REG - Genus - Preliminary Results <Origin Href="QuoteRef">GNS.L</Origin> - Part 4
07/09/2017 07:07
- Part 4: For the preceding part double click ID:nRSG0426Qc
Balance at 1 July 2015 19.8 31.5 51.3 4.5 - - 55.8 -
Amortisation for the year 2.3 3.8 6.1 0.7 - 0.2 7.0 -
Effect of movements in exchange rates - 5.6 5.6 0.2 - - 5.8 -
Balance at 30 June 2016 22.1 40.9 63.0 5.4 - 0.2 68.6 -
Reclassified from tangible fixed assets - - - 0.7 - - 0.7 -
Amortisation for the year 2.7 6.0 8.7 1.3 0.4 0.8 11.2 -
Effect of movements in exchange rates - 1.0 1.0 0.1 - - 1.1 -
Balance at 30 June 2017 24.8 47.9 72.7 7.5 0.4 1.0 81.6 -
Carrying amounts
At 30 June 2017 28.6 34.4 63.0 1.3 20.9 3.1 88.3 104.7
At 30 June 2016 24.5 31.8 56.3 1.5 17.8 2.4 78.0 86.0
At 30 June 2015 26.3 30.0 56.3 2.1 11.1 0.3 69.8 73.9
Additions in the year to intangible assets of £3.1m relates to costs capitalised in respect of the GSS development project.
Included above is £20.9m of capitalised development expenses in respect of GSS, and a further £9.3m is included within
fixed assets relating to GSS.
Additions to patents and licences of £1.5m relate to a stage payment for the worldwide licence to use Caribou Biosciences,
Inc.'s leading CRISPR-Cas9 gene editing technology platform.
9. BIOLOGICAL ASSETS
Fair value of biological assets Bovine Porcine Total
£m £m £m
Non-current biological assets 144.8 97.9 242.7
Current biological assets - 50.2 50.2
Balance at 30 June 2015 144.8 148.1 292.9
Increases due to purchases 7.7 112.9 120.6
Decreases attributable to sales - (152.0) (152.0)
Decrease due to harvest (31.6) (18.0) (49.6)
Changes in fair value less estimated sale costs 2.1 67.7 69.8
Acquisition 1.9 - 1.9
Effect of movements in exchange rates 21.4 26.0 47.4
Balance at 30 June 2016 146.3 184.7 331.0
Non-current biological assets 146.3 118.3 264.6
Current biological assets - 66.4 66.4
Balance at 30 June 2016 146.3 184.7 331.0
Increases due to purchases 11.9 176.0 187.9
Decreases attributable to sales - (197.8) (197.8)
Decrease due to harvest (40.7) (19.3) (60.0)
Changes in fair value less estimated sale costs 10.3 66.0 76.3
Acquisition 5.4 - 5.4
Effect of movements in exchange rates 4.3 6.0 10.3
Balance at 30 June 2017 137.5 215.6 353.1
Non-current biological assets 137.5 141.7 279.2
Current biological assets - 73.9 73.9
Balance at 30 June 2017 137.5 215.6 353.1
Bovine biological assets include £6.9m (2016: £7.8m) 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% (2016: 8.0%).
Decreases due to harvest represent the semen extracted from the biological assets. Inventories of such semen are shown as
biological asset harvest.
Included in increases due to purchases is £87.0m arising on the initial recognition of biological assets acquired through
multiplier purchases, other than parent gilts (2016: £49.4m).
Decreases attributable to sales during the period of £197.8m (2016: £152.0m) include £66.6m (2016: £49.6m) 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.
Porcine biological assets include £111.0m (2016: £69.3m) relating to the fair value of the retained interest in the
genetics animals, other than parent gilts, transferred to customers under royalty contracts.
Total revenue in the period, including parent gilts, includes £159.5m (2016: £127.2m) in respect of these contracts,
comprising £54.0m (2016: £38.1m) on the initial transfer of animals to customers and £105.5m (2016: £89.1m) in respect of
royalties received.
For pure line porcine herds, the net cash flows from the herds' expected output 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% (2016: 11.0%). The number of future generations taken into account is seven (2016: seven) and their
estimated useful lifespan is 1.4 years (2016: 1.3 years).
Year ended 30 June 2017 Bovine Porcine Total
£m £m £m
Net IAS 41 valuation movement on biological assets*
Changes in fair value of biological assets+ 10.3 66.0 76.3
Inventory transferred to cost of sales at fair value (38.8) (19.3) (58.1)
Biological assets transferred to cost of sales at fair value - (18.8) (18.8)
(28.5) 27.9 (0.6)
Fair value movement in related financial derivative - (0.5) (0.5)
(28.5) 27.4 (1.1)
Year ended 30 June 2016 Bovine Porcine Total
£m £m £m
Net IAS 41 valuation movement on biological assets*
Changes in fair value of biological assets 2.1 67.7 69.8
Inventory transferred to cost of sales at fair value (28.6) (18.0) (46.6)
Biological assets transferred to cost of sales at fair value - (39.7) (39.7)
(26.5) 10.0 (16.5)
Fair value movement in related financial derivative - (0.6) (0.6)
(26.5) 9.4 (17.1)
* 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.
+ Includes £2.1m write down in bovine assets.
10. TRADE AND OTHER RECEIVABLES
2017£m 2016£m
Trade receivables 73.7 65.0
Other debtors 5.4 5.5
Prepayments and accrued income 7.8 5.3
Other taxes and social security 1.9 2.3
88.8 78.1
Trade receivables
The average credit period our customers take on the sales of goods is 59 days (2016: 61 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% of the total balance of trade receivables (2016: nil).
At 30 June 2017, £56.4m (2016: £50.3m) of trade receivables were not yet due for payment.
11. RETIREMENT BENEFIT OBLIGATIONS
The Group operates 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 UK, which are defined benefit schemes. The
assets of these funds are held separately from the assets of the Group and are 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 and IFRIC 14, are aggregated
for disclosure purposes. The liability split by principal scheme is set out below.
2017£m 2016£m
The Milk Pension Fund - Genus's share 30.4 34.3
The Dalgety Pension Fund - -
Other retirement benefit obligations and other unfunded schemes 10.5 10.2
Overall net pension liability 40.9 44.5
Overall, we expect to pay £7.3m (2017: £7.1m) in contributions to defined benefit plans in the 2018 financial year.
Summary of movements in Group deficit during the year
2017£m 2016£m
Deficit in schemes at the start of the year (44.5) (63.1)
Administration expenses (0.6) (0.7)
Gains on curtailments and settlements - 0.3
Exceptional gain on NMR withdrawal from MPF 1.2 -
Change from RPI to CPI for benefit increases in the MPF - 43.9
Contributions paid into the plans 7.2 6.7
Net pension finance cost (1.2) (2.2)
Actuarial loss recognised during the year 1.2 (12.8)
Movement in restriction of assets 0.3 (0.6)
Recognition of additional liability (4.3) (14.9)
Exchange rate adjustment (0.2) (1.1)
Deficit in schemes at the end of the year (40.9) (44.5)
The expense/(income) is recognised in the following line items in the Income Statement
2017£m 2016£m
Administrative expenses 0.6 0.7
Settlement gain in exceptional items - (0.3)
Exceptional gain on NMR withdrawal from MPF (1.2) -
Change from RPI to CPI for benefit increases in the MPF in exceptional items - (43.9)
Net finance charge 1.2 2.2
0.6 (41.3)
Actuarial assumptions and sensitivity analysis
Principal actuarial assumptions at the reporting date (expressed as weighted averages):
2017 2016
Discount rate 2.65% 2.8%
Consumer Price Index (CPI) 2.05% 1.6%
Retail Price Index (RPI) 3.15% 2.7%
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 2017, the mortality tables used are 97%
of the SN2A tables, with birth year and 2014 CMI projections, subject to a long-term rate of improvement of 1.25% for males
and females (2016: the mortality tables used are 97% of the SN2A tables, with birth year and 2014 CMI projections, subject
to a long-term rate of improvement of 1.25% for males and females).
12. NOTES TO THE CASH FLOW STATEMENT
2017£m 2016£m
Profit for the year 34.3 50.3
Adjustment for:
Net IAS 41valuation movement on biological assets 1.1 17.1
Amortisation of acquired intangible assets 8.7 6.1
Share-based payment expense 4.6 3.8
Share of profit of joint ventures and associates (6.2) (6.9)
Finance costs (net) 3.7 4.6
Income tax expense 6.4 10.6
Exceptional items 2.5 (36.3)
Adjusted operating profit from continuing operations 55.1 49.3
Depreciation of property, plant and equipment 8.8 7.9
Loss/(profit) on disposal of plant and equipment 0.2 (0.2)
Gain on asset held for sale - (0.2)
Amortisation of intangible assets 2.5 0.9
Adjusted earnings before interest, tax, depreciation and amortisation 66.6 57.7
Exceptional item cash (5.4) (4.7)
Other movements in biological assets and harvested produce (5.7) (3.8)
Increase/(decrease) in provisions 0.1 (1.2)
Additional pension contributions in excess of pension charge (6.6) (6.1)
Other (0.9) 0.3
Operating cash flows before movement in working capital 48.1 42.2
Decrease/(increase) in inventories 1.4 (0.7)
(Increase)/decrease in receivables (9.0) 2.6
Increase/(decrease) in payables 5.8 (0.8)
Cash generated by operations 46.3 43.3
Interest received 0.8 0.1
Interest and other finance costs paid (3.1) (1.6)
Cash flow from derivative financial instruments 0.6 0.1
Income taxes paid (10.0) (11.9)
Net cash from operating activities 34.6 30.0
Analysis of net debt
At 1 July 2016£m Net cash flows£m Foreign exchange£m Non-cash movements£m At 30 June 2017£m
Cash and cash equivalents 34.0 (7.7) 0.2 - 26.5
Interest-bearing loans - current (4.6) (3.0) (0.1) - (7.7)
Obligation under finance leases - current (1.1) 2.0 - (2.3) (1.4)
(5.7) (1.0) (0.1) (2.3) (9.1)
Interest-bearing loans - non- current (115.3) (9.4) (2.5) - (127.2)
Obligation under finance lease - non- current (2.7) - (0.1) 1.0 (1.8)
(118.0) (9.4) (2.6) 1.0 (129.0)
Net debt (89.7) (18.1) (2.5) (1.3) (111.6)
Included within non-cash movements is £1.3m in relation to new finance leases.
13. CONTINGENCIES AND BANK GUARANTEES
Contingent liabilities are potential future cash outflows, where the likelihood of payments is considered more than remote
but is not considered probable or cannot be measured reliably.
The retirement benefit obligations referred to in note 11 include obligations relating to the Milk Pension Fund 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 85% (2016: 75%) of the MPF. As a result of the joint and several liability, Genus has a
contingent liability for the scheme's obligations that it has not accounted for. The total deficit of the MPF scheme from
the most recent triennial valuation can be found in note 11.
During the year, as part of a commercial agreement in favour of a third party, we entered into a bank guarantee for £4.1m
which will expire within 2 years.
14. ACQUISITION OF SUBSIDIARIES
De Novo Genetics
On 1 September 2016, we formed De Novo Genetics, a 51% owned Holstein breeding strategic partnership, with De-Su, the
world's leading independent Holstein breeder. De Novo will further accelerate the proportion of bulls Genus produces
internally by combining ABS's and De-Su's elite Holstein breeding programmes. This gives us greater control of the genetics
we need to create differentiated solutions that help commercial dairy farmers increase profitability through improved herd
productivity, health and efficiency.
The preliminary amounts recognised in respect of the identifiable assets acquired/transferred and liabilities assumed, at
the date of acquisition, are set out in the table below.
£m
Intangible assets identified - customer relationships 5.0
Biological assets (including asset transferred) 11.5
Financial assets 0.5
Financial liabilities (6.3)
Total identifiable net assets 10.7
Equity attributable to non-controlling interest (5.3)
5.4
Goodwill 4.8
Total consideration 10.2
Satisfied by:
Net cash outflow arising on acquisition of subsidiary 2.3
Deferred cash consideration 3.5
Deferred contingent cash consideration 0.8
Biological assets transferred 3.6
10.2
The goodwill of £4.8m arising from the acquisition consists largely of future synergies expected from combining the
acquired operations with existing Genus 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 £0.5m and a gross contractual value
of £0.5m.
Hermitage Genetics
On 31 March 2017, we acquired the entire share capital of Hermitage Genetics, which included technology being the genetic
rights and intellectual property of Hermitage. As part of the agreement, the remaining Hermitage business will also become
a strategic supply chain and distribution partner for PIC covering the supply of porcine genetics in several markets.
In addition, we acquired certain Hermitage customer relationships in various geographies including Russia, the US and
several European countries.
The preliminary amounts recognised in respect of the identifiable assets acquired/transferred and liabilities assumed, at
the date of acquisition, are set out in the table below.
£m
Intangible assets identified
- Technology- Customer relationships 6.72.4
Financial assets 0.1
Financial liabilities (1.1)
Total identifiable net assets 8.1
Goodwill 11.4
Total consideration 19.5
Satisfied by:
Cash consideration 15.2
Deferred contingent cash consideration 4.3
19.5
The goodwill of £11.4m arising from the acquisition consists largely of future synergies expected from combining the
acquired operations with existing Genus 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 £0.1m and a gross contractual value
of £0.1m.
If the acquisition of Hermitage Genetics had been completed on the first day of the financial period, Group revenues and
Group profit would have been £2.9m and £1.5m, respectively.
In Vitro Brasil S.A.
During the year, with the agreement of the existing shareholder we purchased the remaining 49% of In Vitro Brasil S.A. for
£11.4m, and the option was cancelled, with a gain of £1.0m being recognised as an exceptional credit.
PIC Italia S.r.l
On 29 September 2016, we increased our shareholding in PIC Italia S.r.l from 50% to 85%, for a cash consideration of
£0.6m.
Net acquisition and integration related costs included within exceptional items amount to £0.6m.
15. NON-CONTROLLING INTEREST
2017£m 2016£m
Non-controlling interest 6.1 5.0
Put option over non-controlling interest (3.3) (11.4)
Total non-controlling interest 2.8 (6.4)
Summarised financial information in respect of each of the Group's subsidiaries that has a material non-controlling
interest is set out below. The summarised financial information below represents amounts before intra-Group eliminations.
De Novo Genetics 2017£m
Biological assets 10.2
Current assets 1.4
Non-current assets 2.4
Current liabilities (2.1)
Net assets 11.9
Equity attributable to owners of the Company (6.1)
Non-controlling interest for De Novo Genetics 5.8
Other non-controlling interest 0.3
Non-controlling interest 6.1
During the year £0.1m of dividends were paid to non-controlling interests (2016: £0.4m).
During the year, with the agreement of the existing shareholder we purchased the remaining 49% of In Vitro Brasil S.A. for
£11.4m.
16. POST BALANCE SHEET EVENTS
There are no post balance sheet events.
This information is provided by RNS
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