Genus plc · LSE:GNS
Genus — H1 FY2020 Earnings Presentation
36 slides from Genus's earnings presentation, February 2020
Slide 1: Interim Results, Half year ended 31 December 2019
INTERIM RESULTS Half year ended 31 December 2019
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: Introduction
Introduction Bob Lawson Chairman 3
Slide 4: Strong performance and strategic momentum
Strong performance and strategic momentum > Record first half performance − Adjusted profit before tax up 25% (27% in constant currency) > Successful CEO transition and CFO appointment > Continued strategic momentum − Excellent performance in PIC − Growing demand for Sexcel − Leading products in all
Slide 5: Financial results
Financial results Alison Henriksen Finance Director 5
Slide 6: Results
Results Half year ended 31 December 2019 % Change 2019 2018 Actual Constant £m £m Currency Currency Revenue 270.7 238.8 13% 13% Adjusted operating profit inc JV exc 43.7 34.2 28% 29% gene editing Adjusted operating profit inc JV 39.4 31.1 27% 28% Net finance costs (2.8) (1.9) (47)% (47)% Adjusted pr
Slide 7: Volume growth
Volume growth Half year ended 31 December 2019 Porcine Dairy & Beef Volume growth (%) Volume growth (%) 18% 10% 16% Excluding 8% China; 18% 14% FY19: 5% 6% 12% FY20 1H: 7% 4% 9% 10% 5% 6% 2% 8% 0% 1% 6% FY16 FY17 FY18 FY19 FY20 1H 4% (2)% 8% (6)% 2% 4% 4% (4)% 0% 0% (6)% FY16 FY17 FY18 FY19 FY20 1H
Slide 8: Adjusted operating profit – by business unit
Adjusted operating profit – by business unit Half year ended 31 December 2019 % Change 2019 2018 Actual Constant £m £m Currency Currency Genus PIC 62.6 48.6 29% 28% Genus ABS 14.6 12.7 15% 17% Operating units 77.2 61.3 26% 26% Research and Development (30.8) (24.9) (24)% (22)% Central costs (7.0) (5
Slide 9: Genus PIC
Genus PIC Half year ended 31 December 2019 % Change 2019 2018 Actual Constant £m £m Currency Currency Revenue 146.5 125.6 17% 15% Adjusted operating profit exc JV 57.3 45.9 25% 24% Adjusted operating profit inc JV 62.6 48.6 29% 28% Adjusted operating margin exc JV 39.1% 36.5% 2.6pts 2.6pts > All reg
Slide 10: Genus ABS
Genus ABS Half year ended 31 December 2019 % Change 2019 2018 Actual Constant £m £m Currency Currency Revenue 118.0 107.8 9% 10% Adjusted operating profit 14.6 12.7 15% 17% Adjusted operating margin 12.4% 11.9% 0.5pts 0.6pts > ABS volumes up 9%, revenue up 10% and profit up 17% − Strong sexed volume
Slide 11: Genus R&D
Genus R&D Half year ended 31 December 2019 % Change 2019 2018 Actual Constant £m £m Currency Currency Porcine product development 12.0 8.5 41% 39% Bovine product development 9.7 9.4 3% 1% Gene editing 4.3 3.1 39% 39% Other research and development 4.8 3.9 23% 21% Net Research and Development1 30.8 2
Slide 12: Statutory income statement
Statutory income statement Half year ended 31 December 2019 2019 2018 Variance £m £m £m Adjusted operating profit exc JV 34.4 28.7 5.7 Net IAS 41 valuation movement 13.3 (9.3) 22.6 Amortisation of acquired intangible assets (4.0) (4.7) 0.7 Share-based payments (2.8) (2.4) (0.4) Exceptional items - P
Slide 13: Cash flow
Cash flow Half year ended 31 December 2019 2019 2018 Variance £m £m £m Adjusted operating profit exc JV 34.4 28.7 5.7 Depreciation and amortisation 13.0 8.1 4.9 Adjusted EBITDA 47.4 36.8 10.6 Working capital (1.4) (11.7) 10.3 Biological assets (4.9) (0.6) (4.3) Pension deficit repair, exceptionals a
Slide 14: Strong financial position
Strong financial position Half year ended 31 December 2019 December December June 2019 2019 2019 (exc IFRS 16) £m £m £m Owners’ equity 496.2 496.3 503.6 Net Debt 107.2 83.8 79.6 1 Key Financial ratios : - Gearing 22% 16% - Net debt to EBITDA 0.9x 1.0x - Interest cover 28x 34x - Dividend cover 2.9x 2
Slide 15: Strong performance vs. medium term objectives
Strong performance vs. medium term objectives OBJECTIVE MEDIUM TERM TARGET 1H FY20 Grow adjusted 10% CAGR operating profit constant currency, ex. gene editing 29% 90%+ cash conversion Convert profit to cash net cash from operations : operating 96% profit ex. JVs Strengthen our Invest in our R&D tech
Slide 16: Operational and strategic update
Operational and strategic update Stephen Wilson Chief Executive 16
Slide 17: Strong first half performance and strategic momentum
Strong first half performance and strategic momentum > Porcine − Strong growth in all regions, particularly in China − Strengthened product line-up driving key accounts wins − Significantly expanding China supply chain to meet demand − Continued progress with PRRSv resistance programme as planned >
Slide 18: Strong royalty growth globally
Strong royalty growth globally Porcine North America +9% growth in global royalty revenue EMEA • Growing share of key 5.3% 30% • Growth in key accounts accounts – existing and 0.2% 2.5% 3.2% 20% 11% 11% in Spain and Russia new wins FY17 FY18 FY19 FY20 1H FY17 FY18 FY19 FY20 1H • Growing royalty • Gr
Slide 19: Winning in the US with superior genetics
Winning in the US with superior genetics Porcine Encouraging early results from our newly Winning share with key accounts in launched terminal products North America PIC 800 boar ✓ Higher growth rate ✓ Better feed conversion > Protein Sources – PIC customer since 1976 ✓ Economic advantage > 30,000+
Slide 20: ASF now widespread in China, causing significant supply shortages
ASF now widespread in China, causing significant Porcine supply shortages Pork production has declined rapidly… …and prices have surged China pork production and sow base China pig price (RMB/kg) 60 45 Over 30% reduction 40 50 35 40 30 25 30 First reported ASF case 20 20 15 10 10 5 0 0 2018 2019 202
Slide 21: Outlook for China porcine industry
Outlook for China porcine industry Porcine Current situation Medium term outlook ASF widespread, large Managing ASF continues ASF IMPACT producers increasing biosecurity to be challenging CHINA China sow herd Growth in technified SUPPLY more than halved pig production INTERNATIONAL Imports surge in
Slide 22: Expanding our supply chain to serve growing demand in China
Expanding our supply chain to serve the growing Porcine demand for high quality breeding stock in China ASF is accelerating the shift to large scale We have accelerated the expansion of our pig production in China1 supply chain in China to meet demand 100% 100% 90 80 % of pig production by farm size
Slide 23: Progress with PRRSv programme and BCA strategic collaboration in China
Progress with PRRSv programme and BCA strategic Porcine collaboration in China Progress with PRRSv programme BCA strategic collaboration in China Beijing Capital Agribusiness Piglet from PRRSv resistance programme > Developed internal capability for producing gene- > BCA PRRSv development collaborat
Slide 24: Strong demand for our leading sexed genetics
Strong demand for our leading sexed genetics Bovine +56% growth in sexed volumes globally +70% +46% > Demand for Sexcel exceeding expectations > Winning in the US with strong product and key account focus > Investment in resources to support sales growth > Strong demand for NuEra beef on dairy genet
Slide 25: Industry demand for superior sexed and beef on dairy genetics continues to grow
Industry demand for superior sexed genetics and Bovine differentiated beef on dairy genetics continues to grow ABS genetics sales volumes to US dairy farmers Conventional dairy genetics ~30% 24% 21% 9% ~45% Beef genetics 4% 31% 5% 24% Sexed dairy 14% 18% genetics 11% FY16 FY17 FY18 FY19 FY20 1H FY23
Slide 26: Expanding IntelliGen footprint to meet growing global demand
Expanding IntelliGen footprint to meet growing global Bovine demand and improving our technology Total Sexcel/IntelliGen sales units1 Units produced, per instrument, per day2 (thousands of artificial insemination straws) (6 month rolling average; relative performance, August 2018 = 100) 1,200 150 1,
Slide 27: Sustained leadership in elite dairy genetics
Sustained leadership in elite dairy genetics Bovine # of Top 100 NM$ bulls1 60 Proven bulls 50 Active genomic bulls Pipeline bulls 40 30 20 10 0 ABS Competitor 1 Competitor 2 Competitor 3 Competitor 4 (1) Proven and genomic analysis based on Top 100 Holsteins (using data from December 2019 from CDCB
Slide 28: Strong demand for our superior beef genetics
Strong demand for our superior beef genetics Bovine Total ABS beef sales volumes by source 35% > NuEra beef breeding programme 25% NuEra NuEra delivering superior genetics 3% 18% NuEra NuEra > Strong production efficiency and carcass quality being demonstrated in initial trials > Expanding our progr
Slide 29: Strong first half performance and strategic momentum
Strong first half performance and strategic momentum > Porcine − Strong growth in all regions, particularly in China − Strengthened product line-up driving key accounts wins − Significantly expanding China supply chain to meet demand − Continued progress with PRRSv resistance programme as planned >
Slide 30: Appendices
Half year ended 31 December 2019 Appendices 30
Slide 31: Proportion of total porcine volumes under royalty
Proportion of total porcine volumes under royalty North America EMEA 96% 97% 97% 98% 97% 71% 63% 64% 68% 68% FY16 FY17 FY18 FY19 FY20 1H FY16 FY17 FY18 FY19 FY20 1H Latin America Asia 81% 75% 73% 77% 77% 58% 44% 43% 33% 37% FY16 FY17 FY18 FY19 FY20 1H FY16 FY17 FY18 FY19 FY20 1H Volumes based on mar
Slide 32: PRRSv resistance programme timeline
PRRSv resistance programme timeline Porcine • Founder Animal Production / Optimization Population A Population B Expand to second NA Internalize founder facility for increased animal production production • Disease and Phenotypic Testing of Purelines (2 generations) Live animal disease Complete firs
Slide 33: Market dynamics
Market dynamics 33 SOURCE: Genus analysis using constant currency
Slide 34: Lease Accounting (IFRS 16)
Lease Accounting (IFRS 16) > IFRS 16 removed distinctions between operating and finance leases from 1 July 2019 − Operating leases are now represented on the Balance Sheet − Liability recognised for the future lease payments − Right of use asset capitalised and depreciated − We have elected not to r
Slide 35: Lease Accounting (IFRS 16) contd.
Lease Accounting (IFRS 16) contd. Impact on cash conversion and free cash flow 2019 IFRS 16 2019 As reported impact exc IFRS 16 £m £m £m Adjusted operating profit exc JV 34.4 34.4 Difference between depreciation and lease payments (0.2) (0.2) Adjusted operating profit exc JV 34.4 (0.2) 34.2 Cash gen
Slide 36: 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 headwind of circa £2.0m for FY20 compared with average FY19 rates FY19 FY20 1H Spot @ Profit Average Average 24 Feb 2020 Sensitivit