Interim Results
Genus PLC
19 November 2002
Immediate Release 19 November 2002
Genus plc
Interim Results for the six months ended 30 September 2002
Genus plc, the international agri-technology Group, announces interim results
for the six months ended 30 September 2002.
Highlights
6 months to 6 months to Improvement
30.9.2002 30.9.2001
Turnover £82.0m £78.3m 5%
Underlying pre-tax profit* £5.2m £3.5m 49%
Pre-tax profit £4.4m £(0.1m) -
Underlying EPS* 10.3p 6.7p 54%
Net debt £17.0m £22.9m 26%
Net gearing 35% 49% -
• Group underlying pre-tax profit* up 49% to £5.2 million
• Underlying EPS* up 54% to 10.3 pence (6.7 pence in 2001)
• Breeding Division - continued strong performance:
- Sales up 2.2% in constant currency in a difficult global market
- Underlying operating profit up 12% to £5.6 million after
including £370,000 of losses affected by economic uncertainties
in Latin America
- The acquisition of the remaining 70% share in ABS Australia Pty
Limited, our exclusive Australian distributor, will add
potential for further growth in Australia and New Zealand
• Recovery in Distribution Division accelerated:
- Like for like market share increased by between 1% - 2%
- Underlying operating profit up 29% to £479,000
- Acquisition from the receivers of Dunnwood's business in July,
increasing Genus' presence in Scotland
• Slow recovery in Consulting Division:
- Agricultural consultancy back on track following Foot and Mouth
- Activity in international strategic and market consultancy
remained low mainly due to world economic recession
- Further re-organisation costing £128,000 included in results
• Sale of Head Office building and devolution of operations will be
completed by 31 December, releasing £2 million in cash
• Progress made in obtaining a more balanced share register, 75,000
ordinary shares have been repurchased from small shareholders and
350,000 shares have been allotted to institutional investors
*On continuing operations, before exceptional items and amortisation of goodwill
Commenting on the outlook for the Group, Richard Wood, Chief Executive Officer,
said:
'Clearly we have had an exceptionally strong start in a potentially difficult
year. However, we are being careful not to expect a correspondingly strong
second half year.
The process of returning to normality following the FMD crisis in the UK has
brought forward the breeding season this year, effectively bringing forward
business we would normally have expected in the second half year. Also, the
Board believes that world agriculture typically exhibits a three year cycle and
that a cyclical downturn has begun. This slowdown was expected and has been
factored into our business plans.
Further Group progress in the second half will, therefore, come from the
continued recovery of the Consulting and Distribution Divisions.'
Richard Wood, Chief Executive
Philip Acton, Finance Director
Genus plc Tel: 01256 347101
Charles Ryland / Catherine Miles
Buchanan Communications Ltd Tel: 020 7466 5000
Chairman's Statement
I am pleased to report that the Group made an exceptional start to the current
financial year.
Group turnover grew by 5% to £82 million, despite the value of overseas revenues
having been eroded by the increasing strength of sterling and including £2.4
million from the acquisition of Dunnwood Limited. Prices were held in all
sectors. Exchange rate management significantly reduced the potential impact on
profits of adverse currency movements.
The Group operating profit was £4.9 million, up 47%. This was after goodwill
amortisation of £0.9 million (£1.0 million in 2001).
Group profit before taxation, of £4.4 million was strongly ahead of the small
loss made last year. Last year's result included the loss on disposals of
discontinued operations of £1.2 million, and the write down and write off of the
investment in Gensel of £1.8 million. Property sales in the first half of this
year contributed £0.1 million (£0.6 million in 2001).
Underlying earnings per share rose by 54% to 10.3 pence (6.7 pence in 2001).
In line with the Board's aim of achieving a more balanced share register, during
the six months ended 30 September 2002, Genus repurchased 75,000 ordinary shares
from shareholders and allotted 350,000 to institutional investors.
Breeding Division - 43.7% of Group turnover
Sales in the core Breeding Division grew by 2.2% at constant exchange rates.
However, when overseas sales were converted into sterling, this resulted in a
small decline. Hedging measures offset the impact of exchange rate movements on
the translation of overseas profit to sterling. The economic problems in Latin
America and the volatility of the Mexican currency reduced profits by £370,000.
Nevertheless, Division underlying operating profit increased by 12% to £5.6
million, helped by an early breeding season in the UK and an 11% increase in
dairy volume in the USA.
In the important UK market, the business retained most of the market share
increase achieved last year. UK productivity improvements maintained last
year's profit, which was above trend because of our successful management of the
business during the Foot and Mouth (FMD) epidemic.
In line with Group strategy we announced, on 12 November, the acquisition of the
remaining 70% share in ABS Australia Pty Limited, our exclusive Australian
distributor. Australia is a fast expanding market because of its increasing
export trade in milk products to Asia. We believe the demand for semen and
insemination services in Australia will grow strongly over the next five years.
This acquisition will act as a springboard for expansion in Australia and New
Zealand.
Consulting Division - 17% of Group turnover
The end of the FMD epidemic helped achieve a level of recovery in Consulting.
However, the agricultural market in the UK has remained flat. Government work
aimed at helping British farming to recover added to reduced levels of
traditional work and brought the agricultural sector back on track.
Underlying profit in aid funded consultancy grew by 19%.
Strategic market consultancy, with its multi-national client base, has remained
severely depressed since 11 September 2001. Sales in that business sector have
halved, generating losses which have offset improvements in other business
sectors.
To speed recovery, a further restructuring of the Consulting Division, costing
£128,000, has been included in these results together with a £0.4 million gain,
following the settlement of an old contract for which we had made a provision.
Distribution Division - 39.3% of Group turnover
The Distribution Division recovery accelerated. Like for like market share
increased by between 1% - 2%, as customers began again to appreciate the high
quality service offered by the Division. Many new accounts were won from across
all competitors and few accounts were lost. Underlying operating profit was
increased by 29% to £479,000 after charging £60,000 in acquisition costs.
The Division moved ahead of all competitors, in July, to acquire Dunnwood
Limited from the receivers. At the time of acquisition, Dunnwood, a small
Scottish company, was in a very depressed condition and unable fully to service
its customers. It has now been revitalised, fully integrated into the Genus
operations and will provide growth potential for the Division in the future.
Net Debt and Dividend
Net debt normally increases at this time of the year due to the payment of the
full year dividend (£1.6 million) and the seasonal increase in working capital,
particularly in Breeding. This year, there was the additional demand on cash of
£0.9 million to fund the Dunnwood acquisition.
Despite these increased demands, careful cash management held the half year net
debt to £17.0 million, down £5.9 million on the same time last year and only
£1.6 million ahead of the year end debt (£2.5 million up in 2001). As a result,
net gearing fell to 35% (49% at 30 September 2001).
In line with our usual practice, the Board does not recommend an interim
dividend due to the high cost of distribution to the relatively large number of
shareholders. The Board expects to recommend a final dividend on the basis of
the anticipated full year results.
Outlook
Clearly we have had an exceptionally strong start in a potentially difficult
year. However, we are being careful not to expect a correspondingly strong
second half year.
The process of returning to normality following the FMD crisis in the UK has
brought forward the breeding season this year, effectively advancing the
business we would normally have expected in the second half year. Also, the
Board believes that world agriculture typically exhibits a three year cycle and
that a cyclical downturn has begun. This slowdown was expected and has been
factored into our business plans.
Further Group progress in the second half will, therefore, come from the
continued recovery of the Consulting and Distribution Divisions.
SUMMARISED GROUP PROFIT AND LOSS ACCOUNT
Six months ended 30 September 2002
Total six Total six
months months Year
ended ended ended
30/9/02 30/9/01 31/3/02
£000 £000 £000
Turnover (note 4)
- ongoing 79,637 78,280 160,421
- acquisitions 2,376 - -
82,013 78,280 160,421
Underlying operating profit (note 4) 5,801 4,284 9,198
Amortisation of goodwill (921) (960) (1,894)
Operating profit (note 4) 4,880 3,324 7,304
- ongoing 4,875 3,324 7,304
- acquisitions 5 - -
Loss on disposal of discontinued operations - (1,165) (1,181)
Profit on disposal of properties 125 558 458
Write-down of investment - (1,809) (1,809)
Net interest payable and similar charges (648) (986) (1,824)
Profit/(loss) on ordinary activities before 4,357 (78) 2,948
taxation
Tax on profit/(loss) on ordinary activities (note (1,566) (947) (2,349)
5)
Profit/(loss) on ordinary activities after 2,791 (1,025) 599
taxation
Minority interests - equity (44) (26) (34)
Profit/(loss) for the financial period 2,747 (1,051) 565
Dividends (note 6) - (4) (1,580)
Retained profit/(loss) for the financial period 2,747 (1,055) (1,015)
Earnings/(loss) per share - underlying (note 7) 10.3p 6.7p 14.8p
- basic (note 7) 8.3p (3.2p) 1.7p
- diluted (note 7) 8.1p (3.2p) 1.7p
Dividends per share - - 4.75p
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
Total six Total six
months months Year
ended ended ended
30/9/02 30/9/01 31/3/02
£000 £000 £000
Profit/(loss) for the financial period 2,747 (1,051) 565
Exchange difference on the re-translation
of net assets of subsidiary undertakings (2,950) (1,207) (164)
Tax on exchange differences 307 137 102
Total recognised gains and losses relating to the period 104 (2,121) 503
SUMMARISED GROUP BALANCE SHEET
At 30 September 2002
At At
30 September 31 March
2002 2001 2002
£000 £000 £000
Fixed assets
Intangible assets 28,913 31,690 31,298
Tangible assets 16,760 17,528 16,602
Investments 103 33 76
45,776 49,251 47,976
Current assets
Stocks 15,074 13,774 14,726
Debtors 34,487 32,651 29,511
Cash at bank and in hand 3,567 5,315 2,703
53,128 51,740 46,940
Creditors: Amounts falling due within one year 42,306 43,688 37,620
Net current assets 10,822 8,052 9,320
Total assets less current liabilities 56,598 57,303 57,296
Creditors: Amounts falling due after more than one year 7,040 9,402 8,026
Provisions for liabilities and charges 404 567 711
Accruals and deferred income 32 33 33
Equity minority interests 209 148 194
Net assets 48,913 47,153 48,332
Capital and reserves
Called up share capital 3,353 3,289 3,325
Share premium account 34,704 33,915 34,138
Profit and loss account 10,856 9,949 10,869
Equity shareholders' funds 48,913 47,153 48,332
SUMMARISED GROUP CASH FLOW STATEMENT
Six months ended 30 September 2002
Six months Six months Year
ended ended ended
30/9/02 30/9/01 31/3/02
£000 £000 £000
Net cash flow from operating activities (note 8) 4,334 1,451 12,099
Returns on investments and servicing of finance (612) (951) (1,704)
Taxation (656) (1,209) (1,715)
Capital expenditure and financial investments (2,128) (721) (2,380)
Acquisitions and disposals (861) 102 161
Equity dividends paid (1,576) (1,481) (1,481)
Net cash flow before management of liquid resources
and financing (1,499) (2,809) 4,980
Management of liquid resources 5,000 700 700
Financing 975 (1,669) (3,694)
Increase/(decrease) in cash 4,476 (3,778) 1,986
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
Six months Six months Year
ended ended ended
30/9/02 30/9/01 31/3/02
£000 £000 £000
Increase/(decrease) in cash 4,476 (3,778) 1,986
Cash inflow from short-term deposits/borrowings (5,000) (700) (700)
(524) (4,478) 1,286
Repayment of loan notes 380 522 989
New bank loans - (522) -
Repayment of long term loans 675 1,518 2,545
New finance leases (1,930) (129) (297)
Repayment of capital element of finance lease 377 322 630
Change in net debt resulting from cash flows (1,022) (2,767) 5,153
Exchange differences (565) 340 (71)
Other (36) (35) (73)
(1,623) (2,462) 5,009
Net debt at 1 April (15,427) (20,436) (20,436)
Net debt at 30 September/31 March (17,050) (22,898) (15,427)
Notes to the Report
1 Accounting policies
The interim results, which are unaudited, have been prepared on the
basis of the accounting policies set out in the group's statutory
accounts for the year ended 31 March 2002.
2 Basis of consolidation
The group's interim result consolidates the results of the company
and its subsidiary companies made up to 30 September 2002.
3 Basis of preparation
The financial information does not constitute statutory accounts as
defined in section 240 of the Companies Act 1985. The financial
information for the full preceding year is based on the statutory
accounts for the financial year ended 31 March 2002. Those accounts,
upon which the auditors issued an unqualified opinion, have been
delivered to the Registrar of Companies.
The interim results were approved by the Board of Directors on 18
November 2002.
4 Turnover and segmental analysis
Turnover, which is stated net of value added tax, represents amounts invoiced to
third parties.
Turnover Underlying Operating Profit/(Loss)*
Six months Six months Year Six months Six months Year
ended ended ended ended ended ended
30/9/02 30/9/01 31/3/02 30/9/02 30/9/01 31/3/02
£000 £000 £000 £000 £000 £000
Area of activity
Breeding 35,835 36,233 74,518 5,618 5,021 10,551
Consulting 13,969 15,734 32,708 202 (639) (1,212)
Distribution 32,250 26,326 53,218 479 370 805
82,054 78,293 160,444 6,299 4,752 10,144
Inter-segmental (41) (13) (23) - - -
sales
Unallocated costs - - - (498) (468) (946)
82,013 78,280 160,421 5,801 4,284 9,198
*Before amortisation of goodwill and exceptional items.
Operating Profit/(Loss)
Six months Six months Year
ended ended ended
30/9/02 30/9/01 31/3/02
£000 £000 £000
Area of activity
Breeding 5,159 4,533 9,581
Consulting 102 (749) (1,412)
Distribution 117 8 81
5,378 3,792 8,250
Unallocated costs (498) (468) (946)
4,880 3,324 7,304
4 Turnover and segmental analysis continued
Turnover Operating Profit
Six months Six months Year Six months Six months Year
ended ended ended ended ended ended
30/9/02 30/9/01 31/3/02 30/9/02 30/9/01 31/3/02
£000 £000 £000 £000 £000 £000
Geographical region
of origin
United Kingdom 60,330 57,051 116,542 2,466 1,100 2,626
Europe 3,737 3,538 6,063 440 270 992
North America 18,384 18,412 39,380 2,247 2,074 4,079
Rest of the world 3,290 3,476 7,017 225 348 553
85,741 82,477 169,002 5,378 3,792 8,250
Inter-segmental sales (3,728) (4,197) (8,581) - - -
Unallocated costs - - - (498) (468) (946)
82,013 78,280 160,421 4,880 3,324 7,304
Turnover
Six months Six months Year
ended ended ended
30/9/02 30/9/01 31/3/02
£000 £000 £000
Geographical region of destination
United Kingdom 52,505 47,351 96,637
Europe 6,324 6,888 14,496
North America 11,957 11,969 26,438
Rest of the world 11,227 12,072 22,850
82,013 78,280 160,421
Figures for the Distribution division for the six months ended 30 September 2002
include turnover of £2,376,000 and operating profit of £5,000 in respect of
acquisitions. Included in the figure for the Consulting division for the six
months ended 30 September 2001 and the year ended 31 March 2002 is turnover of
£224,000 and operating loss of £192,000 in respect of discontinued operations.
All of these results arise in the United Kingdom.
5 Taxation
The taxation charge for the period is based on the estimated
effective tax rate for the full year.
6 Dividends
The dividend charged in the period ended 30 September 2001 of £4,000
represents the final dividend for the year ended 31 March 2001 on
new shares issued subsequent to the year end.
7 Earnings per share
The basic earnings per share is based on a profit for the period of
£2,747,000 (2001: a loss of £1,051,000) and the weighted average
number of ordinary shares in issue of 33,200,000 (2001: 32,847,000).
The underlying earnings per share is based on the underlying earnings
as set out below:
Six months Six months
ended ended
30/9/02 30/9/01
£000 £000
Profit/(loss) for the period 2,747 (1,051)
Add: amortisation of goodwill 921 960
loss on disposal of discontinued operations - 1,165
write-down of investments - 1,809
Less: profit on disposal of properties (125) (558)
3,543 2,325
Less: associated tax on adjustments (115) (110)
3,428 2,215
The diluted earnings per share is based on a profit for the period of £2,747,000
(2001: a loss of £1,051,000) and on 34,062,000 (2001: 33,131,000) diluted
ordinary shares, calculated as follows:
Six months Six months
ended ended
30/9/02 30/9/01
000's 000's
Basic weighted average number of shares 33,200 32,847
Dilutive potential ordinary shares:
Employee share options 862 284
34,062 33,131
8 Reconciliation of operating profit to net cash flow from operating
activities
Six months Six months Year
ended ended ended
30/9/02 30/9/01 31/3/02
£000 £000 £000
Operating profit 4,880 3,324 7,304
Depreciation 1,885 2,077 3,984
Amortisation of milk quota 4 4 8
Amortisation of goodwill 921 960 1,894
(Profit)/loss on disposal of fixed assets (66) 84 222
Deferred government grants (1) (1) (1)
(Increase)/decrease in stocks (596) 4 (298)
(Increase)/decrease in debtors (4,412) (2,562) 558
Increase/(decrease) in creditors 1,719 (2,439) (1,572)
4,334 1,451 12,099
9 Reconciliation of shareholders' funds
Six months Six months Year
ended ended ended
30/9/02 30/9/01 31/3/02
£000 £000 £000
Total recognised gains and losses 104 (2,121) 503
Dividends - (4) (1,580)
Movements in respect of share issues 601 42 173
Purchase of own shares (124) - -
Goodwill reinstated on sale of subsidiary - 1,021 1,021
Total movements during the period 581 (1,062) 117
Shareholders' funds at 1 April 48,332 48,215 48,215
Shareholders' funds at 30 September/31 March 48,913 47,153 48,332
INDEPENDENT REVIEW REPORT TO GENUS plc
Introduction
We have been instructed by the company to review the financial information for
the six months ended 30 September 2002, which comprises Summarised Group Profit
and Loss Account, Statement of Total Recognised Gains and Losses, Summarised
Group Balance Sheet, Summarised Group Cash Flow Statement, Reconciliation of Net
Cash Flow to Movement in Net Debt and the related notes 1 to 9, and we have read
the other information contained in the interim report and considered whether it
contains any apparent misstatements or material inconsistencies with the
financial information.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the directors. The Listing
Rules of the Financial Services Authority require that the accounting policies
and presentation applied to the interim figures should be consistent with those
applied in preparing the preceding annual accounts except where any changes, and
the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in the United Kingdom. A review
consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with United Kingdom Auditing Standards and therefore
provides a lower level of assurance than an audit. Accordingly we do not
express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 September 2002.
Ernst & Young LLP, Manchester
November 2002
Financial Calendar
Financial year end 31 March 2003
Announcement of final results May 2003
Annual General Meeting August 2003
Full and final dividend payment September 2003
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