Genus Plc (LON:GNS), a leading global animal genetics company, announced its unaudited interim results for the six months ended 31 December 2018.
2019 H1 Highlights
· Genus achieved strong strategic progress and performed solidly. Adjusted profit before tax equalled the record of the prior period, despite the challenging environment caused by the rapid spread of African Swine Fever (‘ASF’) in China. Genus expects to perform in line with the Board’s expectations for the full year.
Financial Highlights
· Revenue of £238.8m was unchanged in actual and constant currency. Bovine revenue increased 2% (4% in constant currency) with strong sexed genetics revenue growth of 28%, while porcine revenue declined 1% (2% in constant currency) due to fewer animal shipments in China. Strategically important porcine royalty revenue increased strongly by 12% (11% in constant currency).
· Adjusted operating profit including joint ventures and excluding gene editing increased 2% (3% in constant currency) led by continued good growth in ABS, while increasing investment in R&D as planned. Adjusted profit before tax increased 1% to £29.2m (2% in constant currency).
· Statutory loss before tax of £6.8m (2017: £14.3m profit) primarily due to larger non-cash fair value movements on biological assets and a Guaranteed Minimum Pension (‘GMP’) equalisation charge in respect of legacy pension schemes (see below for further details).
· Adjusted basic earnings per share were 12% lower at 35.8p (11% in constant currency) due to a one-time deferred tax credit of £3.7m in the prior year relating to the tax reforms in the US. The statutory basic loss per share was 11.7p (2017: 69.0p profit per share), reflecting the GMP equalisation charge in the current year and a prior year US deferred tax credit of £32.0m from the US tax reforms.
· Free cash outflow1 of £5.3m (2017: £7.5m inflow) following planned capital investments in growing the IntelliGen® global production base and in Genus One, a new global enterprise system.
· Net debt reduced to £85.3m (2017: £113.4m) and net debt to EBITDA2 ratio of 1.1x (2017: 1.4x), following the payments made under the previously announced strategic collaboration with Møllevang Genetics in July 2018 and successful 5% equity placing in December 2018, which raised £66.5m net of fees.
· Interim dividend increased 10% to 8.9 pence per share payable on 4 April 2019.
Operational and Strategic Highlights3
· ABS – Strong first half performance with continued growth in Sexcel®, our high fertility sexed genetics product produced with IntelliGen technology, and rapid growth in our differentiated beef genetics
o Volume growth of 7%, with sexed genetics up 26% and beef up 24%
o Operating profit growth of 10% in constant currency
o IntelliGen production successfully commenced in three new sites around the world, adding to the existing operations in the US, India and Norway
· PIC volumes and operating profit growth of 1% (2% in actual currency) impacted as expected by the outbreak of ASF across China. Operating profit growth of 7% in constant currency excluding China
o Royalty revenue up 11% with growth in all regions
o Volume growth excluding China of 5%, with particular strength in Latin America and Spain
o Encouraging early results from the strategic collaboration with Møllevang Genetics
o Transport restrictions imposed in China to control ASF caused volumes in China to be 49% lower resulting in profit reducing by approximately £3m compared to same period in the prior year
· Research and development investment increased as planned by 10%, primarily from continued investment in gene editing and the IntelliGen platform
o Continued good progress with the PRRSv programme4
o Strong results continue in our leading dairy, beef and porcine genomic selection programmes
o Integration of Møllevang’s genetics with PIC’s product development programme commenced with encouraging early results
Commenting, Karim Bitar, Chief Executive said:
“Genus performed well in challenging markets and made substantial strategic progress in the first half of the 2019 fiscal year. ABS continued to grow profit in double digits, driven by a combination of the success of Sexcel and NuEra, our proprietary beef genetics. Genus is well placed to benefit from and drive the accelerating market trend of dairy customers using sexed and beef genetics in combination.
“As anticipated, PIC was affected negatively by ASF in China but grew strongly in Europe and Latin America and we successfully commenced our strategic relationship with Møllevang Genetics. Our gene editing programme for PRRSv resistance in pigs made good progress and we have substantially increased the number of animals carrying the edit while continuing to engage constructively with regulatory authorities.
“We anticipate growing in the second half and performing in line with the Board’s expectations in constant currency for the full year. The Board has approved an interim dividend of 8.9 pence per share, an increase of 10% on last year’s interim dividend.”
