Continued Strategic Progress in Challenging
Markets
Webcast Available at 7:01AM BST, 2.01 EDT
Genus (LSE:GNS), a leading global animal genetics company, today
announces its preliminary results for the year ended 30 June 2022.
The full report has been made available on the investors section of
the Genus plc website. The Company will discuss its corporate,
operational and financial highlights in a pre-recorded webcast at
7:01 AM BST, 2.01 EDT.
Commenting on the performance and outlook, Stephen Wilson
(Chief Executive) said:
“The Group performed robustly, although challenging market
conditions in China porcine impacted the performance of PIC. We
also made good strategic progress and completed significant capital
investments including Atlas, PIC’s new elite genetics farm in
Canada to support growth. Our strategic collaboration with Olymel,
which we announced during the year, is progressing well, further
strengthening PIC’s North America business.
“Bovine producers faced more challenging conditions in the
second half of the year, as a result of significantly increased
input costs and the Ukraine war. However, ABS continued to grow
volumes and expand margins, driven by the success of Sexcel
(including expansion of sales through our third party IntelliGen
business), as well as strong growth in sales of our proprietary
NuEra beef genetics across all regions.
“PIC delivered strong growth in operating profits excluding PIC
China, underpinned by market share gains with key customers in
North America, Latin America, and Europe, despite challenging
political and macro-economic events. However, as expected, the
porcine market and COVID-19 lockdowns in China adversely affected
PIC China’s trading during the second half of the year. The live
pig price in China remained below the cost of production and has
only showed signs of recovery since June.
“Over the summer, China’s live pig prices have risen above 21
RMB/kg, improving confidence that the country’s porcine industry is
on the path to recovery and profitability. Industry expectations
are that prices will continue to exceed 20 RMB/kg for the remainder
of 2022, although there could still be some further volatility.
Investments we have made to increase elite porcine supply chain
capacity position Genus well to support Chinese producers' needs
and benefit from the market recovery over time.
“The Board remains confident in the Group's strategy and the
many opportunities for Genus. Medium-term growth expectations
remain unchanged.”
Outlook
As noted above, macro-economic conditions remain particularly
challenging for our customers in many parts of the world, however,
since the start of the 2023 fiscal year, China’s live pig prices
have risen above 21 RMB/kg, improving confidence that the country’s
porcine industry is on the path to recovery. There is still
uncertainty as to how sustained this will be and the implications
for demand for porcine genetics. Our investments in China position
us well to benefit from an upturn. More broadly our clear strategy,
strong product portfolio and depth of skill in our sales, services
and R&D teams give us confidence that we will continue to make
strategic and financial progress in fiscal year 2023 and beyond.
The Group remains well positioned to benefit from improving market
conditions when these occur and therefore our medium-term growth
expectations remain unchanged.
Results presentation today
A pre-recorded analysts and bankers briefing to discuss the
preliminary results for the year ended 30 June 2022 will be held
via a video webcast facility and will be accessible via the
following link from 7:01am today:
https://webcasting.buchanan.uk.com/broadcast/62c6c042d161177b45786de1
This will be followed by a live Q&A session to be held by
invitation via Zoom at 10:30am. Please contact Verity Parker at
Buchanan for details; verityp@buchanan.uk.com
Results Highlights
Adjusted results1
Statutory results
Actual currency
Constant currency
change2
Actual currency
Year ended 30 June
2022
2021
Change
2022
2021
Change
£m
£m
%
%
£m
£m
%
Revenue
593.4
574.3
3
2
593.4
574.3
3
Operating profit
68.8
76.9
(11)
(13)
49.4
47.7
4
Operating profit inc JVs exc gene
editing
85.6
97.4
(12)
(14)
n/a
n/a
n/a
Profit before tax
71.5
84.8
(16)
(18)
48.4
55.8
(13)
Free cash flow
(13.5)
37.5
(136)
n/m3
Basic earnings per share (pence)
82.7
100.9
(18)
(20)
62.5
72.6
(14)
Dividend per share (pence)
32.0
32.0
-
Robust performance across the business, despite challenging
macro-economic events; Group results adversely impacted by PIC
China
- Group revenue up 2% in constant currency (3% in actual
currency), adjusted profit before tax (‘PBT’) down 18% in constant
currency (16% in actual currency)
- Excluding PIC China, Group adjusted PBT up 25% in constant
currency (28% in actual currency) and revenue up 7% in constant
currency (9% in actual currency)
- R&D investment increased by 6%2 as planned
- Statutory PBT reduced by 13% to £48.4m, reflecting lower
adjusted profit, lower net IAS 41 biological asset movement and
share-based payments
Challenging market conditions for PIC China as previously
indicated, strong PIC performance elsewhere
- China pig prices averaged 14.6 RMB/kg through the year, down
50% on the prior year. Since June 2022, these have now recovered to
over 21 RMB/kg, which exceeds the cost of production for most
producers
- Overall PIC volumes were stable, with revenue down 5%2 but
royalty revenue up 1%2. Adjusted operating profit declined by
13%2
- Excluding China, PIC’s volumes up 8%, revenue up 4%2, royalty
revenue up 8%2 and adjusted operating profit up 11%2
- Strong customer wins drove North America growth; solid
performances in Latin America and Europe despite challenging market
conditions for customers
Good performance in ABS, with adjusted operating profit
growth of 9%2 and volume growth of 3%, despite more
challenging market for producers
- Continued success for Sexcel® (supporting sexed volume growth
of 18%) and NuEra® beef (with volumes up 21% and total beef volumes
up 9%)
- Strong growth in third party sales of IntelliGen sexed semen
production in North America and Europe
- High growth in Asia, particularly China and continued growth in
Latin America
- Overall, ABS’s adjusted operating profit up 9%2
Lower cash generation and earnings than prior year, dividends
maintained
- Free cash outflow of £13.5m, reflecting lower profit from PIC
China, continued investment in the business as well as expected
working capital outflows. Solid cash conversion of 82%1
- Net debt increased to £185.0m, with year-end net debt to EBITDA
ratio of 1.7x1, within 1.0x-2.0x targeted range
- On 26 August 2022 Genus extended its multi-currency revolving
credit facility to 2025 and increased the facility by £40m (to
£190m) and USD $25m (to $150m) under an accordion option
- Adjusted earnings per share 18% lower, final dividend in line
with prior year, with 2.6x1 adjusted earnings cover
Continued strategic progress and investment for
growth
- Further genetic progress in pork, dairy and beef, contributing
to a reduction in use of energy, water and land in animal protein
production. Good progress on reduction of Genus’s carbon emissions,
with the primary intensity ratio4 reduced by 25% since FY19
- Acquisition in Canada of Olymel LP’s internal elite porcine
genetics programme, AlphaGene, for CAD$25m (£14.5m) in February
2022 progressing well, generating royalties in the second half
- Significant capital investments to support growth including
expansion of the ABS Leeds facility in Wisconsin, completion of the
PIC Atlas facility in Canada in June 2022 and further roll out of
the GenusOne enterprise system, now live in over 60% of Genus’s
business
- Investments in digitalisation to deliver differentiation for
ABS’s Gene Advance genetic offering and ecommerce capabilities
Building R&D capabilities and opportunity
pipeline
- PRRSv resistant pig programme on track, with final FDA
submissions expected to be made by December 2023
- R&D pipeline strengthened from investments, with an
increase in the number of projects in the discovery and proof of
concept phases
1 Adjusted results are the Alternative
Performance Measures (‘APMs’) used by the Board to monitor
underlying performance at a Group and operating segment level,
which are applied consistently throughout. These APMs should be
considered in addition to, and not as a substitute for or as
superior to statutory measures.
2 Constant currency percentage movements
are calculated by restating the results for the year ended 30 June
2022 at the average exchange rates applied to adjusted operating
profit for the year ended 30 June 2021.
3 n/m = not meaningful
4 The primary intensity ratio is a measure
of the Group’s Scope 1 and 2 emissions per tonne of animal
weight
Financial Review
In the year ended 30 June 2022, the Group achieved revenue
growth of 3% in actual currency (2% in constant currency). However,
adjusted operating profit including joint ventures fell by 13% (15%
in constant currency), due to some significant market challenges.
These included rising inflation (driven particularly by increasing
energy prices), the impact of the war in Ukraine and, most notably,
turbulence in China’s porcine industry following the sharp decline
in pig prices in 2021. The resultant decline in operating profit in
China had a significant impact on the Group’s results. Excluding
PIC China, however, adjusted operating profit including joint
ventures increased by 28% (25% in constant currency).
On a statutory basis, profit before tax was £48.4m (2021:
£55.8m). The difference between statutory and adjusted profit
before tax principally reflected the reduction in the non-cash fair
value of IAS 41 biological assets and lower share-based payment
charge. Basic earnings per share on a statutory basis were 62.5
pence (2021: 72.6 pence).
The Group continued its significant R&D investment strategy,
up 7% (6% in constant currency). Excluding gene editing costs,
adjusted operating profit including joint ventures fell by 12% (14%
in constant currency) and adjusted profit before tax was down 16%
(18% in constant currency).
The effect of exchange rate movements on the translation of
overseas profits was to increase the Group’s adjusted profit before
tax for the year by £1.8m, compared with 2021, primarily due to the
weakness of Sterling.
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.
Forward-looking Statements
This Announcement may contain, and the Company may make verbal
statements containing “forward-looking statements” with respect to
certain of the Company’s plans and its current goals and
expectations relating to its future financial condition,
performance, strategic initiatives, objectives and results. Readers
are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date of this Announcement.
Forward-looking statements sometimes use words such as “aim”,
“anticipate”, “target”, “expect”, “estimate”, “intend”, “plan”,
“goal”, “believe”, “seek”, “may”, “could”, “outlook”, “will” or
other words of similar meaning. By their nature, all
forward-looking statements involve risk and uncertainty because
they relate to future events and circumstances which are beyond the
control of the Company, including amongst other things, diverse
factors such as domestic and global economic business conditions,
market-related risks such as fluctuations in commodity prices,
interest rates and exchange rates, the policies and actions of
governmental and regulatory authorities, the effect of sanctions on
the ability to trade, the effect of competition, inflation,
deflation, the timing effect and other uncertainties of future
acquisitions or combinations within relevant industries, the effect
of the spread of African Swine Fever and other animal diseases, the
continued development and improvement of our IntelliGen®
technology, the development and registration of our innovative new
products, such as our gene edited porcine reproductive and
respiratory syndrome virus resistant pigs, the continued growth in
emerging markets, the effect of tax and other legislation and other
regulations in the jurisdictions in which the Company and its
respective affiliates operate, the effect of volatility in the
equity, capital and credit markets on the Company’s profitability
and ability to access capital and credit, a decline in the
Company’s credit ratings; the effect of operational risks; and the
loss of key personnel. As a result, the actual future financial
condition, performance and results of the Company may differ
materially from the plans, goals and expectations set forth in any
forward-looking statements. Except as required by applicable law or
regulation, the Company expressly disclaims any obligation or
undertaking to publish any updates or revisions to any
forward-looking statements contained in this Announcement to
reflect any changes in the Company’s expectations with regard
thereto or any changes in events, conditions or circumstances on
which any such statement is based.
No statement in this Announcement is intended to be a profit
forecast, and no statement in this Announcement should be
interpreted to mean that earnings per share of the Company for the
current or future financial years would necessarily match or exceed
the historical published earnings per share of the Company.
Information contained in this Announcement should not be relied
upon as a guide to the Company’s future performance.
This announcement is available on the Genus website
www.genusplc.com
GROUP INCOME STATEMENT For the year ended 30 June
2022
2022 £m
2021 £m
REVENUE
593.4
574.3
Adjusted operating profit
68.8
76.9
Adjusting items:
– Net IAS 41 valuation movement on
biological assets
(5.4)
(10.8)
– Amortisation of acquired intangible
assets
(8.3)
(7.4)
– Share-based payment expense
(3.7)
(7.7)
(17.4)
(25.9)
Exceptional items (net)
(2.0)
(3.3)
Total adjusting items
(19.4)
(29.2)
OPERATING PROFIT
49.4
47.7
Share of post-tax profit of joint ventures
and associates retained
5.2
13.1
Finance costs
(6.6)
(5.4)
Finance income
0.4
0.4
PROFIT BEFORE TAX
48.4
55.8
Taxation
(11.7)
(9.0)
PROFIT FOR THE YEAR
36.7
46.8
ATTRIBUTABLE TO:
Owners of the Company
40.9
47.3
Non-controlling interest
(4.2)
(0.5)
36.7
46.8
EARNINGS PER SHARE
Basic earnings per share
62.5p
72.6p
Diluted earnings per share
62.2p
72.0p
2022 £m
2021 £m
Alternative Performance
Measures
Adjusted operating profit
68.8
76.9
Adjusted operating profit attributable to
non-controlling interest
(0.3)
(0.1)
Pre-tax share of profits from joint
ventures and associates excluding net IAS 41 valuation movement
9.2
13.0
Gene editing costs
7.9
7.6
Adjusted operating profit including
joint ventures and associates, excluding gene editing costs
85.6
97.4
Gene editing costs
(7.9)
(7.6)
Adjusted operating profit including
joint ventures and associates
77.7
89.8
Net finance costs
(6.2)
(5.0)
Adjusted profit before tax
71.5
84.8
Adjusted earnings per share
Basic adjusted earnings per share
82.7p
100.9p
Diluted adjusted earnings per share
82.3p
100.1p
Adjusted results are the Alternative Performance Measures
(‘APMs’) used by the Board to monitor underlying performance at a
Group and operating segment level, which are applied consistently
throughout.
GROUP STATEMENT OF COMPREHENSIVE INCOME For the year
ended 30 June 2022
2022 £m
2022 £m
2021 £m
2021 £m
PROFIT FOR THE YEAR
36.7
46.8
Items that may be reclassified
subsequently to profit or loss
Foreign exchange translation
differences
66.6
(45.2)
Fair value movement on net investment
hedges
(0.7)
0.4
Fair value movement on cash flow
hedges
1.9
0.2
Tax relating to components of other
comprehensive expense
(8.2)
7.6
59.6
(37.0)
Items that may not be reclassified
subsequently to profit or loss
Actuarial gains on retirement benefit
obligations
27.3
22.3
Movement on pension asset recognition
restriction
(69.8)
(0.1)
Release/(recognition) of additional
pension liability
43.7
(19.9)
(Loss)/gain on equity instruments measured
at fair value
(6.1)
6.7
Tax relating to components of other
comprehensive income/(expense)
1.1
(2.0)
(3.8)
7.0
OTHER COMPREHENSIVE INCOME/(EXPENSE)
FOR THE YEAR
55.8
(30.0)
TOTAL COMPREHENSIVE INCOME FOR THE
YEAR
92.5
16.8
ATTRIBUTABLE TO:
Owners of the Company
97.3
17.1
Non-controlling interest
(4.8)
(0.3)
92.5
16.8
GROUP STATEMENT OF CHANGES IN EQUITY For the year
ended 30 June 2022
Called up share capital
£m
Share premium account
£m
Own shares £m
Trans- lation reserve
£m
Hedging reserve £m
Retained earnings £m
Total £m
Non- controlling interest
£m
Total equity £m
BALANCE AT 30 JUNE 2020
6.5
179.1
(0.1)
29.5
(0.2)
280.7
495.5
(1.0)
494.5
Foreign exchange translation differences,
net of tax
–
–
–
(37.7)
–
–
(37.7)
0.2
(37.5)
Fair value movement on net investment
hedges, net of tax
–
–
–
0.3
–
–
0.3
–
0.3
Fair value movement on cash flow hedges,
net of tax
–
–
–
–
0.2
–
0.2
–
0.2
Gain on equity instruments measured at
fair value, net of tax
–
–
–
–
–
5.0
5.0
–
5.0
Actuarial gains on retirement benefit
obligations, net of tax
–
–
–
–
–
19.8
19.8
–
19.8
Movement on pension asset recognition
restriction, net of tax
–
–
–
–
–
(0.1)
(0.1)
–
(0.1)
Recognition of additional pension
liability, net of tax
–
–
–
–
–
(17.7)
(17.7)
–
(17.7)
Other comprehensive (expense)/income
for the year
–
–
–
(37.4)
0.2
7.0
(30.2)
0.2
(30.0)
Profit/(loss) for the year
–
–
–
–
–
47.3
47.3
(0.5)
46.8
Total comprehensive (expense)/income
for the year
–
–
–
(37.4)
0.2
54.3
17.1
(0.3)
16.8
Recognition of share-based payments, net
of tax
–
–
–
–
–
4.9
4.9
–
4.9
Dividends
–
–
–
–
–
(19.5)
(19.5)
–
(19.5)
Adjustment arising from change in
non-controlling interest and written put option
–
–
–
–
–
–
–
(0.2)
(0.2)
Issue of ordinary shares
0.1
–
–
–
–
–
0.1
–
0.1
BALANCE AT 30 JUNE 2021
6.6
179.1
(0.1)
(7.9)
–
320.4
498.1
(1.5)
496.6
Foreign exchange translation differences,
net of tax
–
–
–
59.4
–
–
59.4
(0.6)
58.8
Fair value movement on net investment
hedges, net of tax
–
–
–
(0.6)
–
–
(0.6)
–
(0.6)
Fair value movement on cash flow hedges,
net of tax
–
–
–
–
1.4
–
1.4
–
1.4
Loss on equity instruments measured at
fair value, net of tax
–
–
–
–
–
(4.6)
(4.6)
–
(4.6)
Actuarial gains on retirement benefit
obligations, net of tax
–
–
–
–
–
19.5
19.5
–
19.5
Movement on pension asset recognition
restriction, net of tax
–
–
–
–
–
(49.7)
(49.7)
–
(49.7)
Recognition of additional pension
liability, net of tax
–
–
–
–
–
31.0
31.0
–
31.0
Other comprehensive (expense)/income
for the year
–
–
–
58.8
1.4
(3.8)
56.4
(0.6)
55.8
Profit/(loss) for the year
–
–
–
–
–
40.9
40.9
(4.2)
36.7
Total comprehensive (expense)/income
for the year
–
–
–
58.8
1.4
37.1
97.3
(4.8)
92.5
Recognition of share-based payments, net
of tax
–
–
–
–
–
4.0
4.0
–
4.0
Dividends
–
–
–
–
–
(20.9)
(20.9)
–
(20.9)
Adjustment arising from change in
non-controlling interest and written put option
–
–
–
–
–
–
–
(0.1)
(0.1)
BALANCE AT 30 JUNE 2022
6.6
179.1
(0.1)
50.9
1.4
340.6
578.5
(6.4)
572.1
GROUP BALANCE SHEET As at 30 June 2022
2022 £m
2021 £m
ASSETS
Goodwill
111.0
101.5
Other intangible assets
72.0
56.3
Biological assets
333.7
279.9
Property, plant and equipment
171.4
123.0
Interests in joint ventures and
associates
41.2
34.1
Other investments
10.2
14.7
Derivative financial assets
2.2
–
Other receivables
8.6
1.8
Deferred tax assets
10.1
8.0
TOTAL NON-CURRENT ASSETS
760.4
619.3
Inventories
50.9
37.0
Biological assets
33.1
39.6
Trade and other receivables
129.5
106.2
Cash and cash equivalents
38.8
46.0
Income tax receivable
4.0
2.6
Derivative financial assets
1.0
0.1
Asset held for sale
0.2
0.2
TOTAL CURRENT ASSETS
257.5
231.7
TOTAL ASSETS
1,017.9
851.0
LIABILITIES
Trade and other payables
(124.7)
(110.3)
Interest-bearing loans and borrowings
(7.1)
(13.9)
Provisions
(1.9)
(1.3)
Deferred consideration
(0.8)
(1.6)
Obligations under leases
(10.1)
(9.0)
Tax liabilities
(4.9)
(6.4)
Derivative financial liabilities
(1.8)
–
TOTAL CURRENT LIABILITIES
(151.3)
(142.5)
Trade and other payables
(0.2)
(1.4)
Interest-bearing loans and borrowings
(182.1)
(109.4)
Retirement benefit obligations
(8.3)
(11.1)
Provisions
(12.0)
(11.1)
Deferred consideration
(0.7)
(0.5)
Deferred tax liabilities
(60.3)
(53.0)
Derivative financial liabilities
(6.4)
(6.1)
Obligations under leases
(24.5)
(19.3)
TOTAL NON-CURRENT LIABILITIES
(294.5)
(211.9)
TOTAL LIABILITIES
(445.8)
(354.4)
NET ASSETS
572.1
496.6
EQUITY
Called up share capital
6.6
6.6
Share premium account
179.1
179.1
Own shares
(0.1)
(0.1)
Translation reserve
50.9
(7.9)
Hedging reserve
1.4
–
Retained earnings
340.6
320.4
EQUITY ATTRIBUTABLE TO OWNERS OF THE
COMPANY
578.5
498.1
Non-controlling interest
(0.7)
3.6
Put option over non-controlling
interest
(5.7)
(5.1)
TOTAL NON-CONTROLLING INTEREST
(6.4)
(1.5)
TOTAL EQUITY
572.1
496.6
GROUP STATEMENT OF CASH FLOWS For the year ended 30
June 2022
2022 £m
2021 £m
NET CASH FLOW FROM OPERATING
ACTIVITIES
34.3
67.5
CASH FLOWS FROM INVESTING
ACTIVITIES
Dividends received from joint ventures and
associates
3.2
4.1
Joint venture and associate loan
payment
–
(0.4)
Acquisition of joint venture and
associate
(2.2)
(2.4)
Acquisition of trade and assets
(0.8)
(6.9)
Acquisition of Olymel AlphaGene assets
(14.5)
–
Acquisition of investments
(1.0)
(0.9)
Payment of deferred consideration
(1.0)
(6.7)
Purchase of property, plant and
equipment
(42.1)
(28.7)
Purchase of intangible assets
(8.8)
(5.1)
Proceeds from sale of property, plant and
equipment
–
0.3
NET CASH OUTFLOW FROM INVESTING
ACTIVITIES
(67.2)
(46.7)
CASH FLOWS FROM FINANCING
ACTIVITIES
Drawdown of borrowings
138.7
195.1
Repayment of borrowings
(83.9)
(176.1)
Payment of lease liabilities
(11.3)
(11.7)
Equity dividends paid
(20.9)
(19.5)
Dividend to non-controlling interest
(0.1)
(0.2)
Debt issue costs
(0.6)
(1.9)
Issue of ordinary shares
–
0.1
NET CASH INFLOW/(OUTFLOW) FROM
FINANCING ACTIVITIES
21.9
(14.2)
NET (DECREASE)/INCREASE IN CASH AND
CASH EQUIVALENTS
(11.0)
6.6
Cash and cash equivalents at start of the
year
46.0
41.3
Net (decrease)/increase in cash and cash
equivalents
(11.0)
6.6
Effect of exchange rate fluctuations on
cash and cash equivalents
3.8
(1.9)
TOTAL CASH AND CASH EQUIVALENTS AT 30
JUNE
38.8
46.0
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220907006184/en/
Enquiries: Genus plc (Stephen Wilson, Chief Executive
Officer / Alison Henriksen, Chief Financial Officer) +44 1256
345970
Buchanan (Charles Ryland / Chris Lane / Verity Parker) +44 207
4665000
Genius Group Ltd (NYSE:GNS)
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Genius Group Ltd (NYSE:GNS)
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