REG - Genus - Preliminary Results
08/09/2022 07:00
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RNS Number : 6852Y Genus PLC 08 September 2022
For immediate release 8 September 2022
Genus plc
Preliminary results for the year ended 30 June 2022
CONTINUED STRATEGIC PROGRESS IN CHALLENGING MARKETS
Adjusted results(1) Statutory results
Actual currency Constant currency change(2) Actual currency
Year ended 30 June 2022 2021 Change 2022 2021 Change
£m £m % % £m £m %
Revenue 593.4 574.3 3 2 593.4 574.3 3
Operating profit 68.8 76.9 (11) (13) 49.4 47.7 4
Operating profit inc JVs exc gene editing 85.6 97.4 (12) (14) n/a n/a n/a
Profit before tax 71.5 84.8 (16) (18) 48.4 55.8 (13)
Free cash flow (13.5) 37.5 (136) n/m(3)
Basic earnings per share (pence) 82.7 100.9 (18) (20) 62.5 72.6 (14)
Dividend per share (pence) 32.0 32.0 -
Robust performance across the business, despite challenging macro-economic
events; Group results adversely impacted by PIC China
· Group revenue up 2% in constant currency (3% in actual currency),
adjusted profit before tax ('PBT') down 18% in constant currency (16% in
actual currency)
· Excluding PIC China, Group adjusted PBT up 25% in constant currency
(28% in actual currency) and revenue up 7% in constant currency (9% in actual
currency)
· R&D investment increased by 6%(2) as planned
· Statutory PBT reduced by 13% to £48.4m, reflecting lower adjusted
profit, lower net IAS 41 biological asset movement and share-based payments
Challenging market conditions for PIC China as previously indicated, strong
PIC performance elsewhere
· China pig prices averaged 14.6 RMB/kg through the year, down 50% on
the prior year. Since June 2022, these have now recovered to over 21 RMB/kg,
which exceeds the cost of production for most producers
· Overall PIC volumes were stable, with revenue down 5%(2) but royalty
revenue up 1%(2). Adjusted operating profit declined by 13%(2)
· Excluding China, PIC's volumes up 8%, revenue up 4%(2), royalty
revenue up 8%(2) and adjusted operating profit up 11%(2)
· Strong customer wins drove North America growth; solid performances
in Latin America and Europe despite challenging market conditions for
customers
Good performance in ABS, with adjusted operating profit growth of 9%(2) and
volume growth of 3%, despite more challenging market for producers
· Continued success for Sexcel® (supporting sexed volume growth of
18%) and NuEra® beef (with volumes up 21% and total beef volumes up 9%)
· Strong growth in third party sales of IntelliGen sexed semen
production in North America and Europe
· High growth in Asia, particularly China and continued growth in Latin
America
· Overall, ABS's adjusted operating profit up 9%(2)
Lower cash generation and earnings than prior year, dividends maintained
· Free cash outflow of £13.5m, reflecting lower profit from PIC China,
continued investment in the business as well as expected working capital
outflows. Solid cash conversion of 82%(1)
· Net debt increased to £185.0m, with year-end net debt to EBITDA
ratio of 1.7x(1), within 1.0x-2.0x targeted range
· On 26 August 2022 Genus extended its multi-currency revolving credit
facility to 2025 and increased the facility by £40m (to £190m) and USD $25m
(to $150m) under an accordion option
· Adjusted earnings per share 18% lower, final dividend in line with
prior year, with 2.6x(1) adjusted earnings cover
Continued strategic progress and investment for growth
· Further genetic progress in pork, dairy and beef, contributing to a
reduction in use of energy, water and land in animal protein production.
Good progress on reduction of Genus's carbon emissions, with the primary
intensity ratio(4) reduced by 25% since FY19
· Acquisition in Canada of Olymel LP's internal elite porcine genetics
programme, AlphaGene, for CAD$25m (£14.5m) in February 2022 progressing well,
generating royalties in the second half
· Significant capital investments to support growth including expansion
of the ABS Leeds facility in Wisconsin, completion of the PIC Atlas facility
in Canada in June 2022 and further roll out of the GenusOne enterprise system,
now live in over 60% of Genus's business
· Investments in digitalisation to deliver differentiation for ABS's
Gene Advance genetic offering and ecommerce capabilities
Building R&D capabilities and opportunity pipeline
· PRRSv resistant pig programme on track, with final FDA submissions
expected to be made by December 2023
· R&D pipeline strengthened from investments, with an increase in
the number of projects in the discovery and proof of concept phases
Commenting on the performance and outlook, Stephen Wilson (Chief Executive)
said:
"The Group performed robustly, although challenging market conditions in China
porcine impacted the performance of PIC. We also made good strategic progress
and completed significant capital investments including Atlas, PIC's new elite
genetics farm in Canada to support growth. Our strategic collaboration with
Olymel, which we announced during the year, is progressing well, further
strengthening PIC's North America business.
"Bovine producers faced more challenging conditions in the second half of the
year, as a result of significantly increased input costs and the Ukraine war.
However, ABS continued to grow volumes and expand margins, driven by the
success of Sexcel (including expansion of sales through our third party
IntelliGen business), as well as strong growth in sales of our proprietary
NuEra beef genetics across all regions.
"PIC delivered strong growth in operating profits excluding PIC China,
underpinned by market share gains with key customers in North America, Latin
America, and Europe, despite challenging political and macro-economic events.
However, as expected, the porcine market and COVID-19 lockdowns in China
adversely affected PIC China's trading during the second half of the year.
The live pig price in China remained below the cost of production and has only
showed signs of recovery since June.
"Over the summer, China's live pig prices have risen above 21 RMB/kg,
improving confidence that the country's porcine industry is on the path to
recovery and profitability. Industry expectations are that prices will
continue to exceed 20 RMB/kg for the remainder of 2022, although there could
still be some further volatility. Investments we have made to increase elite
porcine supply chain capacity position Genus well to support Chinese
producers' needs and benefit from the market recovery over time.
"The Board remains confident in the Group's strategy and the many
opportunities for Genus. Medium-term growth expectations remain unchanged."
Results presentation today
A pre-recorded analysts and bankers briefing to discuss the preliminary
results for the year ended 30 June 2022 will be held via a video webcast
facility and will be accessible via the following link from 7:01am today:
https://webcasting.buchanan.uk.com/broadcast/62c6c042d161177b45786de1
(https://webcasting.buchanan.uk.com/broadcast/62c6c042d161177b45786de1)
This will be followed by a live Q&A session to be held by invitation via
Zoom at 10:30am. Please contact Verity Parker at Buchanan for details;
verityp@buchanan.uk.com
Enquiries:
Genus plc (Stephen Wilson, Chief Executive Officer / Alison Henriksen, Chief Tel: 01256 345970
Financial Officer)
Buchanan (Charles Ryland / Chris Lane / Verity Parker) Tel: 0207 4665000
About Genus
Genus advances animal breeding and genetic improvement by applying
biotechnology and sells added value products for livestock farming and food
producers. Its technology is applicable across livestock species and is
currently commercialised by Genus in the dairy, beef and pork food production
sectors.
Genus's worldwide sales are made in over 75 countries under the trademarks
'ABS' (dairy and beef cattle) and 'PIC' (pigs) and comprise semen, embryos and
breeding animals with superior genetics to those animals currently in farms.
Genus's customers' animals produce offspring with greater production
efficiency and quality, and our customers use them to supply the global dairy
and meat supply chains.
Genus's competitive edge comes from the ownership and control of proprietary
lines of breeding animals, the biotechnology used to improve them and its
global supply chain, technical service and sales and distribution network.
Headquartered in Basingstoke, United Kingdom, Genus companies operate in over
24 countries on six continents, with research laboratories located in Madison,
Wisconsin, USA.
(1) Adjusted results are the Alternative Performance Measures ('APMs') used by
the Board to monitor underlying performance at a Group and operating segment
level, which are applied consistently throughout. These APMs should be
considered in addition to, and not as a substitute for or as superior to
statutory measures. For more information on APMs, see APM Glossary.
(2) Constant currency percentage movements are calculated by restating the
results for the year ended 30 June 2022 at the average exchange rates applied
to adjusted operating profit for the year ended 30 June 2021.
(3) n/m = not meaningful
(4) The primary intensity ratio is a measure of the Group's Scope 1 and 2
emissions per tonne of animal weight
Chief Executive's Review
A robust performance was achieved by the Group despite some highly challenging
market conditions. We made good progress with our strategy and continued to
invest in the business and in innovation, positioning us for growth and
reflecting our confidence in the future.
Group Performance
Revenue for the year was 2% higher (3% in actual currency), with adjusted
profit before tax down 18% in constant currency (16% in actual currency). PIC
China was a key factor in this performance (see below). Excluding PIC China,
adjusted profit before tax for the Group was up 25% in constant currency (28%
in actual currency).
The macro environment proved particularly difficult for our customers in the
last year, due to a range of factors including record grain, fuel and
fertiliser prices and the ongoing impact of COVID-19 on their operations. The
Russian invasion of Ukraine sent further shockwaves throughout producers'
supply chains, exacerbating inflationary pressures on input costs. While our
customers benefited from rising output prices in some markets, these have
generally lagged behind increases in input costs, putting pressure on their
margins.
Genus PIC revenue declined by 5% in constant currency, although royalty
revenue grew by 1%. Adjusted operating profit (including joint ventures) was
13% lower than the previous year (all figures in constant currency). Excluding
China, PIC's revenue was up 4%, royalty revenue was 8% higher and adjusted
operating profit rose by 11%. This progress included PIC's fastest growth in
North America for a number of years, as a result of our investment in genetics
and capturing market share.
Conditions in China remained challenging, as previously indicated. The China
porcine market suffered from a combination of reduced demand, due to COVID-19
lockdowns, and oversupply following the heavy restocking after African Swine
Fever. This resulted in the industry making heavy losses during the year. More
favourable market conditions have emerged since the end of the financial year.
We continue to see strong long-term prospects for PIC in China as a result of
our product strength and the investments we have made to significantly
increase supply chain capacity and strengthen our team.
Genus ABS grew volumes by 3% and increased revenue and adjusted operating
profit by 7% and 9% respectively, in constant currency, despite the impact of
an IT security incident, now fully resolved, which affected June's trading in
Brazil. The business continued to see growing uptake of our NuEra beef
genetics in dairy herds, which contributed to a 9% increase in global beef
volumes. ABS also delivered further growth in Sexcel sexed genetics, with
sexed volumes being 18% higher.
We made further planned investments in R&D, which are essential to the
long-term development of the business, with expenditure of £67.1m in the
year: an increase of 6% in constant currency. The PRRSv gene editing
programme is on track and we expect to complete FDA submissions by the end of
2023. We have also made considerable progress in building our pipeline of
other R&D projects. Further details are set out below.
Strategic Progress
Our customers choose us because of the strength of our genetic portfolio and
we made good genetic progress across all species during the year. In porcine,
we further enhanced our portfolio through our collaboration with Olymel in
Canada. This has seen us acquire all intellectual property in Olymel's elite
porcine genetics and sign an exclusive long-term genetics collaboration
agreement. The arrangement also increases PIC's footprint in the Canadian
market.
Our programme to produce PRRSv-resistant pigs is making continued progress
with the expansion of E2 generation homozygous edited animals and further
submissions to the FDA as planned. We are focusing on our industry engagement
and increasing production capacity as the prospect of bringing
PRRSv-resistant pigs to market comes closer. We also have a pipeline of other
gene editing projects, primarily in porcine, and our investment in
reproductive technology is making progress.
Digitalisation is an important element of our strategy. In particular, we are
transforming ABS's digital capabilities to improve our ability to engage with
customers, demonstrate genetic improvements in their herds and conduct digital
sales and marketing. The roll-out of our new enterprise system, GenusOne, is
also progressing, having gone live in Spain and Chile during the year and in
the UK shortly after the year end. With the UK rollout now completed, over 60%
of the Group's business is using the new system.
This was a year of major investment in the business, which saw our capital
expenditure peaking. Atlas, our new elite porcine genetics farm in Canada,
opened in June 2022. Our investment in ABS's facility in Leeds, Wisconsin, has
given us increased bull housing and production capacity, as well as generating
efficiency gains.
Sustainability
As a purpose-driven business focused on helping to nourish the world,
sustainability is core to our business model. We have an important role in
reducing the environmental impact of our customers' operations, by delivering
genetic improvement that helps them achieve business goals while using fewer
resources and cutting their carbon footprints. This year, we became a founder
member of the Greener Cattle Initiative, an industry consortium that is
supporting research on how to mitigate methane emissions from cattle. Since
2019 we have also made progress in the business with our own carbon reduction
goals, reducing by 25% our primary carbon intensity, being tonnes of carbon
emitted per tonne of animal bodyweight. We have also reduced our absolute
Scope 1 & 2 carbon footprint by 9% compared to the 2019 baseline.
People
Genus depends on attracting and retaining the best talent and I want to thank
everyone in the Group for their contribution this year. Our Your Voice survey
is a key way in which we measure sentiment around the Group. We were pleased
to achieve our highest-ever response rate and strong results, with increases
in scores for almost all questions. Highlights included a further increase in
the percentage of our people who would recommend Genus to their family or
friends, which now stands at 82%, up from 79% in the previous survey and 73%
in 2017. In addition, some 89% of our people said they enjoy working at Genus,
versus 85% last time.
Outlook
As noted above, macro-economic conditions remain particularly challenging for
our customers in many parts of the world, however, since the start of the 2023
fiscal year, China's live pig prices have risen above 21 RMB/kg, improving
confidence that the country's porcine industry is on the path to recovery.
There is still uncertainty as to how sustained this will be and the
implications for demand for porcine genetics. Our investments in China
position us well to benefit from an upturn. More broadly our clear
strategy, strong product portfolio and depth of skill in our sales, services
and R&D teams give us confidence that we will continue to make strategic
and financial progress in fiscal year 2023 and beyond. The Group remains
well positioned to benefit from improving market conditions when these occur
and therefore our medium-term growth expectations remain unchanged.
Financial and Operating Review
Financial Review
In the year ended 30 June 2022, the Group achieved revenue growth of 3% in
actual currency (2% in constant currency). However, adjusted operating profit
including joint ventures fell by 13% (15% in constant currency), due to some
significant market challenges. These included rising inflation (driven
particularly by increasing energy prices), the impact of the war in Ukraine
and, most notably, turbulence in China's porcine industry following the sharp
decline in pig prices in 2021. The resultant decline in operating profit in
China had a significant impact on the Group's results. Excluding PIC China,
however, adjusted operating profit including joint ventures increased by 28%
(25% in constant currency).
On a statutory basis, profit before tax was £48.4m (2021: £55.8m). The
difference between statutory and adjusted profit before tax principally
reflected the reduction in the non-cash fair value of IAS 41 biological assets
and lower share-based payment charge. Basic earnings per share on a statutory
basis were 62.5 pence (2021: 72.6 pence).
The Group continued its significant R&D investment strategy, up 7% (6% in
constant currency). Excluding gene editing costs, adjusted operating profit
including joint ventures fell by 12% (14% in constant currency) and adjusted
profit before tax was down 16% (18% in constant currency).
The effect of exchange rate movements on the translation of overseas profits
was to increase the Group's adjusted profit before tax for the year by £1.8m,
compared with 2021, primarily due to the weakness of Sterling. All growth
rates quoted are in constant currency unless otherwise stated. Constant
currency percentage movements are calculated by restating the results for the
year ended 30 June 2022 at the average exchange rates applied to adjusted
operating profit for the year ended 30 June 2021.
Revenue
Revenue increased by 2% in constant currency (3% in actual currency) to
£593.4m (2021: £574.3m). PIC's revenue declined by 5% (3% in actual
currency) as a result of the downturn of the porcine market in China impacting
our customers' demand for genetics. In ABS, revenue was up 7% (9% in actual
currency) reflecting the continuing success of Genus's sexed and beef
genetics, particularly in China and Australia.
Adjusted Operating Profit Including JVs
Actual currency Constant currency change
Year ended 30 June 2022 2021 Change
Adjusted Profit Before Tax(1) £m £m % %
Genus PIC 121.2 135.9 (11) (13)
Genus ABS 40.5 36.4 11 9
R&D (67.1) (62.5) (7) (6)
Central costs (16.9) (20.0) 16 18
Adjusted operating profit inc JVs 77.7 89.8 (13) (15)
Net finance costs (6.2) (5.0) (24) (24)
Adjusted profit before tax 71.5 84.8 (16) (18)
(1) Includes share of adjusted pre-tax profits of joint ventures and removes
share of adjusted profits of non-controlling interests.
Adjusted operating profit including joint ventures was £77.7m (2021:
£89.8m), 15% lower in constant currency. The Group's share of adjusted
joint venture operating profit was lower at £9.2m (2021: £13.0m), primarily
due to weaker results in our porcine JVs in China.
Gene editing investment, which is primarily focused on creating pigs resistant
to PRRSv, increased to £7.9m (2021: £7.6m) as we expanded our population of
gene-edited animals. Adjusted operating profit including joint ventures and
excluding gene editing investment was £85.6m (2021: £97.4m), 14% lower, due
to PIC China's performance. However, the underlying business continues to
perform well and over the last five years our compound annual growth rate in
this profit measure has been 10% in constant currency, in line with our
medium-term objective.
PIC's performance during the year was affected particularly by the situation
in China and by market volatility in Latin America and Europe. As a result,
adjusted operating profit including joint ventures was down 13% in constant
currency. However, excluding China, adjusted operating profit rose by 11%.
Volumes were stable and up 8% when China is excluded. Strategically important
royalty revenue was up 1% (8% excluding China), aided by increases of 17% in
Latin America and 7% in Europe, despite the challenging market conditions.
Royalty revenues in North America also grew by 7%, primarily through strong
sales of both our damline and sireline products (particularly the PIC800 boar)
and were further supported by the integration of Olymel's AlphaGene breeding
programme.
ABS's volumes rose by 3% and adjusted operating profit rose by 9%. The
popularity of our proprietary bovine sexed product, Sexcel, continued to
increase, supporting sexed volumes up 18% compared to a very high prior year
growth rate of 29%. Increasing use of NuEra beef genetics in dairy herds
drove beef volume growth of 9%. Asia increased adjusted operating profit by
24% in constant currency, aided by strong growth in China and Australia. Latin
America's profits rose by 2%, lower than expected due to an IT security
incident in June which was quickly resolved but impacted the business's
ability to despatch product prior to the end of the financial year. Europe's
adjusted operating profit declined by 4%, due particularly to market
uncertainty driven by the Ukraine war and rising input costs for producers,
which were felt particularly in the UK business and among our European
distributors. In North America, adjusted operating profit was 4% higher, with
growth of third-party sales of IntelliGen production contributing to profit
growth.
Central costs were 18% lower, at £16.9m (2021: £20.0m) in constant currency,
primarily due to a combination of prudent cost management and lower
performance related employee rewards.
Statutory Profit Before Tax
The table below reconciles adjusted profit before tax to statutory profit
before tax:
2022 2021
£m £m
Adjusted Profit Before Tax 71.5 84.8
Operating profit attributable to non-controlling interest 0.3 0.1
Net IAS 41 valuation movement on biological assets in JVs and associates (1.4) 3.1
Tax on JVs and associates (2.6) (3.0)
Adjusting items:
Net IAS 41 valuation movement on biological assets (5.4) (10.8)
Amortisation of acquired intangible assets (8.3) (7.4)
Share-based payment expense (3.7) (7.7)
Exceptional items (2.0) (3.3)
Statutory Profit Before Tax 48.4 55.8
Statutory profit before tax was £48.4m (2021: £55.8m), largely reflecting
the decrease in the underlying trading performance being partially offset by
lower share-based payment expense, lower exceptional items and a lower
non-cash fair value net IAS 41 biological asset movement. Within this, there
was a £24.5m uplift (2021: £6.4m uplift) in porcine biological assets and a
£29.9m reduction (2021: £17.2m reduction) in bovine biological assets, due
to certain fair value model estimate changes. Share-based payment expense was
£3.7m (2021: £7.7m). These reconciling items are primarily non-cash, can be
volatile and do not correlate to the underlying trading performance in the
year.
Exceptional Items
There was a £2.0m net exceptional expense in the year (2021: £3.3m expense),
which included legal fees of £1.4m (2021: £2.5m) in relation to Genus ABS's
litigation with STgenetics. It also includes a £3.3m credit relating to a
non-refundable cash receipt (net of fees) received for the assignment of
rights to a legacy legal claim in Brazil, and a £2.8m expense relating to a
restructuring programme in ABS North America's supply chain, principally the
closure of barns in Canada. Also contributing to this expense was £0.5m of
one-time costs to help us resolve the IT security incident.
Net Finance Costs
Net finance costs increased to £6.2m (2021: £5.0m). This was primarily
caused by an increase in average borrowings, from £122.0m in 2021 to £173.9m
in 2022, increasing interest costs by £0.8m. Higher market interest rates
also increased interest costs by £0.3m and there were also higher margin and
utilisation fees of £0.2m. Amortisation costs in the year were £0.9m (2021:
£0.9m) and within other interest there was £1.1m (2021: £0.8m) of IFRS 16
finance lease interest and £0.4m (2021: £0.9m) from the unwinding of
discount interest on the Group's pension liabilities and put options.
Taxation
The tax charge on the statutory profit in the year of £14.3m (2021: £12.0m)
represented an effective tax rate ('ETR') of 28.0% (2021: 20.4%). The
statutory tax charge included a one-off charge of £2.2m (4.3%) in the year to
reflect higher deferred tax rates on China Porcine IAS41 assets and increased
by 6.0% due to the reduced share of Group profits arising in China, which
benefits from the availability of tax relief on owned production agricultural
activities.
The tax charge on adjusted profits in the year was £17.4m (2021: £19.1m),
which represented an adjusted ETR of 24.3% (2021: 22.5%). The adjusted tax
charge for the year increased by approximately 3% due to the reduced
availability of tax relief in China on owned production agricultural
activities mentioned above. This adverse movement was partially offset by a
reduction in foreign and withholding taxes due of 1.9%, increases in US
R&D and foreign tax credits of 1.2% and UK fixed asset timing difference
credits of 1.3%. The prior year adjusted tax rate benefitted by 3.3% from the
revaluation of UK deferred tax assets to the future UK tax rate of 25%. The
outlook for the Group adjusted ETR is in the range of 23%-25%, consistent with
the current year and including the impact of the future UK tax rate increase
to 25% from April 2023.
Earnings Per Share
Adjusted basic earnings per share decreased by 18% (20% in constant currency)
to 82.7 pence (2021: 100.9 pence) reflecting the impact of some significant
market challenges, most notably in China's porcine industry. Basic earnings
per share on a statutory basis were 62.5 pence (2021: 72.6 pence), as above
but also reflecting the impact of lower net IAS 41 biological asset movement,
lower share-based payments and lower exceptional items.
Biological Assets
A feature of the Group's net assets is its substantial investment
in biological assets, which under IAS 41 are stated at fair value. At 30
June 2022, the carrying value of biological assets was £387.7m (2021:
£337.3m), as set out in the table below:
2022 2021
£m £m
Non-current assets 333.7 279.9
Current assets 33.1 39.6
Inventory 20.9 17.8
387.7 337.3
Represented by:
Porcine 278.8 227.4
Dairy and beef 108.9 109.9
387.7 337.3
The movement in the overall balance sheet carrying value of biological assets
of £50.4m includes the effect of exchange rate translation increases of
£36.7m. Excluding the translation effect there was:
· a £25.9m increase in the carrying value of porcine biological
assets, due principally to an increase in the number of animals held in our
new genetic nucleus farm in Canada; and
· a £12.2m reduction in the bovine biological assets carrying value,
primarily due to increased production costs and higher risk adjusted discount
rate.
The historical cost of these assets, less depreciation, was £77.2m at 30 June
2022 (2021: £65.1m), which is the basis used for the adjusted results. The
historical cost depreciation of these assets included in adjusted results was
£10.7m (2021: £10.0m).
Retirement Benefit Obligations
The Group's retirement benefit obligations at 30 June 2022 were £8.3m (2021:
£11.1m) before tax and £7.0m (2021: £9.0m) net of related deferred tax. The
largest element of this liability now relates to some legacy unfunded pension
commitments dating prior to the acquisition of PIC by Genus.
During the year, contributions payable in respect of the Group's defined
benefit schemes amounted to £3.5m (2021: £7.4m). Deficit repair
contributions to the Milk Pension Fund ('MPF') ended in September 2021, which
accounts for the reduction in contributions, and we expect the cash payments
for pension contributions to reduce to £1.0m for FY23.
Robust investment strategies and higher bond yields during the year for our
two main defined benefit obligation schemes have led to strengthened financial
positions. Prior to any IFRIC 14 amendments, both the Dalgety Pension Fund and
our share of the MPF reported IAS 19 surpluses.
Cash Flow
2022 2021
Cash flow (before debt repayments) £m £m
Cash generated by operations 56.6 86.6
Interest and paid taxes (22.3) (19.1)
Capital expenditure (50.9) (33.8)
Cash received from JVs 3.2 3.7
Other (0.1) 0.1
Free cash flow (13.5) 37.5
Acquisitions and investments (19.5) (16.9)
Dividends (20.9) (19.5)
Shares issued - 0.1
Net cash (outflow)/inflow (before debt repayments) (53.9) 1.2
Cash generated by operations of £56.6m (2021: £86.6m) represented cash
conversion of 82% (2021: 113%) of adjusted operating profit excluding joint
ventures. The cash conversion rate of adjusted operating profit to cash was
below our objective to achieve conversion of at least 90% annually, however we
expect this to return to meeting this objective in the coming year. The
decrease in cash generation primarily reflected the impact of some significant
market challenges, most notably in China's porcine industry and higher working
capital outflows primarily due to increased inventories, trade receivables and
other receivables. The increase in inventory is for Sexcel units and
IntelliGen equipment to support continued growth and availability of our
industry leading Sexcel product. Trade receivables increased through sales
activity, particularly in North America, and other debtors primarily relate to
China farm production security deposits.
Capital expenditure cash flow of £50.9m (2021: £33.8m) included continued
investment in the ABS supply chain (with state-of-the-art new bull housing in
Wisconsin) increasing PIC's supply chain capacity (with a new genetic nucleus
farm being constructed in Canada) and investment in software development. Cash
inflow from joint ventures were £3.2m (2021: £3.7m). After interest and tax
paid, total free cash flow was £13.5m outflow (2021: £37.5m inflow).
The cash outflow from investments was £19.5m (2021: £16.9m), primarily
involving £14.5m to acquire all intellectual property in Olymel's elite
porcine genetics, £2.2m to increase production capacity through a China JV
and £1.0m of deferred consideration payments from previous acquisitions.
Net Debt and Credit Facilities
Net debt increased to £185.0m at 30 June 2022 (2021: £105.6m), primarily due
to the planned large capital expenditure investments and acquisitions. On 30
June 2022, the Group had headroom of £77.8m (2021:£129.3m) under its
available credit facilities.
During the year, the Group's principal credit facilities comprised a £150m
multi-currency revolving credit facility ('RCF'), a 125 million US dollar RCF
and a 20 million US dollar bond and guarantee facility. The original term of
this facility was for three years to 24 August 2023, with options to extend by
a further year before each of the first and second anniversaries. The credit
facility also included an uncommitted £100m accordion option, which can be
requested on a maximum of three occasions over the lifetime of the facility.
On 24 August 2021, the group and its lenders extended the facility by a
further year to 24 August 2024. With effect from 26 August 2022, the Group
and its lenders increased the multi-currency RCF by £40m to £190m and the
USD RCF by USD 25m to USD 150m, and extended the maturity date of the total
facilities to 24 August 2025.
EBITDA, as calculated under our financing facilities, includes cash received
from joint ventures. Net debt as calculated under our financing facilities
excludes IFRS 16 lease liabilities up to a cap of £30m but includes bank
guarantees. The ratio of net debt to EBITDA on this basis at the year-end has
increased to 1.7 times (2021: 0.9 times) which remains in line with our
medium-term objective of having a ratio of net debt to EBITDA of between 1.0 -
2.0 times. At the end of June 2022, interest cover was at 27 times (2021: 45
times).
Return on Adjusted Invested Capital
The Group's return on adjusted invested capital is measured using adjusted
operating profit including joint ventures after tax, divided by the operating
net assets of the business on the historical cost basis and excluding net debt
and pension liabilities. This removes the impact of IAS 41 fair value
accounting, the related deferred tax and goodwill. The post-tax return on
adjusted invested capital was lower at 13.9% (2021: 23.0%), reflecting the
lower profit and increased asset base from the capital investments in supply
chain capacity and the acquisition of Olymel's AlphaGene programme. The total
increase in the invested capital asset base was £119m of which circa £40m
was due to foreign exchange translation impacts.
Dividend
Recognising the importance of balancing investment for the future with
ensuring an attractive return for shareholders, the Board is recommending a
final dividend of 21.7 pence per ordinary share, consistent with the prior
year final dividend. When combined with the interim dividend, this will result
in a total dividend for the year of 32.0 pence per ordinary share (2021: 32.0
pence per share), the same as prior year. Dividend cover from adjusted
earnings of 2.6 times (2021: 3.2 times), is within the medium-term target of
an adjusted earnings cover range of 2.5 to 3.0 times.
It is proposed that the final dividend will be paid on 9 December 2022 to the
shareholders on the register at the close of business on 18 November 2022.
Genus PIC - Operating Review
Actual currency Constant currency change
Year ended 30 June 2022 2021 Change
£m £m % %
Revenue 306.6 315.6 (3) (5)
Adjusted operating profit exc JV 112.3 122.9 (9) (10)
Adjusted operating profit inc JV 121.2 135.9 (11) (13)
Adjusted operating margin exc JV 36.6% 38.9% (2.3)pts (2.3)pts
Pig producers across the world faced a series of significant challenges, which
increased in the second half of the year. China, the world's largest porcine
market, experienced a significant cyclical downturn during a period of very
restrictive COVID-19 lockdown measures. China pig prices averaged 14.6 RMB/kg
through the year, down 50% on the prior year. African Swine Fever (ASF) is an
ongoing challenge for Chinese producers and during the year the virus spread
into Germany. As the year went on, challenging labour markets and the war in
Ukraine contributed to rising inflation, which had a significant impact on
input costs for producers. Greater risks faced by producers meant there was
less appetite to expand, leading to lower industry growth and lower producer
profitability in most major porcine markets.
PIC's adjusted operating profit was 13% lower than in the previous year in
constant currency. This was driven particularly by an 84% fall in operating
profit within China. Volumes were stable, with revenue down 5% but
strategically important royalty revenue up 1% (both in constant currency).
However, outside China, the business delivered solid growth. Excluding China,
PIC increased adjusted operating profit by 11%. Volumes rose by 8%, revenue
increased by 4% and royalty revenue increased by 8% (both in constant
currency).
Overall, therefore, the business continued to make progress in many parts of
the world while navigating volatility in China. We also continued to invest
in the supply chain to position for further growth. Our largest investment was
the new Atlas nucleus farm in Canada, which was completed in June 2022.
North America
Near-record US pig prices in the first six months of the year driven by robust
domestic demand and declines in both building and feed costs were tempered by
market volatility, rising inflation and a partial reversal in feed cost trends
in the second half. However, the market remains strong, both domestically and
for exports, where higher demand from Mexico is making up for lower demand
from China. The USDA projects pig production to remain relatively consistent
in 2022.
Performance: Strongest performance in recent years, with rises in market share
of 5% for sireline products (aided by the introduction of the PIC800 to
customer herds) and 2% for damline products. Royalties from Olymel commenced
in the second half of the year following the acquisition of Olymel's AlphaGene
programme in February 2022.
· volumes +9%
· revenue +9% and royalty revenue + 7%
· adjusted operating profit +7%
Latin America
Producer profitability in Latin America was also affected by rising production
costs in the second half of the year. However, domestic demand remained strong
throughout the period, compared to the previous year. Brazil is the region's
largest exporter of pork, but a collapse in demand from China coupled with
rising inflation means that many producers are currently experiencing margin
pressure.
Performance: Growth in royalties supported a strong revenue and adjusted
operating profit performance, with double-digit growth in many countries,
partially offset by lower joint venture income in Brazil.
· volumes +8%
· revenue +16% and royalty revenue +17%
· adjusted operating profit +5%
Europe
Producers across the region experienced challenging conditions in a highly
volatile market. While domestic demand remained stable, the spread of ASF into
Germany and the industry downturn in China led to a 22% fall in exports.
During the year, pork production and the region's breeding herd declined. The
war in Ukraine significantly increased input costs and market uncertainty,
which meant that many European producers made losses, despite higher pig
prices.
Performance: Increased breeding stock sales supported by supply chain
investments and partnerships with Hermitage, Møllevang and Sergal. Further
success through strategic focus on royalty revenues, strong growth in Spain
and continued operations in Russia.
· volumes +7%
· revenue -6% and royalty revenue +7%
· adjusted operating profit +1%
Asia
The downturn in China contrasted with market trends elsewhere in Asia. A
cyclical oversupply and weak consumer demand (primarily caused by COVID-19
lockdown restrictions) led to a sharp decline in pig prices during the year,
with producers incurring significant operating losses. Higher input costs also
meant the break-even point for most producers rose to over 18 RMB/kg. However,
during June pig prices began to show recovery, as they rose to almost 19RMB/kg
by the end of the month. They reached more than 21 RMB/kg in July and
August.
Performance: Growth outside China (adjusted operating profit +25% and revenue
+19%), particularly in the Philippines, contrasted with the decline in trading
in China. Commercial terms with a large PIC China customer were changed in the
period to more closely align the economic interests of a unique outcome-based
royalty contract in place. This resulted in a one-time refund of £4.1m,
related to historical royalties.
· volumes -31% (China -42%)
· revenue -34% and royalty revenue -32% (China -48% and -39%
respectively)
· adjusted operating profit -69% (China -84%)
Genus ABS - Operating Review
Actual currency Constant currency change
Year ended 30 June 2022 2021 Change
£m £m % %
Revenue 272.0 250.1 9 7
Adjusted operating profit 40.5 36.4 11 9
Adjusted operating margin 14.9% 14.6% 0.3pts 0.2pts
In the first half of the year, the Global Dairy Trade Whole Milk Powder price
continued to rise, fuelled by increasing demand following the easing of
COVID-19 lockdowns in most geographies. It reached its highest level for over
eight years in March, but subsequently declined in the face of economic
uncertainty and rising inflation. Rising input costs in areas such as feed,
fuel, energy and labour in the second half of the year impacted dairy producer
profitability. These cost increases, to which the war in Ukraine and
weather-related issues were contributory factors, also led to a decline in
milk production during the year.
The same issues affected beef producers, but prices remained high during the
year, partially due to low cattle numbers in some countries and strong demand
from the foodservice industry following the relaxation of COVID-19
restrictions. However, there are some signs that consumer demand may be
softening in China (due to COVID-19 lockdowns) and in the US (as consumers
spend less in the face of rising inflation), with resultant pressure on beef
prices.
ABS maintained its growth trajectory, with volumes rising by 3% and revenue by
7% in constant currency. The business increased adjusted operating profit by
9% in constant currency, despite the impact of an IT security incident, now
fully resolved, which affected Brazil's trading in June and we estimate the
profit impact to have been £0.9m. This progress was underpinned by a growing
number of partnerships with progressive dairy producers, using the combination
of Sexcel and NuEra beef genetics within comprehensive genetic programmes. ABS
also continued to expand and strengthen relationships with participants across
the beef supply chain. As a result, global sexed volumes rose by 18% and beef
volumes by 9% during the year.
North America
Further dairy industry consolidation led to fewer farms with larger herds, but
no change in cow numbers. Higher input costs reduced margins for producers,
despite record milk prices, increasing caution over investment in replacement
heifers for herds. By contrast, the beef market was buoyed by high prices for
calves, increasing production and robust export demand, although there are
signs that consumer demand is now weakening due to rising inflation.
Performance: Strong volume increases driven by growth of exclusive
relationships with strategic accounts, continued growth in the IntelliGen
third party business and NuEra beef volumes up 33%.
· total volumes +8%, sexed volumes +10%, beef volumes +24%
· revenue +4%
· adjusted operating profit +4%
Latin America
Dairy production declined during the year due to a combination of lower herd
numbers, drought, and high input costs. In contrast, the beef industry
continued to grow, with production up 6% in Brazil (particularly following the
lifting of the Chinese embargo on Brazilian beef exports) and 2% in Mexico
(with prices in Mexico 20% higher on average than the previous year).
Inflation continued to affect consumption of both beef and dairy products
during the year, as household purchasing power was eroded across middle-income
groups.
Performance: Slightly lower volumes (although 89% increase in tropical ABS
XBlack genetics, aided by further digital sales campaigns), mitigated by
robust pricing policies. Trading in June was affected by the IT security
incident, which was resolved in the month. This impacted the business's
ability to despatch product prior to the end of the financial year which, by
our estimates, impacted FY22 volumes by 4% with an associated profit impact of
£0.9m. Without this, Latin America profit growth would have been around 11%.
· total volumes -5%, sexed volumes -3%, beef volumes -1%
· revenue +5%
· adjusted operating profit +2%
Europe
The war in Ukraine and its impact on input costs created uncertainty in most
markets. Despite these costs and weather-related issues, which contributed to
lower production across the region, milk prices remained high and are expected
to rise further in the coming months. Beef production declined, with increases
in some countries failing to compensate for reductions in countries like
Germany and France. Lower production led to higher prices, but rising
inflation risks dampening consumer demand.
Performance: Partnerships with a growing range of strategic accounts involving
genomic testing and comprehensive genetic programmes drove growth in
higher-priced sexed and beef products, as well as the IntelliGen third party
business. Robust pricing policies mitigated inflationary cost pressures,
however market uncertainty caused lower volumes and profits, particularly in
the UK and distributor markets.
· total volumes -2%, sexed volumes +8%, beef volumes +9%
· revenue +5%
· adjusted operating profit -4%
Asia
Consolidation of the Chinese dairy industry drove increasing demand for sexed
genetics, supported by growth in domestic production and imports, although
this tapered off later in the year as consumer demand weakened (a factor which
also affected the beef industry). In Australia, favourable weather conditions
and low herd numbers fuelled record beef prices, while the dairy industry
benefitted from China's demand for live heifers.
Performance: Good growth across the region, underpinned by strong progress in
China and Australia and further contract wins in India.
· total volumes +13%, sexed volumes +32%, beef volumes +37%
· revenue +28%
· adjusted operating profit +24%
Research and Development - Operating Review
Actual currency Constant currency change
Year ended 30 June 2022 2021 Change
£m £m % %
Porcine product development 22.5 21.9 3 1
Bovine product development 22.7 19.7 15 13
Gene editing 7.9 7.6 4 1
Other research and development 14.0 13.3 5 5
Net expenditure in R&D 67.1 62.5 7 6
During the year, Genus increased its investment in net research and
development expenditure by 6% in constant currency. This investment supported
gene editing projects, enhanced IntelliGen production capacity, expanded elite
porcine farm populations and strengthened the research and development
pipeline.
Porcine product development
Porcine product development maintained Genus's industry-leading product
differentiation. Further progress on genomic selection, coupled with advances
in digital phenotyping, enabled Genus to accelerate genetic gain and amplify
new traits related to robustness and efficiency. We expect these advances,
along with initial production from new elite facilities, Barrick Family Farms
(in the United States) and PIC's Atlas facility (in Canada) which have both
now been completed, to increase availability of our industry-leading genetics
for North America and global exports during FY23.
Bovine product development
Bovine product development delivered a highly competitive portfolio of dairy
and beef genetics. De Novo Genetics, our joint venture with De-Su Holsteins,
produced over 50% of new Holstein bulls introduced to the market. Further
investment in our proprietary NuEra beef genetics (a rise of 25% expenditure
on the previous year) helped ABS continue to increase their representation
within total beef volumes, of which NuEra now account for one third. In
parallel, validation trials in customer systems reinforced NuEra's superior
performance over competitor genetics. We also expanded production capacity for
sexed bovine genetics, internally and with third-party customers, and won a
Government of India tender for IntelliGen sexed semen production, which we
will begin fulfilling during FY23.
Gene editing
Genus continued to advance the PRRSv resistance project according to plan.
During the year, we expanded our population of gene-edited animals so we could
start additional regulatory studies for the US Food and Drug Administration
while pursuing our plan for regulatory approval in target markets around the
world. We also continued proactive and positive engagement with stakeholders
within and outside the pork supply chain. Through these engagements, we are
explaining our responsible use of gene-editing technology and exploring the
benefits that PRRSv-resistant animals will bring for animal well-being, for
farmers and for efforts to meet evolving consumer expectations around
environmental sustainability and food security.
Other research and development
Other research and development expenditure increased by 5%. This focused on
supporting research in the field of reproductive biology and expansion of our
data science capabilities, as well as further work on genome science and the
development of our bioinformatics platform. We also continued to collaborate
with external partners in a variety of discovery areas.
Principal Risks and Uncertainties
Genus is exposed to a wide range of risks and uncertainties as it fulfils its
purpose of providing farmers with superior genetics, which in turn supports
the fulfilment of its vision of nourishing the world more sustainably.
Some of these risks relate to the current business operations in our global
agricultural markets, 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 heightened by the
Russia-Ukraine conflict.
As part of our risk management process we monitor emerging risks and consider
when to include them in our main risk assessment process. This year our
reviews included:
· the impact of the Russia-Ukraine conflict,
· macroeconomic conditions,
· cyber security, and
· the impacts of COVID-19.
The Russia-Ukraine conflict has increased several principal risks and we have
added cyber security to the principal risks as a result of the increasing
sophistication and frequency of cyber-crime and a recent IT security incident
support elevating cyber to a principal risk. In addition, we continue to
monitor the impact of COVID-19 across our global operations and Brexit for our
European operations, although both have not materially impacted our operations
to date.
In our first year of reporting TCFD we have undertaken a limited qualitative
analysis of climate related risks for alternative climate scenarios (RCP 2.6
vs RCP 4.5) with the support of an external specialist. This has informed our
risk descriptions in relation to climate change as they relate to our
principal risks and to our TCFD reporting. We continue to monitor emerging
risks related to the worsening global macroeconomic impact on our business.
In June 2022, the company experienced an IT security incident which had a
limited impact on the company's systems. The incident, which involved
ransomware, was confined to on-premise systems, with minimal impact to
entities operating on GenusOne. However, impacts on certain local systems did
disrupt operations for a short period, particularly in Latin America. With the
support of external specialists, management fully restored all systems and
files prior to the June month-end. Improvements to system controls and
monitoring activities to detect and help prevent future security incidents
have been implemented across the IT environment. No ransom was paid.
From our broad risk universe, we have identified eleven principal risks, which
we regularly evaluate based on an assessment of the likelihood of occurrence
and the magnitude of potential impact, together with the effectiveness of our
risk mitigation controls.
The Directors confirm that they have undertaken a robust assessment of the
principal and emerging risks and uncertainties facing the Group.
Risk Risk description How we manage risk Risk change in FY22
DEVELOPING PRODUCTS WITH COMPETITIVE ADVANTAGE · Development programmes fail to produce best genetics for customers. Dedicated teams align our product development to customer requirements. We use No change. Our analysis and benchmarking continue to support our genetic
large-scale data and advanced genomic analysis to ensure we meet our breeding improvements.
· Increased competition to secure elite genetics. goals. We frequently measure our performance against competitors in customers'
systems, to ensure the value added by our genetics remains competitive.
CONTINUING TO SUCCESSFULLY DEVELOP INTELLIGEN TECHNOLOGY · Failure to manage the technical, production and financial risks Our continued development of the technology and its deployment to new markets Increased. New Gen2 machines launched during the year are being monitored and
associated with the rapid development of the IntelliGen business. is supported by dedicated internal resources and agreements with suppliers. recalibrated seeking to optimise performance in line with specifications.
Current patent infringement proceedings initiated by STgenetics in the US are Uncertainty over further legal actions and uncertainties in relation to patent
being vigorously defended. infringements.
DEVELOPING AND COMMERCIALISING GENE EDITING AND OTHER NEW TECHNOLOGIES · Failure to develop successfully and commercialise gene editing We stay aware of new technology opportunities through a wide network of No change. Key initiatives continue to progress through the R&D lifecycle,
technologies due to technical, intellectual property ('IP'), market, academic and industry contacts. Our Genus Portfolio Steering Committee and we maintain the high level of investment needed to bring the end products
regulatory or financial barriers. oversees our research, ensures we correctly prioritise our R&D investments to market.
and assesses the adequacy of resources and the relevant IP landscapes. We have
· Competitors secure 'game-changing' new technology. formal collaboration agreements with key partners, to ensure responsible
exploration and development of technologies and the protection of IP. The
Board is updated regularly on key development projects.
CAPTURING VALUE THROUGH ACQUISITIONS · Failure to identify appropriate investment opportunities or to We have a rigorous acquisition analysis and due diligence process, with the No change. We continue to work diligently to identify areas of opportunity
perform sound due diligence. Board reviewing and signing off all material projects. We also have a consistent with our strategic plans and our aim to accelerate growth and
structured post-acquisition integration planning and execution process. create value for our shareholders. Our experiences with post acquisition
· Failure to successfully integrate an acquired business. integration provide a platform for integrating newly acquired businesses.
SUCCEEDING IN GROWTH MARKETS · Failure to appropriately develop our business in China and other Our organisation blends local and expatriate executives, supported by the Increased. This is due to market price volatility and uncertainty affecting
growth markets. global species teams, to allow us to grow our business in key markets, while production and profitability in the China porcine market, the Russia-Ukraine
managing risks and ensuring we comply with our global standards and comply conflict and the worsening global macroeconomic conditions.
with sanctions. We also establish local partnerships where appropriate, to
increase market access.
SUSTAINABILITY · Failure to lead the market in sustainable animal protein production We have a global sustainability strategy and climate change policy that are No change. We have developed our 2030 emissions reduction plan (and 2050 net
and help our customers to meet the challenge of producing meat and milk approved, and regularly reviewed, at Board level. Our Sustainability Committee zero plan) and developed quantifiable, robust performance indicators in
efficiently and sustainably as climate change increases demand. oversees the implementation of the strategy and the annual objective setting relation to life-cycle carbon reduction (per generation) of pigs, beef and
process as well as monitoring progress using key performance indicators. The dairy cows.
· Failure to fulfil our commitment to reduce the environmental impact Board is updated regularly on the progress of the key initiatives and our
of our own operations and implement our Climate Change Policy and TCFD progress against the annual targets. The Company ensures climate-related
reporting. responsibilities and incentives are appropriate at management levels and
considers climate-related implications within important processes including
capital expenditure and procurement. With support from external risk
specialist consultants, we have undertaken comprehensive analysis of our
climate-related risks and opportunities which forms a basis of future
monitoring and quantitative assessment.
PROTECTING IP · Failure to protect our IP could mean Genus-developed genetic We have a global, cross-functional process to identify and protect our IP. Our No change. We continue actively to protect our IP by filing patents attributed
material, methods, systems and technology become freely available to third customer contracts and our selection of multipliers and joint venture partners to our R&D activity.
parties. include appropriate measures to protect our IP. We maintain IP appropriate
landscape watches and where necessary conduct robust 'freedom to operate'
searches, to identify third-party rights to technology.
ENSURING BIOSECURITY AND CONTINUITY OF SUPPLY · Loss of key livestock, owing to disease outbreak. We have stringent biosecurity standards, with independent reviews throughout Increased. This is due to the continued global supply chain challenges imposed
the year to ensure compliance. We investigate biosecurity incidents, to ensure by the COVID-19 outbreak, the continued spread of ASF, and trade sanctions.
· Loss of ability to move animals or semen freely (including across learning across the organisation. We regularly review the geographical Our geographically diverse production facilities and the expert knowledge of
borders) due to disease outbreak, environmental incident or international diversity of our production facilities, to avoid over-reliance on single our supply chain and commercial teams allowed for a swift and comprehensive
trade sanctions and disputes. sites. response to these challenges, which helped to reduce their impact.
· Lower demand for our products, due to industry-wide disease
outbreaks.
HIRING AND RETAINING TALENTED PEOPLE · Failure to attract, recruit, develop and retain the global talent We have a robust talent and succession planning process, including annual Increased. An increased demand post Covid-19 for more flexible working, and
needed to deliver our growth plans and R&D programmes. assessments of our global talent pool and active leadership development current inflationary pressures across the globe may lead to greater attrition.
programmes. The Group's reward and remuneration policies are reviewed
regularly, to ensure their competitiveness. We work closely with several
specialist recruitment agencies, to identify candidates with the skills we
need.
CYBER SECURITY · Failure to adequately detect and mitigate a malicious cyber-attack by We utilise a flexible multi-layered approach that focuses on employee New principal risk. We have noted an increased sophistication and frequency
internal or external activists and the ability to quickly recover. awareness and training, policies, software, and a third-party 24 x 7 of cyber-crime and were subject to a ransomware attack, which was successfully
monitoring Security Operations Centre and follow ISO 27001 standards. We have resolved without payment of a ransom.
· Failure to properly protect our data an systems from an attack. improved our system and data backup procedures and hardened our servers to
further strengthen our resilience. Our GenusOne programme continues to
progress well, improving our operational controls and IT Security as we move
to the cloud.
MANAGING AGRICULTURAL MARKET AND COMMODITY PRICES VOLATILITY · Fluctuations in agricultural markets affect customer profitability We continuously monitor markets and seek to balance our costs and resources in Increased. This is due to increased feed input costs as a result of higher
and therefore demand for our products and services. > Increase in our response to market demand. We actively monitor and update our hedging strategy grain prices, due to the Russia-Ukraine conflict, changes in weather patterns,
operating costs due to commodity pricing volatility. > Longer-term to manage our exposure. Our porcine royalty model and extensive use of and strong demand. In addition, the China pork market continued to deal with
influence of climate factors on the cost and availability of agricultural third-party multipliers mitigates the impact of cyclical price and/or cost the challenges of ASF, price decline, higher input costs and rolling COVID-19
inputs (animal feed) > Macroeconomic downturn accelerated by COVID-19 and changes in pig production. Our R&D programmes measure and track progress lockdowns.
geopolitical tensions > The Russia-Ukraine conflict impact on agricultural in our breeding programmes which reduce the life-cycle carbon footprint of
markets. meat and dairy production for each new generation which is quantifiable.
Group Income Statement
For the year ended 30 June 2022
Note 2022 2021
£m
£m
REVENUE 3 593.4 574.3
Adjusted operating profit 3 68.8 76.9
Adjusting items:
- Net IAS 41 valuation movement on biological assets 10 (5.4) (10.8)
- Amortisation of acquired intangible assets 9 (8.3) (7.4)
- Share-based payment expense (3.7) (7.7)
(17.4) (25.9)
Exceptional items (net) 4 (2.0) (3.3)
Total adjusting items (19.4) (29.2)
OPERATING PROFIT 49.4 47.7
Share of post-tax profit of joint ventures and associates retained 5.2 13.1
Finance costs 5 (6.6) (5.4)
Finance income 5 0.4 0.4
PROFIT BEFORE TAX 48.4 55.8
Taxation 6 (11.7) (9.0)
PROFIT FOR THE YEAR 36.7 46.8
ATTRIBUTABLE TO:
Owners of the Company 40.9 47.3
Non-controlling interest (4.2) (0.5)
36.7 46.8
EARNINGS PER SHARE
Basic earnings per share 7 62.5p 72.6p
Diluted earnings per share 7 62.2p 72.0p
Note 2022
£m
2021
£m
Alternative Performance Measures
Adjusted operating profit 68.8 76.9
Adjusted operating profit attributable to non-controlling interest (0.3) (0.1)
Pre-tax share of profits from joint ventures and associates excluding net IAS 9.2 13.0
41 valuation movement
Gene editing costs 7.9 7.6
Adjusted operating profit including joint ventures and associates, excluding 85.6
gene editing costs
97.4
Gene editing costs (7.9) (7.6)
Adjusted operating profit including joint ventures and associates 77.7 89.8
Net finance costs 5 (6.2) (5.0)
Adjusted profit before tax 71.5 84.8
Adjusted earnings per share
Basic adjusted earnings per share 7 82.7p 100.9p
Diluted adjusted earnings per share 7 82.3p 100.1p
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.
Group Statement of Comprehensive Income
For the year ended 30 June 2022
Note 2022 2022 2021 2021
£m
£m
£m
£m
PROFIT FOR THE YEAR 36.7 46.8
Items that may be reclassified subsequently to profit or loss
Foreign exchange translation differences 66.6 (45.2)
Fair value movement on net investment hedges (0.7) 0.4
Fair value movement on cash flow hedges 1.9 0.2
Tax relating to components of other comprehensive expense (8.2) 7.6
59.6 (37.0)
Items that may not be reclassified subsequently to profit or loss
Actuarial gains on retirement benefit obligations 14 27.3 22.3
Movement on pension asset recognition restriction 14 (69.8) (0.1)
Release/(recognition) of additional pension liability 14 43.7 (19.9)
(Loss)/gain on equity instruments measured at fair value (6.1) 6.7
Tax relating to components of other comprehensive income/(expense) 1.1 (2.0)
(3.8) 7.0
OTHER COMPREHENSIVE INCOME/(EXPENSE) FOR THE YEAR 55.8 (30.0)
TOTAL COMPREHENSIVE INCOME FOR THE YEAR 92.5 16.8
ATTRIBUTABLE TO:
Owners of the Company 97.3 17.1
Non-controlling interest (4.8) (0.3)
92.5 16.8
Group Statement of Changes in Equity
For the year ended 30 June 2022
Note Called up Share premium account £m Own shares Trans- Hedging reserve Retained earnings £m Total Non- Total equity
share capital
£m
lation reserve
£m
£m
controlling interest
£m
£m
£m
£m
BALANCE AT 30 JUNE 2020 6.5 179.1 (0.1) 29.5 (0.2) 280.7 495.5 (1.0) 494.5
Foreign exchange translation differences, net of tax - - - (37.7) - - (37.7) 0.2 (37.5)
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 - - - - 0.2 - 0.2 - 0.2
Gain on equity instruments measured at fair value, net of tax - - - - - 5.0 5.0 - 5.0
Actuarial gains on retirement benefit obligations, net of tax - - - - - 19.8 19.8 - 19.8
Movement on pension asset recognition restriction, net of tax - - - - - (0.1) (0.1) - (0.1)
Recognition of additional pension liability, net of tax - - - - - (17.7) (17.7) - (17.7)
Other comprehensive (expense)/income for the year - - - (37.4) 0.2 7.0 (30.2) 0.2 (30.0)
Profit/(loss) for the year - - - - - 47.3 47.3 (0.5) 46.8
Total comprehensive (expense)/income for the year - - - (37.4) 0.2 54.3 17.1 (0.3) 16.8
Recognition of share-based payments, net of tax - - - - - 4.9 4.9 - 4.9
Dividends 8 - - - - - (19.5) (19.5) - (19.5)
Adjustment arising from change in non-controlling interest and written put - - - - - - - (0.2) (0.2)
option
Issue of ordinary shares 0.1 - - - - - 0.1 - 0.1
BALANCE AT 30 JUNE 2021 6.6 179.1 (0.1) (7.9) - 320.4 498.1 (1.5) 496.6
Foreign exchange translation differences, net of tax - - - 59.4 - - 59.4 (0.6) 58.8
Fair value movement on net investment hedges, net of tax - - - (0.6) - - (0.6) - (0.6)
Fair value movement on cash flow hedges, net of tax - - - - 1.4 - 1.4 - 1.4
Loss on equity instruments measured at fair value, net of tax - - - - - (4.6) (4.6) - (4.6)
Actuarial gains on retirement benefit obligations, net of tax - - - - - 19.5 19.5 - 19.5
Movement on pension asset recognition restriction, net of tax - - - - - (49.7) (49.7) - (49.7)
Recognition of additional pension liability, net of tax - - - - - 31.0 31.0 - 31.0
Other comprehensive (expense)/income for the year - - - 58.8 1.4 (3.8) 56.4 (0.6) 55.8
Profit/(loss) for the year - - - - - 40.9 40.9 (4.2) 36.7
Total comprehensive (expense)/income for the year - - - 58.8 1.4 37.1 97.3 (4.8) 92.5
Recognition of share-based payments, net of tax - - - - - 4.0 4.0 - 4.0
Dividends 8 - - - - - (20.9) (20.9) - (20.9)
Adjustment arising from change in non-controlling interest and written put - - - - - - - (0.1) (0.1)
option
BALANCE AT 30 JUNE 2022 6.6 179.1 (0.1) 50.9 1.4 340.6 578.5 (6.4) 572.1
Group Balance Sheet
As at 30 June 2022
Note 2022 2021
£m
£m
ASSETS
Goodwill 111.0 101.5
Other intangible assets 9 72.0 56.3
Biological assets 10 333.7 279.9
Property, plant and equipment 11 171.4 123.0
Interests in joint ventures and associates 41.2 34.1
Other investments 10.2 14.7
Derivative financial assets 2.2 -
Other receivables 12 8.6 1.8
Deferred tax assets 10.1 8.0
TOTAL NON-CURRENT ASSETS 760.4 619.3
Inventories 50.9 37.0
Biological assets 10 33.1 39.6
Trade and other receivables 12 129.5 106.2
Cash and cash equivalents 38.8 46.0
Income tax receivable 4.0 2.6
Derivative financial assets 1.0 0.1
Asset held for sale 0.2 0.2
TOTAL CURRENT ASSETS 257.5 231.7
TOTAL ASSETS 1,017.9 851.0
LIABILITIES
Trade and other payables 13 (124.7) (110.3)
Interest-bearing loans and borrowings (7.1) (13.9)
Provisions (1.9) (1.3)
Deferred consideration (0.8) (1.6)
Obligations under leases (10.1) (9.0)
Tax liabilities (4.9) (6.4)
Derivative financial liabilities (1.8) -
TOTAL CURRENT LIABILITIES (151.3) (142.5)
Trade and other payables 13 (0.2) (1.4)
Interest-bearing loans and borrowings (182.1) (109.4)
Retirement benefit obligations 14 (8.3) (11.1)
Provisions (12.0) (11.1)
Deferred consideration (0.7) (0.5)
Deferred tax liabilities (60.3) (53.0)
Derivative financial liabilities (6.4) (6.1)
Obligations under leases (24.5) (19.3)
TOTAL NON-CURRENT LIABILITIES (294.5) (211.9)
TOTAL LIABILITIES (445.8) (354.4)
NET ASSETS 572.1 496.6
EQUITY
Called up share capital 6.6 6.6
Share premium account 179.1 179.1
Own shares (0.1) (0.1)
Translation reserve 50.9 (7.9)
Hedging reserve 1.4 -
Retained earnings 340.6 320.4
EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY 578.5 498.1
Non-controlling interest 17 (0.7) 3.6
Put option over non-controlling interest 17 (5.7) (5.1)
TOTAL NON-CONTROLLING INTEREST (6.4) (1.5)
TOTAL EQUITY 572.1 496.6
Group Statement of Cash Flows
For the year ended 30 June 2022
Note 2022 2021
£m
£m
NET CASH FLOW FROM OPERATING ACTIVITIES 15 34.3 67.5
CASH FLOWS FROM INVESTING ACTIVITIES
Dividends received from joint ventures and associates 3.2 4.1
Joint venture and associate loan payment - (0.4)
Acquisition of joint venture and associate (2.2) (2.4)
Acquisition of trade and assets (0.8) (6.9)
Acquisition of Olymel AlphaGene assets (14.5) -
Acquisition of investments (1.0) (0.9)
Payment of deferred consideration (1.0) (6.7)
Purchase of property, plant and equipment (42.1) (28.7)
Purchase of intangible assets (8.8) (5.1)
Proceeds from sale of property, plant and equipment - 0.3
NET CASH OUTFLOW FROM INVESTING ACTIVITIES (67.2) (46.7)
CASH FLOWS FROM FINANCING ACTIVITIES
Drawdown of borrowings 138.7 195.1
Repayment of borrowings (83.9) (176.1)
Payment of lease liabilities (11.3) (11.7)
Equity dividends paid (20.9) (19.5)
Dividend to non-controlling interest (0.1) (0.2)
Debt issue costs (0.6) (1.9)
Issue of ordinary shares - 0.1
NET CASH INFLOW/(OUTFLOW) FROM FINANCING ACTIVITIES 21.9 (14.2)
NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (11.0) 6.6
Cash and cash equivalents at start of the year 46.0 41.3
Net (decrease)/increase in cash and cash equivalents (11.0) 6.6
Effect of exchange rate fluctuations on cash and cash equivalents 3.8 (1.9)
TOTAL CASH AND CASH EQUIVALENTS AT 30 JUNE 38.8 46.0
NOTES TO THE PRELIMINARY RESULTS
For the year ended 30 June 2022
1. REPORTING ENTITY
Genus plc (the 'Company') is a public company limited by shares and
incorporated in England, United Kingdom under the Companies Act 2006. Its
company number is 02972325 and its registered office is Matrix House, Basing
View, Basingstoke, Hampshire RG21 4DZ.
The condensed financial information given does not constitute the Group's
financial statements for the year ended 30 June 2022 or the year ended 30 June
2021, but is derived from those financial statements. The financial statements
for the year ended 30 June 2021 have been delivered to the Registrar of
Companies and those for the year ended 30 June 2022 will be delivered
following the Company's annual general meeting. The auditors have reported on
those financial statements; 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.
2. BASIS OF PREPARATION
We have prepared the condensed financial information for the year ended 30
June 2022 together with the comparative year has been computed in accordance
with international accounting standards in conformity with the requirements of
the Companies Act 2006 and International Financial Reporting Standards
('IFRSs'). The Group Financial Statements have also been prepared in
accordance with IFRSs as issued by the IASB.
Functional and presentational currency
We present the Group Financial Statements in Sterling, which is the Company's
functional and presentational currency. All financial information presented in
Sterling has been rounded to the nearest £0.1m.
The principal exchange rates were as follows:
Average Closing
2022 2021 2020 2022 2021 2020
US Dollar/£ 1.32 1.36 1.26 1.22 1.38 1.24
Euro/£ 1.18 1.13 1.14 1.16 1.17 1.10
Brazilian Real/£ 6.94 7.33 5.74 6.39 6.87 6.77
Mexican Peso/£ 26.97 28.15 26.08 24.45 27.57 28.52
Chinese Yuan/£ 8.55 8.94 8.89 8.15 8.93 8.75
Russian Rouble/£ 98.75 102.04 85.17 66.73 101.10 88.19
While the condensed 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 2022. These financial statements have also been prepared in accordance
with the accounting policies set out in the 2021 Annual Report and Financial
Statements, as amended by the following new accounting standards.
New standards and interpretations
In the current year, 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 2021 and have
been implemented with effect from 1 July 2021. These are:
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 -' Interest Rate
Benchmark Reform - Phase 2'; and
Amendment to IFRS 16 - ' COVID-19-Related Rent Concessions beyond 30 June
2021'.
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 Annual Report, the following standards and interpretations
which have not been applied in the report were in issue but not yet effective
(and in some cases had not yet been adopted by the UK). The Group will
continue to assess the impact of these amendments prior to their adoption.
These are:
Amendments to IAS 1 - ' Classification of Liabilities as Current or
Non-Current';
Amendments to IAS 16 - ' Property, Plant and Equipment - Proceeds before
Intended Use';
Annual Improvements 2018-2020 Cycle;
Amendments to IAS 37 - ' Onerous Contracts - Cost of Fulfilling a Contract';
Amendments to IAS 1 and IFRS Practice Statement 2 - 'Disclosure of Accounting
Policies';
Amendments to IAS 12 - ' Deferred Tax related to Assets and Liabilities
arising from a Single Transaction'; and
Amendments to IAS 8- ' Definition of Accounting Estimates'.
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 has been to categorize 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 Her 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 for a License to HMT 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; use 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. As at 7 September 2022 we are
awaiting a response from HMT.
Under the requirements of IAS 7, where there is cash that is not currently
available to be used by the rest of the group this needs to be disclosed. As
at 30 June 2022 we had a cash balance of £4.5m in the Russian entities of
which £3.9m is not currently available to be used by the group due to being
received from or held in sanctioned banks. If the Group were to obtain the
License from HMT referred to above the £3.9m would be available to be used by
the Group.
Management have performed an assessment of the operations and cash flow over a
period of 18 months from 30 June 2022 to 31 December 2023 based upon the 2023
operating 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 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. We
have concluded that we do have control for the year ended 30 June 2022, as
defined under IFRS 10 Consolidated financial statements' over the Russian
based subsidiaries and are still able to consolidate despite short term
restrictions on extracting cash. We have assessed each of the asset balances
for impairment. The material areas that could give rise to impairment are:
- PIC Russia Farm (£3.7m) - 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 open market price (less cost to sell) the property
would support the carrying value.
- Trade Receivables (£6.0m) - the ongoing financial sanctions may
affect the ability of our customers to pay us for their goods. If it is
determined that our customers are unlikely to repay these amounts then they
should be provided for.
- IAS 41 valuation (£2.9m) - 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 June
valuation.
The impairment analysis performed by management indicates that under the
current business environment and based on the plans for the Financial Year
2023 no impairment is required as at 30 June 2022.
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 of the Group. 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 £16.6m 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 of the Genus group from the date of
any deconsolidation. Revenues from the Russian entities were £14.6m in the
financial year 2022.
Going Concern
As part of the directors' consideration of the appropriateness of adopting the
going concern basis in preparing the financial statements, as well as their
assessment of the Group's viability, 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.
We 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,
with reverse stress tests on both our headroom and banking covenants to ensure
the range beyond the downside scenario is fully assessed.
Based on this assessment our headroom under these sensitivities and reverse
stress tests, including our mitigating actions, remain adequate.
In their assessment of the Group's viability, the Directors have determined
that a three-year time horizon, to June 2025, is an appropriate period to
adopt. This was based on the Group's visibility of its product development
pipeline, for example, because of the genetic lag of approximately three years
between the porcine nucleus herds and customers' production systems and the
pipeline of young bulls. The Board also considered the nature of the principal
risks affecting Genus, including the agricultural markets in which it
operates.
Based on this assessment, 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 this report.
Also, based on this assessment, the Directors have a reasonable expectation
that the Group will be able to continue in operation and meet its liabilities
as they fall due over the period to 30 June 2025. There are no indications
from this assessment that change this expectation when looking beyond 30 June
2025 at the Group's longer-term prospects.
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.
Climate change
In preparing these condensed financial statements we have considered the
impact of both physical and transition climate change risks on the current
valuation of our assets and liabilities. We do not believe that there is a
material impact on the financial reporting judgements and estimates arising
from our considerations and as a result the valuations of our assets or
liabilities have not been significantly impacted by these risks as at 30 June
2022. In concluding, we specifically considered the impact of climate change
on the growth rates and projected cash flows as part of our goodwill
impairment testing. As government policies evolve as a result of commitments
to limit global warming to 1.5°C, we will continue to monitor implications on
the valuations of our assets and liabilities that could arise in future years.
Approval
This preliminary announcement was approved by the board on 7 September 2022.
3. SEGMENTAL INFORMATION
IFRS 8 'Operating Segments' requires operating segments to be identified on
the basis of internal reports about components of the Group that are regularly
reviewed by the Chief Executive and the Board, to allocate resources to the
segments and to assess their performance. The Group's operating and reporting
structure comprises three operating segments: Genus PIC, Genus ABS and Genus
Research and Development. These segments are the basis on which the Group
reports its segmental information. The principal activities of each segment
are as follows:
Genus PIC - our global porcine sales business;
Genus ABS - our global bovine sales business; and
Genus Research and Development - our global spend on research and development.
A segmental analysis of revenue, operating profit, depreciation, amortisation,
non-current asset additions, segment assets and liabilities and geographical
information is provided below. We do not include our adjusting items in the
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 2022 2021
£m £m
Genus PIC 306.6 315.6
Genus ABS 272.0 250.1
Genus Research and Development
Porcine product development 12.4 7.3
Bovine product development 1.7 1.3
Gene editing 0.7 -
Other research and development - -
14.8 8.6
593.4 574.3
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 year is shown on the face of the Group Income
Statement.
Adjusted operating profit 2022 2021
£m £m
Genus PIC 112.3 122.9
Genus ABS 40.5 36.4
Genus Research and Development
Porcine product development (22.4) (21.9)
Bovine product development (22.8) (19.6)
Gene editing (7.9) (7.6)
Other research and development (14.0) (13.3)
(67.1) (62.4)
Adjusted segment operating profit 85.7 96.9
Central (16.9) (20.0)
Adjusted operating profit 68.8 76.9
Our business is not highly seasonal and our customer base is diversified, with
no individual customer generating more than 2% of revenue.
Exceptional items of £2.0m expense (2021: £3.3m expense) relate to Genus ABS
(£4.2m expense) (2021: 2.5m expense), Genus PIC (£0.6m expense) (2021:
£0.3m expense) and our central segment (£2.8m credit) (2021: £0.5m
expense). Note 4 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
Depreciation Amortisation Additions to non-current assets (excluding deferred taxation and financial
instruments)
2022 2021 2022 2021 2022 2021
£m £m £m £m £m £m
Genus PIC 4.5 3.0 7.4 6.5 45.2 10.0
Genus ABS 14.3 13.3 3.4 2.8 25.4 26.8
Genus Research and Development
Research 1.0 0.7 - - 3.3 1.7
Porcine product development 2.2 1.9 - - 1.3 7.1
Bovine product development 2.0 1.8 0.2 0.2 2.7 2.7
5.2 4.4 0.2 0.2 7.3 11.5
Segment total 24.0 20.7 11.0 9.5 77.9 48.3
Central 2.4 3.3 1.6 1.6 5.8 3.9
Total 26.4 24.0 12.6 11.1 83.7 52.2
Segment assets Segment liabilities
2022 2021 2022 2021
£m £m £m £m
Genus PIC 305.4 261.5 (73.4) (57.4)
Genus ABS 261.4 203.1 (78.9) (56.0)
Genus Research and Development
Research 14.7 17.8 (4.4) (6.1)
Porcine product development 275.0 213.6 (57.7) (55.0)
Bovine product development 119.6 125.0 (16.7) (25.5)
409.3 356.4 (78.8) (86.6)
Segment total 976.1 821.0 (231.1) (200.0)
Central 41.8 30.0 (214.7) (154.4)
Total 1,017.9 851.0 (445.8) (354.4)
Geographical information
The Group's revenue by geographical segment is analysed below. This analysis
is stated on the basis of where the customer is located.
Revenue
2022 2021
£m £m
North America 238.5 214.7
Latin America 94.6 83.8
UK 88.7 92.2
Rest of Europe, Middle East, Russia and Africa 88.3 82.1
Asia 83.3 101.5
593.4 574.3
Non-current assets (excluding deferred taxation and financial instruments)
The Group's non-current assets by geographical segment are analysed below and
are stated on the basis of where the assets are located.
2022 2021
£m £m
North America 529.6 419.5
Latin America 56.7 46.1
UK 69.8 73.3
Rest of Europe, Middle East, Russia and Africa 45.7 44.6
Asia 46.3 27.8
748.1 611.3
Revenue by type
2022 2021
£m £m
Genus PIC 158.4 172.6
Genus ABS 262.5 242.2
Genus Research and Development 14.8 8.6
Sale of animals, semen, embryos and ancillary products and services 435.7 423.4
Genus PIC 148.2 143.0
Genus ABS 1.1 0.6
Genus Research and Development - -
Royalties 149.3 143.6
Genus PIC - -
Genus ABS 8.4 7.3
Genus Research and Development - -
Consulting services 8.4 7.3
Total revenue 593.4 574.3
Revenue from contracts with customers
The Group's revenue is analysed below by the timing at which it is recognised.
2022 2021
£m £m
Genus PIC 303.2 312.8
Genus ABS 247.2 229.1
Genus Research and Development 14.1 8.6
Recognised at a point in time 564.5 550.5
Genus PIC 3.4 2.8
Genus ABS 24.8 21.0
Genus Research and Development 0.7 -
Recognised over time 28.9 23.8
Total revenue 593.4 574.3
4. EXCEPTIONAL ITEMS
Operating (expense)/credit 2022 2021
£m £m
Litigation and damages (1.4) (2.5)
Acquisition and integration (0.3) (0.3)
Pension related (0.4) (2.3)
Legacy legal claim 3.3 -
ABS production restructuring (2.8) -
Other (0.4) 1.8
(2.0) (3.3)
Litigation and damages
Litigation includes legal fees and related costs of £1.4m (2021: £2.5m)
related to the actions between ABS Global, Inc. and certain affiliates ('ABS')
and Inguran, LLC and certain affiliates (aka STGenetics ('ST')).
Material litigation activities during the year ended 30 June 2022
In July 2014, ABS launched a legal action against ST in the US District Court
for the Western District of Wisconsin and initiated anti-trust proceedings
which ultimately enabled the launch of ABS's IntelliGen sexing technology in
the US market ('ABS I'). In June 2017, ST filed proceedings against ABS in the
same District Court, where ST alleged that ABS infringed seven patents and
asserted trade secret and breach of contract claims ('ABS II'). The ABS I and
ABS II proceedings in the periods before the year ended 30 June 2021 are more
fully described in the Notes to the Financial Statements in previous Annual
Reports. ABS sought judgments as a matter of law ('JMOL') in relation to the
invalidity of all three of the patents considered in ABS II, JMOLs in relation
to the non-infringement of two of those patents, and a reduction in damages
awarded by the jury.
On 29 January 2020, ST filed a new US complaint against ABS ('ABS III'). ABS
has prepared and filed a response to the ABS III complaint, including a motion
to dismiss, on the basis that all these issues were fully resolved in either
the ABS I or ABS II litigations.
On 10 March 2020, the USPTO issued patent 10,583,439 (the ''439 patent'), and
subsequently ST asked the court for permission to file a supplemental
complaint in ABS III asserting infringement of the '439 patent. On 15 April
2020, ST filed a new complaint ('ABS IV'), asserting the same claim of
infringement of the '439 patent alleged in its supplemental complaint and then
moved to consolidate the ABS IV and ABS III litigation. ABS opposed this
action and has filed a motion for summary dismissal. On 23 June 2020, the
USPTO issued patent 10,689,210 (the ''210 patent'), and on 6 July 2020, ST
sought a second supplement of ABS III by adding a claim of '210 patent
infringement. ABS opposed this action.
On 26 October 2020 and 10 December 2020, ABS filed Inter Partes Reviews
('IPR') against the '439 and '210 patents with the USPTO. On 4 May 2021, the
Patent Trial and Appeal Board ('PTAB') instituted the '439 patent IPR, and the
hearing was completed on 2 February 2022. On 7 June 2021, PTAB declined to
institute the '210 patent IPR and on 28 April 2022, PTAB issued its decision
and declined to invalidate the claims of the '439 patent.
On 20 December 2021, the Wisconsin Federal Court reached a decision on the ABS
III and IV motions, granting ABS's motion to dismiss all claims relating to US
patent 8,206,987 (the ''987 patent'), and denying ST's motion to amend ABS III
to add the '439 and '210 patents. The court dismissed ABS III in its entirety
and entered judgment favour of ABS. ST has appealed this decision.
On 1 July 2022 , the court reached a decision on the ABS II post-judgment
motions as well as the pending motions in ABS IV. The Court deferred to the
jury's verdict in ABS II confirming the validity and infringement of US
patents 7,311,476, 7,611,309 (the ''476 and 309 patents' respectively) and the
'987 patent, and further confirmed the award of costs to ABS of ~$5.3m in
connection with ABS I. In relation to ABS IV, the Court denied ABS' motion to
dismiss the '439 and '210 patent claims on the basis that the challenges were
too fact-based to be resolved at this stage. A Court scheduling conference
confirmed a hearing date of 15 July 2024 for ABS IV hearing. Appeals have been
filed by ABS on the validity and infringement of the '987, the '476 and the
'309 patents and ST has appealed the award of the $5.3m costs.
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 patent 7,311,476 asserted in ABS II. ABS had already sought the revocation
of the '790 patent in April 2017 before the Indian Patent Office and has now
consolidated the revocation petition as a counterclaim in the Indian court
proceedings. Progress of these proceedings has been delayed on multiple
occasions and is next before the court for consideration on 15 September
2022.
Acquisitions and integration
During the year, £0.3m (2021: £0.3m) of expenses were incurred in relation
to acquisitions during the year, with £0.2m relating the Olymel
transaction.
Legacy legal claim
A one-off credit of £3.3m resulted from a non-refundable receipt of cash for
the assignment of rights to a legacy legal claim against the Instituto
Brasileiro de Café (IBC) in Brazil. The claim was for reimbursement of unpaid
amounts plus interest in respect of coffee shipments made by a group
subsidiary to the IBC in the 1990s, when the subsidiary was part of the
Dalgety Group. Under the assignment agreement, the subsidiary has assigned any
future receipt from the legal claim to an Investment Fund in Brazil, in
exchange for an immediate cash amount and a sliding scale earn out payment
which decreases over the duration of the period to the eventual receipt of
proceeds by the assignee. No amount has been recognised in respect of the earn
out payment, as the duration to the eventual settlement of the legal claim
cannot be estimated with any certainty.
ABS production restructuring
A one-off charge of £2.8m was incurred primarily relating to the closure of
our Canadian ABS facilities and disposals of bulls held in North America as
part of a production restructuring.
Pension related
A pensions benefits audit on the National Pig Development pension fund
concluded during the year lead to an aggregate past service charge of £0.4m,
resulted from the recognition of these additional liabilities. In the prior
year, an aggregate past service charge of £2.3m, resulted from recognition of
additional liabilities, relating to Guaranteed Minimum Pension ('GMP') on
historic transfer values.
Other
Included in Other is an expense of £0.5m relating to legal advice, IT
consultancy fees and one-time costs incurred as the direct result of an IT
security incident in June 2022. In the prior year, a £2.0m credit resulting
from a share forfeiture exercise.
5. NET FINANCE COSTS
2022 2021
£m £m
Interest payable on bank loans and overdrafts (4.1) (2.8)
Amortisation of debt issue costs (0.9) (0.9)
Other interest payable (0.1) -
Unwinding of discount put options (0.2) (0.6)
Net interest cost in respect of pension scheme liabilities (0.2) (0.3)
Interest on lease liabilities (1.1) (0.8)
Total interest expense (6.6) (5.4)
Interest income on bank deposits 0.4 0.4
Total interest income 0.4 0.4
Net finance costs (6.2) (5.0)
6. TAXATION AND DEFERRED TAXATION
Income tax expense
2022 2021
£m £m
Current tax expense
Current period 13.6 18.3
Adjustment for prior periods 1.8 1.3
Total current tax expense in the Group Income Statement 15.4 19.6
Deferred tax expense
Origination and reversal of temporary differences (0.5) (10.3)
Adjustment for prior periods (3.2) (0.3)
Total deferred tax credit in the Group Income Statement (3.7) (10.6)
Total income tax expense excluding share of income tax of equity accounted 11.7 9.0
investees
Share of income tax of equity accounted investees 2.6 3.0
Total income tax expense in the Group Income Statement 14.3 12.0
Reconciliation of effective tax rate
2022 2022 2021 2021
% £m % £m
Profit before tax 48.4 55.8
Add back share of income tax of equity accounted investees 2.6 3.0
Profit before tax excluding share of income tax of equity accounted investees 51.0 58.8
Income tax at UK corporation tax of 19% (2021: 19.0%) 19.0 9.7 19.0 11.2
Effect of tax rates in foreign jurisdictions 9.2 4.7 10.5 6.2
Non-deductible expenses 4.3 2.2 2.0 1.2
Tax exempt income and incentives (1.8) (0.9) (8.7) (5.2)
Change in tax rate 2.5 1.3 (4.4) (2.6)
Movements in recognition of tax losses 0.2 0.1 (1.2) (0.7)
Change in unrecognised temporary differences (3.7) (1.9) 2.2 1.3
Tax (over)/under provided in prior periods (2.1) (1.1) 0.5 0.3
Change in provisions (0.2) (0.1) 1.2 0.7
Tax on undistributed reserves 0.6 0.3 (0.7) (0.4)
Total income tax expense in the Group Income Statement 28.0 14.3 20.4 12.0
7. EARNINGS PER SHARE
Basic earnings per share is the profit generated for the financial year
attributable to equity shareholders, divided by the weighted average number of
shares in issue during the year.
Basic earnings per share from continuing operations
2022 2021
(pence) (pence)
Basic earnings per share 62.5 72.6
The calculation of basic earnings per share from continuing operations is
based on the net profit attributable to owners of the Company from continuing
operations of £40.9m (2021: £47.3m) and a weighted average number of
ordinary shares outstanding of 65,395,000 (2021: 65,108,000), which is
calculated as follows:
Weighted average number of ordinary shares (basic)
2022 2021
000s 000s
Issued ordinary shares at the start of the year 65,761 65,092
Effect of own shares held (373) (180)
Shares issued on exercise of stock options 7 9
Shares issued in relation to Employee Benefit Trust - 187
Weighted average number of ordinary shares in year 65,395 65,108
Diluted earnings per share from continuing operations
2022 2021
(pence) (pence)
Diluted earnings per share 62.2 72.0
The calculation of diluted earnings per share from continuing operations is
based on the net profit attributable to owners of the Company from continuing
operations of £40.9m (2021: £47.3m) and a weighted average number of
ordinary shares outstanding, after adjusting for the effects of all potential
dilutive ordinary shares, of 65,714,000 (2021: 65,662,000), which is
calculated as follows:
Weighted average number of ordinary shares (diluted)
2022 2021
000s 000s
Weighted average number of ordinary shares (basic) 65,395 65,108
Dilutive effect of share awards and options 319 554
Weighted average number of ordinary shares for the purposes of diluted 65,714 65,662
earnings per share
Adjusted earnings per share from continuing operations
2022 2021
(pence) (pence)
Adjusted earnings per share 82.7 100.9
Diluted adjusted earnings per share 82.3 100.1
Adjusted earnings per share is calculated on profit before the 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 £54.1m (2021: £65.7m), which is
calculated as follows:
2022 2021
£m £m
Profit before tax from continuing operations 48.4 55.8
Add/(deduct):
Net IAS 41 valuation movement on biological assets 5.4 10.8
Amortisation of acquired intangible assets 8.3 7.4
Share-based payment expense 3.7 7.7
Exceptional items (see note 4) 2.0 3.3
Net IAS 41 valuation movement on biological assets in joint ventures 1.4 (3.1)
Tax on joint ventures and associates 2.6 3.0
Attributable to non-controlling interest (0.3) (0.1)
Adjusted profit before tax 71.5 84.8
Adjusted tax charge (17.4) (19.1)
Adjusted profit after tax 54.1 65.7
Effective tax rate on adjusted profit 24.3% 22.5%
8. DIVIDENDS
Dividends are one type of shareholder return, historically paid to our
shareholders in late November/early December and late March.
Amounts recognised as distributions to equity holders in the year
2022 2021
£m £m
Final dividend
Final dividend for the year ended 30 June 2021 of 21.7 pence per share 14.2 -
Final dividend for the year ended 30 June 2020 of 19.7 pence per share - 12.8
Interim dividend
Interim dividend for the year ended 30 June 2022 of 10.3 pence per share 6.7 -
Interim dividend for the year ended 30 June 2021 of 10.3 pence per share - 6.7
20.9 19.5
The Directors have proposed a final dividend of 21.7 pence per share for 2022.
This is subject to shareholders' approval at the AGM and we have therefore not
included it as a liability in these Financial Statements. The total proposed
and paid dividend for year ended 30 June 2022 is 32.0 pence per share (2021:
32.0 pence per share).
9. INTANGIBLE ASSETS
Porcine Brands, multiplier contracts and customer relationships Separately identified acquired intangible assets Software Assets under construction IntelliGen Patents, licences and other Total
and bovine genetics technology £m £m £m £m £m £m £m
£m
Cost
Balance at 1 July 2020 52.0 85.9 137.9 18.4 2.0 25.4 4.4 188.1
Additions - - - 0.4 3.8 0.9 - 5.1
Acquisition - 3.7 3.7 - - - - 3.7
Disposals - - - (1.1) - - - (1.1)
Transfers - - - 3.1 (3.1) - - -
Effect of movements in exchange rates (0.3) (8.0) (8.3) (0.8) - (2.7) (0.1) (11.9)
Balance at 30 June 2021 51.7 81.6 133.3 20.0 2.7 23.6 4.3 183.9
Additions 4.2 10.3 14.5 0.2 8.6 - - 23.3
Acquisition - 0.4 0.4 - - - - 0.4
Transfers - - - 7.7 (7.7) - - -
Effect of movements in exchange rates 0.6 10.6 11.2 1.0 0.1 3.2 0.1 15.6
Balance at 30 June 2022 56.5 102.9 159.4 28.9 3.7 26.8 4.4 223.2
Amortisation and impairment losses
Balance at 1 July 2020 33.2 68.2 101.4 13.0 - 6.9 3.9 125.2
Disposals - - - (0.6) - - - (0.6)
Amortisation for the year 2.8 4.6 7.4 1.4 - 2.2 0.1 11.1
Effect of movements in exchange rates - (6.6) (6.6) (0.8) - (0.7) - (8.1)
Balance at 30 June 2021 36.0 66.2 102.2 13.0 - 8.4 4.0 127.6
Amortisation for the year 3.0 5.3 8.3 1.7 - 2.5 0.1 12.6
Effect of movements in exchange rates 0.1 8.6 8.7 0.8 - 1.4 0.1 11.0
Balance at 30 June 2022 39.1 80.1 119.2 15.5 - 12.3 4.2 151.2
Carrying amounts
At 30 June 2022 17.4 22.8 40.2 13.4 3.7 14.5 0.2 72.0
At 30 June 2021 15.7 15.4 31.1 7.0 2.7 15.2 0.3 56.3
At 30 June 2020 18.8 17.7 36.5 5.4 2.0 18.5 0.5 62.9
Included within brands, multiplier contracts and customer relationships are
carrying amounts for brands of £0.5m (2021: £0.7m), multiplier contracts of
£11.1m (2021: £0.3m) and customer relationships of £11.2m (2021: £14.4m).
On 22 February 2022, PIC acquired all the intellectual property in Olymel's
AlphaGene elite porcine genetics for a total cash consideration of CAD$ 25.0m
(£14.5m), being £4.2m for porcine genetic technology and £10.3m for
multiplier contracts. The parties have also entered into an exclusive long
term genetics collaboration agreement, where PIC will supply elite germplasm
and manage the ongoing genetic improvement of Olymel's AlphaGene genetics.
Included within the software class of assets is £6.9m (2021: £5.4m) and
included in assets in the course of construction is £2.7m (2021: £1.1m) that
relate to the ongoing development costs of GenusOne, our single global
enterprise system.
10. BIOLOGICAL ASSETS
Fair value of biological assets Bovine Porcine Total
£m £m £m
Non-current biological assets 107.2 202.9 310.1
Current biological assets - 39.8 39.8
Balance at 30 June 2020 107.2 242.7 349.9
Increases due to purchases 15.2 134.8 150.0
Decreases attributable to sales - (223.0) (223.0)
Decrease due to harvest (24.4) (21.4) (45.8)
Business combination - 0.3 0.3
Changes in fair value less estimated sale costs 3.9 118.4 122.3
Effect of movements in exchange rates (9.9) (24.3) (34.2)
Balance at 30 June 2021 92.0 227.5 319.5
Non-current biological assets 92.0 187.9 279.9
Current biological assets - 39.6 39.6
Balance at 30 June 2021 92.0 227.5 319.5
Increases due to purchases 23.3 225.8 249.1
Decreases attributable to sales - (234.8) (234.8)
Decrease due to harvest (17.7) (26.3) (44.0)
Changes in fair value less estimated sale costs (19.6) 61.2 41.6
Effect of movements in exchange rates 10.0 25.4 35.4
Balance at 30 June 2022 88.0 278.8 366.8
Non-current biological assets 88.0 245.7 333.7
Current biological assets - 33.1 33.1
Balance at 30 June 2022 88.0 278.8 366.8
Bovine
Bovine biological assets include £6.9m (2021: £7.4m) 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 leases.
There were no movements in the carrying value of the bovine biological assets
in respect of sales or other changes during the year.
A risk-adjusted rate of 12.5% (2021: 8.8%) 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 year on initial recognition of biological assets in respect of
multiplier purchases, other than parent gilts, of £101.2m (2021: £47.5m).
Decreases attributable to sales during the year of £234.8m (2021: £223.0m)
include £74.0m (2021: £67.4m) 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 £119.0m (2021: £97.9m) 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 year.
Total revenue in the year, including parent gilts, includes £231.4m (2021:
£206.9m) in respect of these contracts, comprising £83.2m (2021: £63.9m) on
initial transfer of animals and semen to customers and £148.2m (2021:
£143.0m) in respect of royalties received.
A risk-adjusted rate of 10.3% (2021: 9.3%) has been used to discount future
net cash flows from the expected output of the pure line porcine herds. The
number of future generations which have been taken into account is seven
(2021: seven) and their estimated useful lifespan is 1.4 years (2021: 1.4
years).
Year ended 30 June 2022
Bovine Porcine Total
£m £m £m
Changes in fair value of biological assets (19.6) 61.2 41.6
Inventory transferred to cost of sales at fair value (10.3) (26.3) (36.6)
Biological assets transferred to cost of sales at fair value - (10.3) (10.3)
(29.9) 24.6 (5.3)
Fair value movement in related financial derivative - (0.1) (0.1)
Net IAS 41 valuation movement on biological assets(1) (29.9) 24.5 (5.4)
Year ended 30 June 2021
Bovine Porcine Total
£m £m £m
Changes in fair value of biological assets 3.9 118.4 122.3
Inventory transferred to cost of sales at fair value (21.1) (21.4) (42.5)
Biological assets transferred to cost of sales at fair value - (90.0) (90.0)
(17.2) 7.0 (10.2)
Fair value movement in related financial derivative - (0.6) (0.6)
Net IAS 41 valuation movement on biological assets(1) (17.2) 6.4 (10.8)
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).
11. 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 2020 67.9 87.8 8.2 163.9 21.9 24.0 45.9 209.8
Additions 1.1 5.9 22.3 29.3 2.3 8.1 10.4 39.7
Business combination - 0.2 - 0.2 - - - 0.2
Transfers 4.3 3.5 (7.8) - - - - -
Disposals (0.3) (2.1) - (2.4) (1.9) (4.7) (6.6) (9.0)
Effect of movements in exchange rates (6.4) (7.3) (0.6) (14.3) (1.6) (1.4) (3.0) (17.3)
Balance at 30 June 2021 66.6 88.0 22.1 176.7 20.7 26.0 46.7 223.4
Additions 0.2 3.9 40.3 44.4 9.2 6.1 15.3 59.7
Transfers 23.5 12.8 (36.3) - - - - -
Disposals (1.4) (2.0) - (3.4) (0.5) (6.0) (6.5) (9.9)
Effect of movements in exchange rates 11.3 10.9 3.5 25.7 2.1 2.3 4.4 30.1
Balance at 30 June 2022 100.2 113.6 29.6 243.4 31.5 28.4 59.9 303.3
Depreciation and impairment losses
Balance at 1 July 2020 24.3 53.1 - 77.4 4.4 10.1 14.5 91.9
Depreciation for the year 3.2 9.8 - 13.0 3.7 7.3 11.0 24.0
Disposals (0.3) (1.5) - (1.8) (1.3) (4.2) (5.5) (7.3)
Effect of movements in exchange rates (2.7) (4.5) - (7.2) (0.3) (0.7) (1.0) (8.2)
Balance at 30 June 2021 24.5 56.9 - 81.4 6.5 12.5 19.0 100.4
Depreciation for the year 3.8 11.0 - 14.8 4.8 6.8 11.6 26.4
Disposals (1.3) (1.8) - (3.1) (0.5) (5.9) (6.4) (9.5)
Impairment 0.8 0.1 - 0.9 - - - 0.9
Effect of movements in exchange rates 4.4 7.1 - 11.5 0.6 1.6 2.2 13.7
Balance at 30 June 2022 32.2 73.3 - 105.5 11.4 15.0 26.4 131.9
Carrying amounts
At 30 June 2022 68.0 40.3 29.6 137.9 20.1 13.4 33.5 171.4
At 30 June 2021 42.1 31.1 22.1 95.3 14.2 13.5 27.7 123.0
12. TRADE AND OTHER RECEIVABLES
2022 2021
£m
£m
Trade receivables 105.3 87.2
Less expected credit loss allowance (4.3) (5.0)
Trade receivables net of impairment 101.0 82.2
Other debtors 10.7 6.4
Prepayments 8.5 6.6
Contract assets 7.7 7.7
Other taxes and social security 1.6 3.3
Current trade and other receivables 129.5 106.2
Other debtors 3.7 1.8
Contract assets 4.9 -
Non-current other receivables 8.6 1.8
138.1 108.0
Trade receivables
The average credit period our customers take on the sales of goods is 62 days
(2021: 53 days). We do not charge interest on receivables for the first 30
days from the date of the invoice.
The Group always 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
(2021: no more than 5%).
13. TRADE AND OTHER PAYABLES
2022 2021
£m
£m
Trade payables 36.0 23.7
Other payables 8.2 7.6
Accrued expenses 61.4 60.2
Contract liabilities 10.1 10.6
Other taxes and social security 9.0 8.2
Current trade and other payables 124.7 110.3
Contract liabilities 0.2 1.4
Non-current trade and other payables 0.2 1.4
The average credit period taken for trade purchases is 39 days (2021: 27
days).
14. 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 ('MPF') and the Dalgety Pension Fund ('DPF') in the UK,
which are defined benefit schemes. The assets of these funds are held
separately from the Group's assets, are administered by trustees and managed
professionally. These schemes are closed to new members.
Retirement benefit obligations
The financial positions 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.
2022 2021
£m
£m
The Milk Pension Fund - Genus's share - 2.2
The Dalgety Pension Fund - -
National Pig Development Pension Fund 0.1 0.3
Post-retirement healthcare 0.6 0.6
Other unfunded schemes 7.6 8.0
Overall net pension liability 8.3 11.1
Overall, we expect to pay £1.0m (2021: £4.1m) in contributions to defined
benefit plans in the 2023 financial year.
Aggregated position of defined benefit schemes
2022 2021
£m
£m
Present value of funded obligations (includes Genus's 86% share of MPF (2021: 857.6 1,097.7
86%))
Present value of unfunded obligations 8.4 8.9
Total present value of obligations 866.0 1,106.6
Fair value of plan assets (includes Genus's 86% share of MPF (2021: 86%)) (936.3) (1,147.2)
Restricted recognition of asset (MPF and DPF) 78.6 8.8
Recognition of additional liability (MPF) - 42.9
Recognised liability for defined benefit obligations 8.3 11.1
Summary of movements in Group deficit during the year
2022 2021
£m
£m
Deficit in schemes at the start of the year (11.1) (18.1)
Administration expenses (0.4) (0.4)
Exceptional cost (0.4) (2.3)
Reclassified from accruals - (0.4)
Contributions paid into the plans 3.5 7.4
Net pension finance cost (0.2) (0.3)
Actuarial gains recognised during the year 27.3 22.3
Movement in restriction of assets (69.8) (0.1)
Release/(recognition) of additional liability 43.7 (19.9)
Exchange rate adjustment (0.9) 0.7
Deficit in schemes at the end of the year (8.3) (11.1)
The expense is recognised in the following line items in the Group Income
Statement
2022 2021
£m
£m
Administrative expenses 0.4 0.4
Exceptional cost 0.4 2.3
Net finance charge 0.2 0.3
1.0 3.0
Actuarial assumptions and sensitivity analysis
Principal actuarial assumptions (expressed as weighted averages) are:
2022 2021
Discount rate 3.90% 1.90%
Consumer Price Index 2.40% 2.10%
Retail Price Index 2.90% 2.85%
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 2022, the mortality tables
used are 100% of the S3PMA (males)/S3PFA_M(females) all lives tables, with
birth year and 2021 CMI projections with a smoothing parameter of Sk = 7.0 and
A=0.5%, subject to a long-term rate of improvement of 1.5% for males and
females and for 2021, the mortality tables used are 97% of the S2NA tables,
with birth year and 2021 CMI projections with a smoothing parameter of Sk =
7.0 and A=0%, subject to a long-term rate of improvement of 1.25% for males
and females.
15. NOTES TO THE CASH FLOW STATEMENT
2022 2021
£m
£m
Profit for the year 36.7 46.8
Adjustment for:
Net IAS 41 valuation movement on biological assets 5.4 10.8
Amortisation of acquired intangible assets 8.3 7.4
Share-based payment expense 3.7 7.7
Share of profit of joint ventures and associates (5.2) (13.1)
Finance costs (net) 6.2 5.0
Income tax expense 11.7 9.0
Exceptional items 2.0 3.3
Adjusted operating profit from continuing operations 68.8 76.9
Depreciation of property, plant and equipment 26.4 24.0
Loss on disposal of plant and equipment 0.4 0.4
Loss on disposal of intangible assets - 0.5
Amortisation and impairment of intangible assets 4.3 3.7
Adjusted earnings before interest, tax, depreciation and amortisation 99.9 105.5
Cash impact of exceptional items 1.1 (3.0)
Other movements in biological assets and harvested produce (19.1) (12.8)
Decrease in provisions and release in deferred consideration - (0.4)
Additional pension contributions in excess of pension charge (3.1) (7.0)
Other 0.2 (1.3)
Operating cash flows before movement in working capital 79.0 81.0
Increase in inventories (6.1) (1.3)
Increase in receivables (18.5) (11.0)
Increase in payables 2.2 17.9
Cash generated by operations 56.6 86.6
Interest received 0.4 0.4
Interest and other finance costs paid (4.0) (2.8)
Interest on leased assets (1.1) (0.8)
Cash flow from derivative financial instruments (0.1) 0.2
Income taxes paid (17.5) (16.1)
Net cash from operating activities 34.3 67.5
Analysis of net debt
Total changes in liabilities due to financing activities are as follows:
At 1 July Net Foreign exchange Other At 30 June 2022
2021
cash flows
£m
non-cash movements
£m
£m
£m
£m
Cash and cash equivalents 46.0 (11.0) 3.8 - 38.8
Interest-bearing loans - current (13.9) 8.9 (1.2) (0.9) (7.1)
Lease liabilities - current (9.0) 11.3 (0.7) (11.7) (10.1)
(22.9) 20.2 (1.9) (12.6) (17.2)
Interest-bearing loans - non-current (109.4) (63.1) (9.6) - (182.1)
Lease liabilities - non-current (19.3) - (1.6) (3.6) (24.5)
(128.7) (63.1) (11.2) (3.6) (206.6)
Total debt financing (151.6) (42.9) (13.1) (16.2) (223.8)
Net debt (105.6) (53.9) (9.3) (16.2) (185.0)
Included within non-cash movements is £15.3m in relation to net new leases
and £0.9m in the unwinding of debt issue costs.
At 1 July Net Foreign exchange Other At 30 June 2021
2020
cash flows
£m
non-cash movements
£m
£m
£m
£m
Cash and cash equivalents 41.3 6.6 (1.9) - 46.0
Interest-bearing loans - current (9.2) (4.4) 0.6 (0.9) (13.9)
Lease liabilities - current (10.0) 11.7 0.2 (10.9) (9.0)
(19.2) 7.3 0.8 (11.8) (22.9)
Interest-bearing loans - non-current (103.6) (12.7) 6.9 - (109.4)
Lease liabilities - non-current (21.1) - 0.3 1.5 (19.3)
(124.7) (12.7) 7.2 1.5 (128.7)
Total debt financing (143.9) (5.4) 8.0 (10.3) (151.6)
Net debt (102.6) 1.2 6.1 (10.3) (105.6)
Included within non-cash movements is £9.4m in relation to net new leases and
£0.9m in the unwinding of debt issue costs.
16. 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. Assessing the amount of liabilities
that are not probable is highly judgemental.
The retirement benefit obligations referred to in note 14 include obligations
relating to the MPF 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 86% (2021:
86%) 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 from the most recent triennial valuation can
be found in note 14.
The Group has widespread global operations and is consequently a defendant in
many legal, tax and customs proceedings incidental to those operations. In
addition, there are contingent liabilities arising in the normal course of
business in respect of indemnities, warranties and guarantees. These
contingent liabilities are not considered to be unusual in the context of the
normal operating activities of the Group. Provisions have been recognised in
accordance with the Group accounting policies where required. None of these
claims are expected to result in a material gain or loss to the Group.
As described in note 3, the Group is involved in ongoing litigation
proceedings and investigations with ST that are at various legal stages. The
Group makes a provision for amounts to the extent where an outflow of economic
benefit is probable and can be reliably estimated. However, there are specific
claims identified in the litigation which the Group considers the outcome of
the claim is not probable and will not result in the outflow of economic
benefit.
The Group's future tax charge and effective tax rate could be affected by
factors such as countries reforming their tax legislation to implement the
OECD's BEPS recommendations and by European Commission initiatives including
state aid investigations.
At 30 June 2022, we had entered into bank guarantees totalling £20.2m (2021:
£19.1m).
17. NON-CONTROLLING INTEREST
2022 2021
£m
£m
Non-controlling interest (0.7) 3.6
Put option over non-controlling interest at inception (5.7) (5.1)
Total non-controlling interest (6.4) (1.5)
Summarised financial information in respect of each of the Group's
subsidiaries that has a material non-controlling interest is set out below
before intra-Group eliminations.
De Novo Genetics LLC £m PIC Italia 2022
£m
S.r.l.
£m
Revenue 3.7 3.4 7.1
Expenses (12.6) (2.6) (15.2)
Total comprehensive (expense)/income for the year (8.9) 0.8 (8.1)
Total comprehensive (expense)/income attributable to owners of the Company (4.5) 0.6 (3.9)
Total comprehensive (expense)/income attributable to the non-controlling (4.4) 0.2 (4.2)
interest
Biological assets 15.2 - 15.2
Current assets 0.9 1.0 1.9
Other non-current assets 0.8 2.3 3.1
Current liabilities (19.6) (1.8) (21.4)
Net (liabilities)/ assets (2.7) 1.5 (1.2)
Equity attributable to owners of the Company 1.8 (1.3) 0.5
Non-controlling interest (0.9) 0.2 (0.7)
Dividends of £0.1m were paid to non-controlling interests (2021: £0.2m).
De Novo Genetics LLC £m PIC Italia 2021
£m
S.r.l.
£m
Revenue 3.4 4.1 7.5
Expenses (4.9) (3.3) (8.2)
Total comprehensive income for the year (1.5) 0.8 (0.7)
Total comprehensive income attributable to owners of the Company (0.8) 0.6 (0.2)
Total comprehensive income attributable to the non-controlling interest (0.7) 0.2 (0.5)
Biological assets 15.8 - 15.8
Current assets 0.9 1.2 2.1
Other non-current assets 0.8 1.8 2.6
Current liabilities (11.5) (1.4) (12.9)
Net assets 6.0 1.6 7.6
Equity attributable to owners of the Company (2.6) (1.4) (4.0)
Non-controlling interest 3.4 0.2 3.6
18. POST BALANCE SHEET EVENTS
With effect from 26 August 2022, the Group and its lenders increased the
Company's multi-currency RCF by £40m to £190m and the USD RCF by USD 25m to
USD 150m, and extended the maturity date of the total facilities to 24 August
2025.
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 Reasons why we believe the
(where applicable)
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;
Including adjusted operating profit from JV and associate results.
Adjusted operating profit inc JVs
share-based payments - this expense is considered to be relatively volatile
See reconciliation below. and not fully reflective of the current period trading, as the performance
criteria are based on EPS performance over a three-year period and include
Including adjusted operating profit from JV and associate results but estimates of future performance; and
Adjusted operating profit inc JVs exc gene editing costs excluding gene editing costs.
exceptional items - these are items which due to either their size or their
nature are excluded, to improve the understanding of the Group's underlying
performance.
See reconciliation below.
Adjusted operating profit inc JVs after tax
Adjusted operating profit including JV less adjusted effective tax.
See reconciliation below.
Adjusted operating profit including JVs less net finance costs.
Adjusted profit inc JVs before tax
See reconciliation below.
Adjusted profit including JVs before tax less adjusted effective tax.
See reconciliation below.
Adjusted profit inc JVs
after tax
Adjusted effective tax rate Total income tax charge for the Group excluding the tax impact of adjusting Provides an underlying tax rate to allow comparability of underlying financial
items, divided by the adjusted operating profit. 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 On a per share basis, this allows the comparability of underlying financial
per share
performance by excluding the impacts of adjusting items.
weighted basic average number of shares.
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 year. The Board dividend policy targets the adjusted earning cover to be between
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 JVs, This APM is presented because it is used in calculating our ratio of net debt
financing facilities depreciation of property, plant and equipment, depreciation of the historical to EBITDA and our interest cover, which we report to our banks to ensure
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 retranslates 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.
Revenue excluding Genus PIC China Revenue made by excluding revenue made by Genus PIC China. Allows for the comparison of the financial performance of Genus PIC by
excluding the results of Genus PIC China, which has been impacted by volatile
See reconciliation below. and challenging market conditions.
Allows for the comparison of
underlying financial performance of
Genus by excluding Genus PIC China.
Adjusted operating profit inc JVs for Genus PIC and exc PIC China Adjusted operating profit including JVs for Genus PIC excluding adjusted
operating profit including JVs made by Genus PIC China .
See reconciliation below.
Adjusted Profit before tax exc PIC China Adjusted profit before tax excluding PIC China.
See reconciliation below.
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
Interest cover The ratio of adjusted net finance costs, calculated in accordance with the This APM is used to understand our ability to meet our interest payments and
definitions used in our financing facilities, is net finance costs with a is also a key metric that we report to our banks to ensure compliance with our
deduction for pension interest, interest from adopting IFRS 16, unwinding of bank covenants.
discount on put options and amortisation of refinancing fees, to adjusted
EBITDA.
Closest equivalent IFRS components for the ratio: The equivalent IFRS
components are finance costs, finance income and operating profit
See calculation and reconciliation below.
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.
Return on adjusted invested capital The Group's return on adjusted invested capital is measured on the basis of This APM is used to measure our ability to efficiently invest our capital and
adjusted operating profit including JVs after tax, which is operating profit gives us a sense of how well we are using our resources to generate returns.
with the pre-tax share of profits from JVs and associates, net IAS 41
valuation movement on biological assets, amortisation of acquired intangible
assets, share-based payment expense and exceptional items added back, net of
amounts attributable to non-controlling interest and tax.
The adjusted operating profit including JVs after tax is divided by adjusted
invested capital, which is the equity attributable to owners of the Company
adding back net debt, pension liability net of related deferred tax and
deducting biological assets (less historical cost) and goodwill, net of
related deferred tax.
Closest equivalent IFRS components for the ratio:
Return on invested capital
See calculation and reconciliation 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 JVs and associates retained.
The tables below reconcile the closest equivalent Ifrs measure to the apm or
outline the calculation of the apm
Income statement measures
Adjusted operating profit exc JVs
Adjusted operating profit inc JVs
Adjusted operating profit inc JVs and exc gene editing costs
2022 2021
£m £m £m £m Reference
Operating profit 49.4 47.7 Group Income Statement
Add back:
Net IAS 41 valuation movement on biological assets 5.4 10.8 Group Income Statement
Amortisation of acquired intangible assets 8.3 7.4 Group Income Statement
Share-based payment expense 3.7 7.7 Group Income Statement
Exceptional items 2.0 3.3 Group Income Statement
Adjusted operating profit exc JVs 68.8 76.9 Group Income Statement
(0.3) (0.1) Group Income Statement
Less: amounts attributable to non-controlling interest
Operating profit from JVs and associates 5.2 13.1 Group Income Statement
Tax on JVs and associates 2.6 3.0 Note 6 - Income tax expense
Net IAS 41 valuation movement 1.4 (3.1) No direct reference
Adjusted operating profit from JVs 9.2 13.0
Adjusted operating profit inc JVs 77.7 89.8
Gene editing costs 7.9 7.6 Note 3 - Segmental information
Adjusted operating profit inc JVs and exc gene editing costs 85.6 97.4
Adjusted operating profit inc JVs after tax
2022 2021
£m £m Reference
Adjusted operating profit inc JVs 77.7 89.8 See APM
Effective tax rate 24.3% 22.5% Note 7 - Earnings per share
Adjusted tax (18.9) (20.2) No direct reference
Adjusted operating profit inc JVs after tax 58.8 69.6
Adjusted profit inc JVs before tax
Adjusted profit inc JVs after tax
2022 2021
£m £m Reference
Adjusted operating profit inc JVs 77.7 89.8 See APM
Less net finance costs (6.2) (5.0) Note 5 - Net finance costs
Adjusted profit inc JVs before tax 71.5 84.8
Adjusted tax (17.4) (19.1) Note 7 - Earnings per share
Adjusted profit inc JVs after tax 54.1 65.7
Adjusted effective tax £m/rate
2022 2021
£m % £m % Reference
Adjusted effective tax £m/rate 17.4 24.3 19.1 22.5 Note 7 - Earnings per share
Exceptional items (0.8) (40.0) (1.1) (33.3) No direct reference
Share-based payment expense (0.5) (13.5) (1.6) (20.8) No direct reference
Amortisation of acquired intangible assets (3.3) (39.8) (1.5) (20.3) No direct reference
Net IAS 41 valuation movement on biological assets 1.5 27.8 (2.9) (26.9) No direct reference
Effective tax £m/rate 14.3 28.0 12.0 20.4 Note 6 - Taxation and deferred taxation
Adjusted basic earnings per share
2022 2021 Reference
Adjusted profit inc JVs after tax (£m) 54.1 65.7 See APM
Weighted average number of ordinary shares (000s) 65.395 65.108 Note 7 - Earnings per share
Adjusted basic earnings per share (pence) 82.7 100.9
Adjusted diluted earnings per share
2022 2021 Reference
Adjusted profit inc JVs after tax (£m) 54.1 65.7 See APM
Weighted average number of diluted ordinary shares (000s) 65.714 65.662 Note 7 - Earnings per share
Adjusted diluted earnings per share (pence) 82.3 100.1
Adjusted earnings cover
2022 2021
pence Times pence times Reference
Adjusted earnings per share 82.7 100.9 See APM
Dividend for the year 32.0 32.0 Note 8 - Dividends
Adjusted earnings cover 2.6 3.2
Adjusted EBITDA - as calculated under our financing facilities
2022 2021
£m £m £m £m Reference
Operating profit 49.4 47.7 Group Income Statement
Add back:
Net IAS 41 valuation movement on biological assets 5.4 10.8 Group Income Statement
Amortisation of acquired intangible assets 8.3 7.4 Group Income Statement
Share-based payment expense 3.7 7.7 Group Income Statement
Exceptional items 2.0 3.3 Group Income Statement
Adjusted operating profit exc JVs 68.8 76.9 Group Income Statement
Adjust for:
Cash received from JVs (dividend and loan repayment) 3.2 4.1 Group Statement of Cash Flows
Depreciation: property, plant and equipment 26.4 24.0 Note 11 - Property, plant and equipment
Operational lease payments (12.4) (12.5) No direct reference
Depreciation: historical cost of biological assets 10.7 10.0 See Financial Review
Amortisation and impairment (excluding separately identifiable acquired 4.3 3.7 Note 9 - Intangible assets
intangible assets)
Less amounts attributable to non-controlling interest (0.3) (0.1) Group Income Statement
Adjusted EBITDA - as calculated under our financing facilities 100.7 106.1
Revenue excluding Genus PIC China
30 June 2022 30 June 2021
£m £m £m £m Reference
Revenue 593.4 574.3 Note 3 - Segmental information
Less revenue in Genus PIC China (29.9) (55.0) No direct reference
Revenue excluding Genus PIC China 563.5 519.3
PIC Adjusted operating profit inc JVs and exc PIC China
30 June 2022 30 June 2021
£m £m £m £m Reference
Adjusted operating profit in Genus PIC 112.3 122.9 Note 3 - Segmental information
Adjusted operating profit from PIC JV's and associates 9.1 13.2 No direct reference
Less amounts attributable to non-controlling interest (0.2) (0.2) No direct reference
Adjusted operating profit inc JVs 121.2 135.9
Less: PIC China adjusted operating profit inc JVs (5.6) (33.4) No direct reference
PIC Adjusted operating profit inc JVs exc PIC China 115.6 102.5
Adjusted Profit before tax exc PIC China
30 June 2022 30 June 2021
£m £m £m £m Reference
Adjusted profit before tax 71.5 84.8 Group Income statement
Less adjusted profit before tax in Genus PIC China (5.6) (33.4) No direct reference
Adjusted profit before tax exc PIC China 65.9 51.4
Balance sheet measures
Net debt
Net debt as calculated under our financing facilities
2022 2021
£m £m £m £m Reference
Current unsecured bank loans and overdrafts 7.1 13.9
Non-current unsecured bank loans and overdrafts 182.1 109.4
Unsecured bank loans and overdrafts 189.2 123.3 Group Balance Sheet
Current obligations under finance leases 10.1 9.0
Non-current obligations under finance leases 24.5 19.3
Obligations under finance leases 34.6 28.3 Group Balance Sheet
Total debt financing 223.8 151.6 Note 15 - Notes to the cash flow statement
Deduct:
Cash and cash equivalents (38.8) (46.0) Group Balance Sheet
Net debt 185.0 105.6
Deduct:
Lower of obligations under finance leases or £30m (30.0) (28.3)
Add back:
Guarantees 20.2 19.1 Note 16 - Contingencies and bank guarantees
Deferred purchase arrangements - 0.1 No direct reference
Net debt - as calculated under our financing facilities 175.2 96.5
Cash flow measures
Cash conversion
2022 2021
£m £m £m £m Reference
Cash generated by operations 56.6 86.6 Note 15 - Notes to the cash flow statement
Operating profit 49.4 47.7 Group Income Statement
Add back:
Net IAS 41 valuation movement on biological assets 5.4 10.8 Group Income Statement
Amortisation of acquired intangible assets 8.3 7.4 Group Income Statement
Share-based payment expense 3.7 7.7 Group Income Statement
Exceptional items 2.0 3.3 Group Income Statement
Adjusted operating profit exc JVs 68.8 76.9 Group Income Statement
Cash conversion (%) 82% 113%
Free cash flow
2022 2021
£m £m £m £m Reference
Cash generated by operations 56.6 86.6 Note 15 - Notes to cash flow statement
Net interest and tax paid (22.3) (19.1) Note 15 - Notes to cash flow statement
Capital expenditure (50.9) (33.8) Group Statement of Cash Flows
Dividends received from JV and associates 3.2 4.1 Group Statement of Cash Flows
Joint venture and associate loan (payment)/repayment - (0.4) Group Statement of Cash Flows
Proceeds from sale of property, plant and equipment - 0.3 Group Statement of Cash Flows
Dividend to non-controlling interest (0.1) (0.2) Group Statement of Cash Flows
Free cash flow (13.5) 37.5
Other measures
Interest cover
2022 2021
£m Times £m Times Reference
Finance costs 6.6 5.4 Group Income Statement
Finance income (0.4) (0.4) Group Income Statement
Net finance costs 6.2 5.0 Note 5 - Net finance costs
Deduct:
Pension interest (0.2) (0.3) Note 5 - Net finance costs
Interest on lease liabilities (1.1) (0.8) Note 5 - Net finance costs
Unwinding discount on put options (0.2) (0.6) Note 5 - Net finance costs
Amortisation of refinancing fees (0.9) (0.9) Note 5 - Net finance costs
Adjusted net finance costs 3.8 2.4
Adjusted EBITDA - as calculated under our financing facilities 100.7 106.1 See APM
Interest cover 27 45
Ratio of net debt to adjusted EBITDA
2022 2021
£m Times £m Times Reference
Net debt - as calculated under our financing facilities 175.2 96.5 See APM
Adjusted EBITDA - as calculated under our financing facilities 100.7 106.1 See APM
Ratio of net debt to EBITDA 1.7 0.9
Return on adjusted invested capital
2022 2021
£m % £m % Reference
Adjusted operating profit inc JVs after tax 58.8 69.6 See APM
Equity attributable to owners of the Company 578.5 498.1 Group Balance Sheet
Add back:
Net debt 185.0 105.6 Note 15 - Notes to the cash flow statement
Pension liability 8.3 11.1 Group Balance Sheet
Related deferred tax (1.3) (2.1) No direct reference
Adjust for:
Biological assets - carrying value (366.8) (319.5) Note 10 - Biological assets
Biological assets' harvest classed as inventories (20.9) (17.8) No direct reference
Biological assets - historic cost 77.2 65.1 See Financial Review
Goodwill (111.0) (101.5) Group Balance Sheet
Related deferred tax 73.0 63.7 No direct reference
Adjusted invested capital 422.0 302.7
Return on adjusted invested capital 13.9% 23.0%
Return on invested capital
2022 2021
£m % £m % Reference
Return on adjusted invested capital 13.9% 23.0% see APM
Adjusted operating profit inc JVs after tax 58.8 69.6 see APM
Tax rate 18.9 24.3% 20.2 22.5% Note 7 - Earnings per share
Adjusted operating profit inc JVs 77.7 89.8 Group Income Statement
Adjusted operating profit attributable to non-controlling interest 0.3 0.1 Group Income Statement
Pre-tax share of profits from JVs exc net IAS 41 valuation movement (9.2) (13.0) Group Income Statement
Adjusted operating profit exc JVs 68.8 76.9 Group Income Statement
Fair value movement on biological assets (5.4) (10.8) Group Income Statement
Amortisation of acquired intangibles (8.3) (7.4) Group Income Statement
Share-based payment expense (3.7) (7.7) Group Income Statement
Exceptional items (2.0) (3.3) Group Income Statement
Share of post-tax profit of JVs 5.2 13.1 Group Income Statement
Finance costs (6.2) (5.0) Group Income Statement
Profit before tax 48.4 55.8 Group Income Statement
Tax (11.7) (9.0) Group Income Statement
Profit 36.7 46.8 Group Income Statement
Equity attributable to owners of the Company 578.5 498.1 Group Balance Sheet
Return on invested capital 6.3% 9.4%
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