Genus Plc · LSE:GNS
Genus — H1 FY2018 Earnings Presentation
32 slides from Genus's earnings presentation, Feb 28, 2018
Slide 1: Interim Results Investor Presentation
INTERIM RESULTS Investor Presentation Half year ended 31 December 2017
Slide 2: Disclaimer
Disclaimer This presentation has been prepared by Genus (“Genus” or “the Company”) and has not been independently verified. Genus is solely responsible for the contents of this document and has taken all reasonable care to ensure that the facts stated herein are true and accurate in all material res
Slide 3: Overview
Overview Bob Lawson Chairman 3
Slide 4: Strong financial results and strategic progress
Strong financial results and strategic progress > Strong performance − Adjusted profit before tax up 16% (20% in constant currency) − Strong free cash flow − Adjusted earnings per share 40.9p, up 34% (39% in constant currency) > Continued strategic progress − Sexcel® launching successfully; secured
Slide 5: Financial results
Financial results Stephen Wilson Finance Director 5
Slide 6: Results
Results Half year ended 31 December 2017 % Change 2017 2016 Actual Constant £m £m Currency Currency Revenue 238.6 222.1 7% 10% Adjusted operating profit exc JV 28.3 24.5 16% 19% Attributable to non-controlling interest (0.4) (1.0) 60% 60% Adjusted share of JV profits 3.6 3.3 9% 15% Adjusted operatin
Slide 7: Volume growth
Volume growth Half year ended 31 December 2017 Porcine Dairy & Beef Volume growth (%) Volume growth (%) 10% 8% 6% 8% 4% 8% 6% 6% 2% 5% 9% 0% 1% 4% FY14 FY15 FY16 FY17 FY18 1H vs 6% (2)% FY17 1H 5% (6)% 2% 4% 4% (4)% 0% (6)% FY14 FY15 FY16 FY17 FY18 1H vs FY17 1H FY14-FY17 are financial years (e.g. F
Slide 8: Adjusted operating profit – by business unit
Adjusted operating profit – by business unit Half year ended 31 December 2017 % Change 2017 2016 Actual Constant £m £m Currency Currency Genus PIC 47.7 46.1 3% 7% Genus ABS 11.6 8.3 40% 47% Operating units 59.3 54.4 9% 13% Research and Development (22.1) (21.9) (1)% (5)% Central costs (5.7) (5.7) -
Slide 9: Genus PIC
Genus PIC Half year ended 31 December 2017 % Change 2017 2016 Actual Constant £m £m Currency Currency Revenue 126.4 122.5 3% 6% Adjusted operating profit exc JV 44.1 42.8 3% 6% Adjusted operating profit inc JV 47.7 46.1 3% 7% Adjusted operating margin exc JV 34.9% 34.9% - 0.1pts > Continued growth i
Slide 10: Genus ABS
Genus ABS Half year ended 31 December 2017 % Change 2017 2016 Actual Constant £m £m Currency Currency Revenue 105.6 93.4 13% 16% Adjusted operating profit 11.7 9.0 30% 36% Adjusted operating profit less NCI1 11.6 8.3 40% 47% Adjusted operating margin 11.1% 9.6% 1.5pts 1.7pts > ABS volumes up 8%, rev
Slide 11: Genus R&D
Genus R&D Half year ended 31 December 2017 % Change 2017 2016 Actual Constant £m £m Currency Currency Porcine product development 8.4 8.2 2% 6% Bovine product development 7.8 8.2 (5)% (2)% Gene editing 2.1 1.5 40% 47% Other research and development 3.8 4.0 (5)% - Research and Development less NCI1 2
Slide 12: Statutory income statement
Statutory income statement Half year ended 31 December 2017 2017 2016 Variance £m £m £m Adjusted operating profit exc JV 28.3 24.5 3.8 Net IAS 41 valuation movement (3.6) (5.0) 1.4 Amortisation of acquired intangibles (5.0) (3.6) (1.4) Share-based payments (3.0) (1.7) (1.3) Exceptional items - Litig
Slide 13: Cash flow
Cash flow Half year ended 31 December 2017 2017 2016 Variance £m £m £m Adjusted operating profit exc JV 28.3 24.5 3.8 Depreciation and amortisation 7.2 5.3 1.9 Adjusted EBITDA 35.5 29.8 5.7 Working capital (4.8) (6.1) 1.3 Biological assets (0.4) (3.0) 2.6 Pension deficit repair, exceptionals and oth
Slide 14: Strong financial position
Strong financial position Half year ended 31 December 2017 2017 2016 £m £m Owners’ equity 419.1 399.5 Net Debt 113.4 109.0 Key Financial ratios: - Gearing 27% 27% 1 - Net debt to EBITDA 1.4x 1.6x 1 - Interest cover 27x 38x 1 - Dividend cover 3.3x 2.8x > Interim dividend up 9.5% > £67m headroom on ba
Slide 15: Business update
Business update Karim Bitar Chief Executive 15
Slide 16: Strong strategic progress
Strong strategic progress > ABS − De Novo breeding programme performing strongly − Encouraging start for Sexcel − IntelliGen technology successfully licensed in Europe and India > PIC − Growing and strengthening our position in key markets − Future Møllevang strategic relationship1 − First gene edit
Slide 17: Genus strategy
Genus strategy Dairy Pork Beef GENETIC IMPROVEMENT SHARED PROPRIETARY TECHNOLOGY PLATFORM BIOSYSTEMS GENOMIC SELECTION GENE EDITING ENGINEERING GENOME SCIENCE 17
Slide 18: De Novo to produce over half of our own new Holstein bulls by FY19
De Novo to produce over half of our own new Dairy Holstein bulls by FY19 Source of new ABS US Holstein genetics 35% 45% 55% 80% 77% Independent breeders 99% 65% 55% 45% 20% 23% ABS – De Novo 1% FY15 FY16 FY17 FY18F FY19F FY20F 18
Slide 19: Effectiveness of our dairy breeding programme – De Novo Genetics
Effectiveness of our dairy breeding programme – Dairy De Novo Genetics # of Top 100 NM$ Holsteins (December 2017) 60 Top 100 NM$ bulls - Proven Top 100 NM$ bulls - Active Genomic 50 Top 100 NM$ bulls - Pipeline* 40 30 20 10 0 Competitor 1 Competitor 2 Competitor 3 Competitor 4 Analysis based on Top
Slide 20: We have witnessed strong demand for our new Sexcel product
We have witnessed strong demand for our new Dairy Sexcel product Sexcel as % of total ABS sexed units 42% 52% 62% 68% 77% Other sexed 98% 58% 48% 38% 32% 23% 2% Aug 17 Sep 17 Oct 17 Nov 17 Dec 17 Jan 18 “Just phenomenally “We started using “Conception rates better with conception Sexcel on our maide
Slide 21: We have expanded our US processing facilities to meet Sexcel demand
We have expanded our US processing facilities to Dairy meet the growing demand for Sexcel Genus IntelliGen facility, Wisconsin, USA 21
Slide 22: Secured third party technology agreements in Europe and India
Secured third party technology agreements in Dairy Europe and India Geno bull stud Mehsana bull stud Uttar Pradesh bull stud > Technology licensed to > IntelliGen will sex genetics > IntelliGen will sex genetics leading Norwegian stud of leading cooperative in in largest milk producing Gujarat State
Slide 23: Proprietary selection programme continues to deliver value for our customers
Proprietary selection programme continues to Pork deliver value for our customers Continuous improvement in our proprietary Customers have started to see the impact of herd through genomic selection relationship based genomic selection on farm Pigs weaned per sow per year PIC Genetic Index (Actual r
Slide 24: Strengthening our supply chain to serve large integrated pork producers globally
Strengthening our supply chain to serve large Pork integrated pork producers globally % volumes under royalty % volumes under royalty North America EMEA 96% 96% 96% 97% 97% 70% • Expanding supply 59% 64% 63% • Expanding stud chain to support 38% network in Spain growth FY14 FY15 FY16 FY17 FY18 1H FY
Slide 25: Strategic developments in China
Strategic developments in China Pork Expanding strategic supply chain Key account growth % of elite sows Total supply chain by production GGP/GP1 100% 25,000 90% 80% 20,000 70% 60% 15,000 50% 40% 10,000 30% 20% 5,000 10% 0% 0 FY12 FY13 FY14 FY15 FY16 FY17 FY18F FY19F Owned JV Multiplication Total So
Slide 26: Strategic relationship with Møllevang Genetics
Strategic relationship with Møllevang Genetics Pork Møllevang will serve as a route to market in Denmark, where PIC currently has limited presence Supply Møllevang will become a supply chain Strategic collaboration partner for PIC in Europe effective July 2018 PIC will sell elite genetics in Denmark
Slide 27: PRRSv resistance programme: first batch of gene edited piglets born, patents granted
PRRSv resistance programme: first batch of gene Pork edited piglets born, patents granted Yrs 1-2 Yrs 2-5 Yrs 5+ CD163 IP Technology licence Scissors optimised Molecular scissor for CD163 edit technology licence Creating founder animals operational Technical & Amplify founder animals by breeding Dev
Slide 28: Summary and outlook
Summary and outlook > ABS − De Novo breeding programme performing strongly − Encouraging start for Sexcel − IntelliGen technology successfully licensed in Europe and India > PIC − Growing and strengthening our position in key markets − Future Møllevang strategic relationship1 − First gene edited pig
Slide 29: Appendices
Half year ended 31 December 2017 Appendices 29
Slide 30: Market dynamics
Market dynamics LIFFE Wheat and CBOT Soybean Corn - Key Markets 400 (£ per tonne) 300 (£ per tonne) CBOT Soybean 250 300 China 200 200 LIFFE 150 EU Wheat Brazil 100 US 100 50 0 0 Feb 15 Feb 16 Feb 17 Feb 18 Feb 15 Feb 16 Feb 17 Feb 18 Dairy - Key Markets Pork - Key Markets 50 (Pence per litre) 3.5 (
Slide 31: Exchange rate sensitivity
Exchange rate sensitivity > Genus’ geographic profile can lead to translational currency impacts > We monitor key rates against GBP > Latest spot rates would indicate a circa £3m headwind for FY18 compared with average FY17 rates FY17 FY18 1H Spot @ Profit Average Average 26 Feb 18 Sensitivity £m1 U
Slide 32: US Tax reform
US Tax reform Half year ended 31 December 2017 Statutory basis Adjusted basis £m 2017 2016 2017 2016 Profit before tax 14.3 11.4 29.0 25.1 Normalised taxation (3.7) (2.6) (7.7) (6.5) One-off deferred tax credit from US tax reform1 32.0 - 3.7 - Profit after tax 42.6 26.8 25.0 18.6 Normalised Effectiv