Genus Plc – Interim Results

Genus plc

Unaudited half year results for the six months ended 31 December 2021

GOOD STRATEGIC PROGRESS and INVESTING FOR GROWTH

 Group performance impacted by PIC China; strong progress in the rest of the business

• Total Group revenue up 1% in constant currency (2% lower in actual currency), adjusted profit before tax ('PBT')¹ down 19% in constant currency (21% in actual currency)
• Excluding PIC China; Group adjusted PBT up 28% in constant currency (25% in actual currency), and revenue up 7% in constant currency (4% in actual currency)
• R&D investment increased 10%² as planned
• Statutory PBT decreased by 35% to £24.4m, due to the lower adjusted profit and net IAS 41 biological asset valuation decrease

Challenging market conditions for PIC in China as expected, strong PIC performance elsewhere

• China pig prices currently under 13RMB/kg, down from 35RMB/kg in December 2020
• PIC volumes 2% lower, revenue 4%² lower. Royalty revenue 1%² lower excluding a customer refund in China⁵.  Consequently, PIC's Adjusted operating profit declined 15%²
• Strong market share gains in North America and Latin America; PIC's volumes up 7% excluding China
• Excluding China, PIC's revenue up 8%², royalty revenue up 4%², adjusted operating profit up 13%² 

Good revenue growth of 4%² and volume growth of 4% in ABS, building on a very strong prior year

• Continued Sexcel® success with sexed volumes up 24% and NuEra® beef with volumes up 13% 
• Continued shift in ABS's product mix with 24% of global volumes sexed genetics and 32% beef
• Strong growth in Brazil, India and China
• ABS's adjusted operating profit up 21%²

Lower cash generation and earnings than prior year, dividends maintained

• Free cash outflow¹ of £16.1m, reflecting expected higher working capital outflows and planned capital investment
• Net debt¹ increased to £143.3m, net debt to EBITDA¹ ratio of 1.4x, within 1.0x-2.0x targeted range
• Adjusted earnings per share¹ down 21%²
• Recommended interim dividend maintained at 10.3p with 2.8x adjusted earnings cover 6

Good strategic progress

• With our leading porcine and bovine genetics, Genus continued to win customers globally
• Accelerating genetic improvement and supply availability in our porcine elite farms.  Investments include a new elite genetics farm, Ankang, in China and Atlas, in Canada, where the first animals have arrived
• New third party IntelliGen technology customer wins, including a significant government tender win in India
• Investments in our new industry leading bull facilities delivering strong efficiency gain
• PRRSv resistant pigs programme is progressing to plan with hundreds of third generation gene-edited animals today
• On 22 February 2022 PIC entered a strategic collaboration with Olymel, the largest porcine producer in Canada, to acquire their elite porcine genetics for CAD$25m (£14.5m), and for the long-term provision of products and services through their AlphaGene genetics programme

Commenting on the interim results, Stephen Wilson, Chief Executive, said:

“As expected, the Group performed strongly other than in the porcine business in China and continued to make good strategic progress while investing for the future. Our strategic collaboration with Olymel announced today will further strengthen PIC's North America business.

“Building on record volume growth in the first half of last year, ABS continued to grow volumes and expand margins, driven by the success of Sexcel , strong growth across all regions of our proprietary NuEra beef genetics and continued operating leverage.

“PIC's adjusted operating profits (excluding PIC China) achieved strong growth, underpinned by market share gains in key customers in North America and Latin America. However, as previously announced in November 2021, the current porcine market in China has had an adverse impact on our trading in China during the first half of the 2022 fiscal year.  Since November, the live pig price in China has remained below the cost of production and declined further to below 13RMB/kg since the beginning of January. The significant impact of PIC China's trading has consequently decreased PIC's and the Group's adjusted operating profit.

“China live pig prices need to improve and be sustained for producer confidence to return and lead to improved demand for porcine genetics. Industry expectations are that prices will improve later in the year, however there is uncertainty on the timing and extent of a recovery. Consequently, we expect the China porcine market will continue to impact on the Group's performance in the second half of the 2022 fiscal year. Importantly, following the investments in our porcine elite supply chain, Genus is well placed to support Chinese producers needs when market conditions improve, and we remain confident in the future growth prospects of PIC China.

“The Board remains confident in the Group's strategy, the many opportunities for Genus and medium-term growth expectations remain unchanged.”