Genus plc · LSE:GNS
Genus — FY2019 Earnings Presentation
36 slides from Genus's earnings presentation, September 2019
Slide 1: Preliminary Results, Year ended 30 June 2019
PRELIMINARY RESULTS Year ended 30 June 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: Overview
Overview Bob Lawson Chairman 3
Slide 4: Continued strategic progress and good performance
Continued strategic progress and good performance > Results in line with expectations − Operating profit excluding gene editing up 6% in constant currency − Adjusted profit before tax up 4% (5% in constant currency) > Continued strategic progress − ABS growth driven by Sexcel® and proprietary geneti
Slide 5: Financial results
Financial results Stephen Wilson Finance Director 5
Slide 6: Results
Results Year ended 30 June 2019 % Change 2019 2018 Actual Constant £m £m Currency Currency Revenue 488.5 470.3 4% 3% Adjusted operating profit inc JV exc 72.2 68.1 6% 6% gene editing Adjusted operating profit inc JV 64.9 63.1 3% 3% Net finance costs (3.9) (4.6) 15% 15% Adjusted profit before tax 61.
Slide 7: Volume growth
Volume growth Year ended 30 June 2019 Porcine Dairy & Beef Volume growth (%) Volume growth (%) 5% 10% 8% excluding China 6% 8% 4% 6% 6% 5% 6% 2% 4% 8% 0% 1% FY15 FY16 FY17 FY18 FY19 6% (2)% 2% 4% 4% (6)% (4)% 0% 0% (6)% FY15 FY16 FY17 FY18 FY19 7
Slide 8: Adjusted operating profit – by business unit
Adjusted operating profit – by business unit Year ended 30 June 2019 % Change 2019 2018 Actual Constant £m £m Currency Currency Genus PIC 100.6 94.8 6% 4% Genus ABS 29.9 26.1 15% 15% Operating units 130.5 120.9 8% 7% Research and Development (54.7) (46.8) (17)% (13)% Central Costs (10.9) (11.0) 1% 4
Slide 9: Genus PIC
Genus PIC Year ended 30 June 2019 % Change 2019 2018 Actual Constant £m £m Currency Currency Revenue 253.7 247.7 2% - Adjusted operating profit exc JV 93.1 88.7 5% 2% Adjusted operating profit inc JV 100.6 94.8 6% 4% Adjusted operating margin exc JV 36.7% 35.8% 0.9pts 0.7pts > Profit growth of 4% de
Slide 10: Genus ABS
Genus ABS Year ended 30 June 2019 % Change 2019 2018 Actual Constant £m £m Currency Currency Revenue 222.6 210.6 6% 7% Adjusted operating profit1 29.9 26.1 15% 15% Adjusted operating margin 13.4% 12.4% 1.0pts 1.0pts > ABS volumes up 6%, revenue up 7% and profit up 15% − Strong sexed volume growth of
Slide 11: Genus R&D
Genus R&D Year ended 30 June 2019 % Change 2019 2018 Actual Constant £m £m Currency Currency Porcine product development 18.4 17.0 8% 5% Bovine product development 20.0 17.2 16% 13% Gene editing 7.3 5.0 46% 42% Other research and development 9.0 7.6 18% 14% Research and Development1 54.7 46.8 17% 13
Slide 12: Statutory income statement
Statutory income statement Year ended 30 June 2019 2019 2018 Variance £m £m £m Adjusted operating profit exc JV 57.7 57.7 - Net IAS 41 valuation movement (14.7) (28.7) 14.0 Amortisation of acquired intangible assets (9.5) (9.5) - Share-based payments (3.0) (5.4) 2.4 Exceptional items - Pension GMP e
Slide 13: Cash flow
Cash flow Year ended 30 June 2019 2019 2018 Variance £m £m £m Adjusted operating profit exc JV 57.7 57.7 - Depreciation and amortisation 17.9 14.6 3.3 Adjusted EBITDA 75.6 72.3 3.3 Working capital (5.1) - (5.1) Biological assets (5.5) (1.9) (3.6) Pension deficit repair (6.7) (6.9) 0.2 Exceptional it
Slide 14: Strong financial position
Strong financial position Year ended 30 June 2019 2019 2018 £m £m Owners’ equity 503.6 416.6 Net Debt 79.6 108.5 Key Financial ratios: - Return on adjusted capital 18.9% 23.9% - Gearing 16% 26% - Net debt to EBITDA 1.0x 1.4x - Interest cover 34x 25x - Dividend cover 2.6x 2.9x > 5% equity placement i
Slide 15: Business update
Business update Karim Bitar Chief Executive 15
Slide 16: Continued strategic progress
Continued strategic progress > Porcine − Strong global growth offsets ASF impact in China − Significant strategic PRRSv resistance collaboration in China with BCA − Further strengthened product portfolio with Møllevang > Bovine − Growing demand for Sexcel and ABS ‘beef on dairy’ genetics − Expanding
Slide 17: Strong royalty growth globally
Strong royalty growth globally Porcine North America +7% growth in global royalty revenue EMEA • Continuing to grow 30% • Double-digit growth maternal line share 3.2% 20% 0.2% 2.5% 11% • Møllevang genetics • Strengthened terminal FY17 FY18 FY19 FY17 FY18 FY19 enabling customer wins sire products and
Slide 18: African Swine Fever significantly impacting China
African Swine Fever significantly impacting China Porcine Pork production in China 60 Market context Million metric tonnes 50 25% 35-40% 10-15% > China has historically produced and 40 consumed ~50% of the world’s pork 30 > Sow herd expected to decline by 20 2018 2019F 2020F 50% in 2019 Hog price in
Slide 19: Outlook for China porcine industry
Outlook for China porcine industry Porcine FY19 FY20 FY21-FY23 ASF widespread and Disease difficult Managing disease continues ASF IMPACT substantial impact to control to be challenging CHINA National sow herd Ongoing risk/ Growth in SUPPLY down 50%1 uncertainty technified production INTERNATIONAL I
Slide 20: Strengthening our supply chain in China
Strengthening our supply chain in China Porcine PIC China supply chain 100% 60 90% 50 Total supply chain in thousands of GGP/GP1 80% 70% % of elite sows by production 40 60% 50% 30 40% 20 30% 20% 10 10% 0% - FY14 FY15 FY16 FY17 FY18 FY19 FY20F FY21F Owned JV Multiplication Total sows Total sows fore
Slide 21: BCA strategic collaboration
BCA strategic collaboration Porcine BCA - a leading agribusiness Scope: PRRSv resistance in China1 and porcine multiplication 1 Research, develop and secure regulatory approval for PRRSv- resistant pigs in China (BCA funded) 2 Planning to integrate PIC genetics into BCA’s multiplication and > Leadin
Slide 22: 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 23: Further strengthening our product portfolio
Further strengthening our product portfolio Porcine PIC Genetic Index 140 Building a best in class Growing nucleus 3 herd population portfolio 120 100 5 More emphasis on growth 2 Entered relationship 80 & robustness in selection with Møllevang 60 4 40 Added direct selection Launched PIC 800 – for me
Slide 24: Strong demand for our leading sexed genetics
Strong demand for our leading sexed genetics Bovine +42% FY19 sexed genetics volume growth Context +49% +24% > Growing Sexcel globally and expanding IntelliGen footprint to meet demand > Strong demand for NuEra beef on dairy genetics > Winning share with key accounts, particularly in the US +30% +91
Slide 25: Growing demand for Sexcel and NuEra differentiated beef genetics
Growing demand for Sexcel and NuEra differentiated Bovine beef genetics ABS genetics sales volumes to US dairy farmers 30% 55% Conventional dairy genetics 74% 84% 81% 35% 21% 9% Beef genetics 4% 35% 5% 24% Sexed dairy 14% 18% 11% genetics 0% 2016 2017 2018 2019 2023F Data represents proportion of to
Slide 26: Expanding IntelliGen labs footprint to meet growing global demand
Expanding IntelliGen labs footprint to meet growing Bovine global demand Total IntelliGen production facilities Total Sexcel/IntelliGen units1 (thousands of artificial insemination straws) 900 800 700 600 500 10 400 300 6 200 3 100 1 0 FY17 FY18 FY19 FY20F Q2 FY18 Q3 FY18 Q4 FY18 Q1 FY19 Q2 FY19 Q3
Slide 27: Leading position in elite dairy genetics
Leading position in elite dairy genetics Bovine 50 # of Top 100 NM$ bulls Proven bulls Active genomic bulls Pipeline bulls 40 30 20 10 0 ABS Competitor 1 Competitor 2 Competitor 3 Competitor 4 Source: Proven and genomic analysis based on Top 100 Holsteins (using data from Aug 2019 from CDCB); pipeli
Slide 28: Continued strategic progress
Continued strategic progress > Porcine − Strong global growth offsets ASF impact in China − Significant strategic PRRSv resistance collaboration in China with BCA − Further strengthened product portfolio with Møllevang > Bovine − Growing demand for Sexcel and ABS ‘beef on dairy’ genetics − Expanding
Slide 29: Appendices
Year ended 30 June 2019 Appendices 29
Slide 30: Exchange rate sensitivity
Exchange rate sensitivity > Genus’ geographic profile can lead to translational currency impacts > We monitor key rates against GBP > 30th August spot rates would indicate a £1-2m gain for FY20 compared with average FY19 rates FY19 FY19 Spot @ Profit Average1 Closing 30 Aug 2019 Sensitivity £m2 US D
Slide 31: Pensions
Pensions > Guaranteed Minimum Pension (GMP) equalisation − Industry-wide defined benefit scheme impact − Lloyds Bank case (October 2018) requires schemes to equalise GMPs − Past service cost charge to Income Statement under IAS19 > Impact on Genus legacy schemes Dalgety Pension Fund (DPF) Milk Pensi
Slide 32: Lease Accounting (IFRS 16)
Lease Accounting (IFRS 16) > IFRS 16 removes distinctions between operating and finance leases from 1 July 2019 − Operating leases will now be represented on the Balance Sheet − Liability recognised for the future lease payments − Right of use asset capitalised and depreciated − We have elected not
Slide 33: Return on adjusted invested capital
Return on adjusted invested capital Year ended 30 June 2019 2019 2018 £m £m Adjusted operating profit inc JV 64.9 63.1 Tax rate 24.3% 20.5% Adjusted operating profit after tax 49.1 50.2 Equity attributable to owners of the company 503.6 416.6 Add back : Net debt 79.6 108.5 Pension liability 24.2 33.
Slide 34: Market dynamics
Market dynamics 34 SOURCE: Genus analysis using constant currency
Slide 35: Proportion of total Porcine volumes under royalty
Proportion of total Porcine volumes under royalty North America EMEA 96% 96% 97% 97% 98% 63% 64% 68% 68% 61% FY15 FY16 FY17 FY18 FY19 FY15 FY16 FY17 FY18 FY19 Latin America Asia 77% 77% 81% 73% 65% 58% 38% 44% 33% 37% FY15 FY16 FY17 FY18 FY19 FY15 FY16 FY17 FY18 FY19 Volumes based on market pig equi
Slide 36: PRRSv resistance collaboration structure
PRRSv resistance collaboration structure Porcine Structure Initial structure1 post MoA approval2 49% 51% 100% 100% PIC China 100% BCA Future BCA Future Bio-Tech3 PRRSv licence/ Bio-Tech3 royalty payments PIC China (1) Upon deal closing following receipt of customary Chinese regulatory approval expec