Interim Results
Genus PLC
26 February 2008
For immediate release 26 February 2008
Genus plc
('Genus' or 'the Company')
Unaudited Interim Results for the six months ended 31 December 2007
Continued Strong Progress
Genus, the world leading animal genetics company, announces its results for the
six months ended 31 December 2007. These results are reported under
International Financial Reporting Standards ('IFRS').
Financial Highlights
Adjusted results at Statutory results after
constant currency+ exceptional items
Six months
ended 31
December 2007 2006 2007 2006
£m £m % £m £m %
Continuing
operations
Revenue 120.4 116.1 +4 120.4 116.3 +4
Operating
profit* 16.9 15.5 +9 10.3 10.6 -3
Profit
before 13.9 10.9 +28 7.3 6.1 +20
tax**
Basic
earnings 16.5p 13.6p +21 8.4p 6.9p +22
per share**
Results at constant Statutory results
currency+
Total
operations
Profit for
the 4.3 3.8 +13 4.3 4.4 -2
period
Basic
earnings 7.7p 6.9p +12 7.7p 8.0p -4
per share
* Adjusted operating profit is before fair value movements on biological assets,
amortisation of intangible assets, share based payments and exceptional items
** Adjusted profit before tax and adjusted basic earnings per share are before
fair value movements on biological assets, amortisation of intangible assets,
share based payments and exceptional items, also excluding other gains and
losses. Both measurements include share of profits of joint ventures and
associates.
+ The results at constant currency for the 6 month period ended 31 December 2006
reflect the rates which applied during the 6 months ended 31 December 2007
Business Highlights
Results have been fully in line with expectations with adjusted profit before
tax from continuing operations in constant currency increasing by 28% to £13.9m
(2006: £10.9m).
Genus' increased diversity and improved efficiency has offset the impact of
exceptionally high global animal feed prices.
•Strong contributions from Bovine worldwide
•Porcine markets in the Far East buoyant due to growing demand and
re-stocking following disease last year
•Porcine earnings volatility reduced by increased adoption of indirect
royalty model
•Benefits accruing in Europe from Porcine restructuring, in spite of
challenging market conditions
•Non-core asset divestment programme completed (SyAqua Mexico and
Development Consulting during the period, Animalcare in January 2008)
•Progress achieved with restructuring the share register with a successful
institutional share placing raising £19m and a further small shareholder
buy-back
•Net debt reduced from £111m to £93m in the period
•Moved to the main market and inclusion in FTSE 250 from 6 February 2008
Commenting on Genus' interim results, Richard Wood, Chief Executive said:-
'Having delivered results that are fully in line with expectations and with
adjusted profit before tax up by 28% at this interim stage, we are in a strong
position to meet targets for the full year.
We have made substantial progress in trading, notwithstanding the impact of
large increases in global animal feed prices. The increase in feed prices has
only currently been reflected in the price of milk and has not yet been
reflected in the prices of pork and beef.
Debt has been reduced substantially. We have completed the divestment of
non-core assets, raised equity and restructured the share register to improve
liquidity in our shares.
I am also pleased to report that, as a result of our strong progress, we were
included in the FTSE 250 index on 6 February.'
For further information please contact:
Genus plc Tel: 01256 345970
Richard Wood, Chief Executive
Martin Boden, Finance Director
Buchanan Communications Tel: 020 7466 5000
Charles Ryland
Suzanne Brocks
Christian Goodbody
This announcement is available on the Genus website at: www.genusplc.com
About Genus
Genus creates and sells added value products for livestock farming and food
producers by creating advances to animal breeding through biotechnology. Its
non-Genetically Modified Organism (GMO) technology is applicable across all
livestock species but is only commercialised by Genus in the bovine and porcine
farming sectors.
Genus' worldwide sales are made in 70 countries under the trade marks 'ABS'
(dairy and beef cattle) and 'PIC' (pigs) and comprise semen and breeding animals
with superior genetics to those animals currently in production. Customers use
Genus genetics in their herds to produce offspring with greater production
efficiency, milk and meat output and quality. These offspring are used to supply
the global dairy and meat supply chain.
Genus' competitive edge has been created from the ownership and control of
proprietary lines of breeding animals, the biotechnology used to improve them
and the Group's global production and distribution network.
Headquartered in Basingstoke, England, Genus companies operate in 30 countries
on 6 continents, with research laboratories located in Madison, USA.
GROUP PERFORMANCE
The Board is pleased to report results that are fully in line with expectations,
notwithstanding the presence of challenging market and operating conditions
during the period.
The US dollar remained weak. With more than 50% of the group's sales being in US
dollars, this reduced reported sales growth. Also, in some agricultural markets,
the dramatic increase in world animal feed prices has not yet been reflected in
increased food prices. As a result, farmer incomes have been temporarily held
back and Genus' operating expenses also rose. The increased diversity of the
group and the operating cost benefits of efficiency improvements made possible
by the Sygen acquisition in December 2005, helped offset these market challenges
and operating cost increases.
Revenue from continuing operations rose by 4% to £120m at constant exchange
rates (2006: £116m).
At constant exchange rates, adjusted profit before tax from continuing
operations, rose by 28% to £13.9m (2006: £10.9m). The exchange translational
impact of £0.5m reduced the increase to 22%.
Before exceptional expenditure, statutory operating profit from continuing
operations was £14.1m, an increase of 9% on last year (2006: £12.9m). Statutory
results, which are stated after charging exceptional expenditure of £3.8m (2006:
£2.3m) show an operating profit from continuing operations of £10.3m which was
3% lower than last year (£10.6m).
Exceptional expenditure comprised £1.6m relating to the main market listing
(2006: £0.7m), £1.4m in Sygen integration costs and £0.8m of uncapitalised
expense for the Group's new Oracle management information system.
These exceptional items and a loss on the disposal of the SyAqua Mexico business
contributed to a reduction in the statutory total profit after tax for the
period to £4.3m (2006: £4.4m) and reduced the statutory basic earnings per share
to 7.7p (2006: 8.0p).
The effective rate of tax on adjusted profit before tax was 31.1%. Adjusted
basic earnings per share from continuing operations rose by 21% in constant
currency to 16.5p (2006: 13.6p) and by 15% (2006: 14.3p) at reported exchange
rates.
The business trading cycle absorbs cash in the first half year in order to fund
working capital. A share placing in November aimed at reducing debt and
improving liquidity in the shares raised £18.9m after expenses. The net effect
of the normal trading absorption of working capital at this time of the year,
inflows from divestments of non-core assets (£2.8m) and the fund raising,
reduced net debt by £18m to £93m by 31 December 2007 (30 June 2007: £111m).
Gearing reduced to 53% at 31 December 2007 from 74% at 30 June 2007, with
interest cover at 2.6 times adjusted operating profit from continuing operations
(31 December 2006: 2.0 times).
The initial proceeds from the sale of Animalcare of £13.4m were received in
January 2008 and have been used to reduce net debt further.
In line with previous years and the stated group dividend policy, the Board will
not be recommending an interim dividend but expects to recommend a final
dividend, when the results for the year to 30 June 2008 are announced.
THE AMERICAS
Constant currency 2007 2006 Movement
£m £m %
Revenue 58.7 55.9 5%
Adjusted operating profit 10.7 10.1 6%
Adjusted operating margin 18.2% 18.1%
In constant currency, revenue increased by 5% to £59m (2006: £56m) and adjusted
operating profit increased by 6% to £11m (2006: £10m). Most of the region's
business is conducted in US dollars. During the period, sterling remained strong
but the exchange rate reduced below the peak reached last year. As a result
exchange translational losses continued but at the reduced level of £0.4m.
Bovine genetics had a good first half year with revenue, in constant currency,
up 17% to £23m. Dairy semen volume was 5% higher and sexed semen sales were
buoyant as farmers sought to increase output because of strong milk prices and
shortages in capacity.
High feed costs, not yet reflected in slaughter pig prices, temporarily held
back the potential for growth in pig genetics. This, together with the impact of
the change in the business model towards indirect royalty business, resulted in
revenue of £34m, in constant currency, reducing by 2%. The strong royalty stream
and the acquisition synergies improved margins by 2% of revenue.
North America
Constant Currency 2007 2006 Movement
£m £m %
Revenue 46.0 43.9 5%
Adjusted operating profit 8.1 7.8 4%
Adjusted operating margin 17.6% 17.8%
The expansion of the Genus Reproduction Management Service (RMS) helped dairy
semen volume rise by 9% in the period. Sexed semen sales trebled as capacity
increased.
In the porcine business, the application of the royalty model helped insulate
the business from the short-term impact of increases in feed prices and royalty
income was 3% higher than last year. In the non-royalty sector, live animal
sales were 4% below last year as customers held back orders pending increases in
slaughter prices which will remain low until retail prices reflect increasing
feed costs.
South America
Constant currency 2007 2006 Movement
£m £m %
Revenue 12.7 11.9 7%
Adjusted operating profit 2.6 2.3 13%
Adjusted operating margin 20.5% 19.3%
Dairy semen volume was 8% higher than last year, with strong performances in
Argentina and Uruguay offset by lower volumes in Mexico, where market conditions
were challenging.
US exports to the region depressed pig slaughter prices in some countries but
trade in Brazil and Chile remained strong due to a government ban on imports
protecting local farmers from low cost imports. The Xaratanga production
facility in Mexico was outsourced in August, incurring an exceptional cost of
£0.1m. This change will reduce operating costs in the second half year.
EUROPE & ASIA
Constant Currency 2007 2006 Movement
£m £m %
Revenue 65.1 63.6 2%
Adjusted operating profit 9.8 8.3 18%
Adjusted operating margin 15.1% 13.1%
In constant currency, revenue increased by 2% to £65m (2006: £64m) and adjusted
operating profit increased by 18% to £10m (2006: £8m). Exchange rates had little
impact on the reported result.
The bovine sector had a very strong first half-year in buoyant market
conditions. Revenue, in constant currency, increased by 14% to £35m. The porcine
sector was temporarily depressed because of high feed prices but was more
buoyant in the Far East because of a capacity shortage. The turn-around in
Australia progressed as the weather improved.
Europe
Constant currency 2007 2006 Movement
£m £m %
Revenue 56.2 56.0 1%
Adjusted operating profit 7.5 7.0 7%
Adjusted operating margin 13.3% 12.5%
Strong demand for elite bovine semen and a buoyant start from the introduction
of sexed semen produced strong bovine profit growth.
Dairy semen volume was 5% higher than last year, driven by dairy heifer
shortages. Growth was particularly strong in the UK where revenues increased by
15%. After its introduction to the UK approximately 12 months ago, over 6% of UK
cows have now been enrolled into the value adding Genus Reproductive Management
Service.
Market conditions were difficult in the European porcine sector. To help farmers
deal with this transitional phase before pork prices increase, the EU is
considering intervention programmes. Revenue was 13% lower than last year as a
result of these challenging market conditions. The increased use of the royalty
based selling model and the benefits of reduced costs arising from the
integration of Sygen increased profit contribution despite the difficult market
conditions.
The small Italian porcine business was divested in January 2008 as part of the
restructuring mentioned above.
Asia
Constant currency 2007 2006 Movement
£m £m %
Revenue 8.9 7.6 17%
Adjusted operating profit 2.3 1.3 77%
Adjusted operating margin 25.8% 17.1%
Bovine semen volume rose 13% with trading being strong in most markets. The
exception was Japan where milk prices did not follow the trend in other
countries and remained low.
Porcine market conditions were buoyant in China, with the market short of
capacity, following the disease outbreak last year and growing market demand.
China is importing pig meat from the USA to help bridge the supply / demand
imbalance. Profit contribution improved strongly, despite a revenue investment
of £0.1m to increase multiplication capacity. This investment, coupled with a
further investment in the region intended for the second half of the current
financial year, is expected to satisfy increasing demand in this market.
RESEARCH & DEVELOPMENT
The same increases in feed prices that have temporarily depressed farm income,
also increased the cost of operating the Genus studs and nucleus herds. This
resulted in an increase in the group's expenditure on research and development.
Despite hedging forward both feed costs and slaughter values, expenditure of
£9.0m was £0.5m higher than last year.
We continue to see the successful results of our bovine genetics programme. Four
Genus bulls are now in the top seven USA rankings and UK bred Picston Shottle's
ranking rose to Number One in the USA as a result of a greater number of
daughters being classified in the USA. This is an exceptional result, it being
very rare for bulls bred outside the USA to achieve high ranking.
During the period, the Genus stud was again expanded and now comprises 189 bulls
(174 bulls as at 30 June 2007), with ten high ranking new bulls entering various
important country market listings.
Sales of ABS Sexation, the Genus sexed semen brand, increased from £1m to £4m of
semen revenue for the period as increased capacity was commissioned. The product
has been firmly established as the world market leader.
Work is continuing on alternative production methods for sexed semen. These aim
to reduce or eliminate the capacity constraint associated with the current
technology. Priority is being given to processes able to sort sperm cells
collectively rather than sequentially.
Work on identifying the leading gene markers for low heritability porcine traits
continued to make good progress. More than 200 markers have been included in the
model used to measure genetic merit, alongside the measurements used
historically. We believe that this enhancement will increase the rate of genetic
improvement Genus will achieve over the next few years. This should increase the
already strong lead the PIC product range has over its competitors.
DISCONTINUED BUSINESSES
The Board has continued to progress the strategy of concentrating upon the
development of the bovine and porcine genetics businesses. The non-core
Development Consulting and Mexican shrimp businesses were divested during the
first half of the year. These businesses were sold for £3.2m and £1.3m
respectively. There was a small net loss on the disposal of the shrimp business.
In January 2008, the last remaining non-core business, Animalcare Limited, was
sold to Ritchey plc for £14.0m (with £0.6m of the proceeds deferred and
dependent on the manufacture of a new product which is under development). This
has completed the disposal programme.
BOARD
In January 2008, Nigel Turner joined the Board as senior independent
non-executive director. Nigel was Chairman of Numis Securities Ltd and Deputy
Chairman of Numis Corporation plc from December 2005 to November 2007.
Previously he was Vice-Chairman of ABN AMRO's Wholesale and Investment Bank and
a partner of Lazard. Nigel will chair the group's Remuneration Committee and
will be a member of the group's Audit and Nomination Committees.
Genus also announced in January 2008 the retirement of Edwin White from the
Board, having been a Board member since Genus became publicly quoted seven years
ago. The Board wishes to record its thanks to Edwin White for his valuable
knowledge and contribution to the growth and success of Genus.
SHARE REGISTER
As part of the Board's strategy to restructure the share register and to improve
the liquidity of its shares, in October 2007 the Company completed a further
voluntary buyback from shareholders who held fewer than 1,500 shares. The shares
sold by these investors were bundled and placed with institutional investors. A
total of 1,167,813 shares (2% of issued share capital) were acquired from 1,720
shareholders (9% of total number of shareholders). The institutional and private
client institutional shareholdings now stand at approximately 76% of the total
register.
PLACING OF NEW ORDINARY SHARES
On 1 November 2007 Genus raised £19.4m, before expenses, through a placing of
2,700,000 new Ordinary shares at 720p each. These shares were placed with
institutional investors by the company's joint broker, Panmure Gordon.
Landsbanki Securities acted as NOMAD and financial adviser to Genus in relation
to the placing.
The proceeds of the placing have been used to reduce the group's net debt and
provide additional financial flexibility for the business.
ADMISSION TO THE OFFICIAL LIST AND FTSE250
On 12 November 2007, Genus was admitted to the Official List of the UK Listing
Authority and the London Stock Exchange's main market for listed securities. The
company's FTSE classification is Biotechnology. On 6 February 2008, Genus was
included in the FTSE250 index.
PRINCIPAL RISKS & UNCERTAINTIES
The Genus 2007 Annual Report and Prospectus dated 6 November 2007 set out a
number of risks and uncertainties that might impact upon the performance of the
group. Copies of these documents are available on the Genus website at
www.genusplc.com. Genus operates a structured risk management process that
identifies, evaluates and prioritises risks and uncertainties and reviews
mitigation activity. There has been no change to the principal risks that might
affect the group in the second half of the financial year other than the
potential impact on sales growth of increasing feed prices which has been
mitigated to date by cost reductions, by the group's strategy of increasing
concentration on the royalty model in the porcine business and the increased
geographical diversification of the business. The Board does not consider the
recent difficulties in the financial credit markets to have impacted the group
due to the high quality of its banking syndicate and pension fund investments.
OUTLOOK
Having delivered results that are fully in line with expectations for the first
half of the year, and with January performance also in line with expectations,
Genus is in a strong position to meet its targets for the full year.
The group is now stronger and more diverse. With the integration of Sygen
nearing completion, Genus is well placed to continue to deliver the strong
growth achieved in previous years, particularly as world agriculture continues
to emerge from the difficulties experienced over the last ten years.
The successful share placing and reduction in debt place Genus in a strong
financial position to achieve further growth.
Food prices are beginning to rise and farmers are investing in capacity and
genetics to improve feed conversion. Genus is in a unique position to benefit
from this gradual market change.
Condensed consolidated income statement
For the six months ended 31 December 2007
Six months ended Six months ended Year ended
31 December 2007 31 December 2006 30 June 2007
Note £m £m £m £m £m £m
Revenue from
continuing operations 5 120.4 116.3 233.8
Adjusted operating
profit from continuing
operations 16.9 15.9 28.7
Fair value movement on
biological assets 1.1 0.3 10.9
Amortisation of
intangible assets (2.6) (2.6) (5.1)
Share based payments (1.3) (0.7) (1.4)
------- ------- -------
Exceptional items: 14.1 12.9 33.1
- Sygen integration
and restructuring
expenses (2.2) (1.6) (3.0)
- Adjustment to
goodwill on
recognition of tax
assets - - (0.7)
- Preparation for main
market listing (1.6) (0.7) (1.0)
------- ------ -------
(3.8) (2.3) (4.7)
Operating profit from
continuing operations 5 10.3 10.6 28.4
Share of profit of
joint ventures and
associates 1.1 0.7 1.3
Other gains and losses - - 0.2
Finance costs 8 (4.1) (5.2) (10.0)
------- ------- ------ ------- ------- -------
Profit before tax from
continuing operations 7.3 6.1 19.9
Taxation 9 (2.6) (2.3) (7.2)
------- ------- ------ ------- ------- -------
Profit for the period
from continuing
operations 4.7 3.8 12.7
(Loss)/profit for the
period from
discontinued
operations 6 (0.4) 0.6 1.9
------- ------- ------ ------- ------- -------
Profit for the period 4.3 4.4 14.6
------- ------- ------ ------- ------- -------
Earnings per share
from continuing
operations
Basic earnings per
share 12 8.4p 6.9p 23.1p
Diluted earnings per
share 12 8.2p 6.7p 22.5p
Basic adjusted
earnings per share 12 16.5p 14.3p 24.6p
Diluted adjusted
earnings per share 12 16.2p 13.9p 23.9p
Earnings per share
from total operations
Basic earnings per
share 12 7.7p 8.0p 26.6p
Diluted earnings per
share 12 7.5p 7.7p 25.8p
Condensed consolidated statement of changes in equity
Called Share Own Translation Hedging Retained Total
up premium shares reserve reserve earnings
account
share
Note capital
£m £m £m £m £m £m £m
Balance at
1 5.5 92.2 (0.2) (4.9) 0.8 50.6 144.0
July 2006 ------ ------ ------ ------- ------- ------ ------
Foreign
exchange
translation
differences - - - (14.7) - - (14.7)
Fair value
movement on
net
investment
hedge, net - - 0.9 - - 0.9
of
tax
Fair value
movement on
cash flow
hedges, net
of - - - - 1.6 - 1.6
tax
Actuarial
gains on
defined
employee
benefit
schemes,
net - - - - - 5.2 5.2
of tax ------ ------ ------ ------- ------- ------ ------
Net income
and
expense
recognised
directly in - - - (13.8) 1.6 5.2 (7.0)
equity
Profit for
the - - - - - 14.6 14.6
period ------ ------ ------ ------- ------- ------ ------
Total
recognised
income and
expense for
the period - - - (13.8) 1.6 19.8 7.6
Recognition
of
share based
payments, - - - - - 3.4 3.4
net
of tax
Issue of
ordinary
shares 0.1 0.3 - - - - 0.4
Dividends 10 - - - - - (4.5) (4.5)
------ ------ ------ ------- ------- ------ ------
Balance at
30 5.6 92.5 (0.2) (18.7) 2.4 69.3 150.9
June 2007 ------ ------ ------ ------- ------- ------ ------
Foreign
exchange
translation
differences - - - 8.2 - - 8.2
Fair value
movement on
net
investment
hedge, net - - - (0.3) - - (0.3)
of
tax
Fair value
movement on
cash flow
hedges, net
of - - - - (1.9) - (1.9)
tax
Actuarial
losses on
defined
employee
benefit
schemes,
net - - - - - (1.5) (1.5)
of tax ------ ------ ------ ------- ------- ------ ------
Net income
and
expense
recognised
directly in - - - 7.9 (1.9) (1.5) 4.5
equity
Profit for
the - - - - - 4.3 4.3
period ------ ------ ------ ------- ------- ------ ------
Total
recognised
income and
expense for
the period - - - 7.9 (1.9) 2.8 8.8
Recognition
of
share based
payments, - - - - - 1.8 1.8
net
of tax
Issue of
ordinary
shares 0.3 19.2 - 19.5
Dividends 10 - - - - - (5.3) (5.3)
------ ------ ------ ------- ------- ------ ------
Balance at
31 5.9 111.7 (0.2) (10.8) 0.5 68.6 175.7
December ------ ------ ------ ------- ------- ------ ------
2007
Condensed consolidated statement of changes in equity (continued)
Called Share Own Translation Hedging Retained Total
up premium shares reserve reserve earnings
account
share
Note capital
£m £m £m £m £m £m £m
Balance at
1 5.5 92.2 (0.2) (4.9) 0.8 50.6 144.0
July 2006 ------ ------ ------ ------- ------- ------ ------
Foreign
exchange
translation
differences - - - (12.0) - - (12.0)
Fair value
movement on
net
investment
hedge, net - - - 0.3 - - 0.3
of
tax
Fair value
movement on
cash flow
hedges, net
of - - - - 0.6 - 0.6
tax
Actuarial
gains on
defined
employee
benefit
schemes,
net - - - - - 3.4 3.4
of tax ------ ------ ------ ------- ------- ------ ------
Net income
and
expense
recognised
directly in - - - (11.7) 0.6 3.4 (7.7)
equity
Profit for
the - - - - - 4.4 4.4
period ------ ------ ------ ------- ------- ------ ------
Total
recognised
income and
expense for
the period - - - (11.7) 0.6 7.8 (3.3)
Recognition
of
share based
payments, - - - - - 0.7 0.7
net
of tax
Issue of
ordinary
shares 0.1 0.4 - - - - 0.5
Dividends 10 - - - - - (4.5) (4.5)
------ ------ ------ ------- ------- ------ ------
Balance at
31 5.6 92.6 (0.2) (16.6) 1.4 54.6 137.4
December ------ ------ ------ ------- ------- ------ ------
2006
Condensed consolidated balance sheet
As at 31 December 2007
31 December 2007 31 December 30 June
Note 2006 2007
(restated)
£m £m £m
Assets
Goodwill 61.7 63.9 60.7
Other intangible assets 79.5 83.5 77.4
Biological assets 11 120.0 106.5 114.1
Property, plant and equipment 26.6 28.7 27.3
Interests in joint ventures
and associates 4.8 3.7 3.5
Available for sale investments 0.5 0.8 0.5
Derivative financial assets 1.6 2.5 4.5
Deferred tax assets 9.0 10.1 10.4
-------- -------- ---------
Total non-current assets 303.7 299.7 298.4
-------- -------- ---------
Inventories 19.3 16.4 18.8
Biological assets 11 24.2 25.3 25.3
Trade and other receivables 53.1 43.9 43.0
Cash and cash equivalents 33.7 26.3 26.0
Income tax receivable 1.0 1.3 1.4
Assets held for sale 6 11.4 21.3 21.9
-------- -------- ---------
Total current assets 142.7 134.5 136.4
-------- -------- ---------
Total assets 446.4 434.2 434.8
-------- -------- ---------
Liabilities
Trade and other payables (42.0) (35.4) (34.8)
Interest-bearing loans and
borrowings (33.3) (25.5) (27.2)
Provisions (1.7) (2.9) (1.9)
Obligations under finance
leases (0.8) (1.7) (0.9)
Current tax liabilities (3.9) (4.5) (4.3)
Liabilities held for sale 6 (3.1) (7.6) (8.3)
-------- -------- ---------
Total current liabilities (84.8) (77.6) (77.4)
-------- -------- ---------
Interest-bearing loans and
borrowings (91.4) (122.6) (108.9)
Employee benefits 15 (15.4) (18.7) (15.9)
Provisions (2.1) (1.6) (2.3)
Deferred tax liabilities (75.6) (76.3) (78.0)
Obligations under finance
leases (1.4) - (1.4)
-------- -------- ---------
Total non-current liabilities (185.9) (219.2) (206.5)
-------- -------- ---------
Total liabilities (270.7) (296.8) (283.9)
-------- -------- ---------
-------- -------- ---------
Net Assets 175.7 137.4 150.9
-------- -------- ---------
Equity
Called up share capital 5.9 5.6 5.6
Share premium account 111.7 92.6 92.5
Own shares (0.2) (0.2) (0.2)
Translation reserve (10.8) (16.6) (18.7)
Hedging reserve 0.5 1.4 2.4
Retained earnings 68.6 54.6 69.3
-------- -------- ---------
Total equity 175.7 137.4 150.9
-------- -------- ---------
Condensed consolidated statement of cash flows
For the six months ended 31 December 2007
Note Six months Six months Year
ended Ended Ended
31 December 31 December 30 June
2007 2006 2007
£m £m £m
-------- --------- -------
Net cash flow from operating
activities 14 5.0 7.3 23.8
-------- --------- -------
Cash flows from investing activities
Dividend received from joint venture
and associates - - 1.3
Interest received 1.0 0.3 2.1
Proceeds from disposal of
subsidiaries 2.8 1.0 1.0
Acquisition of property, plant and
equipment and intangible assets (4.3) (3.1) (7.1)
Proceeds from sale of property, plant
and equipment 0.2 2.3 4.3
-------- --------- -------
Net cash (outflow)/inflow from
investing activities (0.3) 0.5 1.6
-------- --------- -------
Cash flows from financing activities
Repayment of borrowings (16.1) (4.8) (13.8)
Interest paid (5.0) (4.3) (10.9)
Payment of capital element of finance
lease liabilities (0.2) (0.1) (0.9)
Cashflow receipt on closing out
derivative financial instruments - 1.7 1.7
Equity dividends paid - (4.5) (4.5)
New share capital issued 19.5 0.5 0.4
Increase/(decrease) in bank
overdrafts 4.5 (1.7) (2.0)
-------- --------- -------
Net cash inflow/(outflow) from
financing activities 2.7 (13.2) (30.0)
-------- --------- -------
-------- --------- -------
Net increase/(decrease) in cash and
cash equivalents - continuing
operations 4.2 (6.1) (2.7)
Net increase/(decrease) in cash and
cash equivalents - discontinued
operations 3.2 0.7 (1.9)
-------- --------- -------
-------- --------- -------
Net increase/(decrease) in cash and
cash equivalents 7.4 (5.4) (4.6)
-------- --------- -------
Cash and cash equivalents at
beginning of period 27.3 34.0 34.0
Net increase/(decrease) in cash and
cash equivalents 7.4 (5.4) (4.6)
Effect of exchange rate fluctuations
on cash held (0.4) (0.1) (2.1)
-------- --------- -------
Total cash and cash equivalents at
end of period 34.3 28.5 27.3
-------- --------- -------
Of the £34.3m cash and cash equivalents at 31 December 2007 (31 December 2006:
£28.5m), £0.6m is included in assets held for sale in the consolidated balance
sheet (31 December 2006: £2.2m).
Of the £27.3m cash and cash equivalents at 30 June 2007, £1.3m is included in
assets held for sale in the consolidated balance sheet.
Analysis of Net Debt
At 1 July Cash Foreign Non cash At 31 December
2007 flows exchange movements 2007
£m £m £m £m £m
Cash and
cash 26.0 8.1 (0.4) - 33.7
equivalents
Cash and
cash
equivalents
within 1.3 (0.7) - - 0.6
assets --------- ------- -------- --------- --------
held for
sale 27.3 7.4 (0.4) - 34.3
--------- ------- -------- --------- --------
Interest
bearing
loans (27.2) (0.1) (0.2) (5.8) (33.3)
- current
Obligation
under
finance
leases - (0.9) 0.2 - (0.1) (0.8)
current --------- ------- -------- --------- --------
(28.1) 0.1 (0.2) (5.9) (34.1)
--------- ------- -------- --------- --------
Interest
bearing
loans (108.9) 11.7 - 5.8 (91.4)
- non
current
Obligation
under
finance
lease - non (1.4) - - - (1.4)
current --------- ------- -------- --------- --------
(110.3) 11.7 - 5.8 (92.8)
--------- ------- -------- --------- --------
Net Debt (111.1) 19.2 (0.6) (0.1) (92.6)
--------- ------- -------- --------- --------
Cash and interest bearing loans current at 31 December 2007 include UK treasury
cash-pooling balances of £13.5m which are shown gross (31 December 2006:
£11.4m).
Cash and interest bearing loans current includes £2.7m at 31 December 2007
received from the Development Consulting disposal that was applied as a
mandatory repayment of loans on 14 January 2008.
At 1 July Cash Foreign Non cash At 31 December
2006 flows exchange movements 2006
£m £m £m £m £m
Cash and
cash 32.2 (5.8) (0.1) - 26.3
equivalents
Cash and
cash
equivalents
within 1.8 0.4 - - 2.2
assets --------- ------- -------- --------- --------
held for
sale 34.0 (5.4) (0.1) - 28.5
--------- ------- -------- --------- --------
Interest
bearing
loans (25.5) 4.8 - (4.8) (25.5)
- current
Obligation
under
finance
leases - (2.1) 0.1 - 0.3 (1.7)
current --------- ------- -------- --------- --------
(27.6) 4.9 - (4.5) (27.2)
--------- ------- -------- --------- --------
Interest
bearing
loans (126.4) - - 4.9 (121.5)
- non
current
Obligation
under
finance
lease - non (0.1) - - 0.1 -
current --------- ------- -------- --------- --------
(126.5) - - 5.0 (121.5)
--------- ------- -------- --------- --------
Net Debt (120.1) (0.5) (0.1) 0.5 (120.2)
--------- ------- -------- --------- --------
Notes to the condensed set of financial statements
1. General Information
Genus plc is a company incorporated in England and Wales with registration
number 2972325. Its shares are traded on the London Stock Exchange.
Headquartered in Basingstoke, England, Genus companies operate in 30 countries
on six continents, with research laboratories located in Madison, USA.
Genus sells added value products for livestock farming and food producers by
creating advances to animal breeding through quantitative genetics and
biotechnology. Its non-Genetically Modified Organism (GMO) technology is
applicable across all livestock species but is only commercialised by Genus in
the bovine and porcine farming sectors.
Genus' worldwide sales are made in seventy countries under the trade marks 'ABS'
(dairy and beef cattle) and 'PIC' (pigs) and comprise semen and breeding animals
with superior genetics to those animals currently in production. Customers use
Genus genetics in their herds to produce offspring with greater production
efficiency, milk and meat output and quality. These offspring are used to supply
the global dairy and meat supply chain.
Genus' competitive edge has been created from the ownership and control of
proprietary lines of breeding animals, the biotechnology used to improve them
and the Group's global production and distribution network.
2. Basis of preparation
The unaudited Condensed set of Financial Statements for the six months ended 31
December 2007:
• were prepared in accordance with International Accounting Standard 34
'Interim Financial Reporting' ('IAS 34') and thereby International Financial
Reporting Standards ('IFRS'), 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 2007 Annual Report;
• include 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 240
of the Companies Act 1985. They were approved by the Board of Directors on
25 February 2008.
The information relating to the year ended 30 June 2007 is an extract from the
published financial statements for that year, which have been delivered to the
Registrar of Companies. The auditors' report on those financial statements was
not qualified and did not contain statements under section 237(2) or (3) of the
Companies Act 1985.
The balance sheet at 31 December 2006 has been restated to adjust goodwill and
intangible balances to reflect reclassification of goodwill balances to assets
held for sale of £5.8m and exchange translational differences on goodwill and
intangible assets of £2.8m and £3.1m, respectively.
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.
Notes to the condensed set of financial statements
3. Accounting Policies and non-GAAP measure
The condensed set of financial statements has been prepared using accounting
policies consistent with International Financial Reporting Standards (IFRS) and
in accordance with IAS 34 'Interim Financial Reporting'.
The same accounting policies, presentation and methods of computation are
followed in the condensed set of financial statements as applied in the Group's
latest annual audited financial statements, dated 17 September 2007, which are
available on the Group's website www.genusplc.com. These policies have been
consistently applied for all periods presented.
Change in accounting policies
In the current financial year, the Group will adopt International Financial
Reporting Standard 7 'Financial Instruments: Disclosures' (IFRS 7) for the first
time. As IFRS 7 is a disclosure standard, there is no impact of that change in
accounting policy on the half yearly financial report. The additional
disclosures will be made in the annual report for the year ended 30 June 2008.
IFRIC 8 'Scope of IFRS 2', IFRIC 9, 'Re-assessment of embedded derivatives',
IFRIC 10, 'Interim Financial Reporting and Impairments' and IFRIC 11, 'IFRS 2 -
Group and Treasury Share Transactions' have not had any impact on the Group.
At the balance sheet date a number of new standards, amendments and
interpretations were in issue but not yet effective:
- The Group has not adopted early IFRS 8,'Operating
Segments', which is effective for annual periods beginning on or after 1 January
2009. This standard will result in presentational changes to the group's
reported segment information.
- IFRIC 12, 'Service Concession Arrangements' is effective
for periods beginning on or after 1 January 2008 but will not have any impact on
the Group.
- IFRIC 13, 'Customer Loyalty Programmes' is effective for
periods beginning on or after 1 January 2008. The impact of this interpretation
on the Group will be fully considered in due course.
- IFRIC 14, 'IAS 19 - The limit on a Defined Benefit
Asset, Minimum Funding Requirements and their Interaction', although effective
for periods beginning on or after 1 July 2008, has been adopted early by the
Group.
Non-GAAP measure - Adjusted operating profit and adjusted profit before tax
Adjusted operating profit from continuing operations is defined as operating
profit from continuing operations before the fair value movement in biological
assets, amortisation of intangible assets, share based payment expense and
exceptional items.
Adjusted profit before tax is before fair value movements on biological assets,
amortisation of intangible assets, share based payments and exceptional items,
also excluding other gains and losses.
These additional non-GAAP measures of operating performance are included as the
directors believe that they provide a useful alternative measure for
shareholders of the trading performance of the Group since they present
operating profit and profit before tax before the non cash fair value movement
in biological assets, non cash amortisation of intangibles, non cash share based
payment expense and exceptional items. The reconciliation between operating
profit and adjusted operating profit are shown on the face of the income
statement. The directors recognise these alternative measures have certain
limitations.
Notes to the condensed set of financial statements
4. Foreign currency
The principal exchange rates used were as follows:
Average Closing
---------------------- ----------------------
Six months Six months Year 31 31 30 June
ended 31 ended 31 December December
December December 2007
2007
2006 ended 2006 2007
30 June
2007
US Dollar 2.04 1.91 1.94 1.99 1.96 2.01
Euro 1.43 1.48 1.48 1.36 1.48 1.49
Assets and liabilities of overseas undertakings are translated into sterling at
the rate of exchange ruling at the balance sheet date and the income statement
is translated into sterling at average rates of exchange.
5. Segmental information
Segmental information is presented in respect of the Group's business and
geographical segments. The primary business segments are based on the Group's
management and internal reporting structure. Inter-segment pricing is determined
on an arm's length basis.
The Group comprises two main business segments: Bovine Genetics (dairy and beef
cattle) and Porcine Genetics (pigs) which provide farmers with genetically
improved breeding animals that have better production efficiency and better
product quality.
The following non-core business segments were classified as discontinued
operations at 31 December 2007:
• Animal Health, a UK based licensed veterinary pharmaceutical
distribution business;
• Development Consulting, a UK based consulting business supplying
services in the areas of natural resource, economic and social
infrastructure and development; and
• Shrimp Genetics, a division supplying genetically improved breeding
animals.
Notes to the condensed set of financial statements
5. Segmental information (continued)
Area of activity - continuing
operations
Six months ended 31 December 2007
Bovine Porcine Unallocated Total
Genetics Genetics
£m £m £m £m
Revenue from
continuing
operations 58.3 62.1 - 120.4
-------- -------- -------- -------
Adjusted operating
profit before
research and
product development 13.6 15.9 (3.6) 25.9
Research and
product development (4.4) (4.6) - (9.0)
-------- -------- -------- -------
Adjusted operating
profit from
continuing
operations 9.2 11.3 (3.6) 16.9
Fair value movement
on biological
assets 2.2 (1.1) - 1.1
Amortisation of
intangible assets (0.1) (2.5) - (2.6)
Share based payment - - (1.3) (1.3)
Exceptional items
- Sygen
integration,
including IT and
restructuring
expenses - (1.5) (0.7) (2.2)
- Preparation for
main market listing - - (1.6) (1.6)
-------- -------- -------- -------
Operating profit
from continuing
operations 11.3 6.2 (7.2) 10.3
-------- -------- -------- -------
Area of activity - continuing
operations
Six months ended 31 December 2006
Bovine Porcine Unallocated Total
Genetics Genetics
£m £m £m £m
Revenue from
continuing
operations 50.9 65.4 - 116.3
-------- -------- -------- -------
Adjusted operating
profit before
research and
product development 11.6 15.8 (2.9) 24.5
Research and
product development (4.1) (4.5) - (8.6)
-------- -------- -------- -------
Adjusted operating
profit from
continuing
operations 7.5 11.3 (2.9) 15.9
Fair value movement
on biological
assets 2.9 (2.6) - 0.3
Amortisation of
intangible assets (0.1) (2.5) - (2.6)
Share based payment - - (0.7) (0.7)
Exceptional items
- Sygen integration
and restructuring
expenses (0.3) (0.8) (0.5) (1.6)
- Preparation for
main market listing - - (0.7) (0.7)
-------- -------- -------- -------
Operating profit
from continuing
operations 10.0 5.4 (4.8) 10.6
-------- -------- -------- -------
Notes to the condensed set of financial statements
5. Segmental information (continued)
Area of activity - continuing
operations
Year ended 30 June 2007
Bovine Porcine Unallocated Total
Genetics Genetics
£m £m £m £m
Revenue from
continuing
operations 102.3 131.5 - 233.8
-------- -------- -------- --------
Adjusted operating
profit before
research and
product development 20.0 32.8 (6.4) 46.4
Research and
product development (8.3) (9.4) - (17.7)
-------- -------- -------- --------
Adjusted operating
profit from
continuing
operations 11.7 23.4 (6.4) 28.7
Fair value movement
on biological
assets 10.0 0.9 - 10.9
Amortisation of
intangible assets (0.1) (5.0) - (5.1)
Share based payment (0.4) (0.3) (0.7) (1.4)
Exceptional items
- Sygen
integration,
including IT and
restructuring
expenses (0.4) (2.6) - (3.0)
- Adjustment to
goodwill on
recognition of tax
assets - (0.7) - (0.7)
-Preparation for
main market listing - - (1.0) (1.0)
-------- -------- -------- --------
Operating profit
from continuing
operations 20.8 15.7 (8.1) 28.4
-------- -------- -------- --------
Notes to the condensed set of financial statements
5. Segmental information (continued)
Geographical segments
The bovine and porcine segments are managed on a worldwide basis, but operate in
a number of geographical areas. Segment assets are based on the geographical
location of the assets.
Sales revenue by geographical Sales revenue by geographical
region region at destination
of origin
Six months Six months Year Six months Six Year
ended 31 ended 31 ended 31 months
December December December ended 31
2007 2007 December
2006 ended 2006 ended
30 June 30 June
2007 2007
Continuing £m £m £m £m £m £m
operations
North America 53.2 49.5 111.5 46.0 45.8 94.9
South America 10.6 9.2 19.7 12.7 11.3 23.8
--------- --------- --------- -------- -------- --------
63.8 58.7 131.2 58.7 57.1 118.7
United Kingdom 25.7 19.8 44.3 24.3 22.8 44.9
Continental
Europe 27.5 32.7 55.0 31.9 32.7 63.9
Asia 6.8 8.6 10.4 8.9 7.2 13.4
--------- --------- --------- -------- -------- --------
60.0 61.1 109.7 65.1 62.7 122.2
Inter-segmental
sales (3.4) (3.5) (7.1) (3.4) (3.5) (7.1)
--------- --------- --------- -------- -------- --------
Continuing
operations -
total 120.4 116.3 233.8 120.4 116.3 233.8
Discontinued
operations 10.5 13.8 29.2 10.5 13.8 29.2
--------- --------- --------- -------- -------- --------
Total 130.9 130.1 263.0 130.9 130.1 263.0
--------- --------- --------- -------- -------- --------
Discontinued sales revenue derives from the Development Consulting and Animal
Health businesses, which originate in the United Kingdom and from the Shrimp
Genetics business in Mexico and Thailand.
Adjusted operating profit from Operating profit from continuing
continuing operations operations
Six months Six months Year Six months Six months Year
ended 31 ended 31 ended 31 ended 31
December December December December
2007 2007
2006 ended 2006 ended
30 June 30 June
2007 2007
Continuing £m £m £m £m £m £m
operations
North 8.1 8.3 15.1 8.5 5.3 14.9
America
South 2.6 2.2 5.7 1.0 2.2 6.0
America --------- --------- --------- --------- --------- --------
10.7 10.5 20.8 9.5 7.5 20.9
United 5.0 4.9 4.3 3.4 5.1 7.3
Kingdom
Continental
Europe 2.5 1.9 7.1 2.0 1.5 7.1
Asia 2.3 1.5 2.9 2.6 0.8 1.2
--------- --------- --------- --------- --------- --------
9.8 8.3 14.3 8.0 7.4 15.6
Unallocated
costs (3.6) (2.9) (6.4) (7.2) (4.3) (8.1)
--------- --------- --------- --------- --------- --------
Total 16.9 15.9 28.7 10.3 10.6 28.4
--------- --------- --------- --------- --------- --------
Notes to the condensed set of financial statements
5. Segmental information (continued)
Business segments
Area of activity - discontinued Six months ended 31 December 2007
operations
Animal Development Shrimp Total
Health Genetics
Consulting
£m £m £m £m
Revenue 3.9 6.2 0.4 10.5
---------- ---------- ---------- ----------
Adjusted operating
profit/(loss) 0.7 0.1 (0.2) 0.6
---------- ---------- ---------- ----------
Operating
profit/(loss) 0.7 0.1 (0.2) 0.6
---------- ---------- ---------- ----------
Area of activity - Six months ended 31 December 2006
discontinued operations
Animal Development Shrimp Total
Health Genetics
Consulting
£m £m £m £m
Revenue 4.0 9.0 0.8 13.8
---------- ---------- ---------- ----------
Adjusted operating
profit/(loss) 0.8 0.1 (0.7) 0.2
Winding up of legacy
pension scheme (0.6) - - (0.6)
---------- ---------- ---------- ----------
Operating
profit/(loss) 0.2 0.1 (0.7) (0.4)
---------- ---------- ---------- ----------
Area of activity - discontinued Year ended 30 June 2007
operations
Animal Development Shrimp Total
Health Genetics
Consulting
£m £m £m £m
Revenue 7.8 18.2 3.2 29.2
---------- ---------- ---------- ----------
Adjusted operating
profit 1.6 0.8 - 2.4
Winding up of legacy
pension scheme (0.6) - - (0.6)
Share based payments - - (0.1) (0.1)
---------- ---------- ---------- ----------
Operating
profit/(loss) 1.0 0.8 (0.1) 1.7
---------- ---------- ---------- ----------
The segment result from discontinued operations stated above is equal to the
operating profit from discontinued operations disclosed in note 6, which
provides a reconciliation to the net profit/(loss) from discontinued operations.
Notes to the condensed set of financial statements
6. Non-current assets held for sale and discontinued operations
Discontinued operations
Six months Six months ended Year
ended 31 December ended
31 December 2006 30 June 2007
2007
£m £m £m
-------- ------- -------
Adjusted operating profit/(loss)
Loss in Shrimp Genetics for the (0.2) (0.7) -
period
Profit in Development Consulting in
the 0.1 0.1 0.8
period
Profit in Animal Health for the 0.7 0.8 1.6
period
Adjusted operating profit from
discontinued operations 0.6 0.2 2.4
Winding up of legacy pension scheme - (0.6) (0.6)
Share based payments - - (0.1)
-------- ------- -------
Operating profit/(loss) from
discontinued operations 0.6 (0.4) 1.7
Other gains and losses
Sale of properties - - 0.7
Profit arising on sale of Dental
products wholesale division - 0.7 -
Profit on sale of Thailand operation
of - 0.2 0.2
Shrimp Genetics
Profit on sale of Development
consulting 0.1 - -
Loss on sale of Mexico operation of
Shrimp Genetics (0.8) - -
-------- ------- -------
(0.7) 0.9 0.9
(Loss)/profit from discontinued
operations before tax (0.1) 0.5 2.6
Tax (0.3) 0.1 (0.7)
-------- ------- -------
(Loss)/profit from discontinued
operations (0.4) 0.6 1.9
-------- ------- -------
The Board decided in May 2006 to dispose of the Shrimp Genetics business.
Accordingly, the results of this business are shown within discontinued
operations. The Shrimp Genetics business in Thailand was sold on 9 October 2006
for £1.0 million cash resulting in a profit on disposal of £0.2 million; Brazil
was sold on 7 June 2006 for £3.3m resulting in a profit on disposal of £0.6m;
and the remaining Mexican Shrimp Genetics business was disposed of on 4 October
2007 for an initial consideration of £0.3m and deferred consideration of £1.1m,
being a total consideration of £1.4m and a loss on disposal of £0.8m.
The Board decided to dispose of the group's other non-core operations, the
Animal Health business and Development Consulting prior to 31 December 2005.
Accordingly, the results of these entities are shown within discontinued
operations, and their assets and liabilities shown as held for sale at 31
December 2007 and 31 December 2006.
The Animal Health veterinary product and dental product wholesale businesses
were sold on 28 October 2005 and 22 February 2006, respectively.
The business, assets and liabilities of Development Consulting was sold on 6
November 2007 for an initial cash consideration of £2.5m and deferred
consideration of £0.5m, being a total consideration of £3.0m.
On 15 January 2008, Animalcare Limited was sold for an initial cash
consideration of £13.4m. A maximum contingent consideration of £0.6m becomes
payable by June 2008 in the event that production criteria with regard to a
manufacturing contract for a new product are met.
Notes to the condensed set of financial statements
6. Non-current assets held for sale and discontinued operation (continued)
Assets held for sale
At 31 December 2007, Animal Health and PIC Italia Spa were classified as held
for sale together with one freehold property. (31 December 2006: Animal Health,
Development Consulting, Shrimp Genetics and Cazals Genetique SA together with
two freehold properties). The residual Animal Health business and PIC Italia Spa
were divested in January 2008.
The major classes of assets and liabilities comprising the operations held for
sale are as follows:
31 December 31 December 30 June
2007 2006 2007
(restated)
£m £m £m
Assets
Goodwill and intangible assets 6.7 6.3 6.3
Biological assets 0.4 1.0 0.3
Property, plant and equipment 1.3 1.0 2.7
Inventories 0.8 1.5 1.3
Trade and other receivables 1.6 9.3 10.0
Cash and cash equivalents 0.6 2.2 1.3
--------- --------- ---------
Total assets 11.4 21.3 21.9
--------- --------- ---------
Liabilities
Trade and other payables (3.1) (7.6) (8.3)
--------- --------- ---------
Total liabilities (3.1) (7.6) (8.3)
--------- --------- ---------
--------- --------- ---------
Net assets of disposal groups 8.3 13.7 13.6
--------- --------- ---------
7. Exceptional items within continuing operations
Exceptional items are as follows:
Six Six months Year
months ended
ended 31 December ended
31 2006 30 June
December 2007
2007
£m £m £m
Integration and restructuring (primarily Sygen
acquisition related)
- Integration costs, including IT and
restructuring costs 1.8 1.6 3.0
- Irrecoverable Sygen assets 0.3 - -
- Impairment of property asset 0.1 - -
-------- -------- --------
2.2 1.6 3.0
Adjustment to goodwill on recognition
of tax assets - - 0.7
Preparation for main market listing 1.6 0.7 1.0
-------- -------- --------
3.8 2.3 4.7
-------- -------- --------
Included within integration and restructuring costs for the period ended 31
December 2007 is a provision of £0.5m where damages were awarded against the
Company in November 2007 by a Californian court in relation to an employment
dispute involving a former employee of Sygen International plc (see note 18).
Notes to the condensed set of financial statements
8. Net finance costs
Six Six Year
months months
ended
ended 31 ended
December
31 2006 30 June
December
2007 2007
£m £m £m
Interest payable on bank loans &
overdrafts (4.9) (5.5) (11.0)
Finance charges payable under finance
leases and hire purchase contracts (0.1) (0.1) -
Amortisation of debt issue costs (0.2) (0.2) (0.3)
Net interest cost in respect of pension
schemes - (0.2) (0.6)
Other interest payable (0.1) - (0.2)
------- ------- -------
Total finance costs (5.3) (6.0) (12.1)
------- ------- -------
Interest income on bank deposits 0.2 0.5 1.2
Other interest receivable 0.8 0.3 0.9
Net interest income in respect of
pension schemes 0.2 - -
------- ------- -------
Total finance income 1.2 0.8 2.1
------- ------- -------
------- ------- -------
Net finance costs (4.1) (5.2) (10.0)
------- ------- -------
Notes to the condensed set of financial statements
9. Income taxes
Continuing Operations:
Six months Six months ended Year
ended 31 December ended
31 December 2006 30 June
2007 2007
£m £m £m
Current tax 2.2 3.0 5.2
Deferred tax 0.4 (0.7) 2.0
-------- -------- ---------
2.6 2.3 7.2
-------- -------- ---------
The taxation charge for the period is based on the estimated effective tax rate
for the full year of 35.1% (2006: 35.0%). In calculating the effective rate,
account has been taken of differences from the statutory rate arising from tax
rates in foreign jurisdictions, non deductible expenses, tax incentives not
recognised in profit or loss and the effect of movements in the amount of tax
losses and other temporary differences for which a deferred tax credit has not
been recognised.
Deferred taxation is recognised in respect of differences between the carrying
amounts of assets and liabilities in the accounts and the corresponding tax
bases. This is subject to deferred tax assets only being recognised if it is
considered probable that there will be suitable profits from which the future
reversal of the temporary differences can be deducted.
There is a deferred tax liability at the period end of £75.6m (2006: £76.3m)
which mainly relates to the recognition at fair value of biological assets and
intangible assets arising on acquisition and a deferred tax asset of £9.0m
(2006: £10.1m) which mainly relates to future tax deductions in respect of
pension scheme liabilities and share scheme awards.
The total reduction in deferred tax during the period was £1.1m (2006: £2.9m) of
which £0.4m was debited (2006: £0.7m was credited) to the consolidated income
statement and £1.5m (2006: £2.2m) was credited to reserves.
Discontinued Operations:
Six months Six months ended Year
ended 31 December ended
31 December 2006 30 June
2007 2007
£m £m £m
-------- -------- -------
Current tax 0.3 (0.1) 0.6
-------- -------- -------
The tax charge on discontinued operations comprises tax of £0.3m on operating
profits of £0.5m.There is no tax credit on the loss on disposal of £0.7m.
The prior year tax credit comprises a tax credit of £0.1m on operating losses of
£0.4m. There was no prior year tax liability on the profit on disposal of £0.9m.
Notes to the condensed set of financial statements
10. Dividends
Six Six months Year
months ended
ended 31 December ended
31 2006 30 June
December
2007 2007
£m £m £m
Amounts recognised as distributions to equity
holders in the period
Final dividend for the 15 month period
ended 30 June 2006 of 8.25p per share - 4.5 4.5
Final dividend for the 12 month period
ended 30 June 2007 of 9.1p per share 5.3 - -
-------- -------- --------
5.3 4.5 4.5
-------- -------- --------
11. Fair Value of Biological Assets
B ovine Porcine Total
£m £m £m
Balance at 1 July 2007 - continuing operations 73.9 65.5 139.4
- held for sale - 0.3 0.3
------ ------ ------
73.9 65.8 139.7
Change in fair value less estimated point-of-sale
costs 9.6 2.1 11.7
Transfers to inventory (6.3) (3.0) (9.3)
Effect of movements in foreign exchange 0.7 1.9 2.6
------ ------ ------
Balance at 31 December 2007 77.9 66.8 144.7
------ ------ ------
Non-current 77.9 42.1 120.0
Current - 24.2 24.2
------ ------ ------
Biological assets - continuing operations 77.9 66.3 144.2
Biological assets included within assets held for sale - 0.5 0.5
------ ------ ------
Balance at 31 December 2007 77.9 66.8 144.7
------ ------ ------
Notes to the condensed set of financial statements
11. Fair Value of Biological Assets (continued)
Bovine Porcine Total
£m £m £m
Balance at 1 July 2006 - continuing operations 70.6 70.2 140.8
- held for sale - 0.9 0.9
------ ------ ------
70.6 71.1 141.7
Change in fair value less estimated point-of-sale 9.7 - 9.7
costs
Transfers to inventory (7.1) (3.1) (10.2)
Effect of movements in foreign exchange (3.3) (5.1) (8.4)
------ ------ ------
Balance at 31 December 2006 69.9 62.9 132.8
------ ------ ------
Non-current 69.9 36.6 106.5
Current - 25.3 25.3
------ ------ ------
Biological assets - continuing operations 69.9 61.9 131.8
Biological assets included within assets held for sale - 1.0 1.0
------ ------ ------
Balance at 31 December 2006 69.9 62.9 132.8
------ ------ ------
Bovine Porcine Total
£m £m £m
Balance at 1 July 2006 - continuing operations 70.6 70.2 140.8
- held for sale - 0.9 0.9
------ ------ ------
70.6 71.1 141.7
Change in fair value less estimated point-of-sale
costs 27.9 6.3 34.2
Transfers to inventory (19.9) (5.9) (25.8)
Effect of movements in foreign exchange (4.7) (5.7) (10.4)
------ ------ ------
Balance at 30 June 2007 73.9 65.8 139.7
------ ------ ------
Non-current 73.9 40.2 114.1
Current - 25.3 25.3
------ ------ ------
Biological assets - continuing operations 73.9 65.5 139.4
Biological assets included within assets held for sale - 0.3 0.3
------ ------ ------
Balance at 30 June 2007 73.9 65.8 139.7
------ ------ ------
Notes to the condensed set of financial statements
12. Earnings per share
Weighted average number of ordinary shares Six months Six months Year
(basic) ended
ended 31 December ended
31 2006 30 June
December
2007 2007
m m m
Weighted average number of ordinary
shares (basic) 56.2 55.2 54.9
Dilutive effect of share options 1.4 1.6 1.6
-------- ------- ---------
Weighted average number of ordinary
shares for the purpose of diluted
earnings per share 57.6 56.8 56.5
-------- ------- ---------
Six months Six months ended Year
ended 31 December ended
31 December 2006 30 June
2007 2007
Earnings per share from continuing
operations
Basic earnings per share 8.4p 6.9p 23.1p
Diluted earnings per share 8.2p 6.7p 22.5p
Adjusted earnings per share* 16.5p 14.3p 24.6p
Diluted adjusted earnings per share* 16.2p 13.9p 23.9p
Earnings per share from total operations
Basic earnings per share 7.7p 8.0p 26.6p
Diluted earnings per share 7.5p 7.7p 25.8p
Earnings per share measures are calculated on the weighted average number of
ordinary shares in issue during the period. As in previous years, 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.
* The basis for calculating adjusted earnings per share has been changed to
incorporate the results of the joint venture and associates, excluding fair
value movements on biological assets.
Notes to the condensed set of financial statements
12. Earnings per share (continued)
Continuing operations
Basic earnings per share from continuing operations is calculated on the profit
for the period of £4.7m (six months ended 31 December 2006: £3.8m; year ended 30
June 2007: £12.7m)
Adjusted earnings per share is calculated on profit for the period before fair
value movements on biological assets, amortisation of intangible assets, share
based payments, exceptional items and other gains and losses after charging
taxation associated with those profits, of £9.3m (six months ended 31 December
2006 : £7.9m; year ended 30 June 2007: £13.5m), as follows:
Adjusted earnings from continuing Six months Six months Year
operations ended
ended 31 December ended
31 December 2006 30 June
2007 (restated)* 2007
(restated)*
£m £m £m
Profit before tax from continuing
operations 7.3 6.1 19.9
Add/(deduct):
Fair value movement on biological
assets (1.1) (0.3) (10.9)
Amortisation of intangible assets 2.6 2.6 5.1
Share based payments 1.3 0.7 1.4
Integration and restructuring expenses 2.2 1.6 3.0
Preparation for main market listing 1.6 0.7 1.0
Adjustment to goodwill on recognition
of tax assets - - 0.7
Fair value movement on biological
assets in joint venture and associates (0.4) - (0.2)
Other gains and losses - - (0.2)
-------- ------- --------
Profit before fair value movement on
biological assets, amortisation of
intangible assets, share based
payments, exceptional items and other
gains and losses 13.5 11.4 19.8
Adjusted tax charge (4.2) (3.5) (6.3)
-------- ------- --------
Profit before fair value movement on
biological assets, amortisation of
intangible assets, share based
payments, exceptional items and other
gains and losses, after taxation 9.3 7.9 13.5
-------- ------- --------
* The basis for calculating adjusted earnings per share has been change to
include the results of the joint venture and associates, excluding movements of
biological assets.
Total operations
Earnings per share for total operations has been calculated as the profit
attributable to ordinary shareholders of £4.3m (six months ended 31 December
2006 £4.4m; year ended 30 June 2007: £14.6m) divided by weighted average number
of ordinary shares (basic and diluted) as calculated above.
Notes to the condensed set of financial statements
13. Disposal of businesses
The net assets of the Development Consulting and Mexican Shrimp Genetics
businesses at the respective dates of disposal were as follows:
31 December
2007
£m
Net assets 4.6
Attributable goodwill 0.3
Disposal expenses 0.2
---------
5.1
Loss on disposal (0.7)
---------
Total consideration 4.4
---------
Satisfied by:
Cash 2.8
Deferred consideration 1.6
---------
4.4
---------
The deferred consideration will be settled in cash by the purchasers on or
before May 2009.
14. Cashflow from operating activities
Six months Six months ended Year
ended 31 December ended
31 December 2006 30 June
2007 2007
£m £m £m
Profit for the period 4.3 4.4 14.6
Adjustments for:
- Fair value movements on biological
assets (1.1) (0.3) (10.9)
- Amortisation of intangibles 2.6 2.6 5.1
- Adjustment to goodwill on
recognition of tax assets - - 0.7
- Share based payment expense 1.3 0.7 1.5
- Share of profits of associates (1.1) (0.7) (1.3)
- Other gains and losses - - (0.2)
- Finance costs 4.1 5.2 10.0
- Income tax expense 2.6 2.3 7.8
- Loss/(gain) on disposal of
discontinued operations 0.7 (0.6) (0.2)
- Depreciation of property plant &
equipment 1.8 2.5 4.7
- Decrease in provisions (0.4) (0.8) (0.9)
--------- -------- -------
Operating cash flows before movement in
working capital 14.8 15.3 30.9
(Increase)/decrease in inventories (1.3) 0.7 1.6
Increase in receivables (7.6) (1.7) (1.2)
Increase/(decrease) in payables 1.5 (5.4) (4.0)
--------- -------- -------
Cash generated by operations 7.4 8.9 27.3
Income taxes paid (2.4) (1.6) (3.5)
--------- -------- -------
Net cash inflow from operating
activities 5.0 7.3 23.8
--------- -------- -------
Notes to the condensed set of financial statements
15. Employee benefits
Pension & medical plans
Obligation recognised in the consolidated financial statements
The Group provides employee benefits under various arrangements, including
defined benefit and defined contribution pension plans, the details of which are
disclosed in the most recent annual financial statements. Details of the total
recognised defined benefit obligations are provided below:
31 December 31 December 30 June
2007 2006 2007
£m £m £m
Present value of unfunded obligations (6.4) (6.5) (6.5)
Present value of funded obligations (138.1) (135.8) (134.2)
Fair value of plan assets 129.1 123.6 124.8
------- ------- -------
Gross liability for defined benefit
obligations (15.4) (18.7) (15.9)
------- ------- -------
Pension plans
Dalgety pension fund
A Deed of Agreement was signed on 23 January 2008 by the company and the
trustees of the fund, pursuant to the Heads of Agreement which were agreed on 8
November 2007 and which formed the basis of the funding arrangement agreed for
the actuarial valuation of the fund as of 31 March 2006.
Under the agreement the Company agreed to make deficit repair contributions of
£2.4m to the fund of which £1.8m were made by 31 December 2007 with a further
£0.6m in January 2008. The trustees of the fund agreed to transfer an amount of
£4.8m into the fund from their trustee share of surplus. £2.1m of this amount
was in respect of known liabilities with an additional £2.7m transferred as a
reserve against future unknown liabilities materialising. As the economic
benefit to the company of this latter amount is not certain, it is treated as a
contingent asset.
Expense recognised in the consolidated interim income statement
The expense recognised in the consolidated interim income statement consists of
the current service costs, interest on the obligation for employee benefits and
the expected return on plan assets. For the six months ended 31 December 2007,
the Group recognised an expense of £0.5m (six months ended 31 December 2006:
£1.5m; year ended 30 June 2007: £2.7m).
The principal actuarial assumptions at the date of the most recent actuarial
valuations (expressed as weighted averages) are:
31 December 31 December 30 June
2007 2006 2007
% % %
Discount rate 5.7 5.3 5.7
Expected return on plan assets 6.3 6.1 6.6
Future salary increases 4.3 4.1 4.2
Medical cost trend rate 7.2 3.1 7.2
Future pension increases 3.3 3.1 3.2
Notes to the condensed set of financial statements
15. Employee benefits
Share-based payments
The fair value of the share award and share option schemes has been established
using a binomial model. During the six months ended 31 December 2007, the Group
recognised an expense (including National Insurance) of £1.3m related to the
fair value of the share awards and options awarded (six months ended 31 December
2006: £0.7m; year ended 30 June 2007: £1.5m).
16. Share Capital
Share capital at 31 December 2007 amounted to £5.9m. During the period, the
Group issued 3.3m shares of which 2.7m were issued through an institutional
placing raising £18.8m, applied to reduce the group debt.
17. Financial instruments
Hedging of fluctuations in interest rates
The Group adopts a policy of ensuring that between 70 and 90 percent of its
exposure to changes in interest rates on borrowings is hedged. An interest rate
swap, denominated in sterling, has been entered into to achieve an appropriate
mix of fixed and floating rate exposure within the Group's policy. At 31
December 2007, approximately 86 percent of borrowings were hedged with a fixed
rate of interest of 4.74%. The swap matures on an amortised basis as the related
borrowings amortise over the next 3 years.
The Group classifies its interest rate swaps as a cash flow hedge. The fair
value of the interest rate swap at 31 December 2007 was £1.1m (31 December 2006:
£2.0m) and is recognised as a financial asset, with a corresponding credit to
the hedging reserve.
Hedging of fluctuations in foreign currency
The Group is exposed to foreign currency risk on the net assets of overseas
subsidiary entities. To manage this risk a 4.5 year cross currency swap was
entered into in September 2006, designated as a hedge of the spot rate risk
arising on the group's net investment in US dollar denominated subsidiaries.
18. Other matters
Contingencies
There have been no material changes to the Group's contingent liabilities
relating to performance bonds and credit guarantees totalling £1.0m in the six
months ended 31 December 2007, nor the group's ongoing joint and several
liability for the Milk Pension Fund, more fully described in the Annual Report
2007.
There have been no changes to any legal proceedings involving the Group in the
six months ended 31 December 2007 which are expected to have, or have had, a
material effect on the financial position or profitability of the Group save in
relation to an employment dispute involving a previous employee of Sygen
International plc where damages of $975,000 were awarded against the Company in
November 2007 by a Californian court. Whilst this amount has been provided in
the interim results, the Company denies liability and is appealing the decision.
Capital commitments
At 31 December 2007 no capital commitments have been contracted for.
Seasonality
The Group has not historically been subject to significant seasonal trends with
the exception of a higher use of working capital in the first half of the
financial year.
Notes to the condensed set of financial statements
19. 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 Six months Year 31 31 30 June
months ended 31 December December
ended 31 December 2007
December
2007 2006 ended 2006 2007
30 June
2007
Sale of goods to £m £m £m £m £m £m
Joint Ventures
and associates 4.3 5.1 7.0 0.3 0.1 0.5
All outstanding balances with joint ventures and associates are priced on an
arm's length basis and are to be settled in cash within three months of the
reporting date. None of the balances are secured.
During the period the Company paid fees of £2.0m for IT consultancy services.
The Salamander Organization Limited ('Salamander'), a party related to Mr J E
Hawkins, was paid £0.4m (31 December 2006: £0.1m) for services supplied by
Salamander directly and £1.0m (31 December 2006: £0.5m) for services supplied by
external contractors. Mr Hawkins is chairman of the Salamander board and has a
1% shareholding in Salamander. Mr Hawkins had no involvement in the negotiation
of the agreement between the Company and Salamander and the agreement was
entered into on an arm's length basis. The external contractors referred to
above were provided by Reed Professional Services Limited with effect from 1
November 2007 and were paid £0.6m in the period. The agreement with Salamander
was terminated on 20 January 2008.
During the period the Company disposed of its Development Consulting business
after a competitive tender process to the management team and a former director
of the Company, Mr David Timmins, who resigned as a director of the Company on 2
April 2007.
20. Events after the balance sheet date
On 15 January 2008, Animalcare Limited was sold for an initial cash
consideration of £13.4m. A maximum contingent consideration of £0.6m becomes
payable by June 2008 in the event that production criteria with regard to a
manufacturing contract for a new product are met.
Responsibility statement
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 4.4.7R (indication of important events during the first six
months and description of principle 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 Finance Director
R K Wood M B Boden
25 February 2008 25 February 2008
Report on Review of Condensed Set of Financial Statements of Genus plc
We have been engaged by the company to review the condensed set of financial
statements in the interim financial report for the six months ended 31 December
2007 which comprises the Condensed Consolidated Income Statement, the Condensed
Consolidated Statement of Changes in Equity, the Condensed Consolidated Balance
Sheet, the Condensed Consolidated Statement of Cash Flows, the Analysis of Net
Debt and related notes 1 to 20. We have read the other information contained in
the half-yearly financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in the condensed
set of financial statements.
This report is made solely to the company in accordance with International
Standard on Review Engagements 2410 issued by the Auditing Practices Board. Our
work has been undertaken so that we might state to the company those matters we
are required to state to them in an independent review report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company, for our review work, for this
report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved
by, the directors. The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure and Transparency Rules of the
United Kingdoms' Financial Services Authority.
As disclosed in note 2, the annual financial statements of the group are
prepared in accordance with IFRSs as adopted by the European Union. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with International Accounting Standard
34, 'Interim Financial Reporting,' as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review.
Scope of Review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information
Performed by the Independent Auditor of the Entity' issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly, we
do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe
that the condensed set of financial statements in the half-yearly financial
report for the six months ended 31 December 2007 is not prepared, in all
material respects, in accordance with International Accounting Standard 34 as
adopted by the European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Services Authority.
Deloitte & Touche LLP
Chartered Accountants and Registered Auditor
25 February 2008
London, UK
This information is provided by RNS
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