Genus plc Preliminary Results for the Year Ended 30 June 2023

SOLID PERFORMANCE AND GOOD STRATEGIC PROGRESS  

WEBCAST AVAILABLE AT 7:01AM GMT, 2.01 EST

LONDON--(BUSINESS WIRE)--Genus (LSE:GNS), a leading global animal genetics company, today announces its preliminary results for the year ended 30 June 2023. 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 GMT, 2.01 EST.

Commenting on the performance and outlook, Jorgen Kokke, Chief Executive Officer, said:

“The Group achieved a strong operational performance despite ongoing challenging market conditions for producers in several important markets. Revenues grew in all regions and both PIC and ABS delivered profit growth. This also enabled us to deliver record adjusted EBITDA and good cashflow for the Group. Growth in R&D investments, primarily due to the strategically important gene editing work and expansion of PIC’s elite farms, as well as higher interest costs, resulted in adjusted profit before tax consistent with the prior year.

“PIC’s performance was particularly impressive, achieving a record adjusted operating profit for the year. Whilst PIC China had a more challenging second half, this was offset by the strong performance in the rest of the world. Our focus is on ensuring that PIC China can offer the best genetics and customer service in the market, underpinned by royalty contracts where we share in our customers’ success and build a predictable business. Population of PIC’s new world-class elite farms in Canada, Brazil and China positions the business very well to capture future growth opportunities, including commercialising PRRSv-resistant edited pigs.

“The PRRSv-resistant pig programme is reaching an exciting stage, having completed our submissions to the FDA ahead of schedule. Approval is expected in the first half of 2024. We are also progressing the approvals for other markets, including China where we now have consent to import PRRSv-resistant pigs for in-country assessment.

“ABS saw trading improve in the second half and it continued to expand business with strategic accounts, by continuing to build long-term partnerships and offering the leading combination of Sexcel and NuEra beef genetics. This, along with robust price increases to counter inflation, enabled ABS to achieve good performances across most regions, countering the weakness in the Brazilian market, where nevertheless we increased market share.

“In fiscal year 2024 we expect to perform in line with our medium-term growth expectations in constant currency. Based on the recent strengthening of sterling against certain key currencies and higher interest rates in the current year, we expect modest growth in adjusted profit before tax in actual currency. The Board remains confident in the Group's strategy and the many opportunities for Genus.”

Outlook

Genus achieved a strong adjusted operating profit performance in fiscal year 2023, despite challenging conditions for our customers in several parts of the world. Over a five-year period we have delivered performance in line with our stated medium term objective of a 10% CAGR in adjusted operating profit excluding gene editing, in constant currency. We remain confident that Genus is well placed to continue gaining market share through our world class team, market leading genetics, global supply chain and pioneering technology.

We have a clear focus on continuing to drive growth through leveraging the significant investments the Group has made in recent years. The PRRSv-resistant pig represents the most substantial opportunity in the medium term with FDA approval expected in the first half of 2024, having completed our submissions ahead of schedule.

We anticipate that the China porcine market will continue to be volatile, reflecting continued disease outbreaks, a less consolidated industry structure and weak consumer demand. We remain confident PIC China will be a resilient growth business over the medium-term through offering the best genetics, customer service and increasing the penetration of our royalty-based model.

In fiscal year 2024 we expect to continue to perform in line with our expectations for adjusted operating profit excluding gene editing, in constant currency. However, the recent strengthening of the pound sterling relative to several of our key trading currencies is currently anticipated to lead to a currency translation headwind of approximately £5-6m in the year. In addition, we expect finance costs to increase by approximately £2m as a result of the higher interest rate environment. The Board therefore expects modest growth in adjusted profit before tax in actual currency for fiscal year 2024.

The Board remains confident in the Group’s strategy and our medium-term growth expectations remain unchanged.

Results presentation today

A pre-recorded investors, analysts and bankers briefing to discuss the preliminary results for the year ended 30 June 2023 will be accessible via the following link from 7:01am UK time today:

https://stream.buchanan.uk.com/broadcast/64d23b9607eccc4a190b942c

This will be followed by a live Q&A session by invitation. Those unable to attend in person can also join via Zoom at 10:30am UK time. Please contact Verity Parker at Buchanan for details: verity.parker@buchanancomms.co.uk

Results Highlights

Solid Group performance

• Group revenue rose by 10% in constant currency (16% in actual currency)
• Adjusted operating profit including joint ventures up 3% in constant currency (10% in actual currency)
• R&D investment increased by 19%² as planned, including a 66%² rise in gene editing expense in preparation for the anticipated commercialisation of pigs resistant to porcine reproductive and respiratory syndrome virus (PRRSv) which continues to make excellent progress
• Adjusted profit before tax (PBT) flat in actual currency (8% lower in constant currency), with net finance costs up 124%²
• Statutory PBT reduced by 19% to £39.4m, with a £16.9m reduction in the non-cash fair value IAS41 valuation of the Group’s biological assets

Record PIC performance, profit growth achieved in all regions

• Strong demand for PIC’s differentiated genetics drove a 5% increase in volumes, revenue up 7%² and strategically important royalty revenue growth across all regions, up 10%²
• Adjusted operating profit including joint ventures increased by 11%², as the business continued to expand and strengthen commercial relationships with producers around the world
• The performance was driven by strong profit growth in North America, Latin America and Asia. Good growth in Europe, with improved performance in the second half
• Performance in China was affected by ongoing market volatility, particularly in the second half of the year. Volumes were 1% lower in the year, with revenue stable. Royalty revenue was up 26%² and adjusted operating profit was £9.4m (2022: £5.6m, impacted by a £4m customer credit)

Solid ABS performance, profit growth achieved in all regions other than Latin America, which was stable

• Volumes up 3%, revenue up 12%² supported by robust price increases
• Adjusted operating profit up 5%, after a stronger second half. Expansion of long-term partnerships with strategic accounts, underpinned by Sexcel and NuEra beef genetics, drove strong profit growth in North America and good growth in Europe
• Latin America profits stable, despite challenging market conditions, particularly in Brazil where macroeconomic conditions continued to impact beef supply and demand dynamics
• Sexed genetics volumes up 18%; strong growth in volumes of Sexcel and third-party IntelliGen production

Good cash flow, debt leverage reduced and dividend maintained

• Free cash inflow¹ of £18.2m (2022: £13.5m outflow), reflecting record high adjusted EBITDA¹, lower working capital outflows and lower capital expenditure. Strong cash conversion of 105%¹ (2022: 82%) above target level of 90%
• Net debt to EBITDA ratio improved to 1.6x¹ (2022: 1.7x); within the 1.0x-2.0x target range. Net debt¹ of £195.8m (2022: £185.0m) as expected
• Adjusted earnings per share rose 3% in actual currency, full year dividend maintained at 32.0p per share, with 2.7x¹ adjusted earnings cover, comfortably within the 2.5x-3.0x target range

Good strategic progress and continued investment for growth

• Genus’s PRRSv-resistant pigs programme continued to make excellent progress, with submissions to the US Food and Drug Administration (FDA) completed ahead of schedule and approval expected in the first half of 2024. We are making regulatory progress in Colombia, Brazil and also China, where we have obtained consent for import of PRRSv-resistant pigs for in-country assessment
• PIC’s new world-class elite farms in Canada, Brazil and China well positioned to capture future growth opportunities
• GenusOne successfully deployed throughout the majority of Europe in the year; implementation underway in LATAM
• Strong progress in reducing CO2 emissions; primary intensity ratio reduced by 36% and Scope 1 and 2 emissions reduced by 14% compared to our 2019 baseline

About Genus

Genus advances animal breeding and genetic improvement by applying biotechnology and sells added value products for livestock farming and food producers. Its technology is applicable across livestock species and is currently commercialised by Genus in the dairy, beef and pork food production sectors.

Genus's worldwide sales are made in over 75 countries under the trademarks 'ABS' (dairy and beef cattle) and 'PIC' (pigs) and comprise semen, embryos and breeding animals with superior genetics to those animals currently in farms. Genus's customers' animals produce offspring with greater production efficiency and quality, and our customers use them to supply the global dairy and meat supply chains.

Genus’s competitive edge comes from the ownership and control of proprietary lines of breeding animals, the biotechnology used to improve them and its global supply chain, technical service and sales and distribution network.

Headquartered in Basingstoke, United Kingdom, Genus companies operate in over 24 countries on six continents, with research laboratories located in Madison, Wisconsin, USA.

Forward-looking Statements

This Announcement may contain, and the Company may make verbal statements containing “forward-looking statements” with respect to certain of the Company’s plans and its current goals and expectations relating to its future financial condition, performance, strategic initiatives, objectives and results. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Announcement. Forward-looking statements sometimes use words such as “aim”, “anticipate”, “target”, “expect”, “estimate”, “intend”, “plan”, “goal”, “believe”, “seek”, “may”, “could”, “outlook”, “will” or other words of similar meaning. By their nature, all forward-looking statements involve risk and uncertainty because they relate to future events and circumstances which are beyond the control of the Company, including amongst other things, diverse factors such as domestic and global economic business conditions, market-related risks such as fluctuations in commodity prices, interest rates and exchange rates, the policies and actions of governmental and regulatory authorities, the effect of sanctions on the ability to trade, the effect of competition, inflation, deflation, the timing effect and other uncertainties of future acquisitions or combinations within relevant industries, the effect of the spread of African Swine Fever and other animal diseases, the continued development and improvement of our IntelliGen® technology, the development and registration of our innovative new products, such as our gene edited porcine reproductive and respiratory syndrome virus resistant pigs, the continued growth in emerging markets, the effect of tax and other legislation and other regulations in the jurisdictions in which the Company and its respective affiliates operate, the effect of volatility in the equity, capital and credit markets on the Company’s profitability and ability to access capital and credit, a decline in the Company’s credit ratings; the effect of operational risks; and the loss of key personnel. As a result, the actual future financial condition, performance and results of the Company may differ materially from the plans, goals and expectations set forth in any forward-looking statements. Except as required by applicable law or regulation, the Company expressly disclaims any obligation or undertaking to publish any updates or revisions to any forward-looking statements contained in this Announcement to reflect any changes in the Company’s expectations with regard thereto or any changes in events, conditions or circumstances on which any such statement is based.

No statement in this Announcement is intended to be a profit forecast, and no statement in this Announcement should be interpreted to mean that earnings per share of the Company for the current or future financial years would necessarily match or exceed the historical published earnings per share of the Company. Information contained in this Announcement should not be relied upon as a guide to the Company’s future performance.

This announcement is available on the Genus website www.genusplc.com

Adjusted results are the Alternative Performance Measures (‘APMs’) used by the Board to monitor underlying performance at a Group and operating segment level, which are applied consistently throughout. These APMs should be considered in addition to statutory measures, and not as a substitute for or as superior to them.

Enquiries:
Genus plc (Jorgen Kokke, Chief Executive Officer / Alison Henriksen, Chief Financial Officer / Anand Date, Investor Relations Director)
Tel: +44 1256 345970

Buchanan (Charles Ryland / Chris Lane / Verity Parker)
Tel: +44 207 4665000