REG - Genus - Preliminary Results <Origin Href="QuoteRef">GENS.L</Origin> - Part 2
08/09/2016 07:05
- Part 2: For the preceding part double click ID:nRSH2474Ja
ensure responsible exploration and development of the technologies and the protection
of IP. The Board is updated regularly on key development projects.
Capturing value through acquisitions We have a rigorous acquisition analysis and due diligence process, with the Board No change
· Failure to identify appropriate investment opportunities or to perform sound due diligence. reviewing and signing-off all projects. We also have a structured post-acquisition
· Failure to successfully integrate an acquired business. integration planning and execution process.
Growing in emerging markets We have a robust organisation, blending local and expatriate executives supported by No change. Revised plans and approach to the market in China and other emerging markets continue to improve our ability to control and mitigate the risk.
· Failure to appropriately develop business in China and other emerging markets. the global species teams, to ensure we comply with our global standards. The Board
provides regular oversight and dedicated significant time in FY16 to discussing our
strategy and the results of our operations in China.
Operational Risks
Risk description How we manage risk Risk change in FY16
Protecting Intellectual Property (`IP`) We have a global, cross-functional process to identify and protect our IP. Our No change
· Failure to protect our IP means Genus-developed genetic material, methods, systems and technology could become freely available to third-parties. customer contracts and our selection of multipliers and JV partners include
appropriate measures to protect our IP. We conduct robust `Freedom To Operate`
searches to identify third-party rights to technology.
Ensuring biosecurity and continuity of supply We have stringent biosecurity standards, with independent reviews throughout the year No change
· Loss of key livestock, owing to disease outbreak. to ensure compliance. We continue to extend the geographical diversity of our
· Loss of ability to move animals or semen freely (including across borders) due to disease outbreak, environmental incident or international trade sanctions. production facilities, to avoid over-reliance on single sites.
· Industry-wide disease outbreaks affecting demand for Genus products.
Risk change in FY16
Protecting Intellectual Property (`IP`)
· Failure to protect our IP means Genus-developed genetic material, methods, systems and technology could become freely
available to third-parties.
We have a global, cross-functional process to identify and protect our IP. Our customer contracts and our selection of
multipliers and JV partners include appropriate measures to protect our IP. We conduct robust `Freedom To Operate` searches
to identify third-party rights to technology.
No change
Ensuring biosecurity and continuity of supply
· Loss of key livestock, owing to disease outbreak.
· Loss of ability to move animals or semen freely (including across borders) due to disease outbreak, environmental
incident or international trade sanctions.
· Industry-wide disease outbreaks affecting demand for Genus products.
We have stringent biosecurity standards, with independent reviews throughout the year to ensure compliance. We continue to
extend the geographical diversity of our production facilities, to avoid over-reliance on single sites.
No change
Financial Risks
Risk description How we manage risk Risk change in FY16
Managing agricultural market and commodity prices volatility We continuously monitor markets and seek to balance our costs and No change
· Fluctuations in agricultural markets affect customer profitability and therefore demand for our products and services. resources in response to market demand. We actively monitor and update
· Increase in our operating costs, due to commodity pricing volatility. our hedging strategy to manage our exposure. Our porcine royalty model
and extensive use of third-party multipliers mitigates the impact of
cyclical price reductions or cost increases in pig production.
Funding pensions We are the principal employer for the Milk Pension Fund and chair the No change. The trustees decision to grant future pension increases on the basis of the movement in CPI, rather than RPI, will reduce costs. However, this is currently being partially offset by the impact of falling bond yields following the EU referendum in the UK.
· Exposure to costs associated with failure of third-party members of joint and several liabilities pension scheme. group of participating employers. The fund is now closed to future
· Exposure to costs as a result of external factors (such as mortality rates, interest rates or investment values) affecting the size of the pension deficit. service and has an agreed deficit recovery plan, based on the 2015
actuarial valuation. We monitor the strengths of other employers in the
fund and have retained external consultants to provide expert advice.
· Exposure to costs associated with failure of third-party members of joint and several liabilities pension scheme.
· Exposure to costs as a result of external factors (such as mortality rates, interest rates or investment values)
affecting the size of the pension deficit.
We are the principal employer for the Milk Pension Fund and chair the group of participating employers. The fund is now
closed to future service and has an agreed deficit recovery plan, based on the 2015 actuarial valuation. We monitor the
strengths of other employers in the fund and have retained external consultants to provide expert advice.
No change. The trustees decision to grant future pension increases on the basis of the movement in CPI, rather than RPI,
will reduce costs. However, this is currently being partially offset by the impact of falling bond yields following the EU
referendum in the UK.
Group Income Statement Genus plc
For the year ended 30 June 2016
Note 2016£m 2015£m
REVENUE 2 388.3 398.5
ADJUSTED OPERATING PROFIT 2 49.3 47.2
Adjusting items:-
- Net IAS 41 valuation movement on biological assets 9 (17.1) 24.9
- Amortisation of acquired intangible assets 8 (6.1) (6.1)
- Share-based payment expense (3.8) (1.4)
(27.0) 17.4
Exceptional items:-
- Pension related 3 44.2 0.4
- Litigation 3 (6.9) (2.8)
- Acquisition and integration 3 (0.2) (1.4)
- Other (including restructuring) 3 (0.8) (1.3)
36.3 (5.1)
Total adjusting and exceptional items 9.3 12.3
OPERATING PROFIT 58.6 59.5
Share of post-tax profit of joint ventures and associates retained 6.9 2.9
Finance costs 4 (4.7) (4.8)
Finance income 4 0.1 0.2
PROFIT BEFORE TAX 60.9 57.8
Taxation 5 (10.6) (17.3)
PROFIT FOR THE YEAR FROM CONTINUING OPERATIONS 50.3 40.5
ATTRIBUTABLE TO:
Owners of the Company 49.3 39.9
Non-controlling interest 1.0 0.6
50.3 40.5
EARNINGS PER SHARE FROM CONTINUING OPERATIONS 6
Basic earnings per share 81.1p 65.7p
Diluted earnings per share 80.3p 64.9p
NON-STATUTORY MEASURE OF PROFIT
Adjusted operating profit from continuing operations 49.3 47.2
Operating profit attributable to non-controlling interest (1.4) (0.6)
Pre-tax share of profits from joint ventures and associates excluding net IAS 41 valuation movement 6.4 4.6
ADJUSTED OPERATING PROFIT INCLUDING JOINT VENTURES AND ASSOCIATES 54.3 51.2
Net finance costs 4 (4.6) (4.6)
ADJUSTED PROFIT BEFORE TAX FROM CONTINUING OPERATIONS 49.7 46.6
ADJUSTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS 6
Basic adjusted earnings per share 60.7p 56.8p
Diluted adjusted earnings per share 60.1p 56.1p
60.1p
56.1p
Group Statement of Comprehensive Income Genus plc
For the year ended 30 June 2016
2016£m 2016£m 2015£m 2015£m
PROFIT FOR THE YEAR 50.3 40.5
Items that may be reclassified subsequently to profit or loss
Foreign exchange translation differences 76.6 14.5
Fair value movement on net investment hedges (13.3) (6.1)
Fair value movement on cash flow hedges (0.7) -
Tax relating to components of other comprehensive income (16.8) (6.7)
45.8 1.7
Items that may not be reclassified subsequently to profit or loss
Actuarial loss on retirement benefit obligations (12.8) (7.3)
Movement on pension asset recognition restriction (0.6) (1.2)
Recognition of additional pension liability (14.9) -
Tax relating to components of other comprehensive income 4.5 1.6
(23.8) (6.9)
OTHER COMPREHENSIVE INCOME/(EXPENSE) FOR THE YEAR 22.0 (5.2)
TOTAL COMPREHENSIVE INCOME FOR THE YEAR 72.3 35.3
ATTRIBUTABLE TO:
Owners of the Company 72.1 35.0
Non-controlling interest 0.2 0.3
72.3 35.3
Group Statement of Changes in Equity Genus plc
Note Called up share capital£m Share premium account£m Own shares£m Trans-lation reserve£m Hedging reserve£m Retained earnings£m Total£m Non- controlling interest£m Total equity£m
BALANCE AT 30 JUNE2014 6.1 112.2 (0.1) (12.1) - 178.6 284.7 0.6 285.3
Foreign exchange translationdifferences, net of tax - - - 6.8 - - 6.8 (0.3) 6.5
Fair value movement on net investment hedges, net of tax - - - (4.8) - - (4.8) - (4.8)
Actuarial loss on retirement benefit obligations, net of tax - - - - - (5.9) (5.9) - (5.9)
Movement on pension asset recognition restriction, net of tax - - - - - (1.0) (1.0) - (1.0)
Other comprehensive (expense)/income for the year - - - 2.0 - (6.9) (4.9) (0.3) (5.2)
Profit for the year - - - - - 39.9 39.9 0.6 40.5
Total comprehensive income for the year - - - 2.0 - 33.0 35.0 0.3 35.3
Recognition of share-based payments, net of tax - - - - - 2.2 2.2 - 2.2
Adjustment arising from change in non-controlling interest and written put option - - - - - - - (6.6) (6.6)
Dividends 7 - - - - - (11.1) (11.1) - (11.1)
BALANCE AT 30 JUNE2015 6.1 112.2 (0.1) (10.1) - 202.7 310.8 (5.7) 305.1
Foreign exchange translationdifferences, net of tax - - - 58.2 - - 58.2 (1.2) 57.0
Fair value movement on net investment hedges, net of tax - - - (10.6) - - (10.6) - (10.6)
Fair value movement on cash flow hedges, net of tax - - - - (0.6) - (0.6) - (0.6)
Actuarial loss on retirement benefit obligations, net of tax - - - - - (11.0) (11.0) - (11.0)
Movement on pension asset recognition restriction, net of tax - - - - - (0.6) (0.6) - (0.6)
Recognition of additional pension liability, net of tax - - - - - (12.2) (12.2) - (12.2)
Other comprehensive income/(expense) for the year - - - 47.6 (0.6) (23.8) 23.2 (1.2) 22.0
Profit for the year - - - - - 49.3 49.3 1.0 50.3
Total comprehensiveincome for the year - - - 47.6 (0.6) 25.5 72.5 (0.2) 72.3
Recognition of share-based payments, net of tax - - - - - 3.3 3.3 - 3.3
Adjustment arising from change in non-controlling interest - - - - - - - (0.5) (0.5)
Dividends 7 - - - - - (12.2) (12.2) - (12.2)
Issue of ordinary shares - 0.1 - - - - 0.1 - 0.1
BALANCE AT 30 JUNE2016 6.1 112.3 (0.1) 37.5 (0.6) 219.3 374.5 (6.4) 368.1
Group Balance Sheet
Genus plc
As at 30 June 2016
Note 2016£m 2015
£m
ASSETS
Goodwill 8 86.0 73.9
Other intangible assets 8 78.0 69.8
Biological assets 9 264.6 242.7
Property, plant and equipment 61.8 50.3
Interests in joint ventures and associates 24.3 19.6
Other investments 3.6 0.2
Deferred tax assets 4.7 7.8
TOTAL NON-CURRENT ASSETS 523.0 464.3
Inventories 35.7 32.2
Biological assets 9 66.4 50.2
Trade and other receivables 10 78.1 74.7
Cash and cash equivalents 34.0 21.3
Income tax receivable 1.0 0.4
Derivative financial asset 0.6 0.7
Asset held for sale 0.3 0.5
TOTAL CURRENT ASSETS 216.1 180.0
TOTAL ASSETS 739.1 644.3
LIABILITIES
Trade and other payables (65.1) (58.9)
Interest-bearing loans and borrowings (4.6) (12.2)
Provisions (1.2) (2.4)
Obligations under finance leases (1.1) (1.1)
Current tax liabilities (4.9) (6.3)
Derivative financial liabilities (0.5) (0.2)
TOTAL CURRENT LIABILITIES (77.4) (81.1)
Interest-bearing loans and borrowings (115.3) (77.4)
Retirement benefit obligations 11 (44.5) (63.1)
Deferred tax liabilities (118.5) (105.2)
Derivative financial liabilities (12.6) (10.0)
Obligations under finance leases (2.7) (2.4)
TOTAL NON-CURRENT LIABILITIES (293.6) (258.1)
TOTAL LIABILITIES (371.0) (339.2)
NET ASSETS 368.1 305.1
2016£m 2015
£m
EQUITY
Called up share capital 6.1 6.1
Share premium account 112.3 112.2
Own shares (0.1) (0.1)
Translation reserve 37.5 (10.1)
Hedging reserve (0.6) -
Retained earnings 219.3 202.7
Equity attributable to owners of the Company 374.5 310.8
Non-controlling interest 5.0 4.3
Put option over non-controlling interest (11.4) (10.0)
Total non-controlling interest (6.4) (5.7)
Total equity 368.1 305.1
Group Statement of Cash Flows Genus plc
For the year ended 30 June 2016
Note 2016£m 2015£m
NET CASH FLOW FROM OPERATING ACTIVITIES 12 30.0 34.8
CASH FLOWS FROM INVESTING ACTIVITIES
Dividends received from joint ventures and associates 2.4 2.3
Joint venture loan repayment 1.0 -
Acquisition of subsidiaries (net of cash acquired) 14 (3.5) (8.8)
Acquisition of investment (3.5) -
Acquisition of investment in joint venture (0.2) (0.8)
Disposal of subsidiary (net of cash disposed) 0.1 -
Purchase of property, plant and equipment (11.8) (12.0)
Purchase of intangible assets (6.8) (2.8)
Proceeds from sale of property, plant and equipment 1.8 0.3
Proceeds from sale of assets held for sale 0.7 -
NET CASH OUTFLOW FROM INVESTING ACTIVITIES (19.8) (21.8)
CASH FLOWS FROM FINANCING ACTIVITIES
Drawdown of borrowings 53.6 51.8
Repayment of borrowings (37.3) (53.0)
Payment of finance lease liabilities (1.9) (1.5)
Equity dividends paid (12.2) (11.1)
Dividend to non-controlling interest (0.4) -
Issue of ordinary shares 0.1 -
Debt issue costs (1.4) -
NET CASH INFLOW/(OUTFLOW) FROM FINANCING ACTIVITIES 0.5 (13.8)
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 10.7 (0.8)
Cash and cash equivalents at start of the year 21.3 22.8
Net increase/(decrease) in cash and cash equivalents 10.7 (0.8)
Effect of exchange rate fluctuations on cash and cash equivalents 2.0 (0.7)
TOTAL CASH AND CASH EQUIVALENTS AT 30 JUNE 34.0 21.3
Notes to the Preliminary Results Genus plc
For the year ended 30 June 2016
1. REPORTING ENTITY
Status of audit
The financial information given does not constitute the Company's statutory accounts for the year ended 30 June 2016 or the
year ended 30 June 2015, but is derived from those accounts. Statutory accounts for the year ended 30 June 2015 have been
delivered to the Registrar of Companies and those for the year ended 30 June 2016 will be delivered following the Company's
annual general meeting. The auditors have reported on those accounts; their reports were unqualified, did not draw
attention to any matters by way of emphasis without qualifying their reports, and did not contain statements under s.
498(2) or (3) Companies Act 2006.
Basis of preparation
The financial information for the year ended 30 June 2016 together with the comparative year has been computed in
accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union.
The Group Financial Statements are presented in Sterling, which is the Company's functional and presentation currency. All
financial information presented in Sterling has been rounded to the nearest million at one decimal point.
The principal exchange rates were as follows:
Average Closing
2016 2015 2014 2016 2015 2014
US Dollar/£ 1.47 1.57 1.64 1.34 1.57 1.71
Euro/£ 1.33 1.32 1.20 1.20 1.41 1.25
Brazilian Real/£ 5.47 4.26 3.75 4.28 4.89 3.77
Mexican Peso/£ 25.38 22.68 21.44 24.66 24.68 22.18
While the financial information included in this preliminary announcement has been computed in accordance with IFRSs, this
announcement does not itself contain sufficient information to comply with IFRSs. The Company expects to publish full
financial statements that comply with IFRSs in October 2016. These financial statements have also been prepared in
accordance with the accounting policies set out in the 2015 Annual Report and Financial Statements, as amended by the
following new accounting standards.
New standards and interpretations
No new standards and interpretations have been adopted in the current period.
New standards and interpretations not yet adopted
At the date of authorisation of these Group Financial Statements, the following standards and interpretations which have
not been applied in preparing these Group Financial Statements were in issue but not yet effective (and in some cases had
not yet been adopted by the EU):
· Amendments to IFRS 11 'Accounting for acquisitions of interests in Joint ventures', IAS 27 'Equity method in
separate financial statements', IAS 1 'Disclosure Initiatives', IAS 12 'Recognition of deferred tax assets for unrealised
losses';
· Amendments to IFRS 10, IFRS 12 and IAS 28 'Investment entities: Applying the consolidation exception';
· Amendments to IAS 16 and IAS 38 'Clarification of acceptable method of depreciation and amortisation';
· 'Improvements to IFRS 2012 - 2014 cycle';
· IFRS 9 'Financial Instruments';
· IFRS 14 'Regulatory Deferral Response';
· IFRS 15 'Revenue from Contracts with Customers'; and
· IFRS 16 'Leases'.
The Group is currently assessing the impact of the new pronouncements on its results, financial position and cash flows. It
is not practicable to provide a reasonable estimate of the effect of these standards until a detailed review has been
completed.
Going concern
After making enquiries, 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 twelve months from the date of this report.
Accordingly, the Directors continue to adopt and consider appropriate the going concern basis in preparing the Annual
Report and Accounts.
Non-GAAP measures - adjusted operating profit, adjusted profit before tax and adjusted earnings per share
Adjusted operating profit, adjusted profit before tax from continuing operations and adjusted earnings per share exclude
the net IAS 41 valuation movement on biological assets, amortisation of acquired intangible assets, share-based payment
expense, exceptional items and other gains and losses.
We believe these non-GAAP measures provide shareholders with useful information about the Group's trading performance. The
reconciliation between operating profit from continuing operations and adjusted operating profit from continuing operations
is shown on the face of the Group Income Statement.
This preliminary announcement was approved by the Board on 7 September 2016.
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 Group Chief Executive and the Board to allocate resources to the segments
and to assess their performance. For management purposes, the Group's operating and reporting structure comprises four
operating segments; Genus PIC, Genus ABS, Genus Asia and R&D. These segments are the basis on which the Group reports its
segmental information. The principal activities of each segment are as follows:
Genus PIC - Our global porcine sales business excluding Asia
Genus ABS - Our global bovine sales business excluding Asia
Genus Asia - Our porcine and bovine business in Asia
Research and Development - Our global spend on research and development
A segment analysis of revenue, operating profit, depreciation, amortisation and non-current asset additions and segment
assets and liabilities are detailed below. We do not include our adjusting items in the segments as we believe these do not
reflect the underlying progress 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 2016 2015
£m £m
Genus PIC 176.5 175.5
Genus ABS 158.7 167.8
Genus Asia 45.1 41.4
Research and Development
Research - -
Porcine Product Development 8.0 13.8
Bovine Product Development - -
8.0 13.8
388.3 398.5
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 year is shown on the Group Income Statement.
Operating profit 2016 2015
£m £m
Genus PIC 64.2 57.2
Genus ABS 19.5 24.0
Genus Asia 11.3 5.7
Research and Development
Research (8.0) (4.6)
Porcine Product Development (13.5) (11.6)
Bovine Product Development (12.9) (12.4)
(34.4) (28.6)
Segment operating profit 60.6 58.3
Central costs (11.3) (11.1)
Adjusted operating profit 49.3 47.2
Our business is not highly seasonal and our customer base is diversified, with no individual customer generating more than
2% of revenue.
Other segment information
Depreciation Amortisation Additions to non-current assets
2016£m 2015£m 2016£m 2015£m 2016£m 2015£m
Genus PIC 0.6 0.5 5.9 6.1 1.1 0.5
Genus ABS 1.6 1.5 1.0 0.6 2.5 1.8
Genus Asia 0.3 0.5 0.1 - 0.4 0.4
Research and Development
Research - 0.1 - - 3.6 5.2
Porcine Product Development 1.8 1.9 - - 1.7 0.6
Bovine Product Development 1.4 0.2 - - 7.3 5.2
3.2 2.2 - - 12.6 11.0
Segment total 5.7 4.7 7.0 6.7 16.6 13.7
Central costs 2.2 1.6 - - 4.3 3.3
Total 7.9 6.3 7.0 6.7 20.9 17.0
Segment assets Segment liabilities
2016£m 2015£m 2016£m 2015£m
Genus PIC 211.6 194.9 (45.9) (45.5)
Genus ABS 124.2 112.3 (43.7) (39.9)
Genus Asia 42.1 37.0 (8.4) (7.6)
Research and Development
Research 3.7 6.0 (0.4) (0.1)
Porcine Product Development 146.7 110.0 (59.6) (47.6)
Bovine Product Development 203.1 178.9 (51.2) (52.2)
353.5 294.9 (111.2) (99.9)
Segment total 731.4 639.1 (209.2) (192.9)
Central 7.7 5.2 (161.8) (146.3)
Total 739.1 644.3 (371.0) (339.2)
Exceptional items of £36.3m credit (2015: £5.1m expense), relate to Genus ABS (£8.0m expense) and our central segment
(£44.3m credit). Note 3 provides details of these exceptional items.
We consider share-based payments on a Group-wide basis and do not allocate them to reportable segments.
Geographical information
The analysis of revenue by geographical area is stated on the basis of where the legal entity is incorporated and therefore
in the country the revenue will be reported. The Group's revenue by geographical segment is analysed below:
Revenue
2016 2015
£m £m
North America 178.7 181.2
Latin America 58.6 59.0
Europe, Middle East and Africa 105.9 116.9
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