Genus plc Reports Preliminary Results for the Year Ended 30 June 2021
Very Strong Performance and Significant Strategic Progress
Continues Resilience Throughout Covid-19 Pandemic
Webcast Available at 7:01 am BST, 2:01 EDT
Source: Genus plc
via Business Wire - September 09, 2021
LONDON--(BUSINESS WIRE)--Genus (LSE:GNS), a leading global animal genetics company, today announces its preliminary results for the year ended 30 June 2021. 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 AM EDT.
Stephen Wilson, Chief Executive, commenting on the performance and outlook said:
“Genus performed very strongly and made significant strategic progress in the 2021 fiscal year. The Group continued to show its resilience during the COVID-19 pandemic and I would like to thank our people who have shown great dedication to our customers whilst navigating the many challenges that the pandemic has caused.
“Both PIC and ABS grew adjusted operating profits in double digits, with China, Brazil, India and Russia being notably high growth markets. PIC continued its expansion in China and gained further share with large producers, as they continued to rebuild as a result of African Swine Fever. PIC had success around the world with key accounts as a result of our leading genetics and supply chain. The acquisition of Sergal in June 2021 will further strengthen our supply chain and market share in the important Spanish market.
“ABS’s volume growth in the year was a record, driven by the continued success of Sexcel®, and strong performance by our proprietary NuEra® beef genetics. Latin America, Europe and Asia all grew strongly, and ABS’s adjusted operating margin improved through better product mix and operating leverage.
“We also made significant progress across many fronts in our R&D programmes, with for example successful disease trials of our PRRSv resistant pigs, and the establishment of a new world leading team in reproductive biology.
“Looking ahead, the outlook for the Group remains positive and we are confident in our strategy and the many opportunities for Genus. Group performance in FY20 and FY21 was very strong, with good growth across both ABS and PIC, led in particular by strong growth in PIC China, where the opportunity remains large. However, recent volatility in the Chinese porcine market is expected to continue for some months, creating a short-term headwind in FY22, primarily for PIC China. As a result of this headwind, and despite an expected strong performance in the other areas of the business, we expect Genus’s growth to be lower than our medium-term goal in the current year before increasing again in FY23.”
Looking ahead, the outlook for the Group remains positive and we are confident in our strategy and the many opportunities for Genus. Group performance in FY20 and FY21 was very strong, with good growth across both ABS and PIC, led in particular by strong growth in PIC China, where the opportunity remains large. However, recent volatility in the Chinese porcine market is expected to continue for some months, creating a short-term headwind in FY22, primarily for PIC China. As a result of this headwind, and despite expected strong performance in the other areas of the business, we expect Genus’s growth to be lower than our medium-term goal in the current year before increasing again in FY23.
RESULTS PRESENTATION TODAY
A pre-recorded webcast briefing to discuss the preliminary results will be held via a video webcast facility and will be accessible via the following link from 7:01am BST today:
REVENUE GROWTH OF 4% IN ACTUAL CURRENCY AND 10% IN CONSTANT CURRENCY2
Strong revenue growth of 11%2 in PIC, our porcine genetics business; royalty revenue up 11%2, with royalty revenue in China more than doubling and good growth in Latin America and Europe
Continued royalty growth and high breeding stock sales in China contributed to PIC volume growth of 11% (up 5% excluding China)
Excellent revenue growth of 13%2 in ABS, our bovine genetics business, particularly in Brazil, Russia, India and China; continued success with Sexcel® (sexed genetics) and NuEra® (beef genetics)
Record ABS volume growth of 15%, with sexed volumes up 29% and beef up 22%
VERY STRONG ADJUSTED PROFIT BEFORE TAX (‘PBT’)1 GROWTH, UP 38% IN CONSTANT CURRENCY2; STATUTORY PBT AT £55.8M
Adjusted operating profit including joint ventures and excluding gene editing cost1 up 37%2
Double digit adjusted operating profit growth1 in PIC (up 16%2) and ABS (up 21%2); R&D investment increased 2%2
Statutory PBT increased 21% to £55.8m, adversely impacted by a reduced net IAS 41 non-cash fair value biological asset valuation, offset by lower exceptional costs
Foreign currency translation adverse impact on adjusted PBT of £6.3m, primarily reflecting weakness in LATAM currencies
STRONG CASH GENERATION, EARNINGS MOMENTUM AND INCREASED DIVIDEND
Strong free cash flow1 of £37.5m, net debt1 of £105.6m, net debt to EBITDA1 ratio remains strong at 0.9x
Adjusted earnings per share1 up 40% in constant currency2
Recommended final dividend up 10% with 3.2x adjusted earnings cover1
SIGNIFICANT STRATEGIC PROGRESS
Continued to win new customers globally, due to our leading porcine and bovine genetics; genetic improvements contributing to the reduction in use of energy, water and land in animal protein production
PIC China continues to win customers; five new key accounts in FY21; now serving over one third of top Chinese producers
Continued shift in ABS’s product mix; 23% of global sales volume comprising sexed genetics and embryos reflecting Sexcel’s® continued success; 29% beef genetics reflecting the growing use of NuEra beef genetics in dairy herds
Acquisition in Spain of Sergal (total consideration £7.7m) expands supply chain and sireline market share in world’s fourth largest pig market
GenusOne enterprise system successful roll-out continues, with North America completed and Spain now live
Significant capex investment underway, to support expansion of best-in-industry facilities for PIC and ABS
Good progress with carbon reduction with the primary intensity ratio5 reduced by 11% cumulative compared with FY19 baseline
BUILDING R&D CAPABILITIES AND OPPORTUNITY PIPELINE
Good progress with the Porcine Reproductive Respiratory Syndrome virus (‘PRRSv’) resistance development programme, with two successful disease trials and a defined path to regulatory approval
Next generation of IntelliGen, Gen2 (‘Gen2’) sexing technology launched; more compact, effective and efficient than the previous generation technology
Rapidly built world class reproductive biology team and secured strategic partnerships with leading external collaborators
Strategic minority investment in Xelect (£2.4m), a genetics improvement consultancy in the fast-growing aqua genetics market
In the year ended 30 June 2021, the Group’s overall performance was very strong despite some ongoing impacts from COVID-19. The resilience of our operations was reflected in revenue growth of 4% (10% in constant currency) and adjusted operating profit growth including joint ventures of 27% (36% in constant currency) on a restated basis (see below). This was after another year of significant investment in R&D of £62.5m (up 2% in constant currency, down 4% in actual currency). Excluding gene editing costs, adjusted operating profit including joint ventures increased by 37% in constant currency and adjusted profit before tax was up 38% (29% in actual currency).
In line with the IFRIC Interpretation Committee’s new agenda decision published in April 2021, the Group has changed its accounting policy related to the capitalisation of certain software assets. This change relates to the capitalisation of costs of configuring or customising application software under ‘Software as a Service’ (SaaS) arrangements. As a result, we are capitalising less of our GenusOne costs as the system is a Microsoft Dynamics 365 SaaS solution. This change in accounting policy led to an increase in operating expenses amounting to £2.7m in the current year and £5.2m for FY20. All FY20 results are restated. For full details of the impact see Note 2 Basis of Preparation.
On a statutory basis, profit before tax was £55.8m (2020 restated: £46.3m). The difference between statutory and adjusted profit before tax principally reflected the reduction in the non-cash fair value net IAS 41 biological assets, versus an increase last year, and lower exceptional items, principally due to the prior year reflecting £16.4m of litigation fees and damages. Basic earnings per share on a statutory basis were 72.6 pence (2020 restated: 54.4 pence).
Genus continues to report adjusted results as Alternative Performance Measures (‘APMs’), which are used by the Board to monitor underlying performance at a Group and operating segment level and are applied consistently throughout. These APMs should be considered in addition to, and not as a substitute for or as superior to statutory measures.
The effect of exchange rate movements on the translation of our overseas profits was to reduce the Group’s adjusted profit before tax for the year by £6.3m compared with 2020, primarily due to weakness in Latin American currencies. 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 2021 at the average exchange rates applied to adjusted operating profit for the year ended 30 June 2020.
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 80 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.
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 competition, inflation, deflation, the timing effect and other uncertainties of future acquisitions or combinations within relevant industries, the rate of on-going porcine re-stocking in China after African Swine Fever, 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 2021
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