Interim Results
Genus PLC
25 November 2003
FOR IMMEDIATE RELEASE 25th November 2003
GENUS plc
Interim Results for the six months ended 30th September 2003
Genus plc, the International Bovine Genetics company announces interim results
for the six months to 30th September 2003.
Group Highlights Six months to Six months to Change
30th Sept 2003 30th Sept 2002
Group turnover £93.5m £82.0m +14%
Reported underlying* Pre-Tax Profit £4.5m £5.1m -12%
Adjusted underlying* Pre-Tax Profit £4.5m £5.7m -21%
Underlying* EPS 8.8p 11.5p -23%
Net Debt £16.9m £17.1m -1%
Net Gearing 35% 35% 0%
• Group turnover up 14% to £93.5m
- Bovine Genetics up 3% to £40.2m after exchange impact of £1.0m
- Animal Health up 32% to £42.5m; a lower margin business
- Development Consulting steady at £10.8m
• Group underlying pre-tax profit beat expectations but, at
£4.5m, was 12% lower than last year (£5.1m in 2002). If last year's
discontinued losses of £0.6m were to be added back, the result would be 21%
lower. This was largely the result of the late selling season this year for
Bovine Genetics, compared with the early season last year
• Stronger second half year expected
• Bovine Genetics underlying operating profit of £4.9m was 14%
lower because of late selling season and temporarily depressed markets in
some territories
- UK profit contribution ahead of expectation and last year,
despite low milk prices reducing farm incomes
- Volume up 8% in USA; price competition due to the depressed
market; market now improving
- Australian market recovering from severe drought; cow numbers
down 15%. Genus market share increased
- Brazilian market share increased and business profitability
resumed in Sterling terms
* Before exceptional items and amortisation of goodwill
• Animal Health growing strongly; underlying operating profit up
49% to £0.7m
- Wholesale market share remained strong at 14.3%
- New temperature recording 'Identichip' established in market
at premium price with early sales encouraging
Commenting on prospects, Richard Wood, Chief Executive said:-
'Whilst there is still uncertainty in the market place, because of the unusual
weather conditions experienced and generally depressed agricultural economies,
sentiment in most of our major markets is improving, albeit slowly. As a
consequence of this and taking into account the late selling season this year,
we expect trading to improve in the second half year, supported by the normal
seasonal uplift.'
Contact:
Richard Wood Chief Executive Tel: 020 7466 5000
Philip Acton Acting Finance Director thereafter
Genus plc Tel: 01256 347101
Charles Ryland/Catherine Miles
Buchanan Communications Limited Tel: 020 7466 5000
Chairman's Statement
I am pleased to report an improvement in turnover of 14% to £93.5m, although
profits for the first half were lower than for the same period last year. This
was despite a £1m adverse impact on exchange rate and strong competitive
activity holding down prices in temporarily depressed markets for Bovine
Genetics, particularly in the USA and Australia.
Reported underlying operating profit was ahead of expectations, but 12% lower at
£5.1m (£5.8m in 2002). If last year's discontinued losses of £0.6m were to be
added back, the result would be 20% lower. The reduction in profit was due both
to the depressed markets and to the late selling season for Bovine Genetics this
year, especially when compared with the particularly early season last year.
Bovine Genetics contributed £4.9m, 14% lower than last year (£5.7m in 2002) for
the above reasons. In contrast, Animal Health's underlying operating profit was
49% ahead of last year at £0.7m. The small residual Development Consultancy
business performed well to produce an underlying operating profit of £0.3m.
Group operating profit of £3.9m included goodwill amortisation of £0.85m (£0.9m
in 2002) and one-off charges of £0.4m. These comprised £0.3m in underprovisions
for the closures made last year, with the remainder being for an aborted
acquisition bid. The charge of £0.1m associated with the departure of the
Finance Director, as announced in August, has been included in underlying
operating profit. Thus, Group profit before tax of £3.2m was lower than last
year (£4.4m in 2002), but above market expectations.
In line with the Board's aim of achieving a more balanced share register, the
company supported a discounted dealing facility for small shareholders. Some
840 shareholders took advantage of the facility and 226,148 shares were acquired
and placed with institutions.
Net Debt & Dividend
The seasonal nature of the business absorbs working capital in the same half
year that the Company pays the full year dividend which this year, increased to
£1.9m (£1.6m in 2002). The late selling season has also added to this
absorption so that net debt increased by £4.7m (£1.6m) to £16.9m (£17.1m). Net
gearing was constant at 35%. (35% in 2002).
In line with previous years and our stated dividend strategy, the Board does not
recommend an interim dividend due to the high cost of distribution to the still
relatively large number of shareholders.
The Board expects to recommend a final dividend when the full year results are
known.
Bovine Genetics - 43% of Group Turnover
Trading
A late selling season this year delayed and reduced business in the large US
market. Farming economies in the USA have been difficult for nearly 12 months,
with milk to feed ratios more than 30% down on average. Against this
background, the business has done well to increase its sales volume by 8%, but
prices have slipped because of competition from farmer co-operatives, which were
reducing prices due to the tough market conditions. In US$ terms sales were in
line with last year but £1.0m lower, in Sterling terms, because of a 5.7% change
in exchange rate.
By September, the milk to feed ratio in the USA was recovering and had allowed
semen prices to improve again, led by Genus, the clear market leader in the
growth sectors.
By contrast, the UK business was more buoyant, although the market was equally
depressed with farmers lobbying for increased milk prices. Both semen volume
and price increased against last year. However, sales of support products,
particularly silage additive, were lower due to the hot weather conditions
throughout the summer.
The worst summer drought in memory in Australia has reduced cattle numbers by
15% with unfortunate timing, having occurred just after Genus acquired the local
semen company, RAB, in the second half of last year. The drought has now broken
in all areas and farming is getting back to normal, albeit in a smaller and
weaker market, ahead of the start of the selling season.
In the meantime, all the integration objectives for RAB have been met and the
new enhanced operation has increased its market share in the smaller market.
The Bovine Genetic's business has had a very successful six months in Latin
America. In the main market, Brazil, market share has been captured from all
competitors and costs have been cut dramatically by consolidating operations
into one Genus facility located in the agricultural area of Uberaba.
As a result, a loss-making geographical region in the second half of last year
has been restored to a profitable and growing business. This will continue as
long as the exchange rate does not deteriorate from recently established levels.
Sales, although small, also advanced significantly in Chile and in Colombia.
Research & Development
We have continued to advance our core bioscience research programme. This
programme has, for five years, been tilting the traditional selection programme
for stud bulls away from the historical traits associated predominantly with
production, to secondary traits associated with longevity, fertility and disease
resistance. These are judged by Genus to be equally important traits for
successful farming in the future.
Some advances made in fertility traits have been used successfully to increase
Genus' business with companies operating large herds in the West Coast of the
USA, where we are promoting a new added value service. This sells pregnancies
rather than semen, resulting in long-term contracts at better margins if the
Company is successful. In a study of 62,826 cows by Wisconsin State University,
the Genus Reproductive Management Service achieved a 36% increase in pregnancy
rates over the national average. This is judged to represent $90 of profit per
cow per year. We expect that these results will boost Genus' business both in
the USA and elsewhere in the world.
Animal Health - 45.5% of Group Turnover
The veterinary wholesaling business' market share has remained strong at 14.3%
in a market growing at about 3% per annum. This and some bulk trading provided
the majority of the increase in division sales, which rose by 32% to £42.5m.
The smaller business, which markets licensed veterinary products and
pharmaceuticals, also had a good half year. Following a successful launch of
the new and unique Identichip with animal temperature sensing, sales grew and
average prices increased, despite strong competition from non-temperature
sensing competitive products. Sales of the new chip now account for over 20% of
Group microchip sales, with the majority of sales coming from new customers.
This high level of acceptance offers a number of future market options for the
product, including positioning for market penetration or unit profitability.
A collaboration with a European partner saw the launch of two 'over-the-counter'
products, Oticyl and Lax-a-Past. Also, the dossier for a new equine product is
in the final stages of preparation.
Discussions under confidentiality agreements are taking place with three
European and North American multi-national organisations regarding access to
proprietary prescription products. At the same time, discussions have advanced
with Asian suppliers for the manufacture of a number of products the business
currently has manufactured elsewhere under sub-contract.
Development Consulting - 11.5% of Group Turnover
This small residual business has gone from strength to strength in this half
year. It produced an underlying operating profit of £0.34m, up 28% on the same
half last year (£0.28m in 2002 on a like-for-like basis). Last year, the first
half was bolstered by a one-off gain of £0.4 which was also included in
underlying operating profit.
The order book continues to be strong with 544 fee days of work having been won
in September. This brought the firm work secured during the half year to 88% of
an increased full year target.
Group Outlook
Whilst there is still uncertainty in the market place, because of the unusual
weather conditions experienced and generally depressed agricultural economies,
most major markets are past their worst and sentiment is improving globally,
albeit slowly. Against this background, the Board expects trading to improve in
the second half year, given the normal seasonal uplift.
SUMMARISED GROUP PROFIT AND LOSS ACCOUNT
Six months ended 30 September 2003
Unaudited Unaudited
Total six Total six
Months Months Year
Ended Ended Ended
30/9/03 30/9/02 31/3/03
£000 £000 £000
Turnover (note 4)
Continuing operations - ongoing 93,479 79,526 169,749
Discontinued operations - 2,487 3,041
93,479 82,013 172,790
Underlying operating profit (note 4) 5,111 6,395 11,854
Discontinued Operations (284) (594) (1,594)
Exceptional items (112) - (247)
Amortisation of goodwill (849) (921) (1,636)
Operating profit (note 4) 3,866 4,880 8,377
Continuing Operations 4,150 5,474 9,971
Discontinued Operations (284) (594) (1,594)
Loss on disposal of discontinued operations - - (3,179)
Profit on disposal of properties - 125 1,205
Profit on disposal of investment - - 34
Net interest payable and similar charges (648) (648) (1,295)
Profit on ordinary activities before taxation 3,218 4,357 5,142
Tax on profit on ordinary activities (note 5) (1,240) (1,566) (2,325)
Profit on ordinary activities after taxation 1,978 2,791 2,817
Minority interests - equity (39) (44) (63)
Profit for the financial period 1,939 2,747 2,754
Dividends (note 6) (7) - (1,846)
Retained profit for the financial period 1,932 2,747 908
Earnings per share - underlying (note 7) 8.8p 11.5p 22.2p
- basic (note 7) 5.8p 8.3p 8.3p
- diluted (note 7) 5.6p 8.1p 8.1p
Dividends per share - - 5.5p
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
Unaudited Unaudited
Total six Total six
Months Months Year
Ended Ended Ended
30/9/03 30/9/02 31/3/03
£000 £000 £000
Profit for the financial period 1,939 2,747 2,754
Exchange difference on the re-translation
of net assets of subsidiary undertakings (994) (2,950) (2,522)
Tax on exchange differences - 307 254
Total recognised gains and losses relating to the period 945 104 486
SUMMARISED GROUP BALANCE SHEET
At 30 September 2003
Unaudited Unaudited
At At
30 September 31 March
2003 2002 2003
£000 £000 £000
Fixed assets
Intangible assets 27,229 28,913 28,147
Tangible assets 16,784 16,760 16,851
Investments 150 103 83
44,163 45,776 45,081
Current assets
Stocks 17,476 15,074 17,640
Debtors 36,430 34,487 32,177
Cash at bank and in hand 4,584 3,567 6,831
58,490 53,128 56,648
Creditors: Amounts falling due within one year 49,504 42,306 47,636
Net current assets 8,986 10,822 9,012
Total assets less current liabilities 53,149 56,598 54,093
Creditors: Amounts falling due after more than one year 4,085 7,040 5,759
Provisions for liabilities and charges 248 404 623
Accruals and deferred income 30 32 32
Equity minority interests 250 209 222
Net assets 48,536 48,913 47,457
Capital and reserves
Called up share capital 3,382 3,353 3,357
Share premium account 34,824 34,704 34,708
Profit and loss account 10,330 10,856 9,392
Equity shareholders' funds 48,536 48,913 47,457
SUMMARISED GROUP CASH FLOW STATEMENT
Six months ended 30 September 2003
Unaudited Unaudited
Six months Six months Year
Ended ended ended
30/9/03 30/9/02 31/3/03
£000 £000 £000
Net cash inflow from operating activities (note 8) 2,141 4,334 13,454
Returns on investments and servicing of finance (648) (612) (1,295)
Taxation (1,444) (656) (1,637)
Capital expenditure and financial investments (2,170) (2,128) (1,278)
Acquisitions and disposals (161) (861) (4,796)
Equity dividends paid (1,853) (1,576) (1,576)
Net cash (outflow) inflow before management of
liquid resources and financing (4,135) (1,499) 2,872
Management of liquid resources - 5,000 -
Financing 869 975 (2,312)
(Decrease) / increase in cash (3,266) 4,476 560
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
Unaudited Unaudited
Six months Six months Year
Ended ended ended
30/9/03 30/9/02 31/3/03
£000 £000 £000
(Decrease) / increase in cash (3,266) 4,476 560
Cash inflow from short-term borrowings - (5,000) -
(3,266) (524) 560
Repayment of loan notes 793 380 835
Repayment of bank loans - - 3,541
New long term loans (3,039) - -
Repayment of long term loans 1,337 675 -
New finance leases (715) (1,930) (2,382)
Repayment of capital element of finance lease 896 377 920
contracts
Change in net debt resulting from cash flows (3,994) (1,022) 3,474
Exchange differences (745) (565) (24)
Other (6) (36) (219)
Movement in net debt (4,745) (1,623) 3,231
Net debt at 1 April (12,196) (15,427) (15,427)
Net debt at 30 September / 31 March (16,941) (17,050) (12,196)
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 2003.
2 Basis of consolidation
The group's interim results consolidate the results of the company
and its subsidiary companies made up to 30 September 2003.
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 2003. 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 21
November 2003.
4 Turnover and segmental analysis
Turnover, which is stated net of value added tax, represents amounts invoiced to
third parties.
Unaudited Unaudited Unaudited Unaudited
Turnover Underlying Operating Profit/(Loss)*
Six months Six months Year Six months Six months Year
ended ended ended Ended ended Ended
30/9/03 30/9/02 31/3/03 30/9/03 30/9/02 31/3/03
£000 £000 £000 £000 £000 £000
Area of activity
Bovine Genetics 40,162 38,965 79,002 4,899 5,730 11,198
Consultancy 10,835 10,839 23,930 339 684 983
Animal Health 42,520 32,250 69,955 716 479 962
93,517 82,054 172,887 5,954 6,893 13,143
Inter-segmental (38) (41) (97) - - -
sales
Unallocated costs - - - (843) (498) (1,289)
93,479 82,013 172,790 5,111 6,395 11,854
*Before amortisation of goodwill and exceptional items.
Unaudited Unaudited
Operating Profit/(Loss)
Six months Six months Year
Ended ended Ended
30/9/03 30/9/02 31/3/03
£000 £000 £000
Area of activity
Bovine Genetics 4,315 5,271 10,317
Consultancy 40 (10) (642)
Animal Health 354 117 238
4,709 5,378 9,913
Unallocated costs (843) (498) (1,536)
3,866 4,880 8,377
4 Turnover and segmental analysis continued
Unaudited Unaudited Unaudited Unaudited
Turnover Operating Profit
Six months Six months Year Six months Six months Year
ended ended ended Ended ended ended
30/9/03 30/9/02 31/3/03 30/9/03 30/9/02 31/3/03
£000 £000 £000 £000 £000 £000
Geographical region
Of origin
United Kingdom 72,360 60,330 131,421 2,826 2,466 4,099
Europe 3,367 3,737 6,231 626 440 1,196
North America 16,796 18,384 37,128 1,084 2,247 3,947
Rest of the World 5,227 3,290 6,552 514 225 671
97,750 85,741 181,332 5,050 5,378 9,913
Inter-segmental sales (4,271) (3,728) (8,542) - - -
Unallocated costs - - - (1,184) (498) (1,536)
93,479 82,013 172,790 3,866 4,880 8,377
Unaudited Unaudited
Turnover
Six months Six months Year
ended ended ended
30/9/03 30/9/02 31/3/03
£000 £000 £000
Geographical region of destination
United Kingdom 60,553 52,505 107,217
Europe 7,337 6,324 17,077
North America 11,202 11,957 25,248
Rest of the World 14,387 11,227 23,248
93,479 82,013 172,790
The segmental analysis includes the following results from discontinued activities:
Unaudited Unaudited Unaudited Unaudited
Turnover Operating loss
Six months Six months Year Six months Six months Year
ended ended Ended Ended ended ended
30/9/03 30/9/02 31/3/03 30/9/03 30/9/02 31/3/03
£000 £000 £000 £000 £000 £000
Geographical region of origin
United Kingdom - 2,128 2,430 (284) (513) (1,498)
Europe - - - - - -
North America - 359 611 - (81) (96)
Rest of the World - - - - - -
- 2,487 3,041 (284) (594) (1,594)
All discontinued activities derive from the Consulting business.
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 2003 of £7,000
represents the final dividend for the year ended 31 March 2003 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 £1,939,000
(30/9/2002: £2,747,000; 31/3/2003: £2,754,000) and the weighted average number
of ordinary shares in issue of 33,550,000 (30/9/2002: 33,200,000; 31/3/2003:
33,322,000).
The underlying earnings per share is based on the underlying earnings as set out
below:
Unaudited Unaudited
Six months Six months Year
Ended Ended Ended
30/9/03 30/9/02 31/3/03
£000 £000 £000
Profit for the period 1,939 2,747 2,754
Add: amortisation of goodwill 849 921 1,636
Loss on discontinued operations 284 594 1,594
Exceptional items 112 - 247
(Profit)/loss on disposal of properties,
businesses and investments - (125) 1,940
3,184 4,137 8,171
Less: associated tax on adjustments (223) (293) (775)
2,961 3,844 7,396
The diluted earnings per share is based on a profit for the period of £1,939,000
(30/9/2002: £2,747,000; 31/3/2003: £2,754,000) and on 34,453,000 (30/9/2002:
34,062,000; 31/3/2003: 34,175,000) diluted ordinary shares, calculated as
follows:
Unaudited Unaudited
Six months Six months Year
Ended Ended Ended
30/9/03 30/9/03 31/3/03
000's 000's 000's
Basic weighted average number of shares 33,550 33,200 33,322
Dilutive potential ordinary shares:
Employee share options 903 862 853
34,453 34,062 34,175
8 Reconciliation of operating profit to net cash flow from operating
activities
Unaudited Unaudited
Six months Six months Year
Ended Ended Ended
30/9/03 30/9/02 31/3/03
£000 £000 £000
Operating profit 3,866 4,880 8,377
Depreciation 1,791 1,885 3,435
Amortisation of milk quota 4 4 7
Amortisation of goodwill 849 921 1,805
Loss/(profit) on disposal of fixed assets 103 (66) (304)
Deferred government grants (2) (1) (1)
Decrease/(increase) in stocks 164 (596) (2,850)
(Increase) in debtors (4,253) (4,412) (2,555)
(Decrease)/increase in creditors (381) 1,719 5,540
2,141 4,334 13,454
9 Reconciliation of shareholders' funds
Unaudited Unaudited
Six months Six months Year
Ended Ended ended
30/9/03 30/9/02 31/3/03
£000 £000 £000
Total recognised gains and losses 945 104 486
Dividends (7) - (1,846)
Movements in respect of share issues 141 601 602
Purchase of own shares - (124) (117)
Total movements during the period 1,079 581 (875)
Shareholders' funds at 1 April 47,457 48,332 48,332
Shareholders' funds at 30 September / 31 March 48,536 48,913 47,457
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 2003 which comprises the 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. 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.
This report is made solely to the company having regard to guidance contained in
Bulletin 1999/4 'Review of interim financial information' issued by the Auditing
Practices Board. To the fullest extent permitted by the law, we do not accept or
assume responsibility to anyone other than the company, for our work, for this
report, or for the conclusions we have formed.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report as required by the AIM Rules
issued by the London Stock Exchange.
Review work performed
We conducted our review having regard to the guidance contained in Bulletin 1999
/4 'Review of interim financial information' 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 2003.
Ernst & Young LLP
Manchester
Date
Financial Calendar
Financial year end 31 March 2004
Announcement of final results May 2004
Annual General Meeting August 2004
Full and final dividend payment September 2004
This information is provided by RNS
The company news service from the London Stock Exchange
Latest directors dealings
- 43 minutes ago Mattioli Woods
- 1 hour ago Morgan Advanced Materials
- 1 hour ago Capita
- 1 hour ago Judges Scientific
- 1 hour ago Me Group International