REG - Genus - Preliminary Results <Origin Href="QuoteRef">GENS.L</Origin> - Part 3
29/10/2014 07:43
- Part 3: For the preceding part double click ID:nRSC6654Qb
Total
£m £m £m
Non-current biological assets 152.2 70.8 223.0
Current biological assets - 36.8 36.8
Balance at 30 June 2012 152.2 107.6 259.8
Increases due to purchases 5.4 89.0 94.4
Decreases attributable to sales - (131.2) (131.2)
Decrease due to harvest (27.2) (9.4) (36.6)
Changes in fair value less estimated sale costs 12.2 57.5 69.7
Effect of movements in exchange rates 4.4 4.0 8.4
Balance at 30 June 2013 147.0 117.5 264.5
Non-current biological assets 147.0 77.0 224.0
Current biological assets - 40.5 40.5
Balance at 30 June 2013 147.0 117.5 264.5
Increases due to purchases 5.6 102.5 108.1
Decreases attributable to sales - (153.2) (153.2)
Decrease due to harvest (33.3) (11.0) (44.3)
Changes in fair value less estimated sale costs 24.5 75.0 99.5
Acquisition of Génétiporc (see note 14) - 8.9 8.9
Effect of movements in exchange rates (15.2) (15.3) (30.5)
Balance at 30 June 2014 128.6 124.4 253.0
Non-current biological assets 128.6 80.3 208.9
Current biological assets - 44.1 44.1
Balance at 30 June 2014 128.6 124.4 253.0
Bovine biological assets include £3.6m (2013: £3.2m) representing the fair value of bulls owned by third parties but
managed by the Group, net of expected future payments to such third parties and are therefore treated as assets held under
finance leases.
There are no movements in the carrying value of the bovine biological assets in respect of sales or other changes during
the year.
The current market determined post-tax rate used to discount expected future net cash flows from the sale of bull semen is
the Group's weighted average cost of capital. This has been assessed as 8.0% (2013: 8.0%).
Decreases due to harvest represent the semen extracted from the biological assets. Inventories of such semen are shown as
biological asset harvest.
Porcine biological assets include £46.2m (2013: £36.9m) relating to the fair value of the retained interest in the genetics
in respect of animals transferred to customers under royalty contracts. Total revenue in the period includes £80.7m (2013:
£73.0m) in respect of these contracts comprising £13.6m (2013: £10.6m) on initial transfer of animals to customers and
£67.1m (2013: £62.4m) in respect of royalties received. Decreases attributable to sales during the period of £153.2m (2013:
£131.2m) include £32.8m (2013: £28.9m) in respect of the reduction in fair value of the retained interest in the genetics
of animals sold under royalty contracts.
For pure line porcine herds, the net cash flows from the expected output of the herds are discounted at the Group's
required rate of return adjusted for the greater risk implicit in including output from future generations. This adjusted
rate has been assessed as 11.0% (2013: 11.0%). The number of future generations which have been taken into account is seven
(2013: seven) and their estimated useful lifespan is 1.4 years (2013: 1.4 years).
Included in increases due to purchases is the aggregate gain arising during the period on initial recognition of biological
assets in respect of multiplier purchases £34.1m (2013: £28.9m).
Year ended 30 June 2014
Bovine Porcine Total
£m £m £m
Net IAS 41 valuation movement on biological assets*
Changes in fair value of biological assets 24.5 75.0 99.5
Inventory transferred to cost of sales at fair value (30.7) (11.0) (41.7)
Biological assets transferred to cost of sales at fair value - (50.3) (50.3)
(6.2) 13.7 7.5
Year ended 30 June 2013
Bovine Porcine Total
£m £m £m
Net IAS 41 valuation movement on biological assets*
Changes in fair value of biological assets 12.2 57.5 69.7
Inventory transferred to cost of sales at fair value (21.5) (9.4) (30.9)
Biological assets transferred to cost of sales at fair value - (43.7) (43.7)
(9.3) 4.4 (4.9)
*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.
10. TRADE RECEIVABLES
2014£m 2013£m
Trade receivables 63.4 63.6
Other debtors 5.2 9.9
Prepayments and accrued income 3.9 3.9
Other taxes and social security 2.6 1.5
75.1 78.9
Trade receivables
The average credit period our customers take on the sales of goods is 62 days (2013: 67 days). We do not charge interest on
receivables for the first 30 days from the date of the invoice. We provide for all receivables based upon knowledge of the
customer and historical experience, and estimate irrecoverable amounts by reference to past default experience.
No customer represents more than 5 per cent of the total balance of trade receivables (2013: nil).
At 30 June 2014 £44.9m (2013: £45.3m) of trade receivables were not yet due for payment.
Other debtors
Included within other debtors is £nil (2013: £3.4m) which relates to the Besun JV farm stocking.
11. RETIREMENT BENEFIT OBLIGATIONS
The Group has a number of defined contribution and defined benefit pension schemes covering many of its employees. The
principal funds are the Milk Pension Fund and Dalgety Pension Fund in the United Kingdom, which are defined benefit
schemes. The assets of these funds are held separately from the assets of the Group and administered by trustees and
managed professionally. These schemes are closed to new members.
The financial position of the defined benefit schemes as recorded in accordance with IAS 19 are aggregated for disclosure
purposes. The liability split by principal scheme is set out below.
2014£m 2013£m
The Milk Pension Fund - Genus's share 49.5 55.7
The Dalgety Pension Fund - -
Other retirement benefit obligations 8.7 9.3
Overall pension liability 58.2 65.0
Expense/(income) recognised in the income statement
2014£m 2013*£m
Administrative expenses 0.4 0.9
Curtailment gain in administrative expenses - (0.2)
Exceptional item - release of provision - MPF - (7.0)
Finance charge 2.9 3.1
3.3 (3.2)
* restated see note 1
Principal actuarial assumptions at the reporting date (expressed as weighted averages):
2014 2013
Discount rate 4.2% 4.6%
Expected return on plan assets 6.6% 7.1%
Medical cost trend rate 7.2% 7.4%
Future pension increases and inflation 3.2% 3.4%
The mortality assumptions used are consistent with those recommended by the schemes' actuaries and reflect the latest
available tables, adjusted for the experience of the scheme where appropriate. For 2014 and 2013, the mortality tables used
are 90% of the SN1A tables, with birth year and 2011 CMI projections, with mortality rates increased by 25% at all ages.
12. NOTES TO THE CASH FLOW STATEMENT
2014£m 2013*£m
Profit for the year 28.9 23.4
Adjustment for:
Net IAS 41 valuation movement on biological assets (7.5) 4.9
Amortisation of acquired intangible assets 5.8 5.2
Share-based payment expense 0.8 2.8
Share of profit of joint ventures and associates (1.9) (2.8)
Finance costs 5.5 5.7
Income tax expense 9.3 10.0
Other exceptional items 2.0 (4.2)
Adjusted operating profit from continuing operations 42.9 45.0
Depreciation of property, plant and equipment 5.1 5.3
Loss/(gain) on disposal of plant and equipment 0.2 (0.3)
Amortisation of intangible assets 0.6 0.6
Earnings before interest, tax, depreciation and amortisation 48.8 50.6
Exceptional item cash (2.0) (2.8)
Other movements in biological assets and harvested produce (3.0) (3.1)
Increase/(decrease) in provisions 0.2 (1.3)
Additional pension contributions in excess of pension charge (5.6) (2.0)
Other (0.3) (0.1)
Operating cash flows before movement in working capital 38.1 41.3
Decrease/(increase) in inventories 1.5 (1.1)
Decrease/(increase) in receivables 1.1 (7.3)
Increase in payables 3.6 2.0
Cash generated by operations 44.3 34.9
Interest received 0.2 0.1
Interest and other finance costs paid (1.8) (1.6)
Cash flow from derivative financial instruments (0.5) (0.5)
Income taxes paid (9.9) (8.9)
Net cash from operating activities 32.3 24.0
* restated see note 1
Analysis of net debt
At 1 July 2013£m Netcash flows£m Foreign exchange£m Non cash movements £m At 30 June 2014£m
Cash and cash equivalents 18.4 5.8 (1.8) 0.4 22.8
Interest bearing loans - current (7.5) (6.8) 1.0 0.3 (13.0)
Obligation under finance leases - current (1.2) 1.4 0.1 (1.4) (1.1)
(8.7) (5.4) 1.1 (1.1) (14.1)
Interest bearing loans - non-current (60.7) (18.4) 8.0 - (71.1)
Obligation under finance lease - non- current (1.9) - 0.2 0.2 (1.5)
(62.6) (18.4) 8.2 0.2 (72.6)
Net debt (52.9) (18.0) 7.5 (0.5) (63.9)
Included within non-cash movements is £1.2m in relation to new finance leases.
13. CONTINGENCIES
The retirement benefit obligations referred to in note 11 include obligations relating to the Milk Pension defined benefit
scheme. Genus, together with other participating employers, is joint and severally liable for the scheme's obligations.
Genus has accounted for its section and its share of any orphan assets and liabilities, collectively representing
approximately 75% of the Milk Pension Fund. As a result of the joint and several liability, Genus has a contingent
liability for those of the scheme's obligations that Genus has not accounted for.
14. ACQUISTION OF SUBSIDIARY AND RELATED ASSETS
On 18 October 2013, the Group acquired 100% of the share capital of Génétiporc International Minnesota Inc. (US) and
Génétiporc Servicios Tecnicos, S.A.de C.V. (Mexico), along with specific related assets from Génétiporc Inc. (Canada),
(collectively 'Génétiporc').
Genus identified that Génétiporc would be a good strategic fit, providing a complementary product portfolio which will
support our global product development. As a result of the acquisition, we also have a broadened customer base, supply
chain and multiplier base, to further support growth in our North and Latin American businesses.
The amounts recognised in respect of the identifiable assets acquired and liabilities assumed are set out in the table
below.
£m
Intangible assets identified 5.0
Property, plant and equipment 0.2
Biological assets 8.9
Financial assets 3.4
Financial liabilities (2.5)
Total identifiable assets 15.0
Goodwill 7.3
Total consideration 22.3
Satisfied by:
Deferred consideration 0.1
Cash 22.2
Net cash outflow arising on acquisition of subsidiary
Cash consideration 20.2
Add: Overdraft acquired 0.2
20.4
Net cash outflow arising on acquisition of trade and assets 2.0
The goodwill of £7.3m arising from the acquisition consists largely of synergies expected from combining the acquired
operations with our existing operations. None of the goodwill recognised is expected to be deductible for income tax
purposes.
The fair value of the financial assets includes trade receivables with a fair value of £3.4m and a gross contractual value
of £3.7m. Our best estimate at the acquisition date of the cash flows unlikely to be collected is £0.3m.
Acquisition and integration related costs included within exceptional items amount to £1.7m. Between the date of
acquisition and the balance sheet date, Génétiporc contributed £21m of revenue and £1m operating profit before tax to the
Group. Our Brazilian joint venture, Agroceres also acquired Génétiporc do Brasil in a subsequent acquisition, which when
combined with our Génétiporc acquisition contributed £1.3m operating profit before tax, since acquisition and the balance
sheet date.
Due to the transaction's nature, it is impracticable to obtain the information required to disclose what the Group's
revenues and profit would have been, if the acquisition of Génétiporc had been completed on the first day of the financial
period.On 30 June2014, the Group acquired a 50% controlling interest in PIC Italia for a consideration of £0.5m.
15. POST BALANCE SHEET EVENTS
On 14 July 2014, ABS Global, Inc. ('ABS'), a wholly owned subsidiary of the Company, launched a legal action against
Inguran LLC (aka Sexing Technologies ('ST')), in the US District Court for the Western District of Wisconsin alleging,
among other matters, that ST (i) have a monopoly in the processing of sexed bovine semen in the US and (ii) unlawfully
maintain this monopoly through anticompetitive contractual provisions and the repeated acquisition of exclusive patent
rights related to semen processing. The legal action aims to remove these barriers and allow free and fair competition in
the sexed bovine semen processing market ('ABS Action'). ABS intends to pursue vigorously the litigation, in order to seek
to enter and compete in this market through its own technology. On the same date, ABS also filed an Inter-Partes Review
application challenging the validity of one of the ST's group patents (U.S. Patent No. 7,195,920) before the US Patent
Office. On 29 August 2014, ST filed (i) a Motion to Dismiss the ABS Action and (ii) a separate complaint related to the ABS
Action in the Southern District of Texas. The matter is ongoing.
On 1 September 2014, Genus completed the acquisition for £6m of Birchwood Genetics Inc., a privately owned boar stud
operation providing PIC boar semen to mid- and small-sized customers in the US.
This information is provided by RNS
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