TIDMGNS
RNS Number : 1530G
Genus PLC
28 February 2018
Immediate 28 February 2018
Genus plc
('Genus', the 'Company' or the 'Group')
INTERIM RESULTS FOR THE SIX MONTHSED 31 DECEMBER 2017
STRONG FINANCIAL PERFORMANCE AND STRATEGIC PROGRESS
Genus, a leading global animal genetics company, announces its
unaudited interim results for the six months ended 31 December
2017.
Actual currency Constant
currency
**
Six months ended 2017 2016 Movement Movement
31 December
Adjusted results* GBPm GBPm % %
Revenue 238.6 222.1 7 10
Operating profit 28.3 24.5 16 19
Operating profit
inc JVs 31.5 26.8 18 21
Profit before
tax 29.0 25.1 16 20
Basic earnings
per share (pence) 40.9 30.5 34 39
--------------------- ------ ------ --------- -------------
Statutory results
Revenue 238.6 222.1 7
Operating profit 14.3 10.0 43
Profit before
tax 14.3 11.4 25
Basic earnings
per share (pence) 69.0 13.3 419
Dividend per share
(pence) 8.1 7.4 9
* Adjusted results are before net IAS 41 valuation movement on
biological assets, amortisation of acquired intangible assets,
share-based payment expense and exceptional items. Adjusted results
are the alternative performance measures used by the Board to
monitor underlying performance at a Group and operating segment
level. See note 2 to the accounts for further information.
** Constant currency percentage movements are calculated by
restating the results for the six months ended 31 December 2017 at
the average exchange rates applied to adjusted operating profit for
the year ended 30 June 2017.
2018 H1 Highlights
-- The period under review was another successful six months for
Genus, achieving a strong financial performance and strategic
progress, including the successful launch of Sexcel(R), Genus's
proprietary, innovative sexed genetics product
Financial Highlights
-- Revenue of GBP238.6m increased 7% (10% in constant currency)
with strong bovine revenues, up 13% (16% in constant currency).
Porcine revenues grew 3% (6% in constant currency) with increased
royalty revenues in all regions
-- 16% increase in adjusted profit before tax to GBP29.0m (20%
in constant currency) with a strong performance in Genus ABS
reflecting management actions and improved dairy market
conditions
-- Statutory profit before tax up 25% to GBP14.3m due to the strong overall performance
-- Adjusted basic earnings per share up 34% to 40.9p (up 39% in
constant currency) and statutory basic earnings per share up 419%
to 69.0p, reflecting non-cash deferred tax credits of GBP3.7m and
GBP32.0m respectively following the recently announced tax reforms
in the United States
-- Strong free cash inflow(1) of GBP6.5m (2016: GBP0.1m outflow)
and cash conversion(2) of 78% (2016: 55%)
-- Interim dividend increased 9.5% to 8.1 pence per share payable on 4 April 2018
Operational Highlights(3)
-- A strong first half performance in ABS with the launch of
Sexcel, improved market conditions and continued actions to
strengthen execution and improve efficiency
o Volumes growth of 8%, with sexed semen up 32% and IVB embryos
up 35%
o Operating profit up 47%
o Encouraging global sales of Sexcel, our 21(st) Century high
fertility sexed genetics product produced with IntelliGen(R)
technology (previously called Genus Sexed Semen), following its
launch in September 2017
o Enabled Geno SA ('Geno'), the leading Norwegian bull stud, to
produce sexed genetics with IntelliGen technology. Signed contracts
with Mehsana, a leading dairy cooperative in Gujarat, India, and
after the period end with the Uttar Pradesh Livestock Development
Board, to sex their genetics using IntelliGen technology
-- Continued operating profit growth of 7% in PIC on volumes up
5%, particularly in Europe and Latin America, while pig prices
returning to a more normal level reduced profits in China
o Royalty revenues up 8% with growth in all regions, and
particular strength in Europe
o Signed an agreement with Møllevang Genetics, an independent
Danish genetics provider, to establish a strategic relationship
from 1 July 2018
o Results from Hermitage acquisition and partnership in line
with expectations and with encouraging prospects
-- Research and development investment increased by 5%,
primarily driven by a 47% increase in gene editing investment
o First batches of founder gene edited pigs born under the PRRSv
resistance development programme(4)
o IntelliGen technology successfully brought into production in
the US, Europe and India to support ABS Sexcel and third party
customers wanting to use a 21(st) Century sexing technology
o Strong genetic pipeline in bovine as results from the De Novo
joint venture start to come through
Commenting, Karim Bitar, Chief Executive said:
"Genus performed strongly in the first half of the 2018 fiscal
year and made substantial strategic progress. The launch of Sexcel,
our proprietary innovative sexed genetics product, has been well
received by customers and early indications of its performance in
the field are encouraging. We are also pleased to have started
sales of the IntelliGen technology to third parties in Europe and
India, enabling other bull studs to take advantage of this novel
technology.
"ABS overall continued its trend of improved results following
the actions taken last year. PIC continued to perform well, despite
market headwinds in China, and we continued to strengthen its
presence in Europe through the acquisition and partnership with
Hermitage.
"As planned, we increased our investment in our gene editing
platform and made good progress in the PRRSv resistance development
plan. We expect to further increase this investment in the second
half.
"We anticipate performing in line with our expectations in the
full year on a constant currency basis, but now expect actual
currencies to be a headwind for the year. Reflecting the Board's
continuing confidence in the Group's prospects we are recommending
a 9.5% increase in the interim dividend."
An analyst meeting will be held at 8:30am today at Buchanan's
offices (107 Cheapside, London, EC2V 6DN). A live audio feed will
be available to those unable to attend this meeting in person. To
connect to the web cast facility, please go to the following link
approximately 10 minutes (8:20am) before the start of the meeting:
http://vm.buchanan.uk.com/2018/genus280218/registration.htm
For further information please contact:
Genus plc Tel: 01256 345970
Karim Bitar, Chief Executive
Stephen Wilson, Group
Finance Director
Buchanan Tel: 0207 466 5000
Charles Ryland/Victoria
Hayns/Chris Lane
This announcement will be available on the Genus website,
www.genusplc.com
1 Free cash flow is before debt repayments (other than finance
leases), acquisitions, investments and dividends.
(2) Cash conversion is the cash generated by operations of
GBP22.0m (2016: GBP13.5m) as a percentage of adjusted operating
profit from continuing operations of GBP28.3m (2016: GBP24.5m).
(3) Based on adjusted results in constant currency.
(4) The PRRSv programme refers to our development-phase gene
editing programme seeking to confer resistance to pigs to Porcine
Reproductive and Respiratory Syndrome virus.
About Genus
Genus is a world-leading animal genetics company. We
continuously produce better breeding livestock with desirable
characteristics, which helps farmers to produce better quality meat
and milk more efficiently and sustainably. We do this by analysing
animals' DNA to select those with desirable characteristics, and
then breed successive generations from those animals. We also own
technology to screen and process semen for desirable traits, such
as gender, and license technology to make precise, desirable gene
edits to animals' DNA.
Genus's worldwide sales are made in over seventy 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 production.
The Group's competitive edge has been created from the ownership
and control of proprietary lines of breeding animals, proprietary
technology and knowhow used to improve them, relationships with
leading meat and milk producers, and its global supply chain and
distribution networks.
With headquarters in Basingstoke, United Kingdom, Genus
companies operate in over twenty-five countries on six continents,
with research laboratories located in Madison, Wisconsin, USA.
Group Performance
Genus achieved strong financial growth in the first half of the
year, with revenue up 7% (10% in constant currency) and adjusted
profit before tax up 16% (20% in constant currency) from strong
business performances across the Group, particularly in bovine.
Adjusted earnings per share were up 34% (39% in constant currency)
including a deferred tax credit of GBP3.7m following the enactment
of the US tax reform measures.
On a statutory basis, profit before tax was 25% higher primarily
due to the underlying business performance. Earnings per share were
419% higher boosted by a GBP32.0m non-cash reduction in Genus's
deferred tax liabilities primarily related to its biological assets
following the US tax reforms. We continue to use adjusted results
as our primary measures of financial performance as they better
reflect our underlying progress.
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 period by GBP1.0m or 4% compared with 2016. Unless
stated otherwise, the results and review of operations quote
constant currency adjusted growth rates, to give a better
reflection of underlying trading.
Results
Revenue increased by 7% in actual currency and 10% in constant
currency to GBP238.6m (2016: GBP222.1m) during the period. In Genus
ABS, revenue growth of 16% was across all regions with particularly
strong growth in sexed semen revenues, up 30% and IVB, up 45%. In
Genus PIC, revenues grew 6% driven by strong royalty revenues, up
8%, with growth in all regions and particularly in Europe.
Adjusted operating profit including joint ventures was GBP31.5m
(2016: GBP26.8m), up 18% in actual currency and 21% in constant
currency. Within this, Genus's share of adjusted joint venture
operating profits was higher at GBP3.6m (2016: GBP3.3m).
Genus ABS performed strongly following the actions to sharpen
execution, improve efficiency and launch Sexcel, with sales
exceeding expectations. Improved market conditions were also a
contributory factor in the ABS performance. Volumes grew 8% and
operating profit less non-controlling interest increased 47%.
Volumes, average selling prices and revenues grew in all regions.
Profits grew in Europe, Latin America and Asia, while North America
remained little changed as we invested further in the key account
sales force.
Genus PIC had another solid performance with volume growth of
5%, royalty growth of 8%, and profits including joint ventures up
7%. Profits grew strongly in Europe and Latin America, but declined
in Asia due to lower farm margins in China following the
exceptionally high pig prices in the prior year. Customer sales and
royalties in China continued to grow. In North America two boar
multiplication farms were infected by PRRSv in December 2017 and
January 2018, resulting in the need to slaughter the animals and
creating a headwind for 2018.
R&D investment increased as planned by 5%, as we create our
first generation of gene edited elite pigs and the costs of the
PRRSv programme rose by 47%. We also continued to increase our
investment in IntelliGen technologies.
Net finance costs increased to GBP2.5m (2016: GBP1.7m)
principally due to higher levels of net debt following the
acquisition of Hermitage's porcine genetics and higher interest
income in the prior period on Brazilian Real cash deposits hedging
the planned 49% IVB acquisition. Adjusted profit before tax
increased 16% in actual currency to GBP29.0m (2016: GBP25.1m) and
was 20% higher in constant currency.
The tax rate on adjusted profits was 13.8% (2016: 25.9%) and
adjusted earnings per share were up 34% to 40.9 pence (2016: 30.5
pence) benefiting from a GBP3.7m credit from the reduction of
deferred tax liabilities in the US following the enactment of the
US tax reform measures. In the absence of this one-off credit, the
underlying tax rate on adjusted profits would have been 26.6%.
Statutory profit before tax was GBP14.3m (2016: GBP11.4m), up
25% with the net effect of adjusting items little changed in the
period. Statutory after tax profit was GBP42.6m (2016: GBP8.8m)
reflecting a large non-cash deferred tax credit as a result of US
tax reform. This primarily arose on applying the new US tax rates
to the deferred tax liabilities associated with the fair value
uplift under IAS 41 on the Group's biological assets.
Cash Flow and Net Debt
Free cash flow was strong at GBP6.5m (2016: GBP0.1m outflow),
driven by strong cash generated by operations of GBP22.0m (2016:
GBP13.5m), representing conversion of adjusted operating profit of
GBP28.3m (2016: GBP24.5m) into cash of 78% (2016: 55%) following
strong trading performances, particularly in ABS. Capital
expenditure of GBP7.1m (2016: GBP10.2m) included continued
investment in IntelliGen capacity and technology.
Net debt increased from GBP109.0m to GBP113.4m at 31 December
2017, primarily due to the investments in Hermitage Genetics and
the remaining 49% of IVB during the early part of 2017 partially
offset by the strong trading performance and a beneficial impact of
exchange rates on our US Dollar borrowings. The balance sheet
remains healthy with net debt to EBITDA of 1.4 times (2016: 1.6
times), as defined in the debt facility agreement.
Dividend
Reflecting the Board's continuing confidence in the Group's
prospects, the Board has approved an interim dividend of 8.1 pence
per share, an increase of 9.5% on last year's interim dividend of
7.4 pence per share. The interim dividend is payable on 4 April
2018 to those shareholders on the register at 9 March 2018.
Progress on Strategy
During the period we continued to invest in initiatives to
strengthen our competitive position and saw clear benefits from
strategic investments made in the past to strengthen our core
genetics and technology.
We are achieving encouraging results from our investment in De
Novo, our majority owned dairy breeding programme, and expect 45%
of new Holstein bulls coming into production in this fiscal year to
come from De Novo, compared with 23% internally bred in FY17. The
quality of our pipeline of young bulls has also materially
strengthened and is already industry leading. This puts us in a
strong position to provide our customers with elite genetics, but
also enables us to increase the proportion of bulls that are bred
internally, rather than depending on third party breeders.
We successfully launched our proprietary bovine semen sexing
technology in September, offering our bovine customers superior
genetics sexed with our 21st Century laser-based technology under
the Sexcel brand. Sales of Sexcel since launch have exceeded
expectations. Early results in the field have been encouraging,
with many customers reporting increased conception rates using
Sexcel. We have also secured licensing and contract sexing deals
with third parties under the IntelliGen brand. Geno, Norway's
leading bull stud, licensed and took delivery of IntelliGen
machines in October and began sexing bovine genetics in December.
We also signed deals with the Mehsana cooperative in Gujarat,
India, and with the Uttar Pradesh Livestock Development Board
('UPLDB') after the period end to provide their bull studs with
sexed genetics using IntelliGen technology. Genus continues to
defend vigorously its position in the US courts against Sexing
Technologies ('ST') and filed Inter-Partes Reviews at the US Patent
and Trademark Office seeking to revoke five patents ST has asserted
against Genus and has also filed a Motion to Dismiss and
Counterclaims in the Federal Court.
Genus PIC signed a strategic relationship agreement with
Møllevang Genetics, an independent Danish porcine genetics company,
which had until recently been part of the Danbred Danish
cooperative breeding system. This strategic relationship will
commence in July 2018, at which point Møllevang Genetics will
become a genetic distribution and production partner for PIC in
Denmark and parts of Europe.
In our PRRSv resistance programme, the first batches of elite
gene edited piglets were born. The successfully edited piglets,
along with future batches, will serve as the initial founders of
our gene edited herd, which will be monitored and assessed for
technical and regulatory purposes. In addition, US patents relating
to the PRRSv resistance edits and exclusively licensed to Genus
have been granted, strengthening our ability to protect our
intellectual property relating to the PRRSv resistance
programme.
Outlook
Genus performed strongly in the first half of the year. The year
on year comparatives are more demanding in the second half and some
headwinds exist. Nevertheless, Genus expects to make continued
financial and strategic progress in the second half and to perform
in line with its expectations in constant currency. Actual
currencies, while continuing to be volatile, are now expected to
have an adverse impact on reported results in the region of GBP3m
for the 2018 financial year.
Review of Operations
Genus PIC - Operating Review
Actual currency Constant
currency
2017 2016 Movement Movement
GBPm GBPm % %
Revenue 126.4 122.5 3 6
Adjusted operating
profit exc JV 44.1 42.8 3 6
Adjusted operating
profit inc JV 47.7 46.1 3 7
Adjusted operating
margin exc JV 34.9% 34.9% - 0.1pts
Market
Strong demand in the US, both domestically and from Mexico,
combined with low input costs and added meat packing capacity, have
offered producers moderate profits over the last two quarters. Two
new pig processing facilities came on-line in September, adding
slaughter capacity to the US. This has increased competition for
pigs and has enabled pig producers to enjoy continued positive
margins in spite of the previous year's expansion in sow
numbers.
Global pork production has expanded throughout most major pork
exporting regions while import demand in China was over 20% lower
compared with the prior year, resulting in competition and reduced
margins for the key suppliers to this market. The European Union
has been most affected by this change, with a 10% decline in total
exports and 19% erosion in pork prices through the latter half of
2017. Global pig prices have responded similarly with the Global
Pig Price Index slipping over 8% from the June highs. Despite this
decline, pig producers across the globe have generally maintained
positive net margins.
The United States Department of Agriculture is forecasting an
additional 2% growth in global pork production in 2018. China is
the primary driver of this growth with the US, Canada, and Brazil
contributing to lesser degrees. The Chinese sow herd expansion that
began in 2017 is expected to continue in 2018 with large commercial
systems replacing traditional small-scale family farms which will
benefit Genus. Stricter environmental regulations are driving this
modernisation, with vertically integrated companies rapidly
expanding through contract farming agreements. China is projected
to add 1.25 million tons of pork production in 2018, representing a
2.3% increase over the last year. Pig prices in China were 18%
below the exceptionally high prices of the previous year, but
producers were still profitable in the period.
Russia is approaching self-sufficiency in pork production and is
looking toward participation in the global export market and in
December, Russian government authorities placed a ban on imports of
Brazilian beef and pork. As Brazil is Russia's largest supplier of
pork, this development poses a challenge to a Brazilian pork sector
that has already faced increased volatility from inflation and
political instability.
Performance
During the period, PIC operating profit including joint ventures
was GBP47.7m, up 7% in constant currency. Volumes grew by 5% and
revenue was 6% higher, primarily due to royalty growth and higher
breeding stock sales.
In North America, revenue grew 6% in constant currency due to
royalty and breeding stock sales growth. Despite PIC's continued
investments in expanding the supply chain and upgrading
company-owned facilities, North America's profit grew by 3% during
the period. In December 2017 and January 2018, two PIC boar
multiplication farms were infected by PRRSv, resulting in the need
to slaughter out the animals. This will create a headwind for the
North America business in 2018.
Latin American profits improved by 25% and revenues were up 19%
in constant currency. Revenues were up in all countries, showing
signs of improved economic stability in the region. A key
contributor to this growth was royalty revenue which increased by
14% in constant currency. Additionally, operational and product
performance in Brazil drove profits from PIC's joint venture up by
almost 50% for the period in constant currency.
Europe achieved impressive growth in the period, with volumes up
20%, and operating profits grew by 55% in constant currency. Strong
royalty growth driven by execution of strategic pricing initiatives
is a key driver of profit improvements across the region.
Additionally the integration of PIC's partnership with Hermitage
Genetics continues to progress positively. The business
transformation in Europe continues to focus on a royalty model with
producers who value genetics and multiple distribution
partners.
Asia's results were below the prior year by 15% in constant
currency due primarily to weakening market prices for by-product
pigs and biosecurity challenges in China. China continued to grow
customer volumes and revenues, including royalties. Russia,
Philippines and Asia franchises all achieved profit growth. This
performance underscores the benefit of the PIC royalty revenue
model in Asia which achieved 11% growth in constant currency. PIC's
strategy to focus on key large scale customers in emerging markets
while mitigating operational risks continues to position the Asia
region for good long term results.
Overall, the PIC global business delivered solid performance,
despite varying global market conditions and continued investment
to enhance product supply and differentiation. These investments,
along with our strategic relationships such as with Hermitage and
as recently announced with Møllevang, an independent Danish
genetics provider, will continue to enable PIC to better serve
customers, mitigate market risks and support future growth.
Genus ABS - Operating Review
Actual currency Constant
currency
2017 2016 Movement Movement
GBPm GBPm % %
Revenue 105.6 93.4 13 16
Adjusted operating profit 11.7 9.0 30 36
Adjusted operating profit
less non-controlling interest 11.6 8.3 40 47
Adjusted operating margin 11.1% 9.6% 1.5pts 1.7pts
Market
The second half of 2017 generally provided dairy producers with
favourable conditions for profitable milk production. This was at
its peak in Europe with UK milk prices around 30% higher than the
prior year, however there were also gains and less volatility than
recent history in other markets. With global feed prices also down
by 5% against the same period last year, the improved ability for
producers to create cash surpluses for reinvestment and growth
helped to re-instil confidence following the challenges of
2016.
Demand for dairy product continues to show incremental increases
supported by China's growth in demand, particularly for milk
powder, not being met by domestic growth in output. At the same
time challenges in the Middle East increased the levels of surplus
milk available for global marketing.
The growth in milk supply through early 2017 accelerated into
the second half particularly across the big seven exporters
(Europe, the US, New Zealand, Australia, Brazil, Argentina and
Uruguay) and through New Zealand's spring period. Growth in milk
output in the US of around 1.5% has been more moderate with higher
milk yield per cow and a nominal increase in the dairy herd size.
However, global prices have fallen as we enter 2018, with a
particularly pronounced drop in the US, and this is expected to
cause financial strain for US milk producers in the months
ahead.
Global beef output in 2017 grew by 1.5% compared with 2016. This
varied with growth in output of more than 5% in the US, 4% in
Argentina and 2% in Brazil, whereas Europe and Australia were flat.
Consumption of beef globally also grew by just over 1%. China is
developing into a critically important beef market as consumption
grew by 3%, representing a third of the total global increase in
consumption. In contrast, European consumption fell by 1%.
Relatively balanced levels of beef supply and demand suggest that
margins will remain sustainable for global beef producers.
Performance
Operating profits for ABS increased by 47% in constant currency,
on an 8% volume increase and a 16% increase in revenue. Sexed
volumes were up 32% reflecting both a successful launch of Sexcel,
using Genus's proprietary IntelliGen technology, and sales of sexed
inventory produced under the contract with ST which terminated in
August 2017. The increased volumes of sexed genetics also
positively influenced the use of beef-on-dairy genetics, supporting
a 6% increase in global beef volumes. Europe and Asia were key
contributors to the higher results. The business benefited from
favourable global market conditions, particularly in Europe, and
from a reduced overhead base following past management actions.
In Europe, profits were up 15% in constant currency with
conventional dairy volumes increasing 3%. Customers appreciated the
value in using high end beef genetics and sexed genetics as part of
their dairy breeding strategy. As a result, beef volumes increased
by 8%, beef selling prices increased by 10%, due to focus on the
value of differentiated beef genetics, and sexed semen grew 26%,
with a strong uptake of Sexcel.
In North America, profits decreased by 1% in constant currency.
Unit volumes were up by 2% and revenue by 9%, however this was
offset by planned investment in support of a strengthened focus on
key account management. Beef had a good start to the year, with
volumes up 15% over prior year, reflecting improved market
conditions and the use of beef genetics on dairy herds when paired
with sexed genetics, supported by NuEra(R) genetics selected for
cross-bred beef on dairy performance.
In Latin America, profits were up 19% in constant currency with
conventional dairy volumes increasing 8%. Beef volumes were up 5%
despite challenging market conditions and decreased domestic beef
consumption. The launch of NuEra genetics, selected for cross-bred
performance of North American sires with tropical cows, supported
this performance.
In Asia, volumes were up 15% and profits up 111% with growth
across all major countries as we successfully executed our
strategies in each country. China was up 92%, Australia up 93% and
Japan up 32%. Asia also successfully launched Sexcel from our
Brahma stud in India to provide elite sexed genetics into the
Indian market for the first time.
IVB made a positive contribution to the half year results,
delivering embryo volumes up 35%, revenues up 45% and profit up 66%
including the effect of buying out the remaining 49% of IVB earlier
in 2017.
Overall, ABS has delivered an improved performance and, with the
momentum of the Sexcel launch and a strong genetic portfolio,
anticipates continued progress, albeit against stronger
comparatives and with lower US milk prices in the second half.
Research and Development - Operating Review
Actual currency Constant
currency
2017 2016 Movement Movement
GBPm GBPm % %
Porcine product
development 8.4 8.2 2 6
Bovine product
development 7.8 8.2 (5) (2)
Gene editing 2.1 1.5 40 47
Other research
and development 3.8 4.0 (5) -
----- ----- --------- ----------
Net expenditure
in R&D less non-controlling
interest 22.1 21.9 1 5
===== ===== ========= ==========
Performance
Net research and development investment increased by 5% in
constant currency for the half year, as Genus pursued key strategic
initiatives to further strengthen its proprietary differentiated
offerings. Genus expects to continue increasing investment in gene
editing primarily under the PRRSv programme, and also IntelliGen
technology.
The execution of single-step genomic evaluation on all porcine
pure line populations, crossbred products and all traits of
economic importance, is continuing to exceed the aim of a 35%
increase in the rate of genetic gain compared with the period
before its implementation. Spending growth in porcine product
development was a result of increased investments to expand genetic
testing and product validation and to identify new traits of
commercial relevance. These costs were partially offset by
increased slaughter volumes, improved slaughter market prices, and
lower operating expenses in PIC's nucleus herds.
Gene editing expenditure increased 47% in the period primarily
from investment in the investigational PRRSv resistance project,
including work with Caribou Biosciences Inc. to screen editing
reagents and with RenOVAte to produce first generation elite gene
edited pigs. This investment will continue to grow as Genus pursues
the next stages of development and generates further gene edited
animals.
Bovine product development expenditure decreased by 2%. As part
of the continued integration of De Novo, a majority owned joint
venture created in 2016 with DeSu Holsteins, Genus achieved
efficiencies in the bull portfolio and reduced the costs of the
progeny testing programme to streamline and focus operations. At
the same time, the competitive strength of the pipeline of young
bulls increased significantly and the proportion of internally bred
bulls is increasing as expected.
Genus continued to invest in IntelliGen, scaling up product
manufacturing and operations to meet the commercial launch and high
demand. In addition, we continued to drive business development
opportunities in technology transfer and external customer
manufacturing to expand the global IntelliGen footprint. Geno, the
leading Norwegian bull stud, commenced production with IntelliGen
equipment after a successful technology transfer in the period and
a contract to provide sexed semen was signed with the Mehsana
cooperative in Gujarat, India. After the period end, a contract to
provide sexed semen to UPLDB was also signed.
Genus continued to grow its genomic database and expertise in
Real World Data(R) and through this to explore new proprietary
traits. There was also continued investment in building a beef
nucleus herd to develop unique customer products for value capture
in the beef supply chain through genetic improvement and
differentiation. Industry-leading research continued in developing
genomic selection to drive genetic improvement and differentiation
even faster, and on intellectual property creation and
protection.
PRINCIPAL RISKS AND UNCERTAINTIES
The Genus approach to risk management is to identify, evaluate
and prioritise risks and uncertainties and actively manage actions
to mitigate them. The Genus plc Annual Report 2017 (a copy of which
is available on the Genus plc website at www.genusplc.com) sets out
on pages 12-13 a number of risks and uncertainties that might
impact upon the performance of the Group. There has been no
material change to the principal risks that might affect the
performance of the Group in the current financial year.
GENUS PLC
CONDENSED CONSOLIDATED INCOME STATEMENT
For the six months ended 31 December 2017
Six months Six months Year
ended ended ended
31 December 31 December 30 June
Notes 2017 2016 2017
GBPm GBPm GBPm
Revenue 4 238.6 222.1 459.1
Adjusted operating profit 4 28.3 24.5 55.1
Adjusting items:
* Net IAS 41 valuation movement on biological assets 10 (3.6) (5.0) (1.1)
* Amortisation of acquired intangible assets 9 (5.0) (3.6) (8.7)
* Share-based payment expense (3.0) (1.7) (4.6)
------------ ------------ --------
(11.6) (10.3) (14.4)
- Exceptional items:
- Litigation 5 (2.2) (2.9) (5.3)
- Acquisition and integration 5 (0.6) (0.3) (0.6)
- Other (including restructuring) 5 0.4 (1.0) (2.3)
- Pension related 5 - - 5.7
------------ ------------ --------
Total exceptional items (2.4) (4.2) (2.5)
Total adjusting items (14.0) (14.5) (16.9)
------------------------------------------------------------ ---- ------------ ------------ --------
Operating profit 14.3 10.0 38.2
Share of post-tax profit
of joint ventures and associates
retained 11 2.5 3.1 6.2
Finance costs 6 (2.6) (2.2) (4.5)
Finance income 6 0.1 0.5 0.8
Profit before tax 14.3 11.4 40.7
Taxation 7 28.3 (2.6) (6.4)
Profit for the period from
continuing operations 42.6 8.8 34.3
Attributable to:
Owners of the Company 42.1 8.1 32.8
Non-controlling interest 0.5 0.7 1.5
42.6 8.8 34.3
Earnings per share from
continuing operations
Basic earnings per share 13 69.0p 13.3p 53.8p
Diluted earnings per share 13 67.8p 13.1p 53.0p
Alternative measures of
performance
Adjusted operating profit
from continuing operations 28.3 24.5 55.1
Adjusted operating profit
attributable to non-controlling
interest (0.4) (1.0) (2.1)
Pre-tax share of profits
from joint ventures and
associates excluding net
IAS 41 valuation movement 3.6 3.3 7.1
Adjusted operating profit
including joint ventures
and associates 31.5 26.8 60.1
Net finance costs 6 (2.5) (1.7) (3.7)
Adjusted profit before tax
from continuing operations 29.0 25.1 56.4
Adjusted earnings per share
from continuing operations
Basic adjusted earnings
per share 13 40.9p 30.5p 69.4p
Diluted adjusted earnings
per share 13 40.3p 30.2p 68.4p
------------------------------------------------------------ ---- ------------ ------------ --------
GENUS PLC
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 31 December 2017
Six months Six months Year ended
ended ended 30 June
31 December 31 December 2017
2017 2016
GBPm GBPm GBPm GBPm GBPm GBPm
Profit for the period 42.6 8.8 34.3
Items that may be
reclassified subsequently
to profit or loss
Foreign exchange
translation differences (22.3) 40.7 7.7
Fair value movement
on net investment
hedges 3.2 (6.9) (2.7)
Fair value movement
on cash flow hedges 0.5 2.3 2.1
Tax relating to
components of other
comprehensive income 3.5 (10.9) (4.6)
(15.1) 25.2 2.5
------- ------ ------
Items that may not
be reclassified
subsequently to
profit or loss
Actuarial gain on
retirement benefit
obligations 1.8 0.5 1.2
Movement on pension
asset recognition
restriction - (2.7) 0.3
(Recognition) /release
of additional pension
liability (2.0) 1.3 (4.3)
Tax relating to
components of other
comprehensive income (0.1) 0.2 0.4
(0.3) (0.7) (2.4)
------- ------ ------
Other comprehensive
(expense) / income
for the period (15.4) 24.5 0.1
------- ------ ------
Total comprehensive
income for the period 27.2 33.3 34.4
======= ====== ======
Attributable to:
Owners of the Company 26.7 32.6 33.8
Non-controlling
interest 0.5 0.7 0.6
------- ------ ------
27.2 33.3 34.4
======= ====== ======
GENUS PLC
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 31 December 2017
Called
up Share Non-
share premium Own Trans-lation Hedging Retained controlling Total
capital account shares reserve reserve earnings Total interest equity
Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
BALANCE AT 30
JUNE 2016 6.1 112.3 (0.1) 37.5 (0.6) 219.3 374.5 (6.4) 368.1
Foreign exchange
translation
differences,
net of tax - - - 3.9 - - 3.9 (0.9) 3.0
Fair value
movement
on net
investment
hedges,
net of tax - - - (2.2) - - (2.2) - (2.2)
Fair value
movement
on cash flow
hedges, net
of tax - - - - 1.7 - 1.7 - 1.7
Actuarial gain
on retirement
benefit
obligations,
net of tax - - - - - 1.0 1.0 - 1.0
Movement on
pension asset
recognition
restriction,
net of tax - - - - - 0.3 0.3 - 0.3
Recognition
of additional
pension
liability,
net of tax - - - - - (3.7) (3.7) - (3.7)
Other
comprehensive
income/(expense)
for the year - - - 1.7 1.7 (2.4) 1.0 (0.9) 0.1
Profit
for the
year - - - - - 32.8 32.8 1.5 34.3
Total
comprehensive
income/(expense)
for the year - - - 1.7 1.7 30.4 33.8 0.6 34.4
Recognition
of share-based
payments, net
of tax - - - - - 4.0 4.0 - 4.0
Adjustment arising
from change
in
non-controlling
interest - - - - - - - 8.6 8.6
Dividends 8 - - - - - (13.5) (13.5) - (13.5)
Issue of ordinary
shares - 0.5 - - - - 0.5 - 0.5
BALANCE AT 30
JUNE 2017 6.1 112.8 (0.1) 39.2 1.1 240.2 399.3 2.8 402.1
Foreign exchange
translation
differences,
net of tax - - - (18.1) - - (18.1) - (18.1)
Fair value
movement
on net
investment
hedges,
net of tax - - - 2.6 - - 2.6 - 2.6
Fair value
movement
on cash flow
hedges, net
of tax - - - - 0.4 - 0.4 - 0.4
Actuarial gain
on retirement
benefit
obligations,
net of tax - - - - - 1.8 1.8 - 1.8
Movement on
pension asset - - - - - - - - -
recognition
restriction,
net of tax
Release of
additional
pension
liability,
net of tax - - - - - (2.1) (2.1) - (2.1)
Other
comprehensive
(expense)/ income
for the period - - - (15.5) 0.4 (0.3) (15.4) - (15.4)
Profit
for the
period - - - - - 42.1 42.1 0.5 42.6
Total
comprehensive
(expense)/income
for the period - - - (15.5) 0.4 41.8 26.7 0.5 27.2
Recognition
of share-based
payments, net
of tax - - - - - 3.0 3.0 - 3.0
Adjustment arising
from change
in
non-controlling
interest and
written put
option - - - - - - - 0.8 0.8
Dividends 8 - - - - - (9.9) (9.9) - (9.9)
Issue of - - - - - - - - -
ordinary
shares
BALANCE AT 31
DECEMBER 2017 6.1 112.8 (0.1) 23.7 1.5 275.1 419.1 4.1 423.2
Called
up Share Non-
share premium Own Trans-lation Hedging Retained controlling Total
capital account shares reserve reserve earnings Total interest equity
Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
BALANCE AT 30
JUNE 2016 6.1 112.3 (0.1) 37.5 (0.6) 219.3 374.5 (6.4) 368.1
Foreign exchange
translation
differences,
net of tax - - - 28.8 - - 28.8 - 28.8
Fair value
movement
on net
investment
hedges,
net of tax - - - (5.5) - - (5.5) - (5.5)
Fair value
movement
on cash flow
hedges, net of
tax - - - - 1.9 - 1.9 - 1.9
Actuarial gain
on retirement
benefit
obligations,
net of tax - - - - - 0.7 0.7 - 0.7
Movement on
pension
asset recognition
restriction,
net of tax - - - - - (2.7) (2.7) - (2.7)
Release of
additional
pension
liability,
net of tax - - - - - 1.3 1.3 - 1.3
Other
comprehensive
income/(expense)
for the period - - - 23.3 1.9 (0.7) 24.5 - 24.5
Profit
for the
period - - - - - 8.1 8.1 0.7 8.8
Total
comprehensive
income for the
period - - - 23.3 1.9 7.4 32.6 0.7 33.3
Recognition of
share-based
payments,
net of tax - - - - - 1.3 1.3 - 1.3
Adjustment arising
from change in
non-controlling
interest and
written put
option - - - - - - - 2.2 2.2
Dividends 8 - - - - - (9.0) (9.0) - (9.0)
Issue of
ordinary
shares - 0.1 - - - - 0.1 - 0.1
BALANCE AT 31
DECEMBER 2016 6.1 112.4 (0.1) 60.8 1.3 219.0 399.5 (3.5) 396.0
GENUS PLC
CONDENSED CONSOLIDATED BALANCE SHEET
As at 31 December 2017
Notes 31 December 31 December 30 June
2017 2016 2017
GBPm GBPm GBPm
Assets
Goodwill 9 101.9 96.7 104.7
Other intangible
assets 9 81.5 87.0 88.3
Biological assets 10 267.9 289.7 279.2
Property, plant and
equipment 66.4 67.4 67.5
Interests in joint
ventures and associates 11 23.8 26.8 22.7
Other investments 5.5 3.9 5.5
Derivative financial
assets 16 1.8 1.6 0.1
Deferred tax assets 3.9 5.5 3.8
Total non-current
assets 552.7 578.6 571.8
Inventories 32.9 39.8 33.1
Biological assets 10 70.1 70.6 73.9
Trade and other receivables 89.3 83.2 88.8
Cash and cash equivalents 27.7 37.0 26.5
Income tax receivable 2.0 1.2 1.9
Derivative financial
assets 16 - 0.3 1.3
Asset held for sale 0.3 0.3 0.3
Total current assets 222.3 232.4 225.8
------------ ------------ --------
Total assets 775.0 811.0 797.6
Liabilities
Trade and other payables (72.9) (71.5) (76.4)
Interest-bearing loans
and borrowings (13.8) (2.4) (7.7)
Provisions (1.9) (0.9) (2.7)
Obligations under
finance leases (1.6) (2.0) (1.4)
Current tax liabilities (4.2) (5.2) (5.2)
Derivative financial
liabilities 16 (0.8) (0.4) (0.6)
------------ ------------ --------
Total current liabilities (95.2) (82.4) (94.0)
------------ ------------ --------
31 December 31 December 30 June
Notes 2017 2016 2017
GBPm GBPm GBPm
Interest-bearing loans
and borrowings (123.6) (140.0) (127.2)
Retirement benefit
obligations 15 (38.1) (43.3) (40.9)
Provisions (3.7) - (3.7)
Deferred tax liabilities (85.2) (132.5) (124.2)
Derivative financial
liabilities 16 (3.9) (15.2) (3.7)
Obligations under
finance leases (2.1) (1.6) (1.8)
Total non-current
liabilities (256.6) (332.6) (301.5)
Total liabilities (351.8) (415.0) (395.5)
Net assets 423.2 396.0 402.1
Equity
Called up share capital 6.1 6.1 6.1
Share premium account 112.8 112.4 112.8
Own shares (0.1) (0.1) (0.1)
Translation reserve 23.7 60.8 39.2
Hedging reserve 1.5 1.3 1.1
Retained earnings 275.1 219.0 240.2
Equity attributable to
owners of the Company 419.1 399.5 399.3
Non-controlling interest 7.2 11.7 6.1
Put option over non-controlling
interest (3.1) (15.2) (3.3)
Total non-controlling
interest 4.1 (3.5) 2.8
Total equity 423.2 396.0 402.1
GENUS PLC
GROUP STATEMENT OF CASH FLOWS
For the six months ended 31 December 2017
Six months Six months Year
ended ended ended
31 December 31 December 30 June
Notes 2017 2016 2017
GBPm GBPm GBPm
Net cash flow from operating
activities 14 14.3 8.3 34.6
Cash flows from investing
activities
Dividends received from
joint ventures and associates - - 3.8
Joint venture loan repayment - 1.7 3.0
Acquisition of subsidiaries,
net of cash acquired - (2.9) (17.5)
Deferred consideration
paid (1.6) - -
Increase investment in
subsidiaries - - (12.0)
Acquisition of investment - (0.3) (0.3)
Acquisition of investment
in joint venture - - (0.2)
Disposal of joint venture - - 1.5
Purchase of property, plant
and equipment (5.5) (6.5) (13.4)
Purchase of intangible
assets (1.6) (3.7) (5.5)
Proceeds from sale of property,
plant and equipment 0.3 1.0 1.4
Net cash outflow from investing
activities (8.4) (10.7) (39.2)
Cash flows from financing
activities
Drawdown of borrowings 28.5 35.2 68.1
Repayment of borrowings (18.0) (17.8) (55.7)
Payment of finance lease
liabilities (1.0) (1.0) (2.0)
Equity dividends paid (9.9) (9.0) (13.5)
Dividend to non-controlling
interest - - (0.1)
Issue of ordinary shares - 0.1 0.5
Debt issue costs - - (0.4)
Decrease in bank overdrafts (4.0) (3.5) -
Net cash (outflow) / inflow
from financing activities (4.4) 4.0 (3.1)
Net increase/(decrease)
in cash and cash equivalents 1.5 1.6 (7.7)
Cash and cash equivalents
at beginning of period 26.5 34.0 34.0
Net increase / (decrease)
in cash and cash equivalents 1.5 1.6 (7.7)
Effect of exchange rate
fluctuations on cash and
cash equivalents (0.3) 1.4 0.2
Total cash and cash equivalents
at end of period 27.7 37.0 26.5
GENUS PLC
ANALYSIS OF NET DEBT
For the six months ended 31 December 2017
At Net At 31
1 July cash Foreign Non-cash December
2017 flows exchange movement 2017
GBPm GBPm GBPm GBPm GBPm
Cash and cash
equivalents 26.5 1.5 (0.3) - 27.7
---------- -------- ----------- ----------- -----------
Interest-bearing
loans - current (7.7) (6.1) 0.2 (0.2) (13.8)
Obligation under
finance leases
- current (1.4) 1.0 - (1.2) (1.6)
---------- -------- ----------- ----------- -----------
(9.1) (5.1) 0.2 (1.4) (15.4)
---------- -------- ----------- ----------- -----------
Interest-bearing
loans - non-current (127.2) (0.4) 4.0 - (123.6)
Obligation under
finance lease
- non-current (1.8) - 0.1 (0.4) (2.1)
---------- -------- ----------- ----------- -----------
(129.0) (0.4) 4.1 (0.4) (125.7)
---------- -------- ----------- ----------- -----------
Net debt (111.6) (4.0) 4.0 (1.8) (113.4)
========== ======== =========== =========== ===========
At 31
At 1 Net Foreign Non-cash December
July cash exchange movement 2016
2016 flows
GBPm GBPm GBPm GBPm GBPm
Cash and cash equivalents 34.0 1.6 1.4 - 37.0
---------- --------- ----------- ----------- -----------
Interest-bearing loans
- current (4.6) 2.8 (0.4) (0.2) (2.4)
Obligation under finance
leases - current (1.1) 1.0 (0.1) (1.8) (2.0)
---------- --------- ----------- ----------- -----------
(5.7) 3.8 (0.5) (2.0) (4.4)
---------- --------- ----------- ----------- -----------
Interest-bearing loans
- non-current (115.3) (16.7) (8.0) - (140.0)
Obligation under finance
lease - non-current (2.7) - (0.2) 1.3 (1.6)
---------- --------- ----------- ----------- -----------
(118.0) (16.7) (8.2) 1.3 (141.6)
---------- --------- ----------- ----------- -----------
Net debt (89.7) (11.3) (7.3) (0.7) (109.0)
========== ========= =========== =========== ===========
Net debt is defined as the total of cash and cash equivalents,
interest-bearing loans, unamortised debt issue costs and obligation
under finance leases.
GENUS PLC
NOTES TO THE CONDENSED SET OF FINANCIAL STATEMENTS
For the six months ended 31 December 2017
1. Basis of preparation
The unaudited Condensed Set of Financial Statements for the six
months ended 31 December 2017:
-- were prepared in accordance with International Accounting
Standard 34 'Interim Financial Reporting' ('IAS 34') and thereby
International Financial Reporting Standards ('IFRSs'), both as
issued by the International Accounting Standards Board ('IASB') and
as adopted by the European Union ('EU');
-- are presented on a condensed basis as permitted by IAS 34 and
therefore do not include all disclosures that would otherwise be
required in a full set of financial statements; these should be
read, therefore, in conjunction with the Genus plc Annual Report
2017;
-- includes all adjustments, consisting of normal recurring
adjustments, necessary for a fair statement of the results for the
periods presented;
-- do not constitute statutory accounts within the meaning of
section 435 of the Companies Act 2006; and
-- were approved by the Board of Directors on 27 February 2018.
The information relating to the year ended 30 June 2017 is an
extract from the published financial statements for that year,
which have been delivered to the Registrar of Companies. The
auditor's report on those financial statements was not qualified
and did not contain statements under section 498(2) or (3) of the
Companies Act 2006.
The unaudited Condensed Set of Financial Statements for the six
months ended 31 December 2017 has not been reviewed by our
Auditor.
The Genus plc Annual Report 2017 (a copy of which is available
on the Genus plc website at www.genusplc.com) sets out on pages
12-13 a number of risks and uncertainties that might impact upon
the performance of the Group. There has been no material change to
the principal risks that might affect the performance of the Group
in the current financial year. Having considered these risks and
uncertainties, and in the current economic environment, the
Directors have a reasonable expectation that the Company has
adequate resources to continue in operational existence for the
foreseeable future. Therefore they continue to adopt the going
concern basis in preparing the half-yearly report and the Condensed
Set of Financial Statements.
The preparation of the Condensed Set of Financial Statements
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the balance sheet date, and
the reported amounts of revenue and expenses during the period.
Actual results could vary from these estimates. The estimates and
underlying assumptions are reviewed on an ongoing basis. Revisions
to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period or in
the period of revision and future periods if the revision affects
both current and future periods.
In Note 4 we have reclassified the comparative periods to
reflect the change in allocation of costs within the sub analysis
of Research and Development segment, to conform to the current
period definition.
2. Accounting policies and non-GAAP measures
In the current year, the Group has applied a number of
amendments to IFRSs issued by the International Accounting
Standards Board (IASB) that are mandatorily effective for an
accounting period that begins after 1 January 2017. Their addition
has not had any material impact on the disclosures or the amounts
reported in the Interim Financial Statements.
-- Amendments to IAS 7 - Disclosure Initiative
-- Amendments to IAS 12 - Recognition of Deferred tax Assets for Unrealised Losses
-- Annual Improvements to IFRSs 2014 -2016
At the date of the interim 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 EU).
-- IFRS 9 - Financial Instruments
-- IFRS 15 - Revenue from contracts with Customers
-- IFRS 16 - Leases
-- Amendments to IFRS 2 - Classification and Measurement of
Share-based Payments Transactions
-- IFRIC 22 - Foreign Currency Transactions and Advance Consideration
-- IFRIC 23 - Uncertainty over Income Tax Treatments
The Group is currently assessing the impact of the new
pronouncements on its results, financial position and cash
flows.
Alternative performance measures ('APMs')
In reporting nancial information, the Group presents alternative
performance measures, ('APMs'), which are not de ned or speci ed
under the requirements of 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. The APMs are consistent with how the business
performance is planned and reported within the internal management
reporting to the Board and the executive leadership committee. Some
of these measures are also used for the purpose of setting
remuneration targets.
The key APMs that the Group uses include: adjusted operating
profit, adjusted profit before tax from continuing operations,
adjusted earnings per share, adjusted EBITDA and net debt.
The Group reports some nancial measures, on both a reported and
constant currency basis. The constant currency basis, which is an
APM, retranslates the previous year results at the average actual
periodic exchange rates used in the current nancial year. This
measure is presented as a means of eliminating the effects of
exchange rate uctuations on the year-on-year reported results.
The Group makes certain adjustments to the statutory pro t
measures in order to derive many of these APMs. The Group's policy
is to exclude items that are considered to be signi cant in nature
and/or quantum and where treatment as an adjusted item provides
stakeholders with additional useful information to assess the
year-on-year trading performance of the Group. On this basis, the
following were included within adjusted items for the 6 months
ended 31 December 2017:
-- net IAS 41 valuation movements on biological assets -
movements can be materially volatile and do not directly correlate
to the underlying trading performance in the period. Furthermore,
the movement is non-cash related and many assumptions used in the
valuation model are based on future projections rather than current
trading;
-- amortisation of acquired intangible assets - by excluding it
helps the comparability between acquired operations and organically
grown operations, as the latter are not able to recognise
internally generated intangible assets. Adjusting for amortisation
provides a more consistent basis for comparison between the
two;
-- share based payments - this expense is considered to be
relatively volatile and is not fully reflective of the current
period trading as the performance criteria are based on EPS
performance over a three year period and include estimates of
future period performance; and
-- exceptional items - are items which either due to their size
or their nature are excluded to improve the understanding of the
Company's underlying performance, see note 5 for further
details.
The reconciliation between operating profit from continuing
operations and adjusted operating profit from continuing operations
is shown on the face of the Group Income Statement. For adjusted
earnings per share, the reconciliation between profit before tax
and adjusted profit after tax is shown in note 13. For adjusted
EBITDA, the reconciliation between profit after tax and adjusted
EBITDA is shown in note 14. A reconciliation of net debt is
provided after the Group Statement of Cash Flows.
3. Foreign currencies
The principal exchange rates used were as follows:
Average Closing
--------------------------------------- ----------------------------------
Six months Six months Year
ended ended ended 30
31 December 31 December 30 June 31 December 31 December June
2017 2016 2017 2017 2016 2017
US Dollar/GBP 1.33 1.27 1.27 1.35 1.24 1.30
Euro/GBP 1.12 1.16 1.16 1.13 1.17 1.14
Brazilian
Real/GBP 4.28 4.14 4.11 4.48 4.01 4.30
Mexican Peso/GBP 24.68 24.79 24.61 26.58 25.46 23.51
The assets and liabilities of foreign operations, including
goodwill arising on consolidation, are translated into Sterling at
the prevailing exchange rates at the balance sheet date. We
translate these operations' revenues and expenses using an average
rate for the period.
4. 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 Group Chief Executive and
the Board to allocate resources to the segments and to assess their
performance.
The Group's operating and reporting structure comprises of three
operating segments; Genus PIC, Genus ABS and 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
-- Research and Development - our global spend on research and
development.
A segment analysis of revenue, operating profit and segment
assets and liabilities are detailed below. We do not include our
adjusting items in the segments as we believe these do not reflect
the underlying progress 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.
Our business is not highly seasonal and our customer base is
diversified, with no individual customer generating more than 2% of
revenue.
Revenue
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2017 2016 2017
GBPm GBPm GBPm
Genus PIC 126.4 122.5 249.5
Genus ABS 105.6 93.4 195.9
Research and Development
-------------------------------------- ------------- ------------- ------------
Porcine Product Development 5.6 5.4 10.7
Bovine Product Development 1.0 0.8 3.0
Gene Editing - - -
Other Research and Development - - -
-------------------------------------- ------------- ------------- ------------
6.6 6.2 13.7
------------- ------------- ------------
238.6 222.1 459.1
------------- ------------- ------------
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 period is shown on the Condensed
Consolidated Income Statement.
Operating profit
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2017 2016 2017
(Restated) (Restated)
GBPm GBPm GBPm
Genus PIC 44.1 42.8 87.7
Genus ABS 11.7 9.0 22.3
Research and Development
-------------------------------------- ------------- ------------- -------------
Porcine Product Development (8.4) (8.2) (16.6)
Bovine Product Development (7.5) (7.9) (14.2)
Gene Editing (2.1) (1.5) (3.5)
Other Research and Development (3.8) (4.0) (8.4)
-------------------------------------- ------------- ------------- -------------
(21.8) (21.6) (42.7)
------------- ------------- -------------
Segment operating profit 34.0 30.2 67.3
Central (5.7) (5.7) (12.2)
------------- ------------- -------------
Adjusted operating profit 28.3 24.5 55.1
------------- ------------- -------------
Segment assets Segment liabilities
31 30 30
December 31 December June 31 December 31 December June
2017 2016 2017 2017 2016 2017
GBPm GBPm GBPm GBPm GBPm GBPm
Genus PIC 250.4 253.2 258.3 (52.0) (55.4) (60.1)
Genus ABS 141.2 145.7 132.8 (36.1) (43.5) (41.1)
Research and
Development
----------------------------- ------------ ------------ ------------ ------------ ------------ -------
Porcine Product
Development 170.7 172.5 182.4 (52.7) (68.3) (72.0)
Bovine Product
Development 188.2 219.5 202.7 (39.8) (61.5) (52.6)
Gene Editing 5.1 5.1 5.1 (1.4) (0.2) (1.4)
Other Research and
Development 0.4 4.9 0.8 - - -
----------------------------- ------------ ------------ ------------ ------------ ------------ -------
364.4 402.0 391.0 (93.9) (130.0) (126.0)
Segment total 756.0 800.9 782.1 (182.0) (228.9) (227.2)
Central 19.0 10.1 15.5 (169.8) (186.1) (168.3)
------------ ------------ ------------ ------------ ------------ -------
Total 775.0 811.0 797.6 (351.8) (415.0) (395.5)
============ ============ ============ ============ ============ =======
Exceptional items of GBP2.4m expense (2016: GBP4.2m expense),
relate to Genus ABS (GBP2.3m expense), Genus PIC (GBP0.4m credit)
and our central segment (GBP0.5m expense). Note 5 provides the
details of these exceptional items.
We consider share-based payment expenses on a Group-wide basis
and do not allocate them to reportable segments.
Revenue is split by product
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2017 2016 2017
GBPm GBPm GBPm
Sale of animals, semen, embryos
and associated products and
services 175.1 161.4 335.7
Royalties - animal and semen 60.0 57.3 116.1
Consulting services 3.5 3.4 7.3
------------- ------------- ---------
238.6 222.1 459.1
Interest income (see note
6) 0.1 0.5 0.8
------------- ------------- ---------
238.7 222.6 459.9
============= ============= =========
5. Exceptional items
Six months Six months Year
ended ended ended
31 December 31 December 30
2017 2016 June
2017
Operating (expenses)/income: GBPm GBPm GBPm
Litigation (2.2) (2.9) (5.3)
Acquisition and integration (0.6) (0.3) (0.6)
Other (including restructuring) 0.4 (1.0) (2.3)
Pension related - - 5.7
(2.4) (4.2) (2.5)
Litigation
Litigation includes legal fees of GBP2.4m (2016: GBP4.2m)
related to the action by ABS Global, Inc. ('ABS') against Inguran,
LLC (aka Sexing Technologies ('ST')).
On 14 July 2014, ABS launched a legal action against ST in the
US District Court for the Western District of Wisconsin alleging,
among other matters, that ST: (i) has a monopoly in the processing
of sexed bovine semen in the US; and (ii) unlawfully maintains this
monopoly through anticompetitive conduct. The legal action aimed to
remove these barriers and allow free and fair competition in the
sexed bovine semen processing market ('ABS Action'). In parallel
with the ABS Action, ABS also filed Inter-Partes Review
applications ('IPR') before the US Patent Office challenging the
validity of several of ST's group patents, which ST later claimed
were infringed by ABS.
On 11 January and 15 April 2016, the PTAB ruled that US Patent
No. 7,195,920 (the "920 patent') and US Patent No. 7,820,425 (the
"425 patent') were unpatentable. ST has appealed these decisions,
and the appeal was heard by a federal court of appeals on 5
December 2017. The parties await the Federal Circuit's decision. On
14 July 2015 and 2 October 2017, PTAB declined to revoke US Patent
No. 8,206,987 (the "987 patent') and US Patent No. 8,198,092 (the
"092 patent') respectively. ABS has appealed the '092 patent
decision and the validity of the '987 patent will be considered as
part of the ABS Action appeal.
On 31 March 2017, the Court entered a judgment in the ABS Action
which confirmed: (i) the Company and ABS had proved that ST had
wilfully maintained a monopoly in the market for sexed bovine semen
processing in the US since July 2012, and awarded a permanent
injunction against ST which, among other matters, relieved ABS of
certain research, marketing and other non-compete restrictions
contained in the 2012 semen sorting agreement between the parties;
(ii) ST's '987 and '092 patents were valid and infringed; and (iii)
that ABS had materially breached the confidentiality obligations
under the 2012 semen sorting agreement. The Court also confirmed
that: (i) the Company and ABS should pay ST an up-front amount of
$750,000 and an on-going royalty of $1.25 per straw on
commercialisation of the Genus Sexed Semen technology for the use
of ST's '987 patent in the US; (ii) the Company and ABS should pay
ST an up-front payment of $500,000 and an on-going royalty of $0.50
per straw for the use of ST's '092 patent in the US; (iii) ABS
should pay XY, LLC damages of $750,000 for the use of certain XY
trade secrets; and (iv) ABS had breached the confidentiality
obligations under the 2012 semen sorting agreement.
ABS and the Company appealed the '987 patent and the breach of
contract decisions and the appeal hearing was heard on 20 February
2018. The parties await the Court of Appeal's decision. Damages of
$1,250,000 were paid by ABS to ST shortly after the Court's
decision in the ABS Action, and ABS has subsequently amended its
technology such that it does not infringe the '092 patent claims.
ABS has informed ST that it does not intend to pay the $0.50
royalty going forward. Claims for legal costs (and post judgement
interest) already incurred in connection with the ABS Action have
been filed by both parties. ABS has sought approximately $5.4m in
legal fees and costs already charged to the income statement and ST
has sought approximately $280,000 in legal costs (excluding fees).
Both parties await the Court's decision.
On 7 June 2017, ST, XY LLC and Cytonome/ST, LLC filed
proceedings against ABS, the Company and Premium Genetics (UK)
Limited ('PG') in the United States District Court for the Western
District of Wisconsin ("New Litigation"). The New Litigation
alleges that ABS and the Company infringe seven further patents and
asserts trade secret and breach of contract claims. ABS and the
Company have filed an Answer and Counterclaim confirming that they
do not infringe any valid patent, and alleging among other things
that: (i) ST is again in breach of anti-trust legislation; (ii) ST
has breached its 2012 semen sorting agreement with ABS by failing
to produce sorted semen that complies with the contractual
specifications; and (iii) ST has obtained certain patents through
inequitable conduct. In addition, ABS has filed five IPRs seeking
to revoke the additional patents raised in the New Litigation. The
Company and ABS intend to pursue vigorously their counterclaims and
defend the patent infringement and other claims.
Acquisition and integration
During the period, GBP0.6m of expenses were incurred in relation
to acquisitions and integration.
Other (including restructuring)
Included within 'other' are costs principally relating to an
insurance receipt from a legacy environmental claim.
6. Net finance costs
Six months Six months Year
ended ended ended
31 December 31 December 30
2017 2016 June
2017
GBPm GBPm GBPm
Interest payable on bank loans
and overdrafts (1.7) (1.3) (2.7)
Amortisation of debt issue
costs (0.2) (0.2) (0.4)
Other interest payable (0.1) - (0.1)
Net interest cost in respect
of pension scheme liabilities (0.5) (0.6) (1.2)
Net interest cost on derivative
financial instruments (0.1) (0.1) (0.1)
Total interest expense (2.6) (2.2) (4.5)
Interest income on bank deposits 0.1 0.5 0.8
Total interest income 0.1 0.5 0.8
Net finance costs (2.5) (1.7) (3.7)
7. Taxation
Six months Year
ended Six months ended
31 ended 30
December 31 December June
2017 2016 2017
GBPm GBPm GBPm
Current tax 5.6 4.0 10.3
Deferred tax (33.9) (1.4) (3.9)
Income tax (credit) / expense (28.3) 2.6 6.4
The tax credit for the period of GBP28.3m on statutory profit
(2016: tax charge of GBP2.6m) represents an effective tax rate of
-198%. The tax credit for the period has been materially impacted
by the passage into law of the Tax Cuts and Jobs Act in the US,
resulting in the revaluation of the Group's net deferred tax
liability in the US from Federal tax rates of 35% to the lower
Federal tax rate of 28% for reversals in the year to 30 June 2018
and 21% for reversals thereafter. The total deferred tax credit
recognised as at 31 December 2017 in respect of this revaluation of
the Group's net deferred tax liabilities was GBP32.0m. Absent the
revaluation of these deferred tax liabilities the statutory
effective tax rate would have been a charge of 25.9% (2016: 22.8%).
Other aspects of US tax reform are broadly neutral in the
period.
The tax charge on adjusted profits for the period is GBP4.0m
(2016: GBP6.5m), which represents a tax rate on adjusted profits of
13.8%. The tax charge on adjusted profits for the period is also
impacted by tax credits from the restatement of US deferred tax
liabilities totalling GBP3.7m. In the absence of this one-off
credit, the underlying tax rate on adjusted profits would have been
26.6% (2016: 25.9%). Other aspects of US tax reform on the adjusted
tax charge for the period are broadly neutral.
There is a deferred tax liability at the period end of GBP85.2m
(2016: GBP132.5m) which mainly relates to the recognition at fair
value of biological assets and intangible assets arising on
acquisition and a deferred tax asset of GBP3.9m (2016: GBP5.5m)
which mainly relates to future tax deductions in respect of pension
scheme liabilities, share scheme awards and financial
instruments.
8. Dividends
Six months Six months Year
ended ended ended
31 December 31 December 30
2017 2016 June
2017
Amounts recognised as distributions GBPm GBPm GBPm
to equity holders in the
period:
Final dividend
Final dividend for the year
ended 30 June 2017 of 16.2 9.9 - -
pence per share
Final dividend for the year
ended 30 June 2016 of 14.7
pence per share - 9.0 9.0
Interim dividend
Interim dividend for the
year ended 30 June 2017 of
7.4 pence per share - - 4.5
------------- ------------- -------
9.9 9.0 13.5
============= ============= =======
The final dividend for the year ended 30 June 2017 was approved
at the Company Annual General Meeting on 16 November 2017 and paid
on 1 December 2017. On 27 February 2018, the Directors proposed an
interim dividend of 8.1 pence per share payable on 4 April
2018.
9. Intangible assets
Brand,
multiplier Separately
contracts identified Patents,
and acquired Genus licence
customer intangible Sexed and
Technology relationships assets Software Semen other Total Goodwill
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Cost
Balance at
1
July 2016 46.6 72.7 119.3 6.9 17.8 2.6 146.6 86.0
Additions - - - 0.9 3.1 1.5 5.5 -
Acquisition 6.7 7.4 14.1 - - - 14.1 16.2
Reclassified
from tangible
assets - - - 1.0 - - 1.0 -
Effect of
movements
in exchange
rates 0.1 2.2 2.3 - 0.4 - 2.7 2.5
Balance at
30 June 2017 53.4 82.3 135.7 8.8 21.3 4.1 169.9 104.7
========== ============== =========== ========= ======== ========= ======== =========
Additions - - - 0.9 0.8 - 1.7 -
Transfers (1.0) - (1.0) 1.0 - - - -
Reclassified
from tangible
assets - - - 1.1 - - 1.1 -
Disposals - - - (0.1) - (0.2) (0.3) -
Effect of movements
in exchange
rates 0.1 (2.9) (2.8) (0.2) (0.8) 0.1 (3.7) (2.8)
Balance at
31 December
2017 52.5 79.4 131.9 11.5 21.3 4.0 168.7 101.9
========== ============== =========== ========= ======== ========= ======== =========
Amortisation
and impairment
losses
Balance at
1 July 2016 22.1 40.9 63.0 5.4 - 0.2 68.6 -
Amortisation
for the year 2.7 6.0 8.7 1.3 0.4 0.8 11.2 -
Reclassified
from tangible
assets - - - 0.7 - - 0.7 -
Effect of movements
in exchange
rates - 1.0 1.0 0.1 - - 1.1 -
Balance at
30 June 2017 24.8 47.9 72.7 7.5 0.4 1.0 81.6 -
========== ============== =========== ========= ======== ========= ======== =========
Amortisation
for the period 1.8 3.2 5.0 0.6 1.1 0.5 7.2 -
Transfers (0.2) - (0.2) 0.2 - - -
Reclassified
from tangible
assets - - - 0.4 - - 0.4 -
Disposals - - - - - (0.1) (0.1) -
Effect of movements
in exchange
rates - (1.8) (1.8) (0.1) - - (1.9) -
Balance at
31 December
2017 26.4 49.3 75.7 8.6 1.5 1.4 87.2 -
========== ============== =========== ========= ======== ========= ======== =========
Carrying amounts
At 31 December
2017 26.1 30.1 56.2 2.9 19.8 2.6 81.5 101.9
========== ============== =========== ========= ======== ========= ======== =========
At 30 June
2017 28.6 34.4 63.0 1.3 20.9 3.1 88.3 104.7
========== ============== =========== ========= ======== ========= ======== =========
Included within the carrying amount of Software is GBP0.8m
relating to internally generated software assets in the course of
construction.
10. Biological assets
Fair value of biological assets Bovine Porcine Total
GBPm GBPm GBPm
Balance at 1 July 2017 137.5 215.6 353.1
Increases due to purchases 5.9 62.8 68.7
Decreases attributable to sales - (89.7) (89.7)
Decrease due to harvest (14.4) (10.3) (24.7)
Changes in fair value less estimated
sale costs 11.5 31.9 43.4
Effect of movements in exchange
rates (4.9) (7.9) (12.8)
------- ------------ --------
Balance at 31 December 2017 135.6 202.4 338.0
======= ============ ========
Non-current biological assets 135.6 132.3 267.9
Current biological assets - 70.1 70.1
------- ------------ --------
Balance at 31 December 2017 135.6 202.4 338.0
======= ============ ========
Balance at 1 July 2016 146.3 184.7 331.0
Increases due to purchases 6.7 80.2 86.9
Acquisition 5.4 - 5.4
Decreases attributable to sales - (95.2) (95.2)
Decrease due to harvest (17.6) (9.9) (27.5)
Changes in fair value less estimated
sale costs 1.4 32.8 34.2
Effect of movements in exchange
rates 11.0 14.5 25.5
------- ------------ --------
Balance at 31 December 2016 153.2 207.1 360.3
======= ============ ========
Non-current biological assets 153.2 136.5 289.7
Current biological assets - 70.6 70.6
------- ------------ --------
Balance at 31 December 2016 153.2 207.1 360.3
======= ============ ========
Balance at 1 July 2016 146.3 184.7 331.0
Increases due to purchases 11.9 176.0 187.9
Acquisition 5.4 - 5.4
Decreases attributable to sales - (197.8) (197.8)
Decrease due to harvest (40.7) (19.3) (60.0)
Changes in fair value less estimated
sale costs 10.3 66.0 76.3
Effect of movements in exchange
rates 4.3 6.0 10.3
------- ------------ --------
Balance at 30 June 2017 137.5 215.6 353.1
======= ============ ========
Non-current biological assets 137.5 141.7 279.2
Current biological assets - 73.9 73.9
------- ------------ --------
Balance at 30 June 2017 137.5 215.6 353.1
======= ============ ========
Bovine
Bovine biological assets include GBP7.4m (2016: GBP7.7m)
representing the fair value of bulls owned by third parties but
managed by the Group, net of expected future payments to such third
parties and are therefore treated as assets held under finance
leases. There are no movements in the carrying value of the bovine
biological assets in respect of sales or other changes during the
period.
The current market determined post-tax rate used to discount
expected future net cash flows from the sale of bull semen has been
assessed as 9.0% (2016: 8.0%).
Decreases due to harvest represent the semen extracted from the
biological assets. Inventories of such semen are shown as
biological asset harvest.
Porcine
Included in increases due to purchases is the aggregate increase
arising during the period on initial recognition of biological
assets in respect of multiplier purchases, other than parent gilts,
of GBP23.6m (2016: GBP46.9m).
Decreases attributable to sales during the period of GBP89.7m
(2016: GBP95.2m) include GBP27.6m (2016: GBP31.5m) 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 GBP46.8m (2016: GBP54.3m) 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 period.
Total revenue in the period, including parent gilts, includes
GBP81.7m (2016: GBP77.8m) in respect of these contracts, comprising
GBP28.3m (2016: GBP26.0m) on initial transfer of animals to
customers and GBP53.5m (2016: GBP51.8m) in respect of royalties
received.
For pure line porcine herds, the net cash flows from the
expected output of the herds are discounted at the Group's required
rate of return, adjusted for the greater risk implicit in including
output from future generations. This adjusted rate has been
assessed as 11.0% (2016: 11.0%). The number of future generations
which have been taken into account is seven (2016: seven) and their
estimated useful lifespan is 1.4 years (2016: 1.4 years).
Six months ended 31 December 2017 Bovine Porcine Total
GBPm GBPm GBPm
Net valuation movement on biological
assets*
Changes in fair value of biological
assets 11.5 31.9 43.4
Inventory transferred to cost
of sales at fair value (11.3) (10.3) (21.6)
Biological assets transferred
to cost of sales at fair value - (25.2) (25.2)
0.2 (3.6) (3.4)
Fair value movements in related
financial derivative - (0.2) (0.2)
0.2 (3.8) (3.6)
Six months ended 31 December 2016 Bovine Porcine Total
GBPm GBPm GBPm
Net valuation movement on biological
assets*
Changes in fair value of biological
assets 1.4 32.8 34.2
Inventory transferred to cost
of sales at fair value (15.8) (9.9) (25.7)
Biological assets transferred
to cost of sales at fair value - (13.1) (13.1)
(14.4) 9.8 (4.6)
Fair value movements in related
financial derivative - (0.4) (0.4)
(14.4) 9.4 (5.0)
Year ended 30 June 2017 Bovine Porcine Total
GBPm GBPm GBPm
Net valuation movement on biological
assets*
Changes in fair value of biological
assets 10.3 66.0 76.3
Inventory transferred to cost
of sales at fair value (38.8) (19.3) (58.1)
Biological assets transferred
to cost of sales at fair value - (18.8) (18.8)
(28.5) 27.9 (0.6)
Fair value movements in related
financial derivative - (0.5) (0.5)
(28.5) 27.4 (1.1)
* This represents the difference between operating profit
including fair value movement on biological assets under IAS 41 and
related financial derivative and operating profit prepared under
historical cost accounting, which forms part of the reconciliation
to adjusted operating profit.
11. Equity accounted investees
The Group's share of profit after tax in its equity accounted
investees for the six months ended 31 December 2017 was GBP2.5m
(2016: GBP3.1m).
31 31
December December
2017 2016
GBPm GBPm
Balance at 1 July 22.7 24.3
Share of post-tax retained profits
of joint ventures and associates 2.5 3.1
Shareholder loan repayment - (1.7)
Effect of other movements including
exchange rates (1.4) 1.1
Balance at 31 December 23.8 26.8
Summary financial information for equity accounted investees,
adjusted for the percentage ownership held by the Group:
Net IAS
41 valuation
movement Profit
on biological after
Revenue assets Expenses Taxation tax
Income statement GBPm GBPm GBPm GBPm GBPm
Six months ended 31 December
2017 13.6 (0.1) (10.0) (1.0) 2.5
======= ============== ======== ======== ======
Six months ended 31
December 2016 14.9 0.5 (11.6) (0.7) 3.1
======= ============== ======== ======== ======
Year ended 30 June 2017 28.4 0.5 (21.3) (1.4) 6.2
======= ============== ======== ======== ======
12. Related parties
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed in this note. Transactions between the Group and its
joint ventures and associates are described below:
Other related party transactions
Transaction value Balance outstanding
Six months Six months
ended ended Year 31 December 31 December 30
31 December 31 December ended 2017 2016 June
2017 2016 30 June 2017
2017
GBPm GBPm GBPm GBPm GBPm GBPm
Purchase of
goods and services
to joint ventures
and associates 1.3 2.3 3.7 (0.7) (0.1) (0.3)
============ ============ ========= ============= ============= =======
All outstanding balances with joint ventures and associates are
priced on an arm's length basis and are to be settled in cash
within six months of the reporting date. None of the balances are
secured.
13. Earnings per share
Six months Six months Year
ended ended ended
31 31 30
December December June
2017 2016 2017
m m m
Weighted average number of
ordinary shares (basic) 61.1 60.9 60.9
Dilutive effect of share options 1.0 0.7 0.9
Weighted average number of
ordinary shares for the purpose
of diluted earnings per share 62.1 61.6 61.8
Year
Six months Six months ended
ended ended 30
31 December 31 December June
2017 2016 2017
Earnings per share from continuing
operations
Basic earnings per share 69.0p 13.3p 53.8p
Diluted earnings per share 67.8p 13.1p 53.0p
Adjusted earnings per share
from continuing operations
Adjusted earnings per share 40.9p 30.5p 69.4p
Diluted adjusted earnings per
share 40.3p 30.2p 68.4p
Earnings per share measures are calculated on the weighted
average number of ordinary shares in issue during the period. As in
previous periods, adjusted earnings per share have been shown,
since the Directors consider that this alternative measure gives a
more comparable indication of the Group's underlying trading
performance.
Continuing operations
Basic earnings per share from continuing operations is based on
the net profit attributable to owners of the Company for the period
of GBP42.1m (six months ended 31 December 2016: GBP8.1m; year ended
30 June 2017: GBP32.8m) divided by weighted average number of
ordinary shares (basic and diluted) as calculated above.
Adjusted earnings per share is calculated on profit for the
period before net IAS 41 valuation movement on biological assets,
amortisation of acquired intangible assets, share-based payment
expense and exceptional items, after charging taxation associated
with those profits, of GBP25.0m (six months ended 31 December 2016:
GBP18.6m; year ended 30 June 2017: GBP42.3m), which is calculated
as follows:
Adjusted earnings from continuing Six months Six months Year
operations ended ended ended
31 31 30
December December June
2017 2016 2017
GBPm GBPm GBPm
Profit before tax from continuing
operations 14.3 11.4 40.7
Add/(deduct):
Net IAS 41 valuation movement
on biological assets and
commodity futures 3.6 5.0 1.1
Amortisation of acquired
intangible assets 5.0 3.6 8.7
Share-based payment expense 3.0 1.7 4.6
Exceptional items 2.4 4.2 2.5
Net IAS 41 valuation movement
on biological assets in
joint ventures and associates 0.1 (0.5) (0.5)
Tax on joint ventures and
associates 1.0 0.7 1.4
Attributable to non-controlling
interest (0.4) (1.0) (2.1)
Adjusted profit before tax 29.0 25.1 56.4
Adjusted tax charge (4.0) (6.5) (14.1)
Adjusted profit after tax 25.0 18.6 42.3
Effective tax rate on adjusted
profit 13.8% 25.9% 25.0%
14. Cash flow from operating activities
Six months Six months Year
ended ended ended
31 31 December 30
December 2016 June
2017 2017
GBPm GBPm GBPm
Profit for the period 42.6 8.8 34.3
Adjustment for:
Net IAS 41 valuation movement
on biological assets 3.6 5.0 1.1
Amortisation of acquired intangible
assets 5.0 3.6 8.7
Share-based payment expense 3.0 1.7 4.6
Share of profit of joint ventures
and associates (2.5) (3.1) (6.2)
Finance costs (net) 2.5 1.7 3.7
Income tax (credit) / expense (28.3) 2.6 6.4
Exceptional items 2.4 4.2 2.5
Adjusted operating profit
from continuing
operations 28.3 24.5 55.1
Depreciation of property,
plant and equipment 4.9 4.3 8.8
(Profit) / loss on disposal
of plant and equipment (0.1) 0.2 0.2
Loss on disposal of intangible
assets 0.2 - -
Amortisation of intangible
assets 2.2 0.8 2.5
Adjusted earnings before interest,
tax, depreciation and amortisation 35.5 29.8 66.6
Exceptional item cash (3.6) (4.2) (5.4)
Other movements in biological
assets and harvested produce (0.4) (3.0) (5.7)
(Decrease)/increase in provisions (0.4) (0.3) 0.1
Additional pension contribution
in excess of pension charge (3.6) (3.1) (6.6)
Other (0.7) 0.4 (0.9)
Operating cash flows before
movement in working capital 26.8 19.6 48.1
(Increase)/decrease in inventories (1.7) (3.7) 1.4
Increase in receivables (2.3) (1.4) (9.0)
(Decrease)/increase in payables (0.8) (1.0) 5.8
Cash generated by operations 22.0 13.5 46.3
Interest received 0.1 0.5 0.8
Interest and other finance
costs paid (1.9) (1.2) (3.1)
Cash flow from derivative
financial instruments (0.3) 0.3 0.6
Income taxes paid (5.6) (4.8) (10.0)
Net cash from operating activities 14.3 8.3 34.6
=========== ============= ========
15. Retirement benefit obligations
The Group has a number of defined contribution and defined
benefit pension schemes covering many of its employees, further
details can be found in the Genus Annual Report 2017. The
aggregated position of defined benefit schemes are provided
below:
31 December 31 December 30
2017 2016 June
2017
GBPm GBPm GBPm
Present value of funded obligations 421.1 372.6 424.2
Present value of unfunded
obligations 8.7 9.4 9.0
Total present value of obligations 429.8 382.0 433.2
Fair value of plan assets (420.1) (361.8) (418.4)
Restricted recognition of
asset 6.5 9.5 6.5
Recognition of additional
liability (MPF) 21.9 13.6 19.6
Recognised liability for defined
benefit obligations 38.1 43.3 40.9
The Milk Pension Fund ('MPF')
The MPF was previously operated by the Milk Marketing Board, and
was also open to staff working for Milk Marque Ltd (the principal
employer now known as Community Foods Group Limited), National Milk
Records plc, First Milk Ltd, hauliers associated to First Milk Ltd,
Dairy Farmers of Britain Ltd (which went into receivership in June
2009) and Milk Link Ltd.
We have accounted for our section of the scheme and our share of
any orphan assets and liabilities, which together represent
approximately 85% of the MPF. Although the MPF is managed on a
sectionalised basis, it is a "last man standing scheme", which
means that all participating employers are joint and severally
liable for all of the fund's liabilities.
Further details of the Milk Pension Fund can be found in the
Genus Annual Report 2017.
The principal actuarial assumptions (expressed as weighted
averages) are:
31 December 31 December 30
2017 2016 June
2017
% % %
Discount rate 2.6 2.7 2.7
Retail Price Index (RPI) 3.2 3.2 3.2
Consumer Price Index (CPI) 2.1 2.1 2.1
16. Financial instruments fair value disclosures
The table below sets out the categorisation of the financial
instruments held by the Group at 31 December 2017.
We have categorised financial instruments held at valuation into
a three-level fair value hierarchy, based on the priority of the
inputs to the valuation technique in accordance with IFRS 13. The
hierarchy gives the highest priority to quoted prices in active
markets for identical assets or liabilities (Level 1) and the
lowest priority to unobservable inputs (Level 3). Valuations
categorised as Level 2 are obtained from third parties. If the
inputs used to measure fair value fall within different levels of
the hierarchy, we base the category level on the lowest priority
level input that is significant to the fair value measurement of
the instrument in its entirety.
Valuation 31 31 30
level December December June
2017 2016 2017
GBPm GBPm GBPm
Financial assets
Derivative instruments
in non-designated hedge
accounting relationships 2 - 0.3 1.3
Derivative instruments
in designated hedge accounting
relationships 2 1.8 1.6 0.1
Other investments 2 5.5 3.9 5.5
Trade and other receivables
excluding prepayments 2 78.9 76.0 81.0
Cash and equivalents 1 27.7 37.0 26.5
Assets held for sale 2 0.3 0.3 0.3
Financial liabilities
Derivative instruments
in designated hedge accounting
relationships 2 (0.8) - (0.4)
Derivative instruments
in non-designated hedge
accounting relationships 2 (0.8) (0.4) (0.6)
Put option over non-controlling
interest 2 (3.1) (15.2) (3.3)
Trade and other payables
excluding other taxes
and social securities 2 (65.7) (65.4) (69.7)
Loans and overdrafts 2 (137.4) (142.4) (134.9)
Leasing obligations 2 (3.7) (3.6) (3.2)
The Directors consider that the carrying value amounts of
financial assets and financial liabilities recorded at amortised
cost in the financial statements are approximately equal to their
fair values.
GENUS PLC
RESPONSIBILITY STATEMENT
For the six months ended 31 December 2017
We confirm that to the best of our knowledge;
a) the Condensed Set of Financial Statements has been prepared in accordance with IAS 34;
b) the interim management report includes a fair review of the
information required by DTR 4.2.7R (indication of important events
during the first six months and description of the principal risks
and uncertainties for the remaining six months of the year);
and
c) the interim management report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related party
transactions and charges therein).
Neither the Company nor the Directors accept any liability to
any person in relation to the half-yearly financial report except
to the extent that such liability could arise under English Law.
Accordingly, any liability to a person who has demonstrated
reliance on any untrue or misleading statement or omission shall be
determined in accordance with section 90A of the Financial Services
and Markets Act 2000.
By order of the Board
Chief Executive Group Finance Director
Karim Bitar Stephen Wilson
27 February 2018
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR TRMPTMBTTBJP
(END) Dow Jones Newswires
February 28, 2018 02:01 ET (07:01 GMT)
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