for the six months ended
31 December 2023:
· 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 2023;
· 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 21 February 2024.
The information relating to the year ended 30 June 2023, with exception of
note 2, 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 2023 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 2023. The Genus
plc Annual Report 2023 (a copy of which is available on the Genus plc website
at www.genusplc.com (file:///C:/Users/lucyl/Desktop/www.genusplc.com) ) sets
out on pages 61-64 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
2023 2022 2023 2023 2022 2023
US Dollar/£ 1.25 1.18 1.21 1.27 1.21 1.27
Euro/£ 1.16 1.16 1.15 1.15 1.13 1.16
Brazilian Real/£ 6.17 6.16 6.20 6.18 6.39 6.08
Mexican Peso/£ 21.64 23.38 22.84 21.61 23.57 21.74
Chinese Yuan/£ 9.02 8.24 8.44 9.01 8.35 9.21
Russian Rouble/£ 116.45 74.46 86.29 113.39 89.22 112.79
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-based
subsidiaries/entities'). 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 on our business has been to categorise the
banks in Russia into sanctioned and non-sanctioned banks. Where we receive
money from sanctioned banks we are unable to use the cash without a licence
from His Majesty's Treasury ('HMT'). For cash receipts from non-sanctioned
banks into the entities' non-sanctioned banks we are able to use the cash in
Russia for day-to-day operations.
The Group applied to HMT for a licence on 25 April 2022, to allow the use of
payments from sanctioned banks by non-sanctioned Russian customers for the
delivery of porcine and bovine genetics; to allow the use of money in a
non-sanctioned Russian bank account in the name of Genus Russia to pay Russian
suppliers who continue to use sanctioned Russian bank accounts; and to remit
any excess money in Genus Russia's 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 UK Office of Financial Sanctions Implementation ('OFSI') issued a general
licence for trading in agricultural commodities in Russia effective on the 4
November 2022 which 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, where there is cash that is not available to
be used by the rest of the Group this needs to be disclosed. As at 31 December
2023, we had a cash balance of £3.6m (30 June 2023 £3.1m) in the Russian
entities of which £0.8m (30 June 2023: £0.8m) is not currently available to
be used by the Group due to being received from sanctioned banks and held in a
sanctioned bank.
Management has reviewed the operations and cash flow over a period of 18
months from 31 December 2023 to 30 June 2025, based upon the 2025 plans, to
determine whether the Russian entities 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 their 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 these Russian-based subsidiaries.
Genus PLC applied for a licence to the Department for International Trade
('DIT') on 22 September 2022, to allow for UK-based employees within the Genus
group to provide accounting, business and management consulting services to
the Russian-based subsidiaries, for the purpose of helping them carry out
business operations in Russia, delivery of humanitarian assistance activity
and for the production or distribution of food, provided that it is for the
benefit of the civilian population.
The licence was authorised by the DIT and came into force on 11 January 2023.
It authorises the following services:
> The fullest possible range of accounting services, business and
management consulting services, to include advisory, guidance and operational
assistance services provided for business policy and strategy, and the overall
planning, structuring, and control of the organisation.
> The oversight that a parent company would typically provide to its
subsidiaries in the areas of accounting, financial controls, tax, treasury,
finance and human resources, along with similar oversight in the areas of
information technology, supply chain and other types of technology.
The licence expires on 11 January 2025 and, provided the facts and
circumstances surrounding the issuance of the licence currently in place do
not change materially we do not foresee or are aware any reasons at this time
why the licence could not be renewed.
We have concluded that we do have control over the Russian-based subsidiaries
for the half year ended 31 December 2023, as defined under IFRS 10
'Consolidated financial statements', and we are still able to consolidate them
despite short-term restrictions on extracting cash. We have also assessed each
of the asset balances for impairment. The material areas that could give rise
to impairment are:
> PIC Russia farm: £2.4m (30 June 2023: £2.4m) - the value of the farm is
predicated on the future economic benefit of the animals that are being reared
there. We would need to assess if the property's open market price (less cost
to sell) would support the carrying value.
> Trade receivables: £2.4m (30 June 2023: £2.7m) - the ongoing financial
sanctions may affect our customers' ability to pay us for their goods. If
determined that our customers are unlikely to repay these amounts, then they
should be provided for.
> IAS 41 valuation: £1.8m (30 June 2023: £3.9m) - the ongoing impacts of
both the local economic outlook and our customers' ability to pay us could
result in a reversal of the fair value of the Russian biological assets in the
December valuation.
Management's impairment analysis indicates that, under the current business
environment and based on the plans for the Financial Year 2025 no impairment
is required as at 31 December 2023.
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, we
may determine that we do not exercise control, as defined under IFRS 10
'Consolidated financial statements', over the assets and operations of the
Russian entities and we would not be able to consolidate these companies into
the Financial Statements. The deconsolidation would mean that we would
reclassify the Russian entities as investments and we would need to assess for
impairment. A charge of up to £9.3m (30 June 2023: £11.7m) may need to be
recognised in the Income Statement, representing the total net assets of the
two Russian entities. Dependent on the nature of the events leading to the
decision to deconsolidate the entities, there may be additional expenses
incurred which we are unable to estimate at this time. In addition, revenues
would not be consolidated into the Financial Statements from the date of any
deconsolidation. Revenues from the Russian entities were £7.2m in the half
year ended 31 December 2023 (30 June 2023: £21.7m).
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 2023 and have
been implemented with effect from 1 July 2023. These are:
> Amendments to IAS 1 and IFRS Practice Statement 2 - 'Disclosure of
Accounting Policies';
> Amendments to IAS 8 - ' Definition of Accounting Estimates';
> Amendments to IAS 12 - ' Deferred Tax related to Assets and
Liabilities arising from a Single Transaction'; and
> Amendments to IAS 12 - 'International Tax Reform Pillar Two Model
Rules - application of the exception and disclosure of that fact'.
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:
> IFRS S1 'General Requirements for Disclosure of
Sustainability-related Financial Information';
> IFRS S2 'Climate-related Disclosures';
> Amendments to IAS 1 - ' Classification of Liabilities as Current or
Non-Current';
> Amendments to IAS 7 and IFRS 7 - 'Disclosures: Supplier Finance
Arrangements';
> Amendments to IAS 12 - 'International Tax Reform Pillar Two Model
Rules - other disclosure requirements';
> Amendments to IAS 21 - 'Lack of Exchangeability'; and
> Amendments to IFRS 16- ' Lease Liability in a Sale and Leaseback'.
Going Concern
The Genus plc Annual Report 2023 (a copy of which is available on the Genus
plc website at www.genusplc.com) sets out on pages 62-64 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 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 23 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.
> 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;
> Managing agricultural market and commodity prices volatility;
modelled through reductions in price 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; and
> Impact of the war in Ukraine, modelled through reduction in
profit expectations and cash restrictions.
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.
Change of reportable segments
During the review of the Company's interim Financial Statements, management
determined that product development revenues, costs and attributable assets
and liabilities are more accurately presented as part of each trading unit's
profit and loss account. This adjustment aligns our external reporting with
our internal reporting structure, reflecting how the performance of the
trading units is assessed and managed. As a result, the prior periods
comparatives in note 2 have been restated to reflect the change.
Revenue (As previously reported) Impact (restated) (As previously reported) Impact (restated)
Six months of restatement Six months Year of restatement Year
ended ended ended ended
31 December 31 December 30 June 30 June
2022 2022 2023 2023
£m £m £m £m
Genus PIC 179.0 9.0 188.0 349.5 18.6 368.1
Genus ABS 160.8 1.4 162.2 318.8 2.8 321.6
Genus Research and Development
Porcine product development 9.0 (9.0) - 18.5 (18.5) -
Bovine product development 1.4 (1.4) - 2.8 (2.8) -
Gene editing - - - 0.1 (0.1) -
Other research and development - - - - -
10.4 (10.4) - 21.4 (21.4) -
350.2 - 350.2 689.7 - 689.7
Adjusted operating profit (As previously reported) Impact (restated) (As previously reported) Impact (restated)
Six months of restatement Six months Year of restatement Year
ended ended ended ended
31 December 31 December 30 June 30 June
2022 2022 2023 2023
£m £m £m £m
Genus PIC 70.1 (17.0) 53.1 135.0 (37.5) 97.5
Genus ABS 22.4 (12.7) 9.7 43.4 (25.3) 18.1
Genus Research and Development
Porcine product development (13.0) 13.0 - (29.7) 29.7 -
Bovine product development (12.7) 12.7 - (25.6) 25.6 -
Gene editing (7.7) 4.0 (3.7) (14.3) 7.5 (6.8)
Other research and development (9.4) - (9.4) (17.4) - (17.4)
(42.8) 29.7 (13.1) (87.0) 62.8 (24.2)
Adjusted segment operating profit 49.7 - 49.7 91.4 - 91.4
Central (8.5) - (8.5) (16.8) - (16.8)
Adjusted operating profit 41.2 - 41.2 74.6 - 74.6
Segment assets (As previously reported) Impact (restated) (As previously reported) Impact (restated)
Six months of restatement Six months Year of restatement Year
ended ended ended ended
31 December 31 December 30 June 30 June
2022 2022 2023 2023
£m £m £m £m
Genus PIC 294.8 276.5 571.3 265.4 269.1 534.5
Genus ABS 278.4 112.2 390.6 281.7 125.0 406.7
Genus Research and Development
Research 15.8 - 15.8 11.4 - 11.4
Porcine product development 276.5 (276.5) - 269.1 (269.1) -
Bovine product development 112.2 (112.2) - 125.0 (125.0) -
404.5 (388.7) 15.8 405.5 (394.1) 11.4
Segment total 977.7 - 977.7 952.6 - 952.6
Central 46.4 - 46.4 54.9 - 54.9
Total 1,024.1 - 1,024.1 1,007.5 - 1,007.5
Segment liabilities (As previously reported) Impact (restated) (As previously reported) Impact (restated)
Six months of restatement Six months Year of restatement Year
ended ended ended ended
31 December 31 December 30 June 30 June
2022 2022 2023 2023
£m £m £m £m
Genus PIC (65.4) (53.5) (118.9) (66.0) (55.3) (121.3)
Genus ABS (72.1) (13.2) (85.3) (72.5) (19.6) (92.1)
Genus Research and Development
Research (4.0) - (4.0) (4.5) - (4.5)
Porcine product development (53.5) 53.5 - (55.3) 55.3 -
Bovine product development (13.2) 13.2 - (19.6) 19.6 -
(70.7) 66.7 (4.0) (79.4) 74.9 (4.5)
Segment total (208.2) - (208.2) (217.9) - (217.9)
Central (246.0) - (246.0) (222.4) - (222.4)
Total (454.2) - (454.2) (440.3) - (440.3)
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 business including commercialisation costs
relating to PRRS resistant pig ('PRP');
> Genus ABS - our global bovine business; and
> Genus Research and Development - our global spend on gene editing costs
(excluding PRP commercialisation) and other research and development costs.
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
(restated*) (restated*)
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2023 2022 2023
£m £m £m
Genus PIC 175.8 188.0 368.1
Genus ABS 157.8 162.2 321.6
Genus Research and Development - - -
333.6 350.2 689.7
Adjusted operating profit by segment is set out below and reconciled to the
Group's adjusted operating profit. A reconciliation of adjusted operating
profit to profit for the period is shown on the face of the Condensed
Consolidated Income Statement.
Adjusted operating profit
(restated*) (restated*)
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2023 2022 2023
£m £m £m
Genus PIC 46.9 53.1 97.5
Genus ABS 6.7 9.7 18.1
Genus Research and Development (11.3) (13.1) (24.2)
Adjusted segment operating profit 42.3 49.7 91.4
Central (9.3) (8.5) (16.8)
Adjusted operating profit 33.0 41.2 74.6
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 £7.5m net expense (2022: £2.2m net expense) relate to
Genus ABS (£6.9m net expense) and Genus PIC (£0.6m net 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
(restated*) (restated*) 31 (restated*) (restated*)
31 31 30 December 31 30
December December June 2023 December June
£m
2023 2022 2023 2022 2023
£m
£m
£m
£m
£m
Genus PIC 598.6 571.3 534.5 (145.0) (118.9) (121.3)
Genus ABS 400.5 390.6 406.7 (66.7) (85.3) (92.1)
Genus Research and Development 7.6 15.8 11.4 (3.6) (4.0) (4.5)
Segment total 1,006.7 977.7 952.6 (215.3) (208.2) (217.9)
Central 47.2 46.4 54.9 (265.7) (246.0) (222.4)
Total 1,053.9 1,024.1 1,007.5 (481.0) (454.2) (440.3)
Revenue by type
(restated*) (restated*)
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2023 2022 2023
£m
£m
£m
Genus PIC 88.7 99.1 192.1
Genus ABS 154.0 157.3 310.6
Genus Research and Development - - -
Sale of animals, semen, embryos and ancillary products and services 242.7 256.4 502.7
Genus PIC 87.1 88.9 176.0
Genus ABS 0.2 0.5 1.4
Genus Research and Development - - -
Royalties 87.3 89.4 177.4
Genus PIC - - -
Genus ABS 3.6 4.4 9.6
Genus Research and Development - - -
Consulting services 3.6 4.4 9.6
Total revenue 333.6 350.2 689.7
Revenue from contracts with customers
The Group's revenue is analysed below by the timing at which it is recognised.
(restated*) (restated*)
Six months Six months Year
ended
ended
ended
31 December 31 December
30 June
2023 2022
2023
£m £m
£m
Genus PIC 172.4 185.5 362.2
Genus ABS 139.6 148.7 293.1
Genus Research and Development - - -
Recognised at a point in time 312.0 334.2 655.3
Genus PIC 3.4 2.5 5.9
Genus ABS 18.2 13.5 28.5
Genus Research and Development - - -
Recognised over time 21.6 16.0 34.4
Total revenue 333.6 350.2 689.7
* See note 1 for details of the restatements.
3. EXCEPTIONAL ITEMS
Operating (expense)/credit Six months Six months Year
ended ended ended
31 31 30
December December June
2023 2022 2023
£m
£m
£m
Litigation, settlement and damages (net) (4.0) (1.8) (4.5)
Acquisition and integration - - (0.4)
ABS restructuring (2.9) (0.2) 1.7
Other (0.6) (0.2) (0.3)
(7.5) (2.2) (3.5)
Litigation and damages
Litigation includes legal fees, settlement and related costs of £4.0m (2022:
£1.8m) related to the actions between ABS Global, Inc. and certain affiliates
('ABS') and Inguran, LLC and certain affiliates (aka STgenetics ('ST')).
Material litigation activities
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'). On 29
January 2020, ST filed a new US complaint against ABS in the same court ('ABS
III').
On 10 March 2020, the United States Patent and Trademark Office ('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. The ABS I, ABS II, ABS III and ABS IV proceedings in
the periods before the year ended 30 June 2023 are more fully described in the
Notes to the Financial Statements in previous Annual Reports.
On 26 October 2020, ABS filed Inter Partes Reviews ('IPR') against the '439
with the USPTO. On 4 May 2021, the Patent Trial and Appeal Board ('PTAB')
instituted the '439 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 certain
ABS III and ABS IV motions. In relation to ABS III, the court dismissed ABS
III litigation in its entirety and ST appealed certain aspects of the 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 followed the jury
decision in ABS II, and in relation to ABS IV, the Court denied ABS's motion
to dismiss the patent claims. Appeals were filed by ABS on the validity of the
8,206,987 patent (the '987 Appeal'), the 7,311,476, patent and the 7,611,309
patent (the 'ABS II Appeal') and ST appealed the award of the $5.3m in costs
(the 'Fee Award Appeal').
On 27 December 2022, ABS and ST settled the 987 Appeal, the Fee Award Appeal
and the Indian Patent Proceedings (see below).
On 5 July 2023, the Court of Appeals accepted ST's arguments in the ABS III
Appeal in relation to claim preclusion for technology transfer. The ABS III
and ABS IV litigations where then consolidated, and the hearing moved to 31
March 2025.
On 19 October 2023, the Court of Appeals for the Federal Circuit overturned
PTAB's decision in the 439 Appeal and found the independent claims of the '439
patent unpatentable. The Court of Appeals vacated PTAB's decision and
remanded the decision back to the Board for further consideration.
On 11 January 2024, a settlement agreement relating to the 439 Appeal, the ABS
II Appeal, the ABS III/IV litigation and the New Zealand Litigation (see
below) was agreed between the parties and each of these matters were
discontinued. Other than the details given in note 21, the terms of the
settlement agreement are confidential. The CCI Appeal remains ongoing between
the parties (see below).
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, '309 patents and US patent 7, 311,476 asserted in ABS II (the 'Indian
Patent Proceedings'). In June 2021, ST appealed the decision of the
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'). The CCI Appeal is scheduled for 15 February 2024.
New Zealand Litigation: On 14 June 2023, ST initiated proceedings against ABS,
Genus, ABS Genus (NZ) Limited, CRV International BV and CRV Limited in New
Zealand, alleging patent infringement and seeking a preliminary injunction.
ABS sought a stay of the New Zealand Litigation while the US courts consider
whether the settlement agreement between ABS and ST dated 27 December 2022
precludes the New Zealand Litigation. The hearing of the ABS's stay
application and ST's preliminary injunction application was on 27 November
2023 and on 14 December 2023, the New Zealand Court awarded the ST parties the
interim injunction for a limited 3-month period to 30 March 2024 and dismissed
the ABS stay application.
ABS restructuring
As part of an on-going strategic global Value Acceleration programme,
significant one-off expenses in relation to £1.1m of staff redundancies,
£1.5m relating to fixed asset and inventory write downs were incurred and
£0.3m consultancy fees to date.
Other
Included with other is £0.6m expense that relates to costs of repairing
extensive weather damage to part of our elite porcine farm in Canada.
4. NET FINANCE COSTS
Six months Six months Year
ended ended ended
31 31 30
December December June
2023 2022 2023
£m
£m
£m
Interest payable on bank loans and overdrafts (8.5) (4.7) (12.3)
Amortisation of debt issue costs (0.5) (0.5) (1.1)
Other interest payable (0.2) - (0.3)
Unwinding of discount put options (0.2) (0.2) (0.3)
Net interest cost in respect of pension scheme liabilities (0.1) (0.1) (0.2)
Interest on lease liabilities (1.5) (0.6) (1.2)
Total interest expense (11.0) (6.1) (15.4)
Interest income on bank deposits 0.5 - 0.1
Net interest income on derivative financial instruments 1.6 - 1.0
Total interest income 2.1 - 1.1
Net finance costs (8.9) (6.1) (14.3)
5. TAXATION AND DEFERRED TAXATION
Income tax expense
Six months Six months Year
ended ended ended
31 31 30
December December June
2023 2022 2023
£m
£m
£m
Current tax 3.7 7.3 21.5
Deferred tax 0.3 (4.3) (13.9)
Total income tax expense 4.0 3.0 7.6
The tax charge for the period of £4.0m (2022: £3.0m) on the statutory profit
represents an effective tax rate of 27.7% (2022: 20.0%). The increase in the
statutory ETR of 7.7% results from the large tax charge on net IAS 41 profit
of £2.6m which comprises tax at 29.0% on porcine IAS 41 profits of £30.6m
less tax relief of 24.5% on bovine IAS 41 losses of £28.0m.
The tax charge on adjusted profits for the period is £7.3m (2022: £10.2m),
which represents a tax rate on adjusted profits of 25.0% (2022: 24.2%).
There is a deferred tax liability at the period end of £54.2m (2022: £55.8m)
which mainly relates to the recognition at fair value of biological assets and
intangible assets arising on acquisition and a deferred tax asset of £19.0m
(2022: £10.1m) 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
2023 2022 2023
£m
£m
£m
Final dividend
Final dividend for the year ended 30 June 2023 of 21.7 pence per share 14.2 - -
Final dividend for the year ended 30 June 2022 of 21.7 pence per share - 14.2 14.3
Interim dividend
Interim dividend for the year ended 30 June 2023 of 10.3 pence per share - - 6.7
14.2 14.2 21.0
The final dividend for the year ended 30 June 2023 was approved at the Company
Annual General Meeting on 22 November 2023 and paid on 8 December 2023.
On 21 February 2024, the Directors proposed an interim dividend of 10.3 pence
per share payable on 28 March 2024.
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 2022 56.5 102.9 159.4 28.9 3.7 26.8 4.4 223.2
Additions - - - - 9.3 - - 9.3
Transfers - - - 5.9 (5.9) - - -
Effect of movements in exchange rates (0.2) (4.0) (4.2) (0.3) (0.1) (1.1) - (5.7)
Balance at 30 June 2023 56.3 98.9 155.2 34.5 7.0 25.7 4.4 226.8
Additions - - - - 5.4 - - 5.4
Business Combination (see note 19) - 1.9 1.9 - - - 0.1 2.0
Transfers - - - 2.4 (2.4) - - -
Effect of movements in exchange rates - - - (0.1) - (0.1) - (0.2)
Balance at 31 December 2023 56.3 100.8 157.1 36.8 10.0 25.6 4.5 234.0
Amortisation and impairment losses
Balance at 1 July 2022 39.1 80.1 119.2 15.5 - 12.3 4.2 151.2
Amortisation for the year 3.3 4.4 7.7 2.9 - 2.7 0.1 13.4
Effect of movements in exchange rates 0.1 (3.3) (3.2) (0.2) - (0.6) - (4.0)
Balance at 30 June 2023 42.5 81.2 123.7 18.2 - 14.4 4.3 160.6
Disposals - - - - - - - -
Amortisation for the period 1.7 1.2 2.9 1.7 - 1.3 0.1 6.0
Effect of movements in exchange rates - - - - - (0.1) - (0.1)
Balance at 31 December 2023 44.2 82.4 126.6 19.9 - 15.6 4.4 166.5
Carrying amounts
At 31 December 2023 12.1 18.4 30.5 16.9 10.0 10.0 0.1 67.5
At 30 June 2023 13.8 17.7 31.5 16.3 7.0 11.3 0.1 66.2
Included within brands, multiplier contracts and customer relationships are
carrying amounts for brands of £0.5m (30 June 2023: £0.6m), multiplier
contracts of £9.1m (30 June 2023: £9.2m) and customer relationships of
£8.8m (30 June 2023: £7.9m).
Included within the software class of assets is £9.7m (30 June 2023: £9.5m)
and included in assets in the course of construction is £3.0m (30 June 2023:
£2.3m) 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 2023 99.3 242.7 342.0
Increases due to purchases 9.0 71.0 80.0
Decreases attributable to sales - (138.4) (138.4)
Decrease due to harvest (5.6) (16.0) (21.6)
Changes in fair value less estimated sale costs (32.3) 120.5 88.2
Effect of movements in exchange rates 0.2 (0.1) 0.1
Balance at 31 December 2023 70.6 279.7 350.3
Non-current biological assets 70.6 248.7 319.3
Current biological assets - 31.0 31.0
Balance at 31 December 2023 70.6 279.7 350.3
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 2022 88.0 278.8 366.8
Increases due to purchases 23.2 228.9 252.1
Decreases attributable to sales - (259.4) (259.4)
Decrease due to harvest (14.6) (31.4) (46.0)
Changes in fair value less estimated sale costs 6.6 38.2 44.8
Effect of movements in exchange rates (3.9) (12.4) (16.3)
Balance at 30 June 2023 99.3 242.7 342.0
Non-current biological assets 99.3 218.9 318.2
Current biological assets - 23.8 23.8
Balance at 30 June 2023 99.3 242.7 342.0
Bovine
Bovine biological assets include £8.7m (2022: £6.3m) 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 12.0% (June 2023: 13.2%) 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 £31.8m (2022: £28.6m).
Decreases attributable to sales during the period of £138.4m (2022: £160.8m)
include £37.7m (2022: £38.7m) in respect of the reduction in fair value of
the retained interest in the genetics of animals, other than parent gilts,
transferred under royalty contracts.
Also included is £64.4m (2022: £49.1m) 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 £139.6m (2022:
£127.6m) in respect of these contracts, comprising £52.4m (2022: £38.7m) on
initial transfer of animals and semen to customers and £87.1m (2022: £88.9m)
in respect of royalties received.
A risk-adjusted rate of 12.0% (June 2023: 12.9%) 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
(2022: seven) and their estimated useful lifespan is 1.4 years (2022: 1.4
years).
Six months ended 31 December 2023
Bovine Porcine Total
£m £m £m
Changes in fair value of biological assets (32.3) 120.5 88.2
Inventory transferred to cost of sales at fair value 4.3 (16.0) (11.7)
Biological assets transferred to cost of sales at fair value - (74.4) (74.4)
(28.0) 30.1 2.1
Fair value movement in related financial derivative - 0.5 0.5
Net IAS 41 valuation movement on biological assets(1) (28.0) 30.6 2.6
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)
Year ended 30 June 2023
Bovine Porcine Total
£m £m £m
Changes in fair value of biological assets 6.6 38.2 44.8
Inventory transferred to cost of sales at fair value 1.4 (31.4) (30.0)
Biological assets transferred to cost of sales at fair value - (31.4) (31.4)
8.0 (24.6) (16.6)
Fair value movement in related financial derivative - (0.3) (0.3)
Net IAS 41 valuation movement on biological assets(1) 8.0 (24.9) (16.9)
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 2022 100.2 113.6 29.6 243.4 31.5 28.4 59.9 303.3
Additions 0.2 3.1 19.8 23.1 2.0 8.9 10.9 34.0
Transferred from assets held for sale 0.2 - - 0.2 - - - 0.2
Transfers 18.3 12.1 (30.4) - - - - -
Disposals (1.3) (3.7) (0.3) (5.3) - (4.9) (4.9) (10.2)
Effect of movements in exchange rates (6.4) (5.4) (1.8) (13.6) (1.8) (0.8) (2.6) (16.2)
Balance at 30 June 2023 111.2 119.7 16.9 247.8 31.7 31.6 63.3 311.1
Additions 1.3 1.3 7.7 10.3 33.0 3.4 36.4 46.7
Business Combination (see note 19) - 0.3 - 0.3 0.4 - 0.4 0.7
Transfers 4.6 5.7 (10.3) - - - - -
Disposals (0.1) (2.0) - (2.1) (2.3) (1.1) (3.4) (5.5)
Effect of movements in exchange rates (0.5) (0.5) - (1.0) (0.8) 0.4 (0.4) (1.4)
Balance at 31 December 2023 116.5 124.5 14.3 255.3 62.0 34.3 96.3 351.6
Depreciation and impairment losses
Balance at 1 July 2022 32.2 73.3 - 105.5 11.4 15.0 26.4 131.9
Depreciation for the year 5.6 12.8 - 18.4 4.6 7.2 11.8 30.2
Disposals (1.1) (2.7) - (3.8) - (4.7) (4.7) (8.5)
Effect of movements in exchange rates (2.2) (3.6) - (5.8) (0.7) (0.4) (1.1) (6.9)
Balance at 30 June 2023 34.5 79.8 - 114.3 15.3 17.1 32.4 146.7
Depreciation for the period 2.8 6.6 - 9.4 5.1 3.6 8.7 18.1
Impairment 1.7 0.2 - 1.9 - - - 1.9
Disposals (0.1) (1.7) - (1.8) (2.2) (0.7) (2.9) (4.7)
Effect of movements in exchange rates (0.1) (0.4) - (0.5) (0.7) 0.6 (0.1) (0.6)
Balance at 31 December 2023 38.8 84.5 - 123.3 17.5 20.6 38.1 161.4
Carrying amounts
At 31 December 2023 77.7 40.0 14.3 132.0 44.5 13.7 58.2 190.2
At 30 June 2023 76.7 39.9 16.9 133.5 16.4 14.5 30.9 164.4
Included within additions right-of-use assets is £23.4m relating to the lease
of two pig farms in China.
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 2023 was £5.1m (2022: £6.4m).
The carrying value of the investment is reconciled as follows:
31
31 December
December 2022
2023 £m
£m
Balance at 1 July 53.5 41.2
Share of post-tax retained profits of joint ventures and associates 5.3 6.4
Additions 1.2 2.0
Acquisition of controlling interest of Xelect Limited (see note 19) (2.5) -
Dividends received from Agroceres - PIC Genética de Suínos Ltda (Brazil) (3.2) -
Dividends received from Zhidan - Yan'an Xinyongxiang Technology Co., Ltd (1.3) -
(China)
Effect of other movements including exchange rates 0.1 (0.5)
Balance at 31 December 53.1 49.1
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 2023 21.5 2.3 (16.8) (1.7) 5.3
Six months ended 31 December 2022 24.4 0.9 (17.5) (1.4) 6.4
Year ended 30 June 2023 48.1 3.6 (37.3) (3.9) 10.5
Our Brazilian joint venture, Agroceres, includes results from an Argentinian
trading subsidiary, its profit has been impacted by hyperinflation and the
significant revaluation of the Argentinian Peso.
11. INVENTORIES
31 December 31 December 30 June
2023 2022 2023
£m
£m
£m
Biological assets' harvest classed as inventories 24.4 21.8 22.7
Raw materials and consumables 3.9 5.1 3.9
Goods held for resale 37.3 32.3 34.7
65.6 59.2 61.3
During the period £1.7m of inventory was written down to net realisable value
(2022: £0.2m) of which £0.9m is recognised within exceptional items in the
period (2022: nil).'
12. TRADE AND OTHER RECEIVABLES
31 December 31 December 30 June
2023 2022 2023
£m
£m
£m
Trade receivables 93.8 94.4 95.4
Less expected credit loss allowance (3.8) (3.8) (3.9)
Trade receivables net of impairment 90.0 90.6 91.5
Other debtors 7.6 8.9 8.1
Prepayments 11.5 11.4 7.7
Contract assets 21.4 21.3 22.4
Other taxes and social security 3.9 3.7 2.4
Current trade and other receivables 134.4 135.9 132.1
Other debtors 4.6 2.2 3.0
Contract assets 5.6 5.9 5.2
Non-current other receivables 10.2 8.1 8.2
144.6 144.0 140.3
Trade receivables
The average credit period our customers take on the sales of goods is 49 days
(30 June 2023: 48 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 2023: no more than 5%).
13. TRADE AND OTHER PAYABLES
31 December 31 December 30 June
2023 2022 2023
£m
£m
£m
Trade payables 34.9 31.5 34.8
Other payables 3.2 12.8 11.6
Accrued Expenses 51.3 51.0 58.1
Contract liabilities 6.2 7.1 9.8
Other taxes and social security 9.7 8.4 7.7
Current trade and other payables 105.3 110.8 122.0
The average credit period taken for trade purchases is 30 days (30 June 2023:
32 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
2023 2022 2023
000s
000s
000s
Weighted average number of ordinary shares (basic) 65,680 65,540 65,557
Dilutive effect of share awards and options 540 441 441
Weighted average number of ordinary shares for the purpose of diluted earnings 66,220 65,981 65,998
per share
Six months Six months Year
ended ended ended
31 31 30
December December June
2023 2022 2023
(pence) (pence) (pence)
Earnings per share
Basic earnings per share 20.6 20.4 50.8
Diluted earnings per share 20.4 20.3 50.5
Adjusted earnings per share
Adjusted earnings per share 33.3 48.8 84.8
Diluted adjusted earnings per share 33.1 48.5 84.2
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 £13.5m (six months ended 31 December 2022:
£13.4m; year ended 30 June 2023: £33.3m) divided by weighted average number
of ordinary shares (basic and diluted) as calculated above.
Adjusted earnings per share is calculated on profit for the period before net
IAS 41 valuation movement on biological assets, amortisation of acquired
intangible assets, share-based payment expense and exceptional items, after
charging taxation associated with those profits, of £21.9m (six months ended
31 December 2022: £32.0m; year ended 30 June 2023: £55.6m), which is
calculated as follows:
Adjusted earnings
Year
Six months Six months ended
ended ended 30
31 31 June
December December 2023
2023 2022 £m
£m
£m
Profit before tax 14.3 15.0 39.4
Add/(deduct):
Net IAS 41 valuation movement on biological assets (note 8) (2.6) 17.2 16.9
Amortisation of acquired intangible assets (note 7) 2.9 4.8 7.7
Share-based payment expense 3.9 2.3 6.0
Exceptional items (note 3) 7.5 2.2 3.5
Other gains and losses (note 17) 3.4 - (2.7)
Net IAS 41 valuation movement on biological assets in joint ventures (note 10) (2.3) (0.9) (3.6)
Tax on joint ventures and associates (note 10) 1.7 1.4 3.9
Attributable to non-controlling interest 0.4 0.2 0.4
Adjusted profit before tax 29.2 42.2 71.5
Adjusted tax charge (7.3) (10.2) (15.9)
Adjusted profit after tax 21.9 32.0 55.6
Effective tax rate on adjusted profit 25.0% 24.2% 22.2%
15. CASH FLOW FROM OPERATING ACTIVITIES
Six months Year
Six months ended ended
ended 31 30
31 December June
December 2022 2023
£m
£m
2023
£m
Profit for the period 10.3 12.0 31.8
Adjustment for:
Net IAS 41 valuation movement on biological assets (2.6) 17.2 16.9
Amortisation of acquired intangible assets 2.9 4.8 7.7
Share-based payment expense 3.9 2.3 6.0
Share of profit of joint ventures and associates (5.3) (6.4) (10.5)
Other gains and losses 3.4 - (2.7)
Finance costs (net) 8.9 6.1 14.3
Income tax expense 4.0 3.0 7.6
Net exceptional items 7.5 2.2 3.5
Adjusted operating profit from continuing operations 33.0 41.2 74.6
Depreciation of property, plant and equipment 18.1 14.9 30.2
Loss on disposal of plant and equipment 0.1 0.6 0.1
Amortisation and impairment of intangible assets 3.1 2.9 5.7
Adjusted earnings before interest, tax, depreciation and amortisation 54.3 59.6 110.6
Cash impact of exceptional items relating to operating activities (6.1) (3.0) (7.1)
Other movements in biological assets and harvested produce (7.2) (6.7) (11.1)
Decrease in provisions and release in deferred consideration - (0.8) (1.0)
Additional pension contributions in excess of pension charge (0.3) (0.6) (0.6)
Other (1.0) 0.6 0.2
Operating cash flows before movement in working capital 39.7 49.1 91.0
Increase in inventories (3.5) (7.4) (9.6)
Increase in receivables (5.0) (7.1) (9.3)
(Decrease)/increase in payables (8.4) (8.9) 6.6
Cash generated by operations 22.8 25.7 78.7
Interest received 0.5 - 0.1
Interest and other finance costs paid (8.7) (4.4) (10.7)
Interest on leased assets (1.5) (0.6) (1.2)
Cash flow from derivative financial instruments 1.2 (0.2) 1.3
Income taxes paid (8.3) (8.7) (17.8)
Net cash from operating activities 6.0 11.8 50.4
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 2023. The aggregated position of defined benefit
schemes are provided below:
31 December 31 December 30 June
2023 2022 2023
£m
£m
£m
Present value of funded obligations 778.0 778.1 746.8
Present value of unfunded obligations 7.2 7.7 7.4
Total present value of obligations 785.2 785.8 754.2
Fair value of plan assets (809.8) (820.2) (787.6)
Restricted recognition of asset (MPF and DPF) 31.2 41.7 40.3
Recognised liability for defined benefit obligations 6.6 7.3 6.9
The principal actuarial assumptions (expressed as weighted averages) are:
31 31 30
December December June
2023 2022 2023
Discount rate 4.55% 4.85% 5.25%
Consumer Price Index 2.35% 2.55% 2.65%
Retail Price Index 2.75% 2.95% 3.05%
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 2023.
17. Financial instruments fair value disclosures
The table below sets out the categorisation of the financial instruments held
by the Group at 31 December 2023.
We have categorised financial instruments held at valuation into a three-level
fair value hierarchy, based on the priority of the inputs to the valuation
technique in accordance with IFRS 13. The hierarchy gives the highest priority
to quoted prices in active markets for identical assets or liabilities (Level
1) and the lowest priority to unobservable inputs (Level 3). Valuations
categorised as Level 2 are obtained from third parties. If the inputs used to
measure fair value fall within different levels of the hierarchy, we base the
category level on the lowest priority level input that is significant to the
fair value measurement of the instrument in its entirety.
31 December 2023 31 December 2022 30 June 2023
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 0.5 - 3.7 4.2 7.6 - 4.1 11.7 4.8 - 4.0 8.8
Trade and other receivables, excluding prepayments (note 12) - 133.1 - 133.1 - 132.6 - 132.6 - 132.6 - 132.6
Cash and cash equivalents - 42.0 - 42.0 - 42.3 - 42.3 - 36.3 - 36.3
Derivative instruments in non-designated hedge accounting relationships - 0.9 - 0.9 - 0.9 - 0.9 - 0.8 - 0.8
Derivate instruments in designated hedge accounting relationships - 1.4 - 1.4 - 2.6 - 2.6 - 5.6 - 5.6
0.5 177.4 3.7 181.6 7.6 178.4 4.1 190.1 4.8 175.3 4.0 184.1
Financial liabilities
Trade and other payables, excluding other taxes and social security (note 13) - (95.6) - (95.6) - (102.4) - (102.4) - (114.3) - (114.3)
Loans and overdrafts - (233.2) - (233.2) - (222.2) - (222.2) - (200.2) - (200.2)
Leasing obligations - (58.9) - (58.9) - (34.6) - (34.6) - (31.9) - (31.9)
Derivative instruments in non-designated hedge accounting relationships - (0.6) - (0.6) - (0.6) - (0.6) - (0.9) - (0.9)
Derivative instruments in designated hedge accounting relationships - (0.5) - (0.5) - - - - - - - -
Put option over non-controlling interest - (7.3) - (7.3) - (7.4) - (7.4) - (7.1) - (7.1)
Deferred consideration - - (1.2) (1.2) - - (0.6) (0.6) - - (0.6) (0.6)
- (396.1) (1.2) (397.3) - (367.2) (0.6) (367.8) - (354.4) (0.6) (355.0)
The Directors consider that the carrying value amounts of financial assets and
financial liabilities recorded at amortised cost in the financial statements
are approximately equal to their fair values.
Included within other gains and losses is a £3.4m loss (2022 - £nil) on the
mark to market valuation (MTM) in relation to £60m of SONIA interest rate
swaps executed in April 2023. Whilst the interest rate swaps are a perfect
commercial hedge of a similar amount of our GBP borrowings for at least a
three-year period, as the executing banks have a written option at the
three-year point to unilaterally terminate the swaps at no cost, the
transaction does not qualify for hedge accounting treatment. Accordingly, the
MTM gain on the valuation of these swaps is recognised in the Group Income
Statement.
31 December 31 December 30 June
2023 2022 2023
£m
£m
£m
(Loss)/gain on derivative (3.4) - 2.7
Other gains and losses (3.4) - 2.7
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 former 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 2023 amounted to £1.1m (2022: £1.2m). As at
31 December 2023, the balance owing to these entities was £0.1m (2022:
£0.1m), all amounts were settled in cash.
These related party transactions were made on terms equivalent to those that
prevail in arms' length transactions.
Other related party transactions
Transactions between the Group and its joint ventures and associates are
described below:
Transaction value Balance outstanding
Six months Six months Year Six months Six months Year
ended ended ended ended ended ended
31 31 30 31 31 30
December December June December December June
2023 2022 2023 2023 2022 2023
£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 2.6 1.5 4.1 1.2 (0.2) -
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.
19. Business Combinations
On 5(th) December 2023, the group exercised an option to acquire the remaining
61% of the issued share capital of Xelect Limited ('Xelect'). Prior to this,
the group owned 39% of the issued share capital. Xelect is a leading provider
of specialist genetics and breeding management services to the aquaculture
industry. Xelect was acquired to establish a window into the Aqua sector and a
foundational platform upon which the Group can build an entry into the aqua
germplasm space.
The provisional amounts recognised in respect of the identifiable assets
acquired and the liabilities assumed are as set out in the table below.
£m
Other intangible assets 2.0
Property, plant and equipment 0.3
Right of use asset 0.4
Inventories 0.1
Trade and other receivables 0.4
Cash and cash equivalents 0.4
Trade and other payables (0.3)
Obligations under leases (0.4)
Deferred tax liabilities (0.5)
Total identifiable assets 2.4
Goodwill 4.0
Total consideration 6.4
Satisfied by:
Cash 3.3
Previously held 39% (note 10) 2.5
Contingent consideration arrangement 0.6
Total consideration transferred 6.4
Cash consideration 3.3
Less: cash and cash equivalent balances acquired (0.4)
Net cash outflow arising on acquisition 2.9
Prior to control being obtained Xelect was accounted for as an associate (see
note 10), when control was obtained the carrying value of the asset was
£2.5m. The goodwill of £4.0m arising from the acquisition consists of the
knowledge and experience of the workforce. The contingent consideration
arrangement is based on the performance of Xelect in the remainder the year
ending 30 June 2024. The total value of the contingent consideration will not
exceed £0.6m. Acquisition related costs (including administrative costs)
amount to £0.1m.
Xelect contributed £0.1m of revenue and a loss after tax of £0.1m for the
period between the date control was achieved and the balance sheet date. Prior
to control being achieved £nil was recognised in the Group's profit for our
39% share of Xelect's results to that date. If control of Xelect was achieved
on the first day of the financial year, the contribution to revenue would have
been £0.8m and a loss after tax of £0.1m.
20. NON-CONTROLLING INTEREST
31 December 31 December 30 June
2023 2022 2023
£m
£m
£m
Non-controlling interest 3.6 (2.5) (2.2)
Put option over non-controlling interest at inception (5.5) (5.7) (5.5)
Total non-controlling interest (1.9) (8.2) (7.7)
The non-controlling interest can be reconciled as follows:
31
31 December
December 2022
2023 £m
£m
Balance at 1 July (2.2) (0.7)
Total comprehensive expense attributable to the non-controlling interest (3.2) (1.4)
De- Novo Genetics LLC capital injection 8.9 -
Dividends paid by PIC Italia S.r.l - (0.1)
Effect of exchange rates 0.1 (0.3)
Balance at 31 December 3.6 (2.5)
During the period the owners of De Novo Genetics LLC converted amounts owed by
the company into capital. This did not change the percentage of ownership, as
an equivalent loan was also capitalised from ABS Global Inc.
21. Post Balance sheet event
ST litigation settlement
As set out in Note 3, on 11 January 2024 a settlement agreement relating to
the ST litigation was entered into by the parties. Under the settlement
agreement, Genus agreed to pay $20m in cash, in 4 equal instalments, over the
next 18 months. A related exceptional charge of approximately £5m is
expected to be recognised in the full year accounts.
GENUS PLC
RESPONSIBILITY STATEMENT
For the six months ended 31 December 2023
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
Jorgen Kokke Alison Henriksen
21 February 2024
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 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.
See reconciliation below.
Adjusted profit inc JVs before tax
Adjusted profit including JVs before tax less adjusted effective tax.
See reconciliation below.
Adjusted profit inc JVs
after tax
Adjusted operating profit inc JVs exc gene editing costs Previously performance was monitored using adjusted operating profit from JV
and associate results but excluding gene editing costs.
As the Group is approaching PRP commercialisation this measure is no longer
used to track performance in the business, as such it is has not been
included within our APM Glossary.
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
31 December 31 December 30 June
2022
2023 2023
£m £m £m £m £m £m Reference
Operating profit 21.3 14.7 40.5 Group Income Statement
Add back:
Net IAS 41 valuation movement on biological assets (2.6) 17.2 16.9 Group Income Statement
Amortisation of acquired intangible assets 2.9 4.8 7.7 Group Income Statement
Share-based payment expense 3.9 2.3 6.0 Group Income Statement
Exceptional items 7.5 2.2 3.5 Group Income Statement
Adjusted operating profit exc JVs 33.0 41.2 74.6 Group Income Statement
Less: amounts attributable to non-controlling interest 0.4 0.2 0.4 Group Income Statement
Operating profit from joint ventures and associates 5.3 6.4 10.5 Group Income Statement
Tax on joint ventures and associates 1.7 1.4 3.9 Note 10 - Interests in joint ventures and associates
Net IAS 41 valuation movement attributable to joint ventures (2.3) (0.9) (3.6) Note 10 - Interests in joint ventures and associates
Adjusted operating profit from JVs 4.7 6.9 10.8
Adjusted operating profit inc JVs 38.1 48.3 85.8
Adjusted profit inc JVs before tax
Adjusted profit inc JVs after tax
31 December 31 December 30 June
2022
2023 2023
£m £m £m Reference
Adjusted operating profit inc JVs 38.1 48.3 85.8 See APM
Less net finance costs (8.9) (6.1) (14.3) Note 4 - Net finance costs
Adjusted profit inc JVs before tax 29.2 42.2 71.5
Adjusted tax (7.3) (10.2) (15.9) Note 14 - Earnings per share
Adjusted profit inc JVs after tax 21.9 32.0 55.6
Adjusted effective tax £m/rate
31 December 31 December 30 June
2022
2023 2023
£m % £m % £m % Reference
Adjusted effective tax £m/rate 7.3 25.0 10.2 24.2 15.9 22.2 Note 14 - Earnings per share
Exceptional items (1.7) (22.7) (0.5) (22.7) (0.9) (25.7) No direct reference
Share-based payment expense (0.2) (5.1) (0.5) (21.7) (0.8) (14.5) No direct reference
Other gains and losses (0.9) (25.0) - - 0.7 25.0 No direct reference
Amortisation of acquired intangible assets (0.8) (27.6) (0.8) (16.7) (1.9) (24.7) No direct reference
Net IAS 41 valuation movement on biological assets 1.9 73.1 (4.0) (23.3) (1.5) (8.8) No direct reference
Effective tax £m/rate inc joint ventures 5.6 35.0 4.4 26.8 11.5 26.6 No direct reference
Adjusted basic earnings per share
30 June Reference
31 December 31 December 2023
2023 2022
Adjusted profit inc JVs after tax (£m) 21.9 32.0 55.6 See APM
Weighted average number of ordinary shares ('000) 65.680 65.540 65.557 Note 14 - Earnings per share
Adjusted basic earnings per share (pence) 33.3 48.8 84.8
Adjusted diluted earnings per share
30 June Reference
31 December 31 December 2023
2023 2022
Adjusted profit inc JVs after tax (£m) 21.9 32.0 55.6 See APM
Weighted average number of diluted ordinary shares ('000) 66.220 65.981 65.998 Note 14 - Earnings per share
Adjusted diluted earnings per share (pence) 33.1 48.5 84.2
Rolling 12 month Adjusted Earnings cover
31 December 31 December 30 June
2022
2023 2023
Pence Times Pence Times Pence Times Reference
Adjusted Earnings per share 33.3 48.8 84.8 See APM
Add: Prior June Adjusted Earnings per share 84.8 82.7 N/a See APM
Deduct: Prior Interim Adjusted Earnings per share (48.8) (42.4) N/a See APM
Rolling 12 month adjusted Earnings per share 69.3 89.1 84.8
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 2.2 2.8 2.7 No direct reference
Adjusted EBITDA - as calculated under our financing facilities
31 December 31 December 30 June
2022
2023 2023
£m £m £m £m £m £m Reference
Operating profit 21.3 14.7 40.5 Group Income Statement
Add back:
Net IAS 41 valuation movement on biological assets (2.6) 17.2 16.9 Group Income Statement
Amortisation of acquired intangible assets 2.9 4.8 7.7 Group Income Statement
Share-based payment expense 3.9 2.3 6.0 Group Income Statement
Exceptional items 7.5 2.2 3.5 Group Income Statement
Adjusted operating profit exc JVs 33.0 41.2 74.6 Group Income Statement
Adjust for:
Cash received from JVs (dividend and loan repayment) 4.5 - 0.7 Group Statement of Cash Flows
Depreciation: property, plant and equipment 18.1 14.9 30.2 Note 9 - Property, plant and equipment
Operational lease payments (10.4) (6.5) (12.3) No direct reference
Depreciation: historical cost of biological assets 8.3 7.2 13.4 No direct reference
Amortisation and impairment (excluding separately identifiable acquired 3.1 2.9 5.7 Note 7 - Intangible assets
intangible assets)
Less amounts attributable to non-controlling interest 0.4 0.2 0.4 Group Income Statement
Adjusted EBITDA - as calculated under our financing facilities 57.0 59.9 112.7
Rolling 12 month Adjusted EBITDA - as calculated under our financing
facilities
31 December 31 December 30 June
2022
2023 2023
£m £m £m £m £m £m Reference
Operating profit
Adjusted EBITDA - as calculated under our financing facilities 57.0 59.9 112.7 See APM
Add: Prior June Adjusted EBITDA 112.7 100.7 N/a See APM
Deduct: Prior Interim Adjusted EBITDA (59.9) (48.9) N/a See APM
Rolling 12 month Adjusted EBITDA 109.8 111.7 112.7
Balance sheet measures
Net Debt
Net debt as calculated under our financing facilities
31 December 31 December 30 June
2022
2023 2023
£m £m £m £m £m £m Reference
Current unsecured bank loans and overdrafts 7.0 7.3 4.2
Non-current unsecured bank loans and overdrafts 226.2 214.9 196.0
Unsecured bank loans and overdrafts 233.2 222.2 200.2 Group Balance Sheet
Current obligations under finance leases 11.5 9.9 10.0
Non-current obligations under finance leases 47.4 24.7 21.9
Obligations under finance leases 58.9 34.6 31.9 Group Balance Sheet
Total debt financing 292.1 256.8 232.1
Deduct:
Cash and cash equivalents (42.0) (42.3) (36.3) Group Balance Sheet
Net debt 250.1 214.5 195.8
Deduct:
Lower of obligations under finance leases or £30m (30.0) (30.0) (30.0)
Add back:
Guarantees 11.7 13.7 12.6 No direct reference
Cash not available 1.3 - 0.8
Deferred purchase arrangements 1.4 1.4 - No direct reference
Net debt - as calculated under our financing facilities 234.5 199.6 179.2
Cash flow measures
Cash conversion
31 December 31 December 30 June
2022
2023 2023
£m £m £m £m £m £m Reference
Cash generated by operations 22.8 25.7 78.7 Note 15 - Notes to the cash flow statement
Operating profit 21.3 14.7 40.5 Group Income Statement
Add back:
Net IAS 41 valuation movement on biological assets (2.6) 17.2 16.9 Group Income Statement
Amortisation of acquired intangible assets 2.9 4.8 7.7 Group Income Statement
Share-based payment expense 3.9 2.3 6.0 Group Income Statement
Exceptional items 7.5 2.2 3.5 Group Income Statement
Adjusted operating profit exc JVs 33.0 41.2 74.6 Group Income Statement
Cash conversion (%) 69% 62% 105%
Free cash flow
31 December 31 December 30 June
2022
2023 2023
£m £m £m Reference
Cash generated by operations 22.8 25.7 78.7 Note 15 - Notes to cash flow statement
Net interest and tax paid (16.8) (13.9) (28.3) Note 15 - Notes to cash flow statement
Capital expenditure (14.4) (15.0) (35.2) Group Statement of Cash flows
Dividend received from joint venture and associate 4.5 - 2.6 Group Statement of Cash flows
Joint venture and associate loan investment - - (1.9) Group Statement of Cash flows
Proceeds from sale of property, plant and equipment 0.6 - 2.4 Group Statement of Cash flows
Dividend to non-controlling interest - (0.1) (0.1) Group Statement of Cash flows
Free cash flow (3.3) (3.3) 18.2
Other measures
Ratio of net debt to adjusted EBITDA
31 December 31 December 30 June
2022
2023 2023
£m Times £m Times £m Times Reference
Net debt - as calculated under our financing facilities 234.5 199.6 179.2 See APM
Rolling 12 month Adjusted EBITDA - 109.8 111.7 112.7 See APM
as calculated under our financing facilities
Ratio of net debt to Adjusted EBITDA 2.1 1.8 1.6
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