Genus Plc · LSE:GNS
Genus — Investor Day (June 2018)
85 slides from Genus's investor day presentation, Jun 20, 2018
Slide 1: Capital Markets Event
Capital Markets Event 20 June 2018
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: Welcome to the Genus Capital Markets Event
Bob Lawson, Chairman Welcome to the Genus Capital Markets Event 2018 3
Slide 4: Agenda
Agenda Session 1 Session 2 Karim Bitar Dr. Nate Zwald CEO COO Dairy Pioneering animal genetic Delivering genetic improvement improvement to progressive dairy farmers globally (2.00 – 2.15) (4.00 – 4.30) Dr. Jon Lightner Jerry Thompson Chief Scientific Officer COO Beef Delivering superior genetic Del
Slide 5: Pioneering animal genetic improvement
Karim Bitar, CEO Pioneering animal genetic improvement 5
Slide 6: Genus – global agricultural biotechnology pioneer
Genus – global agricultural biotechnology pioneer Pork Dairy Beef R&D Starting to seize Performing well Turning around Robust pipeline opportunity Genus in 2014 Genus in 2017 £372m £459m Revenue Revenue £45m £60m Operating Profit1 Operating Profit1 (1) Adjusted operating profit including JVs; data f
Slide 7: Genus vision
Genus vision “Pioneering animal genetic improvement to help nourish the world” 7
Slide 8: Positive long term demand drivers for our business
Positive long term demand drivers for our business Consumption of animal protein +1% +2% +1% continues to grow1 Consumers are demanding high quality, Protein producers are getting larger and affordable protein produced sustainably becoming more technified 120 2,500 Average milk produced per farm (to
Slide 9: Competitive landscape
Competitive landscape Pork Dairy Beef Consolidation (Top 3 market share)1 47% 27% International competitors Regional/other competitors Internal Programmes (1) Genus estimates for financial year ending June 2017; includes merger between two Top 5 bovine genetics competitors in 2018 9 Note: competitor
Slide 10: Genus business model
Genus business model Dairy Pork Beef GENETIC IMPROVEMENT SHARED PROPRIETARY TECHNOLOGY PLATFORM BIOSYSTEMS GENOMIC SELECTION GENE EDITING ENGINEERING GENOME SCIENCE 10
Slide 11: Genus strategy and capabilities
Genus strategy and capabilities Increasing genetic control & Deliver value in key markets Share in the value delivered product differentiation and segments Elite breeding herds - germplasm Tailored products & services Understanding customer needs Proprietary technology platform Global supply chain D
Slide 12: Delivering superior genetic solutions through pioneering technologies
Dr. Jon Lightner, Chief Scientific Officer Delivering superior genetic solutions through pioneering technologies 12
Slide 13: Shared proprietary technology platform
Shared proprietary technology platform Dairy Pork Beef GENETIC IMPROVEMENT SHARED PROPRIETARY TECHNOLOGY PLATFORM BIOSYSTEMS GENOMIC SELECTION GENE EDITING ENGINEERING GENOME SCIENCE 13
Slide 14: Growing investment in R&D and IP
Growing investment in R&D and IP 2014 2017 100% = £47m +34% Gene editing 7% Research, IP, 100% = £35m 18% genome science, management 12% 13% Biosystems engineering 5% R&D Dairy & Beef Investment1 40% 27% product develop. 43% 35% Porcine product development IP position2 ~200 ~300 patents patents (1)
Slide 15: Pioneering through people: culture and organization
Pioneering through people: culture and organization Attract and develop Engage people Strengthen R&D talent community • Communicate to • Challenging • Expanded the drive alignment expectations team & trust • Best-in-class • Over 100 PhDs • Encourage career staff (across thought opportunities Genus)
Slide 16: Accelerating our technology transformation
Accelerating our technology transformation Programme status Impact today Impact tomorrow A critical enabler but not a Cutting edge lab and Efficiency and improved profit centre Genome computing capabilities customer solutions Science Introduced competition to the market Profit driver Successful laun
Slide 17: Being the best at driving genetic improvement
Being the best at driving genetic improvement Programme status Impact today Impact tomorrow Maintain product leadership Industry leading genomic selection programme Industry leading products Møllevang to further Pork strengthen our offering2 Sustain product leadership Industry leading Holstein 46 To
Slide 18: Genomic selection delivering: porcine
Genomic selection delivering: porcine PIC Genetic Index > Consistently sustained 35%+ 150 increase in rate of gain Relationship based genomic selection starts > Continue to lead the global industry 100 — Significantly increased animals genotyped 50 — Refined statistical methodology 0 for maximizing
Slide 19: Genomic selection made real
Genomic selection made real Trends: pre-wean survivability and total Success story...more and better piglets born Pre-wean Total born survivability 3.0 Total born 5.0% Pre-wean survivability 2.0 Relationship based genomic 2.5% 1.0 selection starts 0.0 0.0% -1.0 -2.5% -2.0 -3.0 -5.0% 200601 2006 2009
Slide 20: De Novo: Genus's leading Holstein breeding programme
De Novo: Genus’s leading Holstein breeding programme Leading breeding Leading germplasm1 + Technology + People & talent = prgramme Other 24 Consistently 38 producing 16 world leading 7 15 Holstein bulls partner herds Competitor 2 Competitor 1 20 (1) Represents the Top 100 NM$ Holstein females as at
Slide 21: Successfully launched Sexcel and Intelligen
Successfully launched Sexcel™ and Intelligen™ 21
Slide 22: Multiple routes to market maximize technology impact
Multiple routes to market maximize technology impact DIRECT INDIRECT INDIRECT Sexing our own Processing third Licensing our genetics party genetics technology 22
Slide 23: R&D Video
Delivering superior genetic solutions through pioneering technologies R&D VIDEO 23
Slide 24: Sexcel performance
Sexcel performance Rigorous scientific performance Sexcel has demonstrated superior comparisons product performance > Captured large real world dataset > Statistically significant fertility improvement > Identified contemporaneous use of Sexcel > Customer observable and competitor sexed product > Co
Slide 25: Transformational potential of gene editing
Transformational potential of gene editing Today 2015 • Advanced development of PRRSv technology by Genus • Publication of PRRSv resistance by U Missouri • Seeking proof of concept and Genus 2013 for Bovine Respiratory Disease Resilience • Genus exclusive global • First gene edited pig license creat
Slide 26: Combatting PRRSv through gene editing
Combatting PRRSv through gene editing PRRSv impacts pigs and producers around Genus research collaboration the world demonstrates PRRSv-resistance in pigs PRRSv infected region > Resistance through edit of single native gene PRRSv free region without introduction of other species’ DNA > Gene edited
Slide 27: PRRSv programme – significant progress made
PRRSv programme – significant progress made US and European patents granted2 First elite edited pigs born US-FDA INAD granted1 Optimized Caribou reagents deployed for editing December 2015 2016 2017 2018 - First PRRSv resistant pigs produced Genus Caribou exclusive - Genus exclusive global license c
Slide 28: PRRSv programme – path forward and key milestones
PRRSv programme – path forward and key milestones Workstream Animal ~1000 terminal Amplification & pigs evaluated First breedings of ~100 Homozygous ~100 Homozygous Evaluation elite edited pigs edited pure line Camborough™ parent animals off test sows farrowed Gateway #1 Gateway #2 2018 2019 2020 20
Slide 29: Future directions
Future directions Delivering today… …shaping tomorrow 29
Slide 30: Delivering genetic improvement to large integrated pork producers globally
Dr. Bill Christianson, COO Porcine Delivering genetic improvement to large integrated pork producers globally 30
Slide 31: Never stop improving
Never stop improving U Genus 31
Slide 32: PIC is the global leader in pig genetics
PIC is the global leader in pig genetics Global pig production market Share of addressable market Other 23% Less advanced Advanced production production ~50% ~50% Competitor 1 Internal programs Competitor 2 Competitor 4 Competitor 3 Note: reflects competitive landscape in 2017 Source: Governmental a
Slide 33: Strong fundamentals for PIC genetics
Strong fundamentals for PIC genetics Market dynamics Continued growth in pork Rapid modernization Implications for PIC Global Pork production outlook OECD Example: consolidation in (mln metric tons) China (Rabobank) 100% Growth of pig genetics market 118 128 +1% p.a. Growth in 0% Improved ability fo
Slide 34: PIC competes by driving genetic improvement in pig genetics
PIC competes by driving genetic improvement in pig genetics PIC investing in genetic gain levers… …resulting in acceleration of the rate of gain Examples of recent investments PIC Genetic Index 150 Selection intensity: Genetic variation: increased pure line acquired new populations germplasm Relatio
Slide 35: PIC focuses on the top of the breeding pyramid
PIC focuses on the top of the breeding pyramid PIC presence in the pig breeding pyramid Objectives vary at each level of the pyramid Boar studs Genetic improvement boars Great Grand Parent (GGP) 1 Pure line expansion Nucleus semen Cross breeding for parent Sows in (F1) production Multiplication Gran
Slide 36: PIC's global supply chain has presence in all regions
PIC’s global supply chain has presence in all regions PIC supply network Example: PIC owned & contracted elite nucleus farms in 6 clusters1 PIC manage genetics for 800+ farms • 400+ multipliers (sireline & damline) • ~400 boar studs Farms are owned by PIC, contracted from 3rd parties or owned by cus
Slide 37: PIC sells to leading producers across the globe
PIC sells to leading producers across the globe PIC customers include over 70% of the world’s top pork producers who... • ...measure the impact of genetics • ... aim to capture value along the end- to-end pork supply chain PIC works with strong partners to supply smaller local producers 37
Slide 38: Customer video
Delivering genetic improvement to leading integrated pork producers globally CUSTOMER VIDEO 38
Slide 39: PIC's sales approach is underpinned by a royalty model
PIC’s sales approach is underpinned by a royalty model PIC royalty model % of volumes under royalty £ Stocking Producing Ramp up North America EMEA Grand parent production Full Parents sows commercial pigs production 97% 97% 96% 96% 96% 64% 70% 59% 63% 38% FY14 FY15 FY16 FY17 FY18 1H FY14 FY15 FY16
Slide 40: Growth has come from organic and inorganic initiatives
Growth has come from organic and inorganic initiatives Go to market Genetic gain Supply chain efficiency Customer focus Aligned interest Génétiporc Birchwood Inorganic Hermitage Møllevang from July 2018 Genomics Elite farm expansions Key account strategy New royalty models Transformation in Organic
Slide 41: PIC has delivered profitable growth
PIC has delivered profitable growth OP ex. Product OP inc. Product Volume (MPE) 1 Revenue2 Development3 Development3,4 22% p.a. 14% p.a. 19% p.a. £95m 4% p.a. £78m £250m £78m £208m £65m 133m 139m £187m 129m £64m 122m £169m £52m £56m £43m 2014 2015 2016 2017 2014 2015 2016 2017 2014 2015 2016 2017 20
Slide 42: Improved performance has enabled PIC to expand margins
Improved performance has enabled PIC to expand margins Gross Margin (£/MPE) Actions that enabled margin improvement • Accelerated genetic improvement in nucleus +10% herds • Drove down lag through expanding the PIC supply chain FY13 FY17 • Demonstrated the value in customer systems with customer tri
Slide 43: Case study: European transformation
Case study: European transformation Examples of PIC distribution partners1 Four pillars of PIC Europe transformation • Directly serving large integrated producers (From July 2018) • Serving other segments through distribution partners • Upgraded product by reducing genetic lag • Right-sized the orga
Slide 44: Case study: PIC China has laid a strong foundation for growth
Case study: PIC China has laid a strong foundation for growth PIC China track record and strategic plan Example: PIC China’s long term relationships Track record: • Introduced royalty to multiple customers New Hope Shyiang Shanxi Daxiang (incl. Besun JV) • Reduced genetic lag • Reduced farming expos
Slide 45: Building PIC's competitive advantages
Building PIC’s competitive advantages Competitive • Deliver improved germplasm product • Leading products for all segments • Use sequencing data for accuracy portfolio • Earliest adopter of technology • Progress PRRSv-resistance programme Relations with • Serving >70% of ~200 largest • Continue key
Slide 46: PIC: the world's leading porcine genetics company
PIC: the world’s leading porcine genetics company 46
Slide 47: Q&A – session I
Q&A Ww Genus Q&A — session |
Slide 48: Delivering genetic improvement to progressive dairy farmers globally
Dr. Nate Zwald, COO Dairy Delivering genetic improvement to progressive dairy farmers globally 48
Slide 49: Our global dairy business
Our global dairy business ABS Eel Profit From Genetic Progress \ ips Genus 49
Slide 50: Demand for quality dairy genetics is supported by strong long term fundamentals
Demand for quality dairy genetics is supported by strong long term fundamentals FARMER PRODUCTIVITY farmers want to produce more milk with fewer inputs, as competition for resources grows CONSUMER DEMAND GROWING DEMAND COW HEALTH growing demand for affordable, farmers desire cows that are high quali
Slide 51: ABS Dairy produces and markets elite dairy genetics
ABS Dairy produces and markets elite dairy genetics Commercial Platform 70+ countries 50,000+ customers Breed superior Market semen bulls Collect and and embryos Reproductive & ~18m process semen genetic services units sold annually 6 production studs 1,600+ employees globally 51 Information as of J
Slide 52: Genomic technology is changing the way genetics are evaluated and priced
Genomic technology is changing the way genetics are evaluated and priced Historically a bull would be evaluated according to how productive its offspring are years after breeding… ‘CALF’ BEGINS PRODUCTIVE LIFE ‘calf’ gives birth and begins milking; farmer realises the benefit of the CALF IS BORN gen
Slide 53: Dairy genetics market is changing rapidly
Dairy genetics market is changing rapidly Ownership of the world’s leading dairy Customers are harnessing sexing and IVF animals (used for breeding) is consolidating technologies to improve their herds Breeders in Top 200 NM$ bull rankings ABS volume growth by product type for 2017 2008 2018 107 35%
Slide 54: ABS has the strongest dairy product line-up in the industry
ABS has the strongest dairy product line-up in the industry % of ABS Holstein bulls sourced internally # of bulls Top 100 NM$ bull rankings 50 45 65% 45% 40 0% 20% FY14 FY16 FY18F FY20F 35 30 Top 100 NM$ bulls - Proven Top 100 NM$ bulls - Active Genomic 25 Top 100 NM$ bulls - Pipeline* 20 15 10 5 0
Slide 55: Consolidation in genetics is also driving consolidation amongst bovine genetics companies
Consolidation in genetics is also driving consolidation amongst bovine genetics companies 9% Share of global bovine genetics by volume 8% 7% Merging 6% Recently acquired share Existing share 5% 4% 3% 2% 1% 0% ABS Competitor 1 Competitor 2 Competitor 3 Competitor 4 Competitor 5 Competitor 6 Competito
Slide 56: Transforming ABS Dairy
Transforming ABS Dairy Create superior Become the genetic Capture a share of the genetics advisor of choice value delivered Sourcing bulls from third party Selling proven bulls from catalogues Unit pricing based on FROM breeders and utilising competitor’s based on public index scores genetic merit t
Slide 57: Demand for Sexcel is exceeding our expectations
Demand for Sexcel is exceeding our expectations Sexcel sales are growing rapidly… …and we are capturing a share of the value £m 3 Global Sexcel revenues1 ABS average unit price for sexed genetics2 2 +5% 1 0 Aug 17 Sep 17 Oct 17 Nov 17 Dec 17 Jan 18 Feb 18 Mar 18 Apr 18 May 18 Revenues Sep 17 Jan 18
Slide 58: Customer video
ABS: the genetic and repro partner of choice for progressive dairy farmers globally CUSTOMER VIDEO 58
Slide 59: ABS's sexed genetics accelerate genetic progress and increase profitability
ABS’s sexed genetics accelerate genetic progress and increase dairy farmers’ profitability Higher quality heifers identified and bred with High quality female sexed semen calves (replacements) Conventional Lower cost milking dairy semen pregnancies Milking pregnancies Beef semen with higher value ca
Slide 60: ABS's growing IVF platform
ABS’s growing IVF platform means that more customers can access the power of male and female selection US media & embryo IVB relocates to ABS’s ABS acquires IVB laboratory opens Brazilian headquarters 270,000+ 2015 2016 2017 2018 embryos1 p.a. +35%1 in 2017 IVB USA launched to New laboratory in US k
Slide 61: ABS provides a differentiated service model for our customers globally
ABS provides a differentiated service model for our customers globally Fat & protein Smaller cows Cheese Maintain size Fluid Larger cows Simple online tool generates Universal General health Functional tailored genetic index and genetic selection Repro Robot ready ranks bulls according to a tool Udd
Slide 62: ABS has a strong global footprint
ABS has a strong global footprint Direct presence Indirect presence ABS production stud(s) Other bull facility IVF facilities IntelliGen facility 62
Slide 63: ABS: the genetic and repro partner of choice for progressive dairy farmers
ABS: the genetic and repro partner of choice for progressive dairy farmers globally Total Genetic Solution Sexing Producing embryos Making with proprietary to accelerate our own elite genetics technology genetic progress Delivering superior genetic and repro services 63
Slide 64: Delivering genetic improvement across the beef value chain globally
Jerry Thompson, COO Beef Delivering genetic improvement across the beef value chain globally 64
Slide 65: ABS's global beef business
ABS’s global beef business 65
Slide 66: Beef is a large and growing opportunity
Beef is a large and growing opportunity The top 6 markets account for over 60% of beef produced globally Global beef production 70mT Consumption growth – developed 0.4% Consumption growth – developing 1.4% 8 mT 11 mT 7 mT 10 mT 3 mT 3 mT 66 Source: OECD-FAO; Beef and veal production in cwe; growth i
Slide 67: ABS is focused on key beef production markets where we can have an impact
ABS is focused on key beef production markets where we can have an impact with elite terminal genetics Beef produced through Beef produced Genetic source of beef1 artificial insemination2 1% 6% DxD BxD 11 mT 5-10% BxB 94% 12% DxD 10 mT BxB 10-15% (Tropical) 88% 18% 32% DxD BxB 1 mT ~50% BxD 50% (1)
Slide 68: Transforming ABS Beef
Transforming ABS Beef Create superior Demonstrate value to Capture a share of the genetics our customers value delivered FROM Sourcing bulls from Selling ‘the bull’ based on generic Unit pricing based on third party breeders industry evaluations to all segments industry evaluations TO TO TO Demonstr
Slide 69: Shifting genetic focus to whole chain profitability
Shifting genetic focus to whole chain profitability 70,000 728,000 20,000 2,100 4 (major) 10s > 100m Seedstock1 Cow Calf2 Stocker3 Feedlot Packer Retailer Consumer MATERNAL MATERNAL MATERNAL MATERNAL MATERNAL Now our focus is toMATERNAL MATERNAL create new products prioritising terminal genetics tha
Slide 70: Developing whole chain profit-focused terminal genetics
Developing whole chain profit-focused terminal genetics We are developing proprietary genetics tailored to key markets Utilise insight from real data for product development Measure performance of Improve nucleus T14 Terminal Line offspring from herd farm to fork Breed customer herd with our genetic
Slide 71: Partnering with a leading US feedlot to develop terminal BeefxBeef genetics
Partnering with a leading US feedlot to develop whole chain terminal BeefxBeef genetics Sire Index Total Profit R&D partnership to Proprietary profit- Longstanding ABS beef discover value of focused index being genetics customer terminal genetics in finalised customer system <2015 2016 2017 2018 201
Slide 72: Identifying which beef genetics are more profitable for tropical cross-breeding
Identifying which beef genetics are more profitable for tropical BeefxBeef cross-breeding, and capturing value Change in price of genetics post XBlack launch +74% Price Pre XBlack Price Post XBlack +21% +12% No change Sire 1 Sire 2 Sire 3 Sire 4 Increasing XBlack genetic index value 72 Source: Genus
Slide 73: Delivering more profitable proprietary beef genetics to dairy farmers
Delivering more profitable proprietary beef genetics to dairy farmers Maximising dairy farmers’ profitability Delivering more value through proprietary beef genetics Incremental £ value to the dairy farmer by sire compared with low indexing sire More milk from the herd More calves +141 +157 to sell
Slide 74: Delivering more profitable whole chain beef genetics to a leading beef processor
Delivering more profitable whole chain beef genetics to a leading beef processor Demonstrating which genetics produce Delivering incremental profit and starting more profitable carcasses to implement a royalty model Carcass yield compared with low indexing sire Incremental £ value per head realised
Slide 75: Customer video
Developing profit-focused terminal genetics CUSTOMER VIDEO 75
Slide 76: Pioneering a new approach to genetic value creation for the beef industry
Pioneering a new approach to genetic value creation for the beef industry > ABS Beef is at the start of an exciting transformation > The opportunity for whole chain profit focused terminal beef genetics is large > The biology of bovine reproduction and pace of industry change make this a medium to l
Slide 77: Delivering sustainable profit growth and investing to strengthen our position
Stephen Wilson, CFO Delivering sustainable profit growth and investing to strengthen our position 77
Slide 78: Strong historical financial performance
Strong historical financial performance Revenue Operating Profit CAGR 7% CAGR 10% 459 60 372 399 388 51 54 45 2014 2015 2016 2017 2014 2015 2016 2017 Profit Before Tax Earnings per Share (pence) CAGR 13% CAGR 14% 56 69 47 50 61 39 57 47 2014 2015 2016 2017 2014 2015 2016 2017 Operating profit adjust
Slide 79: Historical operating profit performance
Historical operating profit performance CAGR CAGR 2018 H1 £m FY14 FY17 actual constant growth in currency currency const. currency 55.6 94.8 20% 14% 7% 27.3 21.3 (8%) (10%) 47% R&D (27.7) (43.8) (17%) (10%) Central Costs (10.4) (12.2) (6%) (1%) Operating Profit 44.8 60.1 10% 7% Gene editing costs (a
Slide 80: Investing to strengthen our position
Investing to strengthen our position Invested £100m in 2017 49% £m Besun JV 120 100 80 51% 60 40 20 0 FY13 FY14 FY15 FY16 FY17 1 2 Research & Development Capital Expenditure Acquisitions & Investments (1) Includes IntelliGen capitalised development cost (2) Includes biological asset cash movements a
Slide 81: Strong cash generation supporting investment and dividend growth
Strong cash generation supporting investment and dividend growth £m (59) (24) 1.0x 176 1.5x EBITDA (47) EBITDA (53) (82) (112) (23) Opening net debt Cash generated Capex Pension deficit Dividends Acquisitions & Currency impact Closing net debt 2014 repair investments 2017 Net debt 2014 refers to ope
Slide 82: We will continue to invest and strengthen our business
We will continue to invest and strengthen our business Pork Dairy Beef Product/ technology PRRSv programme Supply chain Expand supply chain New global production facility Enterprise system Møllevang effective July 2018 82
Slide 83: Focused on delivering sustainable growth
Focused on delivering sustainable growth Growth (CAGR) 2009 - 2014 2014 - 2017 2017 - 2023 Operating profit – actual currency 2% 10% Operating profit – constant currency 4% 7% Mid-high single digit Operating profit – constant ex. gene editing 4% 9% Double digit Pork Dairy Beef • Lead in profit-focus
Slide 84: Clear objectives to growing shareholder value
Clear objectives to growing shareholder value OBJECTIVE MEDIUM TERM TARGET Grow operating profit 10% CAGR constant currency, ex. gene editing Convert profit to cash > 90% cash conversion net cash from operations : operating profit ex. JVs Invest in our R&D technology Strengthen our capabilities plat
Slide 85: Q&A – session II
Q&A Ww Genus Q&A — session Il