REG - Genus - Preliminary Results
07/09/2023 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20230907:nRSG6342La&default-theme=true
RNS Number : 6342L Genus PLC 07 September 2023
Immediate release 7 September 2023
Genus plc
Preliminary results for the year ended 30 June 2023
SOLID PERFORMANCE AND GOOD STRATEGIC PROGRESS
Adjusted results(1) Statutory results
Actual currency Constant currency change(2) Actual currency
Year ended 30 June 2023 2022 Change 2023 2022 Change
£m £m % % £m £m %
Revenue 689.7 593.4 16 10 689.7 593.4 16
Operating profit 74.6 68.8 8 2 40.5 49.4 (18)
Operating profit inc JVs 85.8 77.7 10 3 n/a n/a n/a
Operating profit inc JVs exc gene editing 100.1 85.6 17 9 n/a n/a n/a
Profit before tax 71.5 71.5 - (8) 39.4 48.4 (19)
Free cash flow 18.2 (13.5) n/a n/a
Basic earnings per share (pence) 84.8 82.7 3 (5) 50.8 62.5 (19)
Dividend per share (pence) 32.0 32.0 -
Solid Group performance
· Group revenue rose by 10% in constant currency (16% in actual
currency)
· Adjusted operating profit including joint ventures up 3% in constant
currency (10% in actual currency)
· R&D investment increased by 19%(2) as planned, including a 66%(2)
rise in gene editing expense in preparation for the anticipated
commercialisation of pigs resistant to porcine reproductive and respiratory
syndrome virus (PRRSv) which continues to make excellent progress
· Adjusted profit before tax (PBT) flat in actual currency (8% lower in
constant currency), with net finance costs up 124%(2)
· Statutory PBT reduced by 19% to £39.4m, with a £16.9m reduction in
the non-cash fair value IAS41 valuation of the Group's biological assets
Record PIC performance, profit growth achieved in all regions
· Strong demand for PIC's differentiated genetics drove a 5% increase
in volumes, revenue up 7%(2) and strategically important royalty revenue
growth across all regions, up 10%(2)
· Adjusted operating profit including joint ventures increased by
11%(2), as the business continued to expand and strengthen commercial
relationships with producers around the world
· The performance was driven by strong profit growth in North America,
Latin America and Asia. Good growth in Europe, with improved performance in
the second half
· Performance in China was affected by ongoing market volatility,
particularly in the second half of the year. Volumes were 1% lower in the
year, with revenue stable. Royalty revenue was up 26%(2) and adjusted
operating profit was £9.4m (2022: £5.6m, impacted by a £4m customer credit)
Solid ABS performance, profit growth achieved in all regions other than Latin
America, which was stable
· Volumes up 3%, revenue up 12%(2) supported by robust price increases
· Adjusted operating profit up 5%, after a stronger second half.
Expansion of long-term partnerships with strategic accounts, underpinned by
Sexcel and NuEra beef genetics, drove strong profit growth in North America
and good growth in Europe
· Latin America profits stable, despite challenging market conditions,
particularly in Brazil where macroeconomic conditions continued to impact beef
supply and demand dynamics
· Sexed genetics volumes up 18%; strong growth in volumes of Sexcel and
third-party IntelliGen production
Good cash flow, debt leverage reduced and dividend maintained
· Free cash inflow(1) of £18.2m (2022: £13.5m outflow), reflecting
record high adjusted EBITDA(1), lower working capital outflows and lower
capital expenditure. Strong cash conversion of 105%(1) (2022: 82%) above
target level of 90%
· Net debt to EBITDA ratio improved to 1.6x(1) (2022: 1.7x); within the
1.0x-2.0x target range. Net debt(1) of £195.8m (2022: £185.0m) as expected
· Adjusted earnings per share rose 3% in actual currency, full year
dividend maintained at 32.0p per share, with 2.7x(1) adjusted earnings cover,
comfortably within the 2.5x-3.0x target range
Good strategic progress and continued investment for growth
· Genus's PRRSv-resistant pigs programme continued to make excellent
progress, with submissions to the US Food and Drug Administration (FDA)
completed ahead of schedule and approval expected in the first half of 2024.
We are making regulatory progress in Colombia, Brazil and also China, where
we have obtained consent for import of PRRSv-resistant pigs for in-country
assessment
· PIC's new world-class elite farms in Canada, Brazil and China well
positioned to capture future growth opportunities
· GenusOne successfully deployed throughout the majority of Europe in
the year; implementation underway in LATAM
· Strong progress in reducing CO2 emissions; primary intensity ratio
reduced by 36% and Scope 1 and 2 emissions reduced by 14% compared to our 2019
baseline
Commenting on the performance and outlook, Jorgen Kokke, Chief Executive
Officer, said:
"The Group achieved a strong operational performance despite ongoing
challenging market conditions for producers in several important markets.
Revenues grew in all regions and both PIC and ABS delivered profit growth.
This also enabled us to deliver record adjusted EBITDA and good cashflow for
the Group. Growth in R&D investments, primarily due to the strategically
important gene editing work and expansion of PIC's elite farms, as well as
higher interest costs, resulted in adjusted profit before tax consistent with
the prior year.
"PIC's performance was particularly impressive, achieving a record adjusted
operating profit for the year. Whilst PIC China had a more challenging second
half, this was offset by the strong performance in the rest of the world. Our
focus is on ensuring that PIC China can offer the best genetics and customer
service in the market, underpinned by royalty contracts where we share in our
customers' success and build a predictable business. Population of PIC's new
world-class elite farms in Canada, Brazil and China positions the business
very well to capture future growth opportunities, including commercialising
PRRSv-resistant edited pigs.
"The PRRSv-resistant pig programme is reaching an exciting stage, having
completed our submissions to the FDA ahead of schedule. Approval is expected
in the first half of 2024. We are also progressing the approvals for other
markets, including China where we now have consent to import PRRSv-resistant
pigs for in-country assessment.
"ABS saw trading improve in the second half and it continued to expand
business with strategic accounts, by continuing to build long-term
partnerships and offering the leading combination of Sexcel and NuEra beef
genetics. This, along with robust price increases to counter inflation,
enabled ABS to achieve good performances across most regions, countering the
weakness in the Brazilian market, where nevertheless we increased market
share.
"In fiscal year 2024 we expect to perform in line with our medium-term growth
expectations in constant currency. Based on the recent strengthening of
sterling against certain key currencies and higher interest rates in the
current year, we expect modest growth in adjusted profit before tax in actual
currency. The Board remains confident in the Group's strategy and the many
opportunities for Genus."
Results presentation today
A pre-recorded investors, analysts and bankers briefing to discuss the
preliminary results for the year ended 30 June 2023 will be accessible via the
following link from 7:01am UK time today:
https://stream.buchanan.uk.com/broadcast/64d23b9607eccc4a190b942c
(https://stream.buchanan.uk.com/broadcast/64d23b9607eccc4a190b942c)
This will be followed by a live Q&A session by invitation. Those unable to
attend in person can also join via Zoom at 10:30am UK time. Please contact
Verity Parker at Buchanan for details: verity.parker@buchanancomms.co.uk
(mailto:verity.parker@buchanancomms.co.uk)
Enquiries:
Genus plc (Jorgen Kokke, Chief Executive Officer / Alison Henriksen, Chief Tel: 01256 345970
Financial Officer /
Anand Date, Investor Relations Director)
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 statutory measures, and not as a substitute for or
as superior to them. For more information on APMs, see the APM Glossary.
(2) Constant currency percentage movements are calculated by representing the
results for the year ended 30 June 2023 at the average exchange rates applied
to adjusted operating profit for the year ended 30 June 2022.
(3) The primary intensity ratio is a measure of the Group's Scope 1 and 2
emissions per tonne of animal weight
Chief Executive Officer's Review
I am pleased to be reporting to you for the first time as CEO of Genus. Since
joining the Company in May this year, I have been deeply impressed by what I
have seen, including the strong competitive position of our businesses, the
depth of the Group's talent, its cutting-edge science and the quality of
investment in the Group's facilities. It is very clear to me that Genus has a
significant growth opportunity ahead of it and I am looking forward to
progressing our growth strategy in the years to come.
In the year to 30 June 2023, the Group faced challenging conditions in several
markets, notably for PIC China and ABS Brazil. Nevertheless, PIC and ABS
achieved geographically broad-based profit growth, enabling the Group to
deliver solid results, and we have continued to invest in the growth drivers
of our business, positioning ourselves for sustainable success.
Group Performance
Revenue for the year was £689.7m, up 16% (10% in constant currency), with
adjusted profit before tax stable at £71.5m (-8% in constant currency),
reflecting investment in our gene editing programme and higher interest costs.
PIC's global volumes were up 5% and revenue rose by 7% in constant currency,
with strategically important royalty revenue up 10%. Adjusted operating profit
(including joint ventures) was 11% higher in constant currency. The North and
Latin America businesses continued to perform strongly, while the European
business saw an improvement in trading in the second half of the year, after
being affected by difficult market conditions in some countries in the first
six months.
PIC China saw a significant swing in its performance during the year, as the
market recovery in the first half stalled. The market was weak from December
2022, reflecting high supply of slaughter pigs due to ASF and weak consumer
demand. As a result, pig prices fell to a point where producers were
unprofitable, with many delaying rebuilding their sow herds. After an
operating profit of £8.8m in the first half, PIC China had only a modest
profit in the second half of the year. We remain confident that our
investments in PIC China give us a strong platform to capture the growth
opportunities in China and build a strong predictable royalty-based business,
including commercialising PRRSv-resistant pigs.
ABS saw trading improve as the year progressed. Volumes increased by 3%,
revenue was 12% higher in constant currency and adjusted operating profit grew
by 5%. The North American business had a strong year and Europe delivered good
growth, although in Latin America, market conditions remained challenging in
Brazil, particularly in the first half. Volumes in ABS continued to benefit
from take-up of sexed genetics.
Strategic Progress
Our PRRSv-resistant pig programme is reaching an exciting stage, as we have
continued to deliver important milestones. During the year we finished the
final regulatory animal studies and since the year end we have completed our
submissions to the FDA. We expect the FDA's approval in the first half of
2024. In preparation for commercialising our gene-edited animals, we continue
to engage with customers and industry participants, and are seeing high
interest. In China, the regulatory environment is developing, with the
publication of regulations on gene-edited animals, and we also gained consent
to import PRRSv-resistant pigs to China, for in-country regulatory assessment.
We also made progress towards obtaining regulatory approval in Colombia and
Brazil.
In addition to PRRSv, we have active research programmes using gene editing to
produce animals resistant to other diseases. Elsewhere in our R&D
programme, we have seen encouraging progress in reproductive biology and have
further enhanced our IntelliGen capabilities and technology, to deliver
continuous improvement and efficiency gains.
After a peak year of investment in the 2022 fiscal year, we have invested
further to complete multi-year investments in our facilities and systems. In
the porcine business, our Atlas facility in Canada came into operation in the
year, Granja Genesis in Brazil was stocked and we have started stocking Ankang
in China. We used the opportunity of the new capacity in North America to
temporarily destock the Aurora farm to enable facility and health upgrades to
be made, which will further strengthen our porcine supply capability. We have
continued to build out ABS's facilities in Leeds, Wisconsin. We have also
completed the majority of the rollout of GenusOne in Europe, with Latin
America and Asia to follow. The system is already giving us much greater
visibility of performance in the countries where we are using it, giving us
access to data we did not have before, identifying further opportunities
within the business.
Sustainability
We made further progress with our sustainability agenda as we continued to
work through our plan, delivering real reductions in our carbon footprint. In
the year our scope 1 and 2 carbon footprint reduced by 5% and since 2019 has
reduced by 14%, while continuing to grow our business, resulting in a 36%
improvement in our primary intensity ratio over this period, ahead of our
original target. At the same time, we see sustainability as a business
opportunity, as our customers look to use genetics to reduce emissions from
their herds. Genus recently received a grant of £3m from Innovate UK to
further our work on Climate-Smart Genetics in beef, which is a validation of
the work we have been doing to show that genetics can make an important
difference. In addition, we are working in collaboration with the Gates
Foundation and other partners to improve dairy genetics in East Africa.
People
As previously announced, my predecessor Stephen Wilson will retire from Genus
at the end of September 2023. We have been working closely together on the
transition and I thank him for his support and his significant contribution to
the Group during his decade on the Board.
Dr Bill Christianson has also retired as Chief Operating Officer of Genus PIC.
He joined our porcine business 30 years ago and has been instrumental in its
success. We were delighted to fill this key position internally and I look
forward to working with Dr Matt Culbertson, previously Global Product
Development and Technical Services Director, who was the outstanding candidate
for the role.
Genus employs highly talented people at all levels of the business and around
the world, and I thank them all on the Board's behalf for their contribution
this year. We continue to invest in learning and development, strengthen our
approach to diversity and inclusion and enable our people to share in the
Group's success through a new employee share scheme.
Outlook
Genus achieved a strong adjusted operating profit performance in fiscal year
2023, despite challenging conditions for our customers in several parts of the
world. Over a five-year period we have delivered performance in line with our
stated medium term objective of a 10% CAGR in adjusted operating profit
excluding gene editing, in constant currency. We remain confident that Genus
is well placed to continue gaining market share through our world class team,
market leading genetics, global supply chain and pioneering technology.
We have a clear focus on continuing to drive growth through leveraging the
significant investments the Group has made in recent years. The
PRRSv-resistant pig represents the most substantial opportunity in the medium
term with FDA approval expected in the first half of 2024, having completed
our submissions ahead of schedule.
We anticipate that the China porcine market will continue to be volatile,
reflecting continued disease outbreaks, a less consolidated industry structure
and weak consumer demand. We remain confident PIC China will be a resilient
growth business over the medium-term through offering the best genetics,
customer service and increasing the penetration of our royalty-based model.
In fiscal year 2024 we expect to continue to perform in line with our
expectations for adjusted operating profit excluding gene editing, in constant
currency. However, the recent strengthening of the pound sterling relative to
several of our key trading currencies is currently anticipated to lead to a
currency translation headwind of approximately £5-6m in the year. In
addition, we expect finance costs to increase by approximately £2m as a
result of the higher interest rate environment. The Board therefore expects
modest growth in adjusted profit before tax in actual currency for fiscal year
2024.
The Board remains confident in the Group's strategy and our medium-term growth
expectations remain unchanged.
Financial and Operating Review
Financial Review
In the year ended 30 June 2023, the Group achieved revenue growth of 16% in
actual currency (10% in constant currency). Adjusted operating profit
including joint ventures was up 10% (3% in constant currency), reflecting good
profit growth across our businesses, and was 17% higher (9% in constant
currency) before gene editing costs. R&D investment increased by 29% (19%
in constant currency), as planned, due to an increase in gene editing costs as
we move closer to commercialisation of the PRRSv-resistant pig and higher
porcine product development costs, primarily due to the start of operations at
our Atlas facility in Canada.
On a statutory basis, profit before tax was £39.4m (2022: £48.4m). The
difference between the movement in statutory and adjusted profit before tax
was mainly due to a reduction in the non-cash fair value of IAS 41 porcine
biological assets, and a higher share-based payment charge. Basic earnings per
share on a statutory basis were 50.8 pence (2022: 62.5 pence).
Adjusted profit before tax remained at £71.5m (down 8% in constant currency),
with the improved trading performance being offset by higher interest expense,
which increased from £6.2m to £14.3m (up 124% 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 £5.4m
compared with 2022, primarily due to the strength of the Brazilian Real and
Mexican Peso against Sterling during the year. 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
2023 at the average exchange rates applied to adjusted operating profit for
the year ended 30 June 2022.
Revenue
Revenue increased by 16% (10% in constant currency) to £689.7m (2022:
£593.4m). PIC's revenue rose by 14% (7% in constant currency) with growth
across all regions and a double-digit increase in strategically important
royalty revenue. In ABS, revenue was up 17% (12% in constant currency),
reflecting the continuing success of Genus's sexed genetics and NuEra beef
genetics as well as the implementation of robust prices increases to offset
the effects of cost inflation.
Adjusted Operating Profit Including JVs
Actual currency Constant currency change
Year ended 30 June 2023 2022 Change
Adjusted Profit Before Tax(1) £m £m % %
Genus PIC 145.3 121.2 20 11
Genus ABS 43.6 40.5 8 5
R&D (86.3) (67.1) (29) (19)
Central costs (16.8) (16.9) 1 1
Adjusted operating profit inc JVs 85.8 77.7 10 3
Net finance costs (14.3) (6.2) (131) (124)
Adjusted profit before tax 71.5 71.5 0 (8)
(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 £85.8m (2022:
£77.7m), 3% higher in constant currency. The Group's share of adjusted joint
venture operating profit, primarily from our Brazilian joint venture with
Agroceres, was higher at £10.8m (2022: £9.2m).
Gene editing investment, which is primarily focused on the PRRSv-resistant pig
programme, increased to £14.3m (2022: £7.9m) as planned. This enabled us to
continue expanding our population of gene-edited animals and increase
preparation for commercialisation. Adjusted operating profit including joint
ventures and excluding gene editing investment was £100.1m (2022: £85.6m),
9% higher in constant currency. Over the last five years, our compound annual
growth rate in this profit measure remains at 10% in constant currency, in
line with our medium-term objective.
PIC's performance was a record level, with adjusted operating profit including
joint ventures up 11% in constant currency. Volumes were up by 5% and
strategically important royalty revenue was up 10%, with increases across all
regions.
ABS's volumes rose by 3% and adjusted operating profit also rose by 5%. Demand
for Sexcel, our proprietary bovine sexed product, continued to increase, as
well as our IntelliGen third party sexed processing, supporting an 18% rise in
sexed volumes and further growth in our proprietary NuEra beef genetics. There
was adjusted operating profit growth across most regions, with North America
increasing adjusted operating profit by 17% in constant currency. Latin
America's profits were stable, despite the region continuing to suffer from
challenging market conditions. Europe's adjusted operating profit grew by 7%,
due to growth across most countries, and in Asia adjusted operating profit was
4% higher, due to growth in our India IntelliGen business.
Central costs were stable, at £16.8m (2022: £16.9m) in constant currency,
primarily due to prudent cost management.
Statutory Profit Before Tax
The table below reconciles adjusted profit before tax to statutory profit
before tax:
2023 2022
£m £m
Adjusted Profit Before Tax 71.5 71.5
Operating profit attributable to non-controlling interest (0.4) 0.3
Net IAS 41 valuation movement on biological assets in JVs and associates 3.6 (1.4)
Tax on JVs and associates (3.9) (2.6)
Adjusting items:
Net IAS 41 valuation movement on biological assets (16.9) (5.4)
Amortisation of acquired intangible assets (7.7) (8.3)
Share-based payment expense (6.0) (3.7)
Other gains and losses 2.7 -
Exceptional items (3.5) (2.0)
Statutory Profit Before Tax 39.4 48.4
Statutory profit before tax was £39.4m (2022: £48.4m), with improved trading
performance being offset by higher interest expense, a higher non-cash fair
value net charge for IAS 41 biological asset movement, higher share-based
payment expenses and higher net exceptional items. Within this, there was a
£24.9m reduction (2022: £24.5m uplift) in porcine biological assets,
primarily due to the temporary destocking of the Aurora farm in Canada to
complete a facility and health upgrade, and a £8.0m uplift (2022: £29.9m
reduction) in bovine biological assets, due to certain fair value model
estimate changes. Share-based payment expense was £6.0m (2022: £3.7m). 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 £3.5m net exceptional expense in the year (2022: £2.0m net
expense), which included legal fees of £5.4m (2022: £1.4m) primarily related
to Genus ABS's ongoing litigation with STgenetics and a £0.9m credit for a
part that was settled during the year. It also included a £1.7m credit
relating to an in-year sale of our Canadian ABS facilities, following the
prior year ABS production restructuring.
The prior year benefited from a £3.3m credit relating to a non-refundable
cash receipt related to a legacy legal claim in Brazil, £2.8m of
restructuring expense principally related to the closure of ABS supply chain
barns in Canada and £0.5m of one-time costs to resolve an IT security
incident.
Net Finance Costs
Net finance costs increased to £14.3m (2022: £6.2m), primarily due to
interest rate rises during the year. Average interest rates more than doubled
to 4.94% (2022: 2.27%), raising the cost of like-for-like borrowings by
£4.6m. Average borrowings increased by 30% to £226.9m (2022: £173.9m),
primarily due to the cash investments in the prior period on supply chain
capacity and the acquisition of Olymel's AlphaGene programme, resulting in a
further £2.6m increase in interest costs in this year. The interest rate
increases were partially mitigated by the company's fixed interest cover,
which reduced the impact of rate increases by around £1.0m.
Amortisation costs in the year were £1.1m (2022: £0.9m) and within other
interest there was IFRS 16 finance lease interest of £1.2m (2022: £1.1m) and
both a discount interest unwind on the Group's pension liabilities and put
options totalling £0.5m (2022: £0.4m). Foreign interest in the year was an
expense of £0.2m (2022: £0.3m income).
Taxation
The statutory profit tax charge for the period, including share of income tax
of equity accounted investees, of £11.5m (June 22: £14.3m) represents an
effective tax rate (ETR) of 26.6% (June 22: 28.0%). The reduction in the
statutory ETR of 1.4 points results from the recognition of additional
deferred tax assets, net of increased UK and foreign tax rates, as explained
further below.
The adjusted profit tax charge for the year of £15.9m (June 22: £17.4m)
represents an ETR on adjusted profits of 22.2% (June 22: 24.3%), a reduction
of 2.1 points. Of this, a decrease of 6.2 points is due to the recognition of
deferred tax assets for brought forward losses in Genus's Australia and France
subsidiaries. This is offset by a 1.5 point increase, due to the rise in the
UK and Consolidation Tax rates from 19% to 20.5%, and by a further 2.6 point
increase in overseas taxes during the year. These higher overseas taxes are
due to an increased share of Group profits in higher tax jurisdictions and
reduced tax credits relating to agricultural activity in China. The Group's
anticipated adjusted ETR for 2024 is 24% to 27%, which is higher than the
current year due to the full year impact of the UK tax rate increase to 25%
that took effect from April 2023 and the above noted change in profit mix to
higher tax rate jurisdictions.
Earnings Per Share
Adjusted basic earnings per share increased by 3% (5% reduction in constant
currency) to 84.8 pence (2022: 82.7 pence), reflecting the improved trading
performance and lower effective tax rate, and offset by higher interest
expenses. Basic earnings per share on a statutory basis were 50.8 pence
(2022: 62.5 pence), taking into account the factors above and the impact of a
higher non-cash fair value net charge for IAS 41 biological asset movement,
higher share-based payment expenses and higher net 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 2023, the carrying value of biological assets was £364.7m (2022:
£387.7m), as set out in the table below:
2023 2022
£m £m
Non-current assets 318.2 333.7
Current assets 23.8 33.1
Inventory 22.7 20.9
364.7 387.7
Represented by:
Porcine 242.7 278.8
Dairy and beef 122.0 108.9
364.7 387.7
The movement in the overall balance sheet carrying value of biological assets
of £23.0m includes the effect of an exchange rate translation decrease of
£17.2m. Excluding the translation effect there was:
· a £23.7m reduction in the carrying value of porcine biological
assets, due principally to the depopulation of animals held in Aurora, our
genetic nucleus farm in Canada, in preparation for an upgrade to the farm
facilities and health status, and higher global interest rates which impact
the valuation discount rates; and
· a £17.9m increase in the bovine biological assets carrying value,
primarily reflecting increases in average selling prices.
The historical cost of these assets, less depreciation, was £83.4m at 30 June
2023 (2022: £77.2m), which is the basis used for the adjusted results. The
historical cost depreciation of these assets included in adjusted results was
£13.4m (2022: £10.7m).
Retirement Benefit Obligations
The Group's retirement benefit obligations at 30 June 2023 were £6.9m (2022:
£8.3m) before tax and £5.6m (2022: £7.0m) net of related deferred tax. The
largest element of this liability now relates to some legacy unfunded pension
commitments dating prior to Genus's acquisition of PIC.
Despite difficult stock market conditions, robust investment strategies and
higher bond yields during the year mean our two main defined benefit
obligation schemes have remained in sound financial positions. Prior to any
IFRIC 14 amendments, both the Dalgety Pension Fund and our share of the Milk
Pension Fund reported IAS 19 surpluses.
Cash Flow
2023 2022
Cash flow (before debt repayments) £m £m
Cash generated by operations 78.7 56.6
Interest and paid taxes (28.3) (22.3)
Capital expenditure (35.2) (50.9)
Net cash received from JVs 0.7 3.2
Other 2.3 (0.1)
Free cash flow 18.2 (13.5)
Acquisitions and investments 1.2 (19.5)
Dividends (21.0) (20.9)
Net cash outflow (before debt repayments) (1.6) (53.9)
Cash generated by operations of £78.7m (2022: £56.6m) represented cash
conversion of 105% (2022: 82%) of adjusted operating profit excluding joint
ventures. The cash conversion rate of adjusted operating profit to cash
exceeded our objective to achieve conversion of at least 90% annually. We
expect to continue meeting this objective in the coming year. The increase in
cash generation primarily reflected a record adjusted EBITDA performance of
£110.6m (2022: £99.9m), along with lower working capital and biological
asset outflows. Working capital improvement was aided particularly by focused
accounts receivable collections, which improved days sales outstanding by 8
days to 48 days.
Capital expenditure cash flow of £35.2m (2022: £50.9m) was significantly
lower as planned, after our peak year of investment in 2022. Spend included
£19.8m of continued investment in our global facilities, as well as work to
upgrade our Whenby UK facility, further investment in global IntelliGen
capabilities and investment in software development, including the continued
rollout of our GenusOne platform and improvements to our digital platform.
Net cash inflow from joint ventures was £0.7m (2022: £3.2m). After interest
and tax paid, total free cash flow was £18.2m inflow (2022: £13.5m outflow).
The cash inflow from investments was £1.2m (2022: £19.5m outflow), with
proceeds from the sale of Caribou shares of £3.4m being offset by investments
in our China joint ventures of £1.0m, to increase production capacity, and
£0.8m of deferred consideration payments from previous acquisitions. The
prior-year investments included £14.5m to acquire the intellectual property
in Olymel's elite porcine genetics.
Net Debt and Credit Facilities
Net debt increased to £195.8m at 30 June 2023 (2022: £185.0m). Cash
inflows and outflows in the year largely balanced, with the increase in net
debt primarily driven by new lease agreements. The ratio of net debt to
EBITDA as calculated under our financing facilities at the year-end has
reduced to 1.6 times (2022: 1.7 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 2023, interest cover was at 10 times (2022: 27
times).
During the year, the Group's principal credit facilities comprised a £190m
multi-currency revolving credit facility (RCF), a USD 150m RCF and a USD 20m
bond and guarantee facility. An additional £40m of accordion facility remains
available for the duration of the facility agreement. The maturity date of the
facility was extended by a further year in August 2022, 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. On 30 June 2023, the Group had headroom of £118.7m (2022:
£77.8m) under its available credit facilities.
Capital allocation priorities and return on adjusted invested capital
Our capital allocation prioritises the investment of cash in areas that will
deliver future earnings growth and strong cash returns on a sustainable basis.
This includes investment for organic growth as a first priority through
investment in our existing businesses, including capital expenditure in
infrastructure, innovation in new products and the development of our people.
We supplement organic growth with value enhancing acquisitions in current and
adjacent market niches, aligned with our purpose. This brings new technology,
intellectual property and talent into the Group and expands our market reach,
keeping Genus well-positioned in growing markets over the long term.
The return on adjusted invested capital, as defined in the alternative
performance measures glossary, was higher at 14.7% (2022: 13.9%), reflecting
growth of 14% in adjusted operating profit including joint ventures after tax
to £66.8m (2022: £58.8m), due to the 10% increase in operating profit
including joint ventures, and a 2.1 point improvement in the adjusted
effective tax rate. Adjusted invested capital increased at a slower rate, by
8% to £455.0m (2022: £422.0m), as we continued to invest in facilities,
IntelliGen capacity, digital capability and our biological assets.
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 (2022: 32.0
pence per share). Dividend cover from adjusted earnings of 2.7 times (2022:
2.6 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 8 December 2023 to the
shareholders on the register at the close of business on 10 November 2023.
Genus PIC - Operating Review
Actual currency Constant currency change
Year ended 30 June 2023 2022 Change
£m £m % %
Revenue 349.5 306.6 14 7
Adjusted operating profit exc JV 135.0 112.3 20 11
Adjusted operating profit inc JV 145.3 121.2 20 11
Adjusted operating margin exc JV 38.6% 36.6% 2.0pts 1.6pts
Porcine markets around the world continued to face challenging conditions
during the year. These included economic uncertainty, volatile pig prices and
outbreaks of disease, especially African Swine Fever (ASF) and PRRSv. China,
the world's largest porcine market, experienced greater volatility than other
markets. Pig prices in China averaged 18.8 RMB/kg through the year and were
much weaker than expected in the second half, averaging 14.7 RMB/kg since
January.
Price declines in many regions caused significant pressure on producer
margins. This, together with inflation increasing input costs, drove some
producers to reduce or delay replenishing their herds.
Despite such challenging conditions impacting porcine markets, PIC increased
adjusted operating profit by 11% as the business continued to expand and
strengthen commercial relationships with producers around the world. Volumes
rose by 5%, aided by increased breeding stock sales in Europe and further
growth in market share within North America. Revenue growth across all regions
resulted in overall revenue increasing by 7% and strategically important
royalty revenue rising by 10%.
North America
The US breeding herd declined slightly, with slower production growth in the
second half of the year as domestic demand was lower in the face of rising
inflation and competition from other proteins. Pig prices fell sharply as a
result, reducing producer margins already under pressure from high input
costs. However, exports continued to grow, aided by lower prices compared with
some other markets and a weakening US dollar. This was driven particularly by
strong demand from China and Mexico.
Performance: The business performed strongly throughout the year, with market
share gains across our customer base through sales of both sireline and
damline products (volumes up 4% and 15% respectively). This was aided
particularly by the continuing popularity of the PIC 800 sire and Camborough
sow. The increases in market share and contributions from Olymel's AlphaGene
programme drove strong royalty revenue growth and a double-digit increase in
adjusted operating profit.
· volumes +9%
· revenue +4% and royalty revenue +8%
· adjusted operating profit +9%
Latin America
In Mexico, pork prices were lower than the previous year but remained well
above the five-year average and rose again in the final quarter. Production
increased slightly, as expected, but weaker domestic demand meant many
producers made losses for much of the year, although they are now approaching
or above breakeven. In Brazil, declining feed prices fuelled an increase in
production and helped to meet rising export demand, particularly from China.
These exports, when combined with seasonal domestic demand, helped pig prices
rise by over 10% in the final quarter, strengthening producer margins.
Performance: Lower breeding stock sales meant sales revenue declined. However,
strong royalty revenue from Mexico, Chile and Colombia, as well as 14% growth
in income from our joint venture with Agroceres, drove a double-digit increase
in adjusted operating profit, with all the larger countries contributing.
· volumes 0%
· revenue -6% and royalty revenue +12%
· adjusted operating profit +12%
Europe
The region experienced the greatest reduction in its breeding herd for 10
years and production contracted in major markets, due to the ongoing economic,
geopolitical and regulatory challenges impacting the agricultural sector. This
led to tight supply, driving pig prices to record highs and significantly
improving producer margins. These factors, along with high feed costs, disease
challenges and declining pork exports, are likely to constrain industry
recovery and sow herd growth in the future.
Performance: Despite challenging market conditions, breeding stock sales in
relation to royalty contracts rose and led to revenue growing 20%. Rising
royalty revenue, including double-digit growth in Spain, PIC's largest
European market, and Russia, from previous expansion projects, helped the
business deliver further growth in adjusted operating profit.
· volumes +8%
· revenue +20% and royalty revenue +9%
· adjusted operating profit +6%
Asia
Volatility in the China porcine market continued through this fiscal year,
with pig prices declining from a high of 28 RMB/kg in October 2022 to 14
RMB/kg by the end of June 2023. In addition, China experienced significant ASF
outbreaks, which created high levels of pork inventory, and there was a slow
recovery in domestic demand following the relaxation of COVID-19 restrictions.
All these factors resulted in many producers operating at a loss and remaining
cautious. Elsewhere in the region, ASF outbreaks affected both Vietnam and the
Philippines, although pork production is gradually growing in both markets.
Performance: Rising sales in the Philippines and Asia franchise businesses,
including Vietnam and South Korea, led to increased revenue. In China, market
volatility caused a decline in breeding stock sales, but overall revenue
remained stable, aided in particular by solid growth in royalty revenue. The
growth in royalty revenue, as well as the impact of a one-time £4m customer
credit in the prior year, meant there was a double-digit rise in adjusted
operating profit despite lower breeding stock margins and the impact of two
disease outbreaks on joint venture farms in the second half of the year.
Continued investment in China's supply chain and biosecurity means Genus is
well-positioned to benefit as the market stabilises.
· volumes 0% (PIC China -1%)
· revenue +3% (PIC China stable) and royalty revenue +20% (PIC China
+26%)
· adjusted operating profit +32% (PIC China +62%)
Genus ABS - Operating Review
Actual currency Constant currency change
Year ended 30 June 2023 2022 Change
£m £m % %
Revenue 318.8 272.0 17 12
Adjusted operating profit 43.6 40.5 8 5
Adjusted operating margin 13.7% 14.9% (1.2)pts (1.1)pts
Declining feed costs encouraged producers in Europe to maintain high levels of
milk production, but markets in Latin America were affected by high costs,
drought and limited forage. Growth in China was more modest than expected due
to slow recovery following the relaxation of COVID-19 restrictions. High
inventory and weaker consumer demand led to reduced milk prices in Brazil and
China, and prices in the US declined significantly in the second half of the
year.
Global beef production remained steady, with dips in the US and Europe offset
by rises in Brazil and Australia. Beef prices remained high in the US but
declined year-on-year in Brazil, due to high inventory and lower consumer
spending power. Prices in Europe declined as more animals were sent to
slaughter in response to the falling milk prices.
Despite the challenging market conditions, ABS continued to expand and
strengthen its partnerships with strategic accounts around the world. Through
these exclusive relationships, ABS is developing and delivering bespoke
genetic plans and growing sales of Sexcel and NuEra beef genetics to
accelerate customer success. These relationships drove a 3% increase in
volumes, which more than offset lower sales of conventional beef and dairy
genetics in some markets. More widely, the business continued to follow robust
pricing strategies to mitigate the impact of cost inflation and exercised
effective cost management. Such factors helped to deliver a 12% rise in
revenue, which translated into 5% growth in adjusted operating profit, after
taking account of the impact of higher supply chain costs following an IT
incident in June 2022.
North America
Dairy demand remained stable but milk prices fell significantly in the second
half of the year. This reduced producer margins, leading to higher herd
culling and feed ration changes, which is likely to slow growth in milk
production. The US beef herd contracted due to drought conditions and
production has declined during 2023 to date, with tighter supply driving
wholesale prices to approach record highs. These have yet to impact retail
demand but the high prices and lower domestic production have significantly
reduced export volumes.
Performance: Double-digit growth in revenue was driven by robust price
increases, rising sales of sexed genetics and ancillary products and services.
This more than offset lower volumes of conventional and beef genetics as
customers used sexed genetics to invest in more replacement heifers, rather
than beef by-product income. These activities, along with continued expansion
of our IntelliGen sexed processing for third-party customers, achieved a 17%
increase in adjusted operating profit.
· volumes +5%
· revenue +15%
· adjusted operating profit +17%
Latin America
High costs, drought and limited forage availability affected milk production
in Argentina and Uruguay, reducing producer margins. Milk production in Brazil
remained subdued and previously rising prices are now declining due to lower
consumer demand and the increase in supply following imports. Strong beef
exports from Brazil were driven by growing demand from China in particular,
but high inventory and lower consumer purchasing power impacted the domestic
market. Demand for beef in Mexico remains steady and exports have recently
improved after a slow start to 2023.
Performance: A transition from conventional to sexed genetics across the
region, along with robust price increases, led to a 12% rise in revenue on
broadly stable volumes comparable to the previous year. Growth and effective
cost management in Argentina supported an increase in adjusted operating
profit there, although this was offset by declines in other countries,
primarily Brazil, where there were challenging market conditions that
particularly impacted the embryo business, along with high business cost
inflation.
· volumes -1%
· revenue +12%
· adjusted operating profit 0%
Europe
Lower input costs encouraged producers to maintain milk production levels.
Following highs in the previous year, milk prices declined amid concerns over
weakening consumer demand in the face of inflationary pressure. Beef
production across the region dipped and carcass prices have begun to decline
as more cows are sent for slaughter in response to the falling milk price,
although it remains well above the five-year average. Beef exports fell by
more than 20% during the year, as high carcass prices led customers in some
markets to source cheaper alternatives.
Performance: Increased sales in most retail markets, particularly France and
Russia, were partially offset by lower volumes in some distributor-led
markets, due to economic conditions and limited availability of certain types
of bulls for those markets. However, both revenue and adjusted operating
profit rose following targeted price increases and the expansion of
GeneAdvance long-term contracts with strategic accounts. IntelliGen
third-party business in the region continued to grow, with new customers in
Italy, the Netherlands, and Israel.
· volumes +1%
· revenue +8%
· adjusted operating profit +7%
Asia
Milk production in China continued to grow, albeit more slowly in the second
half of the year, but high domestic inventory and weak consumer demand meant
that milk prices declined. This led to growing numbers of animals being sent
to slaughter, boosting beef production. Slaughter volumes also increased in
Australia, but lower domestic milk production contributed to a double-digit
reduction in exports. Growth in India's milk production slowed, despite
increasing consumer demand, due to the impact of disease outbreaks and rising
costs, particularly for feed. Demand for beef in Japan continued to fall.
Performance: Overall volumes rose by 8%, with double-digit growth in sales of
sexed genetics in Australia, China and India tempered by fewer deliveries
through our distributor network, particularly in Japan due to a market
slowdown in the second half of the year. Growth in volumes in India were
driven by a contract with the Government of India and support for third-party
customers through IntelliGen technology. These increases in volumes, together
with significant strategic account growth in China, drove a 20% rise in
revenue and 4% increase in adjusted operating profit.
· volumes +8%
· revenue +20%
· adjusted operating profit +4%
Research and Development - Operating Review
Actual currency Constant currency change
Year ended 30 June 2023 2022 Change
£m £m % %
Porcine product development 29.7 22.5 32 24
Bovine product development 24.9 22.7 10 1
Gene editing 14.3 7.9 81 66
Other research and development 17.4 14.0 24 13
Net expenditure in R&D 86.3 67.1 29 19
During the year, net research and development expenditure rose by 19% in
constant currency, as planned. This increase enabled further investment in a
wide range of areas, including the research and development pipeline, new
technologies, gene editing projects and product development initiatives.
Porcine product development
Porcine product development made further progress on genomic selection and
enhanced genetic gain for target traits, including prolificacy, throughput,
carcass value and efficiency. We also expanded our use of digital phenotyping
to four further sites, helping us identify patterns in movement and behaviour
to aid improvement of robustness and longevity. These advances, along with
continued expansion of our global supply chain (including the addition of
three facilities to our nucleus network) enabled us to enhance resilience of
supply for customers around the world. Product development costs increased by
24% during the year, due principally to the start of operations at our Atlas
facility in Canada. Higher feed prices during the year also contributed to the
increase in expenditure.
Bovine product development
We continued to strengthen our proprietary range of NuEra beef genetics and to
invest in further product trials, from which preliminary data shows positive
performance against competitor genetics in areas such as feed efficiency and
growth rates.
We made further investments in our proprietary bovine sexing technology,
enabling us to continue strengthening our capability to produce sexed genetics
for ABS and for third-party customers through IntelliGen technology.
Gene editing
We made significant progress on our PRRSv-resistant pig programme, as we seek
regulatory approval for our gene-edited animals in target markets around the
world. This included completing data submissions to the FDA ahead of schedule
and we expect approval in the first half of 2024. We are also making
regulatory progress in Brazil and Colombia andwe gained consent to import
PRRSv-resistant pigs to China, for in-country regulatory assessment. In
parallel, we continued to expand capacity across our nucleus network in
preparation for the potential marketing of our gene-edited animals. We also
continued to explore how responsible use of gene editing could combat other
porcine diseases. This included evaluating potential target edits and
establishing further collaborations with academic partners.
Other research and development
Other research and development expenditure increased by 13%, compared to the
previous year. This enabled us to make further progress with our pioneering
work on reproductive biology, including collaborating with the University of
Florida to explore how embryonic stem cells could enhance genetic gain, and
introducing a new medium for embryo culture, which improves the quantity and
quality of embryos produced in commercial laboratories.
The increased investment also helped us develop our work on biosystems
engineering and data analytics, with progress in the latter area enabling us
to link and query different data sets simultaneously and elicit faster and
deeper insights to inform genetic improvement. We also continued to
collaborate with external partners on a series of discovery projects.
genus risk management
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 our business operations, while others relate to
future commercial exploitation of our leading-edge R&D programmes. We are
also exposed to global economic and political risks such as trade restrictions
attributed to the ongoing Russia-Ukraine conflict and slow economic recovery
in China post Covid-19.
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 of risks focused on:
· the continued impact of the Russia-Ukraine conflict;
· geopolitical tensions across the globe;
· macroeconomic conditions;
· impacts of climate change;
· carbon pricing; and
· cyber security.
There have been two changes to our principal risks this year. The first is an
increase to our Sustainability risk given increased regulations, reporting
requirements and carbon pricing. The second is a reduction in our Hiring and
Retaining Talented People risk based on our successful recruitment and
succession planning for key positions.
Last year we elevated cyber security to a principal risk and we continue to
see an increase in the sophistication and frequency of cyber-crime across
industries.
From our broad risk universe, we have identified 11 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.
Risk Risk description How we manage risk Risk change in FY23
Strategic Risks
DEVELOPING PRODUCTS WITH COMPETITIVE ADVANTAGE · Development programmes Dedicated teams align our product development to customer requirements. We use No change. Our analysis and benchmarking continue to support our genetic
fail to produce best genetics for customers. large-scale data and advanced genomic analysis to ensure we meet our breeding improvements.
goals. We frequently measure our performance against competitors in
· Increased competition to secure elite genetics. customers' systems, to ensure the value added by our genetics remains
competitive. We also partner with universities and other bodies to further our
developments.
CONTINUING TO SUCCESSFULLY DEVELOP INTELLIGEN TECHNOLOGY · Failure to manage the technical, production and financial Our continued development of the technology and its deployment to new markets No change. We have expanded the number of machines in our customer base this
risks associated with the is supported by dedicated internal resources and agreements with suppliers. To year and continue to optimise performance.
rapid development of the IntelliGen business. ensure optimum performance we provide maintenance and specialist training to
our customers.
There continues to be uncertainty over further legal actions and uncertainties
in relation to patent infringements.
Current patent infringement proceedings initiated by STgenetics in the US
continue to be vigorously defended.
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 life
technologies due to technical, intellectual property ('IP'), market, academic and industry contacts. Our Genus Portfolio Steering Committee cycle, and we maintain the high level of investment needed to bring the end
regulatory or financial barriers. oversees our research, ensures we correctly prioritise our R&D investments products 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. We work closely with regulators to ensure our products meet exacting
standards. We are expecting FDA regulatory approval for our PRRSv resistant
pigs in the first half of 2024.
CAPTURING VALUE THROUGH ACQUISITIONS · Failure to identify appropriate investment opportunities or to perform We have a rigorous acquisition analysis and due diligence process, with the No change. We continue to work diligently to identify areas of opportunity
sound due diligence. Board reviewing and signing off all material projects. We also have a consistent with our strategic plans, values and our aim to accelerate growth
structured post-acquisition integration planning and execution process focused and create value for our shareholders.
· Failure to successfully integrate an acquired business. on maximising value
Our experiences with post-acquisition integration provide a platform for
successfully integrating newly acquired businesses.
SUCCEEDING IN GROWTH MARKETS · Failure to appropriately develop our business in China and other growth Our organisation blends local and expatriate executives, supported by the No change. The global macroeconomic conditions driven by post Covid-19
markets. global species teams, to allow us to grow our business in key markets, while recovery and the Russia-Ukraine conflict have driven market price
managing risks and ensuring we comply with our global standards and with volatility. This has been especially felt in the China porcine market.
sanctions. We also establish local partnerships where appropriate, to increase
market access.
Risk Risk description How we manage risk Risk change in FY23
Strategic Risks continued
SUSTAINABILITY · Failure to lead the market in sustainable animal protein production and We have a global sustainability strategy and Climate Change Policy that are Increased. There is increasing regulation and demand for transparency and
help our customers to meet the challenge of producing meat and milk approved, and regularly reviewed, at Board level. Our Sustainability Committee accuracy of reporting on sustainability targets. There is an increase in
efficiently and sustainably, as climate change increases demand. oversees the implementation of the strategy and the annual objective setting carbon cost and a notable change in more frequent weather-related events
process as well as monitoring progress using key performance indicators and across the globe.
· Failure to fulfil our commitment to reduce the environmental impact of our sustainability risk register. We have developed our 2030 emissions
our own operations and implement our Climate Change Policy and TCFD reporting. reduction plan (and 2050 net zero plan) and developed quantifiable, robust
performance indicators in relation to life-cycle carbon reduction (per
generation) of pigs, beef and dairy cows. Our carbon reduction plans are on track to meet our 2030 goals and we have
achieved a significant reduction in our intensity measures since 2019.
Operational Risks
PROTECTING IP · Failure to protect our IP could mean Genus-developed genetic material, 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
methods, systems and technology become freely available to third parties. customer contracts and our selection of multipliers and joint venture partners to our R&D activity.
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 No change. There continue to be global supply chain challenges driven by the
the year to ensure compliance. We investigate biosecurity incidents, to ensure current economic climate, increased trade sanctions, and the continued spread
· Loss of ability to move animals or semen freely (including across learning across the organisation. We regularly review the geographical of ASF, especially in China.
borders) due to disease outbreak, environmental incident or international diversity of our production facilities, to avoid over-reliance on single
trade sanctions and disputes. sites.
· 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 Reduced. We have been able to attract and recruit key talent to critical roles
needed to deliver our growth plans and R&D programmes. assessments of our global talent pool and active leadership development including the new CEO. Post-COVID employee turnover in certain areas has now
programmes. The Group's reward and remuneration policies are reviewed returned to normal levels.
regularly, to ensure their competitiveness, and we have a long-term retention
incentive scheme. We work closely with several specialist recruitment
agencies, to identify candidates with the skills we need.
Risk Risk description How we manage risk Risk change in FY23
Operational Risks continued
CYBER SECURITY · Failure to adequately detect and mitigate a malicious cyber-attack by We utilise a flexible multi-layered approach that focuses on employee No change. There has been a continued rise in the sophistication, methods of
internal or external activists and the ability to quickly recover. awareness and training, policies, software, and a third-party 24 x 7 attack and frequency of cyber-crime. Increased geopolitical tensions also
monitoring Security Operations Centre and follow ISO 27001 standards. We have heighten the risks of a targeted cyber-attack. To mitigate these risks, our
· Failure to properly protect our data and systems from an attack. improved our system and data backup procedures and hardened our servers to programme of enhancing cyber protection following the IT security incident in
further strengthen our resilience and have a programme focused on continued June 2022 was successfully implemented in the year.
cyber security improvements. Our GenusOne programme continues to progress
well, improving our operational controls and IT security as we move to the
cloud.
Financial Risks
MANAGING AGRICULTURAL MARKET AND COMMODITY PRICES VOLATILITY · Fluctuations in agricultural markets affect customer profitability and We continuously monitor markets and seek to balance our costs and resources No change. There has been a slow post Covid-19 economic recovery and global
therefore demand for our products and services. in response to market demand. We actively monitor and update our hedging inflationary pressure, however agricultural input prices are now reducing for
strategy to manage our exposure. Our porcine royalty model and extensive use producers in many of our markets.
· Commodity pricing volatility may increase our operating costs. of third-party multipliers mitigates the impact of cyclical price and/or cost
changes in pig production. The China pork market continues to deal with the challenges of ASF, volatile
· Climate factors may have a longer-term influence on the cost and
prices and weak demand.
availability of agricultural inputs (animal feed).
· Geopolitical tensions and the Russia-Ukraine conflict may impact on
agricultural markets.
Group Income Statement
For the year ended 30 June 2023
Note 2023 2022
£m
£m
REVENUE 3 689.7 593.4
Adjusted operating profit 3 74.6 68.8
Adjusting items:
- Net IAS 41 valuation movement on biological assets 11 (16.9) (5.4)
- Amortisation of acquired intangible assets 10 (7.7) (8.3)
- Share-based payment expense (6.0) (3.7)
(30.6) (17.4)
Exceptional items (net) 4 (3.5) (2.0)
Total adjusting items (34.1) (19.4)
OPERATING PROFIT 40.5 49.4
Share of post-tax profit of joint ventures and associates retained 13 10.5 5.2
Other gains and losses 5 2.7 -
Finance costs 6 (15.4) (6.6)
Finance income 6 1.1 0.4
PROFIT BEFORE TAX 39.4 48.4
Taxation 7 (7.6) (11.7)
PROFIT FOR THE YEAR 31.8 36.7
ATTRIBUTABLE TO:
Owners of the Company 33.3 40.9
Non-controlling interest (1.5) (4.2)
31.8 36.7
EARNINGS PER SHARE
Basic earnings per share 8 50.8p 62.5p
Diluted earnings per share 8 50.5p 62.2p
Note 2023
£m
2022
£m
Alternative Performance Measures
Adjusted operating profit 74.6 68.8
Adjusted operating loss/(profit) attributable to non-controlling interest 0.4 (0.3)
Pre-tax share of profits from joint ventures and associates excluding net IAS 10.8 9.2
41 valuation movement
Gene editing costs 14.3 7.9
100.1 85.6
Adjusted operating profit including joint ventures and associates, excluding
gene editing costs
Gene editing costs (14.3) (7.9)
Adjusted operating profit including joint ventures and associates 85.8 77.7
Net finance costs 6 (14.3) (6.2)
Adjusted profit before tax 71.5 71.5
Adjusted earnings per share
Basic adjusted earnings per share 8 84.8p 82.7p
Diluted adjusted earnings per share 8 84.2p 82.3p
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 2023
Note 2023 2023 2022 2022
£m
£m
£m
£m
PROFIT FOR THE YEAR 31.8 36.7
Items that may be reclassified subsequently to profit or loss
Foreign exchange translation differences (27.2) 66.6
Fair value movement on net investment hedges - (0.7)
Fair value movement on cash flow hedges 0.8 1.9
Tax relating to components of other comprehensive expense/(income) 3.1 (8.2)
(23.3) 59.6
Items that may not be reclassified subsequently to profit or loss
Actuarial (loss)/gains on retirement benefit obligations 17 (40.4) 27.3
Movement on pension asset recognition restriction 17 38.3 (69.8)
Release of additional pension liability 17 3.0 43.7
Gain/(loss) on equity instruments measured at fair value 1.7 (6.1)
Tax relating to components of other comprehensive (income)/expense (1.2) 1.1
1.4 (3.8)
OTHER COMPREHENSIVE (EXPENSE)/INCOME FOR THE YEAR (21.9) 55.8
TOTAL COMPREHENSIVE INCOME FOR THE YEAR 9.9 92.5
ATTRIBUTABLE TO:
Owners of the Company 11.1 97.3
Non-controlling interest (1.2) (4.8)
9.9 92.5
Group Statement of Changes in Equity
For the year ended 30 June 2023
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 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 income/(expense) 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 income/(expense) 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 9 - - - - - (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
Foreign exchange translation differences, net of tax - - - (24.2) - - (24.2) 0.3 (23.9)
Fair value movement on net investment hedges, net of tax - - - - - - - - -
Fair value movement on cash flow hedges, net of tax - - - - 0.6 - 0.6 - 0.6
Gain on equity instruments measured at fair value, net of tax - - - - - 0.7 0.7 - 0.7
Actuarial loss on retirement benefit obligations, net of tax - - - - - (30.3) (30.3) - (30.3)
Movement on pension asset recognition restriction, net of tax - - - - - 28.7 28.7 - 28.7
Recognition of additional pension liability, net of tax - - - - - 2.3 2.3 - 2.3
Other comprehensive (expense)/income for the year - - - (24.2) 0.6 1.4 (22.2) 0.3 (21.9)
Profit/(loss) for the year - - - - - 33.3 33.3 (1.5) 31.8
Total comprehensive income/(expense) for the year - - - (24.2) 0.6 34.7 11.1 (1.2) 9.9
Recognition of share-based payments, net of tax - - - - - 6.3 6.3 - 6.3
Dividends 9 - - - (21.0) (21.0) - (21.0)
Adjustment arising from change in non-controlling interest and written put - - - - - - - (0.1) (0.1)
option
BALANCE AT 30 JUNE 2023 6.6 179.1 (0.1) 26.7 2.0 360.6 574.9 (7.7) 567.2
Group Balance Sheet
As at 30 June 2023
Note 2023 2022
£m
£m
ASSETS
Goodwill 107.8 111.0
Other intangible assets 10 66.2 72.0
Biological assets 11 318.2 333.7
Property, plant and equipment 12 164.4 171.4
Interests in joint ventures and associates 13 53.5 41.2
Other investments 8.8 10.2
Derivative financial assets 4.9 2.2
Other receivables 15 8.2 8.6
Deferred tax assets 16.5 10.1
TOTAL NON-CURRENT ASSETS 748.5 760.4
Inventories 14 61.3 50.9
Biological assets 11 23.8 33.1
Trade and other receivables 15 132.1 129.5
Cash and cash equivalents 36.3 38.8
Income tax receivable 4.0 4.0
Derivative financial assets 1.5 1.0
Asset held for sale - 0.2
TOTAL CURRENT ASSETS 259.0 257.5
TOTAL ASSETS 1,007.5 1,017.9
LIABILITIES
Trade and other payables 16 (122.0) (124.7)
Interest-bearing loans and borrowings (4.2) (7.1)
Provisions (1.8) (1.9)
Deferred consideration - (0.8)
Obligations under leases (10.0) (10.1)
Tax liabilities (7.4) (4.9)
Derivative financial liabilities (1.8) (1.8)
TOTAL CURRENT LIABILITIES (147.2) (151.3)
Trade and other payables 16 - (0.2)
Interest-bearing loans and borrowings (196.0) (182.1)
Retirement benefit obligations 17 (6.9) (8.3)
Provisions (10.3) (12.0)
Deferred consideration (0.6) (0.7)
Deferred tax liabilities (51.2) (60.3)
Derivative financial liabilities (6.2) (6.4)
Obligations under leases (21.9) (24.5)
TOTAL NON-CURRENT LIABILITIES (293.1) (294.5)
TOTAL LIABILITIES (440.3) (445.8)
NET ASSETS 567.2 572.1
EQUITY
Called up share capital 6.6 6.6
Share premium account 179.1 179.1
Own shares (0.1) (0.1)
Translation reserve 26.7 50.9
Hedging reserve 2.0 1.4
Retained earnings 360.6 340.6
EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY 574.9 578.5
Non-controlling interest (2.2) (0.7)
Put option over non-controlling interest (5.5) (5.7)
TOTAL NON-CONTROLLING INTEREST (7.7) (6.4)
TOTAL EQUITY 567.2 572.1
Group Statement of Cash Flows
For the year ended 30 June 2023
Note 2023 2022
£m
£m
NET CASH FLOW FROM OPERATING ACTIVITIES 18 50.4 34.3
CASH FLOWS FROM INVESTING ACTIVITIES
Dividends received from joint ventures and associates 13 2.6 3.2
Joint venture and associate loan investment 13 (1.9) -
Acquisition of joint venture and associate 13 (1.0) (2.2)
Acquisition of trade and assets - (0.8)
Acquisition of Olymel AlphaGene assets - (14.5)
Sale of other investments 3.4 -
Acquisition of other investments (0.4) (1.0)
Payment of deferred consideration (0.8) (1.0)
Purchase of property, plant and equipment (25.9) (42.1)
Purchase of intangible assets (9.3) (8.8)
Proceeds from sale of property, plant and equipment 2.4 -
NET CASH OUTFLOW FROM INVESTING ACTIVITIES (30.9) (67.2)
CASH FLOWS FROM FINANCING ACTIVITIES
Drawdown of borrowings 126.8 138.7
Repayment of borrowings (111.7) (83.9)
Payment of lease liabilities (11.1) (11.3)
Equity dividends paid (21.0) (20.9)
Dividend to non-controlling interest (0.1) (0.1)
Debt issue costs (1.1) (0.6)
Issue of ordinary shares - -
NET CASH (OUTFLOW)/INFLOW FROM FINANCING ACTIVITIES (18.2) 21.9
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 1.3 (11.0)
Cash and cash equivalents at start of the year 38.8 46.0
Net increase/(decrease) in cash and cash equivalents 1.3 (11.0)
Effect of exchange rate fluctuations on cash and cash equivalents (3.8) 3.8
TOTAL CASH AND CASH EQUIVALENTS AT 30 JUNE 36.3 38.8
NOTES TO THE GROUP FINANCIAL STATEMENTS
For the year ended 30 June 2023
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 2023 or the year ended 30 June
2022, but is derived from those financial statements. The financial statements
for the year ended 30 June 2022 have been delivered to the Registrar of
Companies and those for the year ended 30 June 2023 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 2023 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
2023 2022 2021 2023 2022 2021
US Dollar/£ 1.21 1.32 1.36 1.27 1.22 1.38
Euro/£ 1.15 1.18 1.13 1.16 1.16 1.17
Brazilian Real/£ 6.20 6.94 7.33 6.08 6.39 6.87
Mexican Peso/£ 22.84 26.97 28.15 21.74 24.45 27.57
Chinese Yuan/£ 8.44 8.55 8.94 9.21 8.15 8.93
Russian Rouble/£ 86.29 98.75 102.04 112.79 66.73 101.10
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 2023. These financial statements have also been prepared in accordance
with the accounting policies set out in the 2022 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 2022 and have
been implemented with effect from 1 July 2022. These are:
> Amendments to IFRS 3 - 'Business Combinations' - References to the
Conceptual Framework;
> Amendments to IAS 12 - 'Income Taxes' - International tax reform -
Pillar two model rules;
> Amendments to IAS 16 - 'Property, Plant and Equipment' - Proceeds
before Intended Use;
> Amendments to IAS 37 - 'Onerous Contracts' - Cost of Fulfilling a
Contract; and
> Annual Improvements 2018-2020 Cycle.
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 IFRS 16 - 'Lease Liability in a Sale and Leaseback';
> Amendments to IAS 1 - 'Classification of Liabilities as Current or
Non-Current';
> Amendments to IAS 1 and IFRS Practice Statement 2 - 'Disclosure of
Accounting Policies';
> Amendments to IAS 7 and IFRS 7 - 'Disclosures: Supplier Finance
Arrangements';
> Amendments to IAS 8 - 'Definition of Accounting Estimates'; and
> Amendments to IAS 12 - 'Deferred Tax related to Assets and Liabilities
arising from a Single Transaction'.
Impact of Russian Sanctions
The Group has two group operating companies that are incorporated in Russia -
Limited Liability Co. Genus ABS Russia and PIC Genetics LLC ('Russian-based
subsidiaries/entities'). Following the sanctions that have been put in place
by the UK and other governments, the Group implemented a comprehensive
screening process with external counsel to ensure that its Russian entities do
not trade with sanctioned individuals or entities controlled by them. The main
impact of the sanctions regime on our business has been to categorise the
banks in Russia into sanctioned and non-sanctioned banks. Where we receive
money from sanctioned banks we are unable to use the cash without a licence
from His Majesty's Treasury ('HMT'). For cash receipts from non-sanctioned
banks into the entities' non-sanctioned banks we are able to use the cash in
Russia for day-to-day operations.
The Group applied to HMT for a licence on 25 April 2022, to allow the use of
payments from sanctioned banks by non-sanctioned Russian customers for the
delivery of porcine and bovine genetics; to allow the use of money in a
non-sanctioned Russian bank account in the name of Genus Russia to pay Russian
suppliers who continue to use sanctioned Russian bank accounts; and to remit
any excess money in Genus Russia's non-sanctioned Russian bank account
(regardless of whether it was received from a sanctioned or nonsanctioned
Russian bank account) to other Genus Group company UK bank accounts.
The UK Office of Financial Sanctions Implementation ('OFSI') issued a general
licence for trading in agricultural commodities in Russia effective on the 4
November 2022 which provides exemptions to the sanctions regime in connection
with the export, production and transport of agricultural commodities. This
definition includes reproductive materials such as are supplied by Genus.
Under this general licence, receipts from non-sanctioned customers received
from and before 4 November 2022 from sanctioned banks no longer need to be
frozen and can be freely used. Also receipts from a sanctioned customer, if
made through a non-sanctioned bank, no longer need to be frozen and can be
freely used. If any customer is or becomes sanctioned and pays through a
sanctioned bank, these funds would still need to be frozen even after 4
November 2022.
Under the requirements of IAS 7, where there is cash that is not available to
be used by the rest of the Group this needs to be disclosed. On 24 February
2023, the UralSib bank was put on the UK financial sanctions list and as such
ABS and PIC Russia subsequently opened new bank accounts with the OTP Bank on
21 March 2023 and on 16 May 2023 respectively. Any receipts from sanctioned
banks into the sanctioned UralSib account have been frozen and are not used
for business disbursements.
As at 30 June 2023, we had a cash balance of £3.1m (30 June 2022 £4.5m) in
the Russian entities of which £0.8m (30 June 2022: £0.2m) is not currently
available to be used by the Group due to being received from sanctioned banks
and held in a sanctioned bank. Management has reviewed the operations and cash
flow over a period of 18 months from 30 June 2023 to 31 December 2024, based
upon the 2024 plans, to determine whether the Russian entities have sufficient
non-sanctioned cash flow to enable them to continue day-to-day operations and
to meet liabilities as they fall due. The analysis indicates they do have
sufficient non-sanctioned cash flow to enable them to meet their day-to-day
operational needs.
Critical accounting judgement - exercise of control
Management has assessed whether the actions of the UK and Russian Governments
have caused the Group to lose control of these Russian-based subsidiaries.
Genus PLC applied for a licence to the Department for International Trade
('DIT') on 22 September 2022, to allow for UK-based employees within the Genus
group to provide accounting, business and management consulting services to
the Russian-based subsidiaries, for the purpose of helping them carry out
business operations in Russia, delivery of humanitarian assistance activity
and for the production or distribution of food, provided that it is for the
benefit of the civilian population.
The licence was authorised by the DIT and came into force on 11 January 2023.
It authorises the following services:
> The fullest possible range of accounting services, business and
management consulting services, to include advisory, guidance and operational
assistance services provided for business policy and strategy, and the overall
planning, structuring, and control of the organisation.
> The oversight that a parent company would typically provide to its
subsidiaries in the areas of accounting, financial controls, tax, treasury,
finance and human resources, along with similar oversight in the areas of
information technology, supply chain and other types of technology.
The licence expires on 11 January 2025 and, provided the facts and
circumstances surrounding the issuance of the licence currently in place do
not change materially we do not foresee any reasons why the licence could not
be renewed.
We have concluded that we do have control over the Russian-based subsidiaries
for the year ended 30 June 2023, as defined under IFRS 10 'Consolidated
financial statements', and we are still able to consolidate them despite
short-term restrictions on extracting cash. We have also assessed each of the
asset balances for impairment. The material areas that could give rise to
impairment are:
> PIC Russia farm: £2.4m (30 June 2022: £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 property's open market price
(less cost to sell) would support the carrying value.
> Trade receivables: £2.7m (30 June 2022: £6.0m) - the ongoing
financial sanctions may affect our customers ability to pay us for their
goods. If determined that our customers are unlikely to repay these amounts,
then they should be provided for.
> IAS 41 valuation: £3.9m (30 June 2022: £2.8m) - 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.
Management's impairment analysis indicates that, under the current business
environment and based on the plans for the Financial Year 2024 no impairment
is required as at 30 June 2023.
Management will continue to monitor the situation closely to see if any
further changes require additional analysis that may result in a different
conclusion.
In the event of changes in legislation, such as more restrictive sanctions
imposed by the UK Government or actions taken by the Russian Government, we
may determine that we do not exercise control, as defined under IFRS 10
'Consolidated financial statements', over the assets and operations of the
Russian entities and we would not be able to consolidate these companies into
the Financial Statements. The deconsolidation would mean that we would
reclassify the Russian entities as investments and we would need to assess for
impairment. A charge of up to £11.7m (2022: £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 from the date of any
deconsolidation. Revenues from the Russian entities were £21.7m in the year
ended 30 June 2023 (2022: £14.6m).
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 2026, 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.
Genus's credit facility agreement which consists of a £190m multi-currency
RCF, a 150m US dollar RCF and a US 20m USD bond guarantee. The term of the
facility is for four years to August 2025 having already exercised both
extension options. Additionally, there is an uncommitted £40m accordion
option which can be requested a further two occasions over the remaining
lifetime of the facility. The group have yet to enter discussions with the
banking syndicate regarding a new facility, however given the current standing
of our business relationship with the syndicate we have a reasonable
expectation that a new facility would be offered on appropriate terms.
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 2026. There are no indications
from this assessment that change this expectation when looking beyond 30 June
2026 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.
Change in trade and other receivables
It was identified that certain contract assets were previously incorrectly
classified as current trade receivables. The prior periods have been restated,
reducing current trade receivables by £9.6m in June 2022, with a
corresponding increase in current contract assets.
Climate change
In preparing these consolidated 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
2023. 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 6 September 2023.
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 2023 2022
£m £m
Genus PIC 349.5 306.6
Genus ABS 318.8 272.0
Genus Research and Development
Porcine product development 18.5 12.4
Bovine product development 2.8 1.7
Gene editing 0.1 0.7
Other research and development - -
21.4 14.8
689.7 593.4
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 2023 2022
£m £m
Genus PIC 135.0 112.3
Genus ABS 43.4 40.5
Genus Research and Development
Porcine product development (29.7) (22.4)
Bovine product development (25.6) (22.8)
Gene editing (14.3) (7.9)
Other research and development (17.4) (14.0)
(87.0) (67.1)
Adjusted segment operating profit 91.4 85.7
Central (16.8) (16.9)
Adjusted operating profit 74.6 68.8
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 £3.5m net expense (2022: £2.0m net expense) relate to
Genus ABS (£2.7m net expense) (2022: £4.2m net expense), Genus PIC (£nil)
(2022: £0.6m net expense) and our central segment (£0.8m net expense) (2022:
£2.8m net credit). 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)
2023 2022 2023 2022 2023 2022
£m £m £m £m £m £m
Genus PIC 5.0 4.5 6.8 7.4 6.8 45.2
Genus ABS 16.0 14.3 4.4 3.4 21.8 25.4
Genus Research and Development
Research 1.3 1.0 - - 1.6 3.3
Porcine product development 4.5 2.2 - - 1.2 1.3
Bovine product development 1.7 2.0 0.4 0.2 4.9 2.7
7.5 5.2 0.4 0.2 7.7 7.3
Segment total 28.5 24.0 11.6 11.0 36.3 77.9
Central 1.7 2.4 1.8 1.6 7.0 5.8
Total 30.2 26.4 13.4 12.6 43.3 83.7
Segment assets Segment liabilities
2023 2022 2023 2022
£m £m £m £m
Genus PIC 265.4 305.4 (66.0) (73.4)
Genus ABS 281.7 261.4 (72.5) (78.9)
Genus Research and Development
Research 11.4 14.7 (4.5) (4.4)
Porcine product development 269.1 275.0 (55.3) (57.7)
Bovine product development 125.0 119.6 (19.6) (16.7)
405.5 409.3 (79.4) (78.8)
Segment total 952.6 976.1 (217.9) (231.1)
Central 54.9 41.8 (222.4) (214.7)
Total 1,007.5 1,017.9 (440.3) (445.8)
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
2023 2022
£m £m
North America 288.5 238.5
Latin America 105.6 94.6
UK 93.1 88.7
Rest of Europe, Middle East, Russia and Africa 109.6 88.3
Asia 92.9 83.3
Total revenue 689.7 593.4
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.
2023 2022
£m £m
North America 508.6 529.6
Latin America 69.6 56.7
UK 71.5 69.8
Rest of Europe, Middle East, Russia and Africa 43.8 45.7
Asia 33.6 46.3
Non-current assets (excluding deferred taxation and financial instruments) 727.1 748.1
Revenue by type
2023 2022
£m £m
Genus PIC 173.5 158.4
Genus ABS 307.8 262.5
Genus Research and Development 21.4 14.8
Sale of animals, semen, embryos and ancillary products and services 502.7 435.7
Genus PIC 176.0 148.2
Genus ABS 1.4 1.1
Genus Research and Development - -
Royalties 177.4 149.3
Genus PIC - -
Genus ABS 9.6 8.4
Genus Research and Development - -
Consulting services 9.6 8.4
Total revenue 689.7 593.4
Revenue from contracts with customers
The Group's revenue is analysed below by the timing at which it is recognised.
2023 2022
£m £m
Genus PIC 343.7 303.2
Genus ABS 293.0 247.2
Genus Research and Development 21.3 14.1
Recognised at a point in time 658.0 564.5
Genus PIC 5.8 3.4
Genus ABS 25.8 24.8
Genus Research and Development 0.1 0.7
Recognised over time 31.7 28.9
Total revenue 689.7 593.4
4. EXCEPTIONAL ITEMS
Operating (expense)/credit 2023 2022
£m £m
Litigation (4.5) (1.4)
Acquisition and integration (0.4) (0.3)
Pension related - (0.4)
Legacy legal claim - 3.3
ABS production restructuring 1.7 (2.8)
Other (0.3) (0.4)
Net exceptional items (3.5) (2.0)
Litigation
Litigation includes legal fees and related costs of £4.5m (2022: £1.4m)
related to the actions between ABS Global, Inc. and certain affiliates ('ABS')
and Inguran, LLC and certain affiliates (also known as STgenetics ('ST')). The
net expense comprises £5.4m of legal costs and a £0.9m settlement credit
(see below for further details).
Material litigation activities to 31 August 2023
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.
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 United States Patent and Trademark Office ('USPTO')
issued patent 10,583,439 (the ''439 patent'), and subsequently ST asked the
court for permission to file a supplemental complaint in ABS III asserting
infringement of the '439 patent. On 15 April 2020, ST filed a new complaint
('ABS IV'), asserting the same claim of infringement of the '439 patent
alleged in its supplemental complaint and then moved to consolidate the ABS IV
and ABS III litigation. 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 20
September 2022 the USPTO issued patent 11,446,665 (the ''665 patent') and ST
subsequently sought a third-party supplement of ABS III by adding a claim of
infringement of the '665 patent. ABS has opposed this action as well, and
sought dismissal of all infringement claims.
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. ABS has appealed the
'439 patent decision (the ''439 Appeal').
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 in favour of ABS. ST appealed certain aspects of the
decision relating to technology transfer to third parties, one of the three
arguments put forward by ST in ABS III (the 'ABS III Appeal'). On 5 July 2023,
the Court of Appeals accepted ST's argument that claim preclusion from the ABS
I decision did not apply against ABS III in relation to technology transfer,
and that the Federal court improperly broadened the scope of the ABS I
judgment to address induced infringement.
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, and 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's 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. ABS filed counterclaims
alleging, among other things, anti-competitive conduct and infringement of
four ABS patents, later narrowed to three ABS patents. The hearing date of 15
July 2024 has been confirmed for ABS IV. Appeals were filed by ABS on the
validity and infringement of the '987 patent (the "987 Appeal"), the '476 and
the '309 patents (the "ABS II Appeal") and ST has appealed the award of the
$5.3m costs (the 'Fee Award Appeal').
On 27 December 2022, ABS and ST settled the 987 Appeal, the Fee Award Appeal
and the Indian Patent Proceedings (along with related patent oppositions in
India), delivering lower patent royalty payments for ABS and a settlement
exceptional credit of £0.9m. The ABS II Appeal, the ABS III Appeal, the ABS
IV litigation, the 439 Appeal, and the CCI Appeal remain ongoing. The 439
Appeal is scheduled for hearing on 5 September 2023 and the ABS II appeal is
likely to be heard before the end of the year.
Indian Litigation: In September 2019, ST also filed parallel patent
infringement proceedings against ABS in India, alleging infringement of the
Indian patent 240790 (''790 patent'). The '790 patent is the equivalent of the
US '476 , '309 patents and US patent 7, 311,476 asserted in ABS II. 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 (the "Indian Patent
Proceedings"). In June 2021, ST appealed the decision of the Competition
Commission of India ('CCI') which had confirmed that ABS India had not
breached the Indian Competition Act in relation to its participation in a
sexed semen tender offered by the Utter Pradesh Livestock Development Board
(the "CCI Appeal"). The CCI Appeal is scheduled for 11 October 2023.
NZ litigation: On 14 June 2023, ST initiated proceedings against ABS, Genus,
ABS Genus (NZ) Limited, CRV International BV and CRV Limited (together 'CRV')
in New Zealand, alleging patent infringement and seeking a preliminary
injunction. ABS had previously been awarded the semen sexing services for
CRV's bovine semen in New Zealand and other jurisdictions. ABS has sought a
stay of the New Zealand proceedings while the US court's consider whether the
settlement agreement between ABS and ST dated 27 December 2022 precludes the
New Zealand proceedings. The hearing of the ABS's stay application and ST's
preliminary injunction application is scheduled for 27 November 2023.
Acquisitions and integration
During the year, £0.4m (2022: £0.3m) of expenses were incurred in relation
to potential acquisitions.
ABS production restructuring
A one-off credit of £1.7m primarily related to the sale of our Canadian ABS
facilities as part of a production restructuring. The cash inflow of £1.8m is
included in investing activities.
Other
Included in Other is an expense of £0.3m relating to the sign-on bonus of the
newly appointed CEO, a £0.2m credit resulting from a share forfeiture
exercise and £0.2m in relation to the prior year IT incident. In the prior
year, a £0.5m expense relating to legal advice, IT consultancy and one-time
costs was incurred as the direct result of an IT security incident in June
2022.
5. Other gains and losses
Included with other gains and losses is a £2.7m gain on the mark to market
valuation (MTM) in relation to £60m of SONIA interest rate swaps executed in
April 2023. Whilst the interest rate swaps are a perfect commercial hedge of a
similar amount of our GBP borrowings for at least a three-year period, as the
executing banks have a written option at the three-year point to unilaterally
terminate the swaps at no cost, the transaction does not qualify for hedge
accounting treatment. Accordingly the MTM gain on the valuation of these swaps
as at 30 June 2023 is recognised in the Group Income Statement.
2023 2022
£m
£m
Gain on derivative 2.7 -
Other gains and losses 2.7 -
6. NET FINANCE COSTS
2023 2022
£m £m
Interest payable on bank loans and overdrafts (12.3) (4.1)
Amortisation of debt issue costs (1.1) (0.9)
Other interest payable (0.3) (0.1)
Unwinding of discount on put options (0.3) (0.2)
Net interest cost in respect of pension scheme liabilities (0.2) (0.2)
Interest on lease liabilities (1.2) (1.1)
Total interest expense (15.4) (6.6)
Interest income on bank deposits 0.1 0.4
Net interest income on derivative financial instruments 1.0 -
Total interest income 1.1 0.4
Net finance costs (14.3) (6.2)
7. TAXATION AND DEFERRED TAXATION
Income tax expense
2023 2022
£m £m
Current tax expense
Current period 20.6 13.6
Adjustment for prior periods 0.9 1.8
Total current tax expense in the Group Income Statement 21.5 15.4
Deferred tax expense
Origination and reversal of temporary differences (9.2) (0.5)
Adjustment for prior periods (4.7) (3.2)
Total deferred tax credit in the Group Income Statement (13.9) (3.7)
Total income tax expense excluding share of income tax of equity accounted 7.6 11.7
investees
Share of income tax of equity accounted investees (see note 13) 3.9 2.6
Total income tax expense in the Group Income Statement 11.5 14.3
Reconciliation of effective tax rate
2023 2023 2022 2022
% £m % £m
Profit before tax 39.4 48.4
Add back share of income tax of equity accounted investees 3.9 2.6
Profit before tax excluding share of income tax of equity accounted investees 43.3 51.0
Income tax at UK corporation tax of 20.5% (2022: 19.0%) 20.5 8.9 19.0 9.7
Effect of tax rates in foreign jurisdictions 13.6 5.9 9.2 4.7
Non-deductible expenses 6.7 2.9 4.3 2.2
Tax exempt income and incentives (3.0) (1.3) (1.8) (0.9)
Change in tax rate (1.2) (0.5) 2.5 1.3
Movements in recognition of tax losses (5.0) (2.2) 0.2 0.1
Change in unrecognised temporary differences (7.8) (3.4) (3.7) (1.9)
Tax over / (under) provided in prior periods 1.8 0.8 (2.1) (1.1)
Change in provisions 0.5 0.2 (0.2) (0.1)
Tax on undistributed reserves 0.5 0.2 0.6 0.3
Total income tax expense in the Group Income Statement 26.6 11.5 28.0 14.3
8. 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
2023 2022
(pence) (pence)
Basic earnings per share 50.8 62.5
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 £33.3m (2022: £40.9m) and a weighted average number of
ordinary shares outstanding of 65,557,000 (2022: 65,395,000), which is
calculated as follows:
Weighted average number of ordinary shares (basic)
2023 2022
000s 000s
Issued ordinary shares at the start of the year 65,774 65,761
Effect of own shares held (468) (373)
Shares issued on exercise of stock options 1 7
Shares issued in relation to Employee Benefit Trust 250 -
Weighted average number of ordinary shares in year 65,557 65,395
Diluted earnings per share from continuing operations
2023 2022
(pence) (pence)
Diluted earnings per share 50.5 62.2
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 £33.3m (2022: £40.9m) and a weighted average number of
ordinary shares outstanding, after adjusting for the effects of all potential
dilutive ordinary shares, of 65,988,000 (2022: 65,714,000), which is
calculated as follows:
Weighted average number of ordinary shares (diluted)
2023 2022
000s 000s
Weighted average number of ordinary shares (basic) 65,557 65,395
Dilutive effect of share awards and options 441 319
Weighted average number of ordinary shares for the purposes of diluted 65,998 65,714
earnings per share
Adjusted earnings per share from continuing operations
2023 2022
(pence) (pence)
Adjusted earnings per share 84.8 82.7
Diluted adjusted earnings per share 84.2 82.3
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, other gains and losses and exceptional
items, after charging taxation associated with those profits, of £55.6m
(2022: £54.1m), which is calculated as follows:
2023 2022
£m £m
Profit before tax from continuing operations 39.4 48.4
Add/(deduct):
Net IAS 41 valuation movement on biological assets (see note 11) 16.9 5.4
Amortisation of acquired intangible assets (see note 10) 7.7 8.3
Share-based payment expense 6.0 3.7
Exceptional items (see note 4) 3.5 2.0
Other gains and losses (see note 5) (2.7) -
Net IAS 41 valuation movement on biological assets in joint ventures (see note (3.6) 1.4
13)
Tax on joint ventures and associates (see note 13) 3.9 2.6
Attributable to non-controlling interest 0.4 (0.3)
Adjusted profit before tax 71.5 71.5
Adjusted tax charge (15.9) (17.4)
Adjusted profit after tax 55.6 54.1
Effective tax rate on adjusted profit 22.2% 24.3%
9. 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
2023 2022
£m £m
Final dividend
Final dividend for the year ended 30 June 2022 of 21.7 pence per share 14.3 -
Final dividend for the year ended 30 June 2021 of 21.7 pence per share - 14.2
Interim dividend
Interim dividend for the year ended 30 June 2023 of 10.3 pence per share 6.7 -
Interim dividend for the year ended 30 June 2022 of 10.3 pence per share - 6.7
Total dividend 21.0 20.9
The Directors have proposed a final dividend of 21.7 pence per share for 2023.
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 2023 is 32.0 pence per share (2022:
32.0 pence per share).
10. 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 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
Additions - - - - 9.3 - - 9.3
Transfers - - - 5.9 (5.9) - - -
Effect of movements in exchange rates (0.2) (4.0) (4.2) (0.3) (0.1) (1.1) - (5.7)
Balance at 30 June 2023 56.3 98.9 155.2 34.5 7.0 25.7 4.4 226.8
Amortisation and impairment losses
Balance at 1 July 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
Amortisation for the year 3.3 4.4 7.7 2.9 - 2.7 0.1 13.4
Effect of movements in exchange rates 0.1 (3.3) (3.2) (0.2) - (0.6) - (4.0)
Balance at 30 June 2023 42.5 81.2 123.7 18.2 - 14.4 4.3 160.6
Carrying amounts
At 30 June 2023 13.8 17.7 31.5 16.3 7.0 11.3 0.1 66.2
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
Included within brands, multiplier contracts and customer relationships are
carrying amounts for brands of £0.6m (2022: £0.5m), multiplier contracts of
£9.2m (2022: £11.1m) and customer relationships of £7.9m (2022: £11.2m).
Included within the software class of assets is £9.5m (2022: £6.9m) and
included in assets in the course of construction is £2.3m (2022: £2.7m)
that relate to the ongoing development costs of GenusOne, our single global
enterprise system and £1.6m (2022: £nil) that relate to IntelliGen.
11. BIOLOGICAL ASSETS
Fair value of biological assets Bovine Porcine Total
£m £m £m
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
Increases due to purchases 23.2 228.9 252.1
Decreases attributable to sales - (259.4) (259.4)
Decrease due to harvest (14.6) (31.4) (46.0)
Changes in fair value less estimated sale costs 6.6 38.2 44.8
Effect of movements in exchange rates (3.9) (12.4) (16.3)
Balance at 30 June 2023 99.3 242.7 342.0
Non-current biological assets 99.3 218.9 318.2
Current biological assets - 23.8 23.8
Balance at 30 June 2023 99.3 242.7 342.0
Bovine
Bovine biological assets include £8.9m (2022: £6.9m) 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 13.2% (2022: 12.5%) 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 in
note 14.
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 £91.5m (2022: £101.2m).
Decreases attributable to sales during the year of £259.4m (2022: £234.8)
include £104.6m (2022: £74.0m) 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 £96.5m (2022: £119.0m) 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 £281.9m (2022:
£231.4m) in respect of these contracts, comprising £105.9m (2022: £83.2m)
on initial transfer of animals and semen to customers and £176.0m (2022:
£148.2m) in respect of royalties received.
A risk-adjusted rate of 12.9% (2022: 10.3%) 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
(2022: seven) and their estimated useful lifespan is 1.4 years (2022: 1.4
years).
Year ended 30 June 2023
Bovine Porcine Total
£m £m £m
Changes in fair value of biological assets 6.6 38.2 44.8
Inventory transferred to cost of sales at fair value 1.4 (31.4) (30.0)
Biological assets transferred to cost of sales at fair value - (31.4) (31.4)
8.0 (24.6) (16.6)
Fair value movement in related financial derivative - (0.3) (0.3)
Net IAS 41 valuation movement on biological assets(1) 8.0 (24.9) (16.9)
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)
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)
12. 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 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
Additions 0.2 3.1 19.8 23.1 2.0 8.9 10.9 34.0
Transferred from assets held for sale 0.2 - - 0.2 - - - 0.2
Transfers 18.3 12.1 (30.4) - - - - -
Disposals (1.3) (3.7) (0.3) (5.3) - (4.9) (4.9) (10.2)
Effect of movements in exchange rates (6.4) (5.4) (1.8) (13.6) (1.8) (0.8) (2.6) (16.2)
Balance at 30 June 2023 111.2 119.7 16.9 247.8 31.7 31.6 63.3 311.1
Depreciation and impairment losses
Balance at 1 July 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
Depreciation for the year 5.6 12.8 - 18.4 4.6 7.2 11.8 30.2
Disposals (1.1) (2.7) - (3.8) - (4.7) (4.7) (8.5)
Impairment - - - - - - - -
Effect of movements in exchange rates (2.2) (3.6) - (5.8) (0.7) (0.4) (1.1) (6.9)
Balance at 30 June 2023 34.5 79.8 - 114.3 15.3 17.1 32.4 146.7
Carrying amounts
At 30 June 2023 76.7 39.9 16.9 133.5 16.4 14.5 30.9 164.4
At 30 June 2022 68.0 40.3 29.6 137.9 20.1 13.4 33.5 171.4
13. EQUITY ACCOUNTED INVESTEES
2023 2022
£m
£m
Balance at 1 July 41.2 34.1
Share of post-tax retained profits of joint ventures and associates 10.5 5.2
Additions 1.0 2.2
Long term loan investment 1.9 -
Dividends received from Agroceres - PIC Genética de Suínos Ltda (Brazil) (2.4) (3.1)
Dividends received from Società Agricola GENEETIC S.r.l (Italy) (0.2) (0.1)
Effect of other movements including exchange rates 1.5 2.9
Balance at 30 June 53.5 41.2
The additions in the year solely relate to cash injections made to Inner
Mongolia Haoxiang Pig Breeding Co. Ltd. to fund their operation.
There are no significant restrictions on the ability of the joint ventures and
associates to transfer funds to the Parent, other than those imposed by the
Companies Act 2006 or equivalent government rules within the joint venture's
jurisdiction.
Summary unaudited financial information for equity accounted investees,
adjusted for the Group's percentage ownership, is shown below:
Net IAS 41
valuation Profit after
movement tax
on biological £m
Revenue assets Expenses Taxation
Income Statement £m £m £m £m
Year ended 30 June 2023 48.1 3.6 (37.3) (3.9) 10.5
Year ended 30 June 2022 39.9 (1.4) (30.7) (2.6) 5.2
14. INVENTORIES
2023 2022
£m
£m
Biological assets' harvest classed as inventories 22.7 20.9
Raw materials and consumables 3.9 3.6
Goods held for resale 34.7 26.4
Inventories 61.3 50.9
15. TRADE AND OTHER RECEIVABLES
2023 (restated(1))
£m
2022
£m
Trade receivables (restated(1)) 95.4 95.7
Less expected credit loss allowance (3.9) (4.3)
Trade receivables net of impairment 91.5 91.4
Other debtors 8.1 10.7
Prepayments 7.7 8.5
Contract assets (restated(1)) 22.4 17.3
Other taxes and social security 2.4 1.6
Current trade and other receivables 132.1 129.5
Other debtors 3.0 3.7
Contract assets 5.2 4.9
Non-current other receivables 8.2 8.6
Trade and other receivables 140.3 138.1
1 See note 2 for details of the prior period restatement.
Trade receivables
The average credit period our customers take on the sales of goods is 48 days
(2022 (restated(1)): 56 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
(2022: no more than 5%).
16. TRADE AND OTHER PAYABLES
2023 2022
£m
£m
Trade payables 34.8 36.0
Other payables 11.6 8.2
Accrued expenses 58.1 61.4
Contract liabilities 9.8 10.1
Other taxes and social security 7.7 9.0
Current trade and other payables 122.0 124.7
Contract liabilities - 0.2
Non-current trade and other payables - 0.2
The average credit period taken for trade purchases is 32 days (2022: 39
days).
17. 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/(asset) split by principal scheme is set out below.
2023 2022
£m
£m
The Milk Pension Fund - Genus's share - -
The Dalgety Pension Fund - -
National Pig Development Pension Fund (0.2) 0.1
Post-retirement healthcare 0.5 0.6
Other unfunded schemes 6.6 7.6
Overall net pension liability 6.9 8.3
Overall, we expect to pay £0.9m (2022: £1.0m) in contributions to defined
benefit plans in the 2024 financial year.
Aggregated position of defined benefit schemes
2023 2022
£m
£m
Present value of funded obligations (includes Genus's 86% share of MPF (2022: 746.8 857.6
86%))
Present value of unfunded obligations 7.4 8.4
Total present value of obligations 754.2 866.0
Fair value of plan assets (includes Genus's 86% share of MPF (2022: 86%)) (787.6) (936.3)
Restricted recognition of asset (MPF and DPF) 40.3 78.6
Recognition of additional liability (MPF) - -
Recognised liability for defined benefit obligations 6.9 8.3
Summary of movements in Group deficit during the year
2023 2022
£m
£m
Deficit in schemes at the start of the year (8.3) (11.1)
Administration expenses (0.7) (0.4)
Exceptional cost - (0.4)
Contributions paid into the plans 1.5 3.5
Net pension finance cost (0.2) (0.2)
Actuarial (losses)/gains recognised during the year (40.4) 27.3
Movement in restriction of assets 38.3 (69.8)
Release of additional liability 3.0 43.7
Exchange rate adjustment (0.1) (0.9)
Deficit in schemes at the end of the year (6.9) (8.3)
The expense is recognised in the following line items in the Group Income
Statement
2023 2022
£m
£m
Administrative expenses 0.7 0.4
Exceptional cost - 0.4
Net finance charge 0.2 0.2
0.9 1.0
Actuarial assumptions and sensitivity analysis
Principal actuarial assumptions (expressed as weighted averages) are:
2023 2022
Discount rate 5.25% 3.90%
Consumer Price Index 2.65% 2.40%
Retail Price Index 3.05% 2.90%
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 2023, the mortality tables
used are 100% of the S3PMA (males)/S3PFA_M (females) all lives tables, with
birth year and CMI 2022 projections with parameters of Sk=7.0 and A=0.5% and
weighting parameters of w2020=0%, w2021=0% and w2022=25%, subject to a
long-term rate of improvement of 1.50% per annum for males and females and 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% per annum for males and females.
18. NOTES TO THE CASH FLOW STATEMENT
2023 2022
£m
£m
Profit for the year 31.8 36.7
Adjustment for:
Net IAS 41 valuation movement on biological assets 16.9 5.4
Amortisation of acquired intangible assets 7.7 8.3
Share-based payment expense 6.0 3.7
Share of profit of joint ventures and associates (10.5) (5.2)
Other gains and losses (2.7) -
Finance costs (net) 14.3 6.2
Income tax expense 7.6 11.7
Exceptional items (net) 3.5 2.0
Adjusted operating profit from continuing operations 74.6 68.8
Depreciation of property, plant and equipment 30.2 26.4
Loss on disposal of plant and equipment 0.1 0.4
Amortisation and impairment of intangible assets 5.7 4.3
Adjusted earnings before interest, tax, depreciation and amortisation 110.6 99.9
Cash impact of exceptional items relating to operating activities (7.1) 1.1
Other movements in biological assets and harvested produce (11.1) (19.1)
Decrease in provisions (1.0) -
Additional pension contributions in excess of pension charge (0.6) (3.1)
Other 0.2 0.2
Operating cash flows before movement in working capital 91.0 79.0
Increase in inventories (9.6) (6.1)
Increase in receivables (9.3) (18.5)
Increase in payables 6.6 2.2
Cash generated by operations 78.7 56.6
Interest received 0.1 0.4
Interest and other finance costs paid (10.7) (4.0)
Interest on leased assets (1.2) (1.1)
Cash flow from derivative financial instruments 1.3 (0.1)
Income taxes paid (17.8) (17.5)
Net cash from operating activities 50.4 34.3
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 2023
2022
cash flows
£m
non-cash movements
£m
£m
£m
£m
Cash and cash equivalents 38.8 1.3 (3.8) - 36.3
Interest-bearing loans - current (7.1) 3.8 0.2 (1.1) (4.2)
Lease liabilities - current (10.1) 11.1 0.5 (11.5) (10.0)
(17.2) 14.9 0.7 (12.6) (14.2)
Interest-bearing loans - non-current (182.1) (17.8) 3.9 - (196.0)
Lease liabilities - non-current (24.5) - 0.8 1.8 (21.9)
(206.6) (17.8) 4.7 1.8 (217.9)
Total debt financing (223.8) (2.9) 5.4 (10.8) (232.1)
Net debt (185.0) (1.6) 1.6 (10.8) (195.8)
Included within non-cash movements is £9.7m in relation to net new leases and
£1.1m in the unwinding of debt issue costs.
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.
19. 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 17 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% (2022:
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.
As described in note 4, 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 where 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 2023, we had entered into bank guarantees totalling £12.6m (2022:
£20.2m).
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 Calculation methodology and closest equivalent IFRS measure Reasons why we believe the
Performance Measures
(where applicable)
APMs are useful
Income Statement measures
Adjusted operating 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
profit exc JVs 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
Closest equivalent IFRS measure: Operating profit(1) trading 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
but it is also a measure excluded from our managements remuneration
assessment, as well as our debt agreements and banking covenants. It is also
one requested and used by our investor group to evaluate our performance.;
> share-based payments - this expense is considered to be relatively
volatile and not fully reflective of the current period trading, as the
Including adjusted operating profit from JV and associate results. performance criteria are based on EPS performance over a three-year period and
include estimates of future performance; and
See reconciliation below
Adjusted operating
> exceptional items - these are items which due to either their size or
profit inc JVs their nature are excluded, to improve the understanding of the Group's
underlying performance.
Adjusted operating
Including adjusted operating profit from JV and associate results but
profit inc JVs exc gene editing costs excluding gene editing costs.
See reconciliation below
Adjusted operating
profit inc JVs after tax
Adjusted operating profit including JV less adjusted effective tax.
See reconciliation below
Adjusted profit inc
JVs before tax
Adjusted operating profit including JVs less net finance costs.
Adjusted profit inc
See reconciliation below
JVs after tax
Adjusted profit including JVs before tax less adjusted effective tax.
See reconciliation below
Adjusted effective Total income tax charge for the Group excluding the tax impact of adjusting Provides an underlying tax rate to allow comparability of underlying financial
tax rate 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 Adjusted profit after tax profit divided by the weighted basic average number On a per share basis, this allows the comparability of underlying financial
earnings per share of shares. performance by excluding the impacts of adjusting items.
Closest equivalent IFRS measure: Earnings per share
See reconciliation below
Adjusted diluted Underlying attributable profit divided by the diluted weighted basic average
earnings per share number of shares.
Closest equivalent IFRS measure: Diluted earnings per share
See reconciliation below
Adjusted earnings Adjusted earnings per share divided by the expected dividend for the year. The Board's dividend policy targets adjusted earning cover to be between 2.5-3
cover
times.
See reconciliation 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.
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 reconciliation 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 is also a key metric that we report to our banks to ensure compliance with our
a 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 reconciliation below
Ratio of net debt to adjusted EBITDA The ratio of net debt, calculated in accordance with the definitions This APM is used as a measurement of our leverage and is also a key metric
used in our financing facilities, is gross debt, made up of unsecured bank that we report to our banks to ensure compliance with our bank covenants.
loans and 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 reconciliation below
Return on adjusted invested capital The Group's return on adjusted invested capital is measured on This APM is used to measure our ability to efficiently invest our capital and
the basis of adjusted operating profit including JVs after tax, which gives us a sense of how well we are using our resources to generate returns.
is operating profit 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 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
2023 2022
£m £m £m £m Reference
Operating profit 40.5 49.4 Group Income Statement
Add back:
Net IAS 41 valuation movement on biological assets 16.9 5.4 Group Income Statement
Amortisation of acquired intangible assets 7.7 8.3 Group Income Statement
Share-based payment expense 6.0 3.7 Group Income Statement
Exceptional items 3.5 2.0 Group Income Statement
Adjusted operating profit exc JVs 74.6 68.8 Group Income Statement
Amounts attributable to non-controlling interest 0.4 (0.3) Group Income Statement
Operating profit from JVs and associates 10.5 5.2 Group Income Statement
Tax on JVs and associates 3.9 2.6 Note 7 - Income tax expense
Net IAS 41 valuation movement (3.6) 1.4 Note 13 - Equity accounted investees
Adjusted operating profit from JVs 10.8 9.2
Adjusted operating profit inc JVs 85.8 77.7
Gene editing costs 14.3 7.9 Note 3 - Segmental information
Adjusted operating profit inc JVs and exc gene editing costs 100.1 85.6
Adjusted operating profit inc JVs after tax
2023 2022
£m £m Reference
Adjusted operating profit inc JVs 85.8 77.7 See APM
Effective Tax Rate 22.2% 24.3% Note 8 - Earnings per share
Adjusted tax (19.0) (18.9) No direct reference
Adjusted operating profit inc JVs after tax 66.8 58.8
Adjusted profit inc JVs before tax
Adjusted profit inc JVs after tax
2023 2022
£m £m Reference
Adjusted operating profit inc JVs 85.8 77.7 See APM
Less net finance costs (14.3) (6.2) Note 6 - Net finance costs
Adjusted profit inc JVs before tax 71.5 71.5
Adjusted tax (15.9) (17.4) Note 8 - Earnings per share
Adjusted profit inc JVs after tax 55.6 54.1
Adjusted effective tax £m/rate
2023 2022
£m % £m % Reference
Adjusted effective tax £m/rate 15.9 22.2 17.4 24.3 Note 8 - Earnings per share
Exceptional items (0.9) (25.7) (0.8) (40.0) No direct reference
Share-based payment expense (0.8) (14.5) (0.5) (13.5) No direct reference
Other gains and losses 0.7 25.0 - - No direct reference
Amortisation of acquired intangible assets (1.9) (24.7) (3.3) (39.8) No direct reference
Net IAS 41 valuation movement on biological assets (1.5) (8.8) 1.5 27.8 No direct reference
Effective tax £m/rate 11.5 26.6 14.3 28.0 Note 7 - Taxation and deferred taxation
Adjusted basic earnings per share
2023 2022 Reference
Adjusted profit inc JVs after tax (£m) 55.6 54.1 See APM
Weighted average number of ordinary shares (000s) 65.557 65.395 Note 8 - Earnings per share
Adjusted basic earnings per share (pence) 84.8 82.7
Adjusted diluted earnings per share
2023 2022 Reference
Adjusted profit inc JVs after tax (£m) 55.6 54.1 See APM
Weighted average number of diluted ordinary shares (000s) 65.998 65.714 Note 8 - Earnings per share
Adjusted diluted earnings per share (pence) 84.2 82.3
Adjusted earnings cover
2023 2022
pence times pence times Reference
Adjusted earnings per share 84.8 82.7 See APM
Dividend for the year 32.0 32.0 Note 9 - Dividends
Adjusted earnings cover 2.7 2.6
Adjusted EBITDA - as calculated under our financing facilities
2023 2022
£m £m £m £m Reference
Operating profit 40.5 49.4 Group Income Statement
Add back:
Net IAS 41 valuation movement on biological assets 16.9 5.4 Group Income Statement
Amortisation of acquired intangible assets 7.7 8.3 Group Income Statement
Share-based payment expense 6.0 3.7 Group Income Statement
Exceptional items 3.5 2.0 Group Income Statement
Adjusted operating profit exc JVs 74.6 68.8 Group Income Statement
Adjust for:
Cash received from JVs (dividend and loan investment) 0.7 3.2 Group Statement of Cash Flows
Depreciation: property, plant and equipment 30.2 26.4 Note 12 - Property, plant and equipment
Operational lease payments (12.3) (12.4) No direct reference
Depreciation: historical cost of biological assets 13.4 10.7 No direct reference
Amortisation and impairment (excluding separately identifiable acquired 5.7 4.3 Note 10 - Intangible assets
intangible assets)
Amounts attributable to non-controlling interest 0.4 (0.3) Group Income Statement
Adjusted EBITDA - as calculated under our financing facilities 112.7 100.7
Balance sheet measures
Net debt
Net debt as calculated under our financing facilities
2023 2022
£m £m £m £m Reference
Current unsecured bank loans and overdrafts 4.2 7.1
Non-current unsecured bank loans and overdrafts 196.0 182.1
Unsecured bank loans and overdrafts 200.2 189.2 Group Balance Sheet
Current obligations under finance leases 10.0 10.1
Non-current obligations under finance leases 21.9 24.5
Obligations under finance leases 31.9 34.6 Group Balance Sheet
Total debt financing 232.1 223.8 Note 18 - Notes to the cash flow statement
Deduct:
Cash and cash equivalents (36.3) (38.8) Group Balance Sheet
Net debt 195.8 185.0
Deduct:
Lower of obligations under finance leases or £30m (30.0) (30.0)
Add back:
Guarantees 12.6 20.2 Note 19 - Contingencies and bank guarantees
Cash not available 0.8 - No direct reference
Net debt - as calculated under our financing facilities 179.2 175.2
Cash flow measures
Cash conversion
2023 2022
£m £m £m £m Reference
Cash generated by operations 78.7 56.6 Note 18 - Notes to the cash flow statement
Operating profit 40.5 49.4 Group Income Statement
Add back:
Net IAS 41 valuation movement on biological assets 16.9 5.4 Group Income Statement
Amortisation of acquired intangible assets 7.7 8.3 Group Income Statement
Share-based payment expense 6.0 3.7 Group Income Statement
Exceptional items 3.5 2.0 Group Income Statement
Adjusted operating profit exc JVs 74.6 68.8 Group Income Statement
Cash conversion (%) 105% 82%
Free cash flow
2023 2022
£m £m £m £m Reference
Cash generated by operations 78.7 56.6 Note 18 - Notes to the cash flow statement
Net interest and tax paid (28.3) (22.3) Note 18 - Notes to the cash flow statement
Capital expenditure (35.2) (50.9) Group Statement of Cash Flows
Dividends received from JV and associates 2.6 3.2 Group Statement of Cash Flows
Joint venture and associate loan investment (1.9) - Group Statement of Cash Flows
Proceeds from sale of property, plant and equipment 2.4 - Group Statement of Cash Flows
Dividend to non-controlling interest (0.1) (0.1) Group Statement of Cash Flows
Free cash flow 18.2 (13.5)
Other measures
Interest cover
2023 2022
£m Times £m Times Reference
Finance costs 15.4 6.6 Group Income Statement
Finance income (1.1) (0.4) Group Income Statement
Net finance costs 14.3 6.2 Note 6 - Net finance costs
Deduct:
Pension interest (0.2) (0.2) Note 6 - Net finance costs
Interest on lease liabilities (1.2) (1.1) Note 6 - Net finance costs
Unwinding discount on put options (0.3) (0.2) Note 6 - Net finance costs
Amortisation of refinancing fees (1.1) (0.9) Note 6 - Net finance costs
Adjusted net finance costs 11.5 3.8
Adjusted EBITDA - as calculated under our financing facilities 112.7 100.7 See APM
Interest cover 10 27
Ratio of net debt to adjusted EBITDA
2023 2022
£m Times £m Times Reference
Net debt - as calculated under our financing facilities 179.2 175.2 See APM
Adjusted EBITDA - as calculated under our financing facilities 112.7 100.7 See APM
Ratio of net debt to EBITDA 1.6 1.7
Return on adjusted invested capital
2023 2022
£m % £m % Reference
Adjusted operating profit inc JVs after tax 66.8 58.8 See APM
Equity attributable to owners of the Company 574.9 578.5 Group Balance Sheet
Add back:
Net debt 195.8 185.0 Note 18 - Notes to the cash flow statement
Pension liability 6.9 8.3 Group Balance Sheet
Related deferred tax (1.2) (1.3) No direct reference
Adjust for:
Biological assets - carrying value (342.0) (366.8) Note 11 - Biological assets
Biological assets' harvest classed as inventories (22.7) (20.9) Note 14 - Inventories
Biological assets - historic cost 83.4 77.2 No direct reference
Goodwill (107.8) (111.0) Group Balance Sheet
Related deferred tax 67.7 73.0 No direct reference
Adjusted invested capital 455.0 422.0
Return on adjusted invested capital 14.7% 13.9%
Return on invested capital
2023 2022
£m % £m % Reference
Return on adjusted invested capital 14.7% 13.9% See APM
Adjusted operating profit inc JVs after tax 66.8 58.8 See APM
Tax rate 19.0 22.2% 18.9 24.3% Note 8 - Earnings per share
Adjusted operating profit inc JVs 85.8 77.7 Group Income Statement
Adjusted operating profit attributable to non-controlling interest (0.4) 0.3 Group Income Statement
Pre-tax share of profits from JVs exc net IAS 41 valuation movement (10.8) (9.2) Group Income Statement
Adjusted operating profit exc JVs 74.6 68.8 Group Income Statement
Fair value movement on biological assets (16.9) (5.4) Group Income Statement
Amortisation of acquired intangibles (7.7) (8.3) Group Income Statement
Share-based payment expense (6.0) (3.7) Group Income Statement
Exceptional items (3.5) (2.0) Group Income Statement
Share of post-tax profit of JVs 10.5 5.2 Group Income Statement
Other gains and losses 2.7 - Group Income Statement
Finance costs (14.3) (6.2) Group Income Statement
Profit before tax 39.4 48.4 Group Income Statement
Tax (7.6) (11.7) Group Income Statement
Profit 31.8 36.7 Group Income Statement
Equity attributable to owners of the Company 574.9 578.5 Group Balance Sheet
Return on invested capital 5.5% 6.3%
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR FLFVTARIRIIVRecent news on Genus
See all newsREG - Genus - Interim Results
AnnouncementREG - Genus - Trading Update
AnnouncementREG - Genus - Total Voting Rights
AnnouncementREG - Genus - Block listing Interim Review
AnnouncementREG - Genus - Non-Executive Director Appointment
Announcement