For immediate release

5 September 2024

Genus plc

Preliminary results for the year ended 30 June 2024

STRUCTURALLY STRENGTHENING GENUS IN A CHALLENGING YEAR

	Adjusted results1						Statutory results
	Actual currency				Constant currency change2		Actual currency
Year ended 30 June	2024	2023	Change				2024	2023	Change
	£m	£m	%		%		£m	£m	%
Revenue	668.8	689.7	(3)		2		668.8	689.7	(3)
Operating profit	67.0	74.6	(10)		(3)		6.4	40.5	(84)
Operating profit inc JVs	78.1	85.8	(9)		(3)		n/a	n/a	n/a
Profit before tax	59.8	71.5	(16)		(8)		5.5	39.4	(86)
Net cash flows from operating activities	55.1	45.9	20		n/m5		29.8	50.4	(41)
Free cash flow6	(3.2)	9.1	n/m5		n/m5
Basic earnings per share (pence)	65.5	84.8	(23)		(15)		12.0	50.8	(76)
Dividend per share (pence)							32.0	32.0	-

 

Strategic progress achieved despite challenging markets

·    Management actions limited the impact on adjusted operating profit in a difficult year for volumes:

o  ABS Value Acceleration Programme ("VAP") initiated to structurally improve Bovine's margins, cash generation and returns profile; Phase 1 delivered £7.3m of adjusted operating profit benefit in FY24 (£10m annualised benefit); Phase 2 underway and expected to deliver £5m of adjusted operating profit benefit in FY25 (£10m annualised)

o  R&D strategic review completed, resulting in a sharper focus on key workstreams and savings of £2.4m realised in FY24 (£5m of annualised adjusted operating profit benefit in FY25)

o  Exceptional restructuring costs related to management actions of £6.7m in FY24

·    Encouraging regulatory progress on the PRRS³ Resistant Pig ("PRP"):

o  Favourable regulatory determinations from Brazil (April 2024) and Colombia (October 2023)

o  Continuing positive engagement with the US FDA⁴, with approval expected in 2025

o  Initial submissions to Canadian and Japanese authorities made, as planned

o  PIC PRPs arriving in China imminently for in-country testing

Financial performance as expected, with structural changes driving stronger performance in the second half

·    Second half adjusted operating profit including JVs of £40.0m, 15% higher year on year in constant currency, with £9.4m of benefit from management actions. Compares with first half adjusted operating profit including JVs of £38.1m, 17% lower year on year in constant currency

·    Adjusted operating profit including JVs 3%² lower in constant currency (9% lower in actual currency). Good PIC ex-China growth and the realisation of benefits across ABS and R&D were offset by poor China performances and ABS volume trends

·    Adjusted profit before tax (PBT) of £59.8m, 8%² lower in constant currency (16% lower in actual currency). Statutory PBT of £5.5m, 86% lower in actual currency, primarily due to a £8.6m decrease in the non-cash fair value IAS41 valuation of Group biological assets (including JV's) and net exceptional expenses of £24.6m⁸ (2023: £3.5m net expense)

·    New cash conversion¹ metric introduced which includes investments in biological assets, capital expenditure, lease repayments and cash received from JVs; 71% achieved in FY24 (2023: 53%)

·    Net Debt¹ increased to £248.7m with a net debt to adjusted EBITDA¹ ratio of 2.0x, as expected, within our target range of 1.0x to 2.0x

Divisional headlines⁷

·    PIC - Resilient growth ex-China, in a difficult market PIC China doubled its royalty customer numbers:

o  Continued genetic improvement, delivering $4.39/pig of genetic profit gain (2023: $3.74/pig)

o  PIC volumes increased 3%, revenue decreased 1%² and strategically important royalty revenue increased 4%², in constant currency

o  PIC trading regions ex-China adjusted operating profit increased 4%² in constant currency

o  PIC China adjusted operating profit decreased 60%² in constant currency due to the challenging market environment and planned supply chain investments; good commercial progress - 13 new royalty customers won since June 2023

·    ABS - Challenging markets, particularly China; VAP delivering structural improvements and significant cost efficiencies:

o  Volumes decreased 6% (ABS ex-China volumes decreased 1%) with sexed volumes up 3%, beef volumes decreased 6%

o  Revenue increased 4%² in constant currency as price actions, mix and IntelliGen growth offset volume declines

o  Adjusted operating profit decreased 3%² in constant currency mitigated by VAP actions

o  VAP Phase 1 achieved £10m run-rate of annualised adjusted operating profit improvement by the end of FY24; Phase 2 underway and expected to deliver £5m of savings in FY25 (£10m annualised) 

Outlook

·    Market conditions stable to slowly improving although we remain cautious, particularly in China

·    Solid adjusted operating profit growth expected from PIC in constant currency

·    ABS expected to return to adjusted operating profit growth in constant currency, a stronger business with actions from VAP

·    Management expects significant growth in FY25 Group adjusted profit before tax in constant currency, in-line with current market expectations

·    Currency headwind of approximately £8-9m in FY25 if current exchange rates continue throughout the fiscal year

 

Commenting on the performance and outlook, Jorgen Kokke, Chief Executive Officer, said:

"Genus made significant progress against its strategic priorities during FY24. I am confident that our decisive actions to structurally strengthen the Group will yield significant benefits in the years to come.

In FY25, we will continue to execute against our strategic priorities and we expect to achieve significant growth in Group adjusted profit before tax in constant currency, in-line with market expectations. However, Sterling has continued to appreciate against key foreign currencies since our trading update on 17 July 2024, and we now expect a currency headwind of approximately £8-9m in FY25, if current exchange rates continue throughout the fiscal year."

Results presentation and live Q&A session today

A pre-recorded investors, analysts and bankers briefing to discuss the preliminary results for the year ended 30 June 2024 will be accessible via the following link from 7:01am UK time today:

 

https://webcasting.buchanan.uk.com/broadcast/66b0dea408f685532e0148c7

This will be followed by at 10.30 UKT time by a live Q&A session by invitation at Peel Hunt, 100 Liverpool Street, EC2M 2AT. Those unable to attend in person can also join via Zoom. Please contact Verity Parker at Buchanan for details: verity.parker@buchanancomms.co.uk

Enquiries:

Genus plc (Jorgen Kokke, Chief Executive Officer / Alison Henriksen, Chief Financial Officer / Anand Date, Investor Relations Director)	Tel: 01256 345970
Buchanan (Charles Ryland / Toto Berger / Sophie Wills / Verity Parker)	Tel: 0207 4665000

 

About Genus

Genus advances animal breeding and genetic improvement by applying biotechnology and sells added value products for livestock farming and food producers. Its technology is applicable across livestock species and is currently commercialised by Genus in the dairy, beef and pork food production sectors.

Genus's worldwide sales are made in over 80 countries under the trademarks 'ABS' (dairy and beef cattle) and 'PIC' (pigs) and comprise semen, embryos and breeding animals with superior genetics to those animals currently in farms. Genus's customers' animals produce offspring with greater production efficiency and quality, and our customers use them to supply the global dairy and meat supply chains. Genus thereby enables its customers to produce greater volumes of high quality animal protein whilst using fewer inputs such as feed, water and land. This is both good for the environment and the sustainability of our customers' operations.  

Genus's competitive edge comes from the ownership and control of proprietary lines of breeding animals, the biotechnology used to improve them and its global supply chain, technical service and sales and distribution network.

Headquartered in Basingstoke, United Kingdom, Genus companies operate in over 24 countries on six continents, with research laboratories located in Madison, Wisconsin, USA.

¹ Adjusted results are the Alternative Performance Measures ('APMs') used by the Board to monitor underlying performance at a Group and operating segment level, which are applied consistently throughout. These APMs should be considered in addition to statutory measures, and not as a substitute for or as superior to them. For more information on APMs, see the APM Glossary

² Constant currency percentage movements are calculated by representing the results for the year ended 30 June 2024 at the average exchange rates applied to adjusted operating profit for the year ended 30 June 2023

³ Porcine Reproductive and Respiratory Syndrome

⁴ United States Food and Drug Administration

⁵ n/m = not meaningful

⁶ Free cash flow definition has changed this year to include lease repayments, the 2023 comparative has also been restated

⁷ Prior year period restated. Please see Note 2 of the notes to the condensed set of Financial Statements changes of reportable segments

⁸ Net exceptional expenses of £24.6m predominantly comprised £10.4m related to ST litigation and settlements, £6.7m related to restructuring activity and £7.4m related to a number of potential corporate transactions which are no longer active

 

CHIEF EXECUTIVE'S REVIEW

Strategic Priorities Have Started To Deliver

FY24 was a challenging year for Genus, due particularly to market conditions in many parts of the world, but we took proactive steps to minimise the impact and made significant strategic progress to strengthen the company's position for FY25 and beyond.  

Group Performance

Group revenue increased by 2% in constant currency and decreased 3% in actual currency. Adjusted PBT decreased by 8% in constant currency (16% in actual currency), whilst statutory PBT decreased by 86%.

PIC achieved a robust performance, growing market share and increasing profit in all regions outside Asia. Europe was the standout performer, while North America increased profits in very challenging conditions. Asia was impacted by the ongoing slow recovery in China, resulting in reduced profits. Overall PIC's volumes increased 3%, revenue decreased 1% and royalty revenue increased 4%, in constant currency. Adjusted operating profit (including joint ventures) decreased by 2% in constant currency.  

ABS faced significant challenges around the globe, particularly in China and Brazil. As a result, volumes decreased 6% albeit revenues increased by 4% in constant currency. Adjusted operating profit decreased 3% in constant currency, with the impact of the challenging trading largely offset by £7.3m of profit improvements from our Value Acceleration Programme (VAP). ABS was significantly impacted by exchange rate movements in the year, most notably the Argentine Peso. This resulted in adjusted operating profit in actual currency decreasing 25%.

Our Strategic Priorities

This year, we have focused on our four strategic priorities to improve profitability and guide our progress. 

1. Continue growth in porcine, with more stable growth in China

We continued to extend PIC's lead in differentiated genetics and services, supported by continued acceleration of genetic gain for target traits across our product lines. PIC also demonstrated superior genetic performance through product validation trials in every geography. In China, we focused our go-to-market strategy on driving royalty revenue with key accounts. This enhanced commercial approach resulted in us signing new royalty customers in FY24, which both supports long-term growth and reduces exposure to volatility. We have a strong relationship with the BCA and we continue to work together to bring PRP to China.

2. Deliver successful commercialisation of PRP

We continued to invest in preparations for the prospective commercialisation of this ground-breaking product, increasing our population of pigs, which now spans multiple generations. In parallel, we made encouraging progress with regulatory approvals, achieving favourable determinations in Colombia and Brazil while continuing to engage with regulators in other target markets. In particular, we maintained positive engagement with the US Food and Drug Administration, with the focus now being post-approval compliance. We also made regulatory submissions in Canada and Japan and received a licence to import gene-edited animals into China for testing, with shipments expected to start in FY25. 

3. Deliver greater value from bovine

Through VAP, we are taking concerted action to strengthen the business, increase effectiveness and enhance efficiency which will improve margins. Under the leadership of Jim Low, who joined in April as our new ABS Chief Operating Officer, we are focused on delivering a multi-year transformation programme. Actions to date have included price increases on our value-added services, rationalisation of production and integration of beef, dairy and IntelliGen to increase productivity and drive efficiencies in our supply chain. Further actions being taken in FY25 are expected to deliver £5m of profit improvement in FY25 at an annualised run-rate of £10m by the end of that year.

During the year, ABS launched its new Sexcel Male Beef product. This is a major breakthrough which utilises our proprietary sexing technology to help customers produce more male calves, for sale into the beef supply chain.

4. Generate attractive returns from more focused R&D investments

We conducted a strategic review of our R&D activities, considering each project's deliverability, commercial potential and strategic fit. As a result, we stopped work on around a third of these projects, giving Genus a more focused approach and balanced portfolio, closely aligned with company strategy and business need. We expect £5m of annualised adjusted operating profit benefit from FY25. While our near-term focus is on PRP regulatory approval and the launch of Sexcel Male Beef, we continue to be excited about the opportunities generated by our R&D programme in areas such as disease resistant animals and reproductive technology.

Our People And Culture

Colleagues across our company continued to demonstrate deep commitment, drive and energy, despite some difficult circumstances during the year. Our teams helped us navigate challenges and deliver the strategic progress that positions us well for the future. I would like to thank all Genus team members for their contribution.  

Any successful company requires a compelling vision and a vibrant culture that unites its people. We have reviewed both this year.  

We adjusted our vision to be Pioneering animal genetic improvement to sustainably nourish the world. We retained the focus on innovation, which is the bedrock of our genetic improvement work. However, we added explicit reference to sustainability, to recognise how we help customers increase the global supply of safe, nutritious and affordable protein, with use of fewer natural resources.  

We also refreshed our company values, which reflect our culture, to help inspire colleagues around the world and guide the way we all work. These four values are Collaborate as One Team, Create Value for Customers, Innovate with Purpose and Never Stop Improving. These values represent who we are at our best and are being embedded across the company.  

Helping Customers Achieve Their Sustainability Goals

The animal protein sector is a significant producer of greenhouse gases and we continue to demonstrate the role that genetic improvement plays in reducing emissions. PIC has completed a life cycle analysis (LCA) in North America showing that its conventional genetics reduce emissions by more than 7% against the industry average. The PRP will further improve this, as better animal health leads to increased production and higher animal welfare. We are pursuing further LCAs globally, in PIC and ABS, as we continue to demonstrate the environmental commitment reflected in our vision. 

 

Financial and Operating Review

Financial Review

In the year ended 30 June 2024, Group revenue decreased by 3% in actual currency (a 2%² increase in constant currency). Adjusted operating profit including joint ventures decreased by 9% (3%² in constant currency), reflecting the challenging market environments experienced by both businesses along with foreign currency headwinds. R&D investment decreased by 12% (9%² in constant currency) following a strategic review of activities to align to Genus's strategy and ensure they have compelling commercial opportunity, resulting in around a third of projects being stopped.  During the year, management also initiated ABS's Value Acceleration Programme to structurally improve margins, ROIC¹ and cash generation¹. Phase 1 of VAP has achieved £7.3m of adjusted operating profit improvement in the year.

On a statutory basis, profit before tax was £5.5m (2023: £39.4m). The difference between statutory and adjusted profit before tax was predominantly due to a £23.2m decrease in the non-cash fair value IAS41 valuation of biological assets of the Group, a £14.6m increase in the non-cash fair value IAS41 valuation of biological assets in JVs and associates, and net exceptional expenses of £24.6m (2023: £3.5m net expense). Basic earnings per share on a statutory basis were 12.0 pence (2023: 50.8 pence).

Adjusted profit before tax of £59.8m decreased 8% in constant currency, with interest expense increasing from £14.3m to £18.3m (a 22%² increase in constant currency) primarily from higher interest rates. 

The effect of exchange rate movements on the translation of overseas profits decreased the Group's adjusted profit before tax for the year by £6.2m compared with 2023, primarily due to the weakness of the Argentine Peso and Russian Ruble against Sterling during the year.

Revenue

Revenue decreased by 3% in actual currency (a 2%² increase in constant currency) to £668.8m (2023: £689.7m). PIC's revenue decreased by 4% (a 1%² decrease in constant currency), however strategically important royalty revenues increased by 4%² in constant currency. In ABS, revenue decreased by 2% (a 4%² increase in constant currency), however sexed revenues increased 8% in constant currency reflecting the continuing success of Genus's sexed genetics and IntelliGen processing capability.

 Adjusted Operating Profit Including JVs

	Actual currency				Constant currency change
Year ended 30 June	2024	20232	Change
Adjusted Profit Before Tax1	£m	£m	%		%
Genus PIC	103.6	108.7	(5)		(2)
Genus ABS	14.0	18.7	(25)		(3)
R&D	(21.8)	(24.8)	(12)		(9)
Central costs	(17.7)	(16.8)	(5)		(12)
Adjusted operating profit inc JVs	78.1	85.8	(9)		(3)
Net finance costs	(18.3)	(14.3)	(28)		(22)
Adjusted profit before tax	59.8	71.5	(16)		(8)

¹ Includes share of adjusted pre-tax profits of joint ventures and removes share of adjusted profits of non-controlling interests

² Prior year period restated. Please see Note 2 of the notes to the condensed set of Financial Statements changes of reportable segments

Adjusted operating profit including joint ventures was £78.1m (2023: £85.8m), a 3%² decrease in constant currency. The Group's share of adjusted joint venture operating profit, primarily from our Brazilian joint venture with Agroceres, was similar to prior year at £10.2m (2023: £10.8m). 

PIC's adjusted operating profit including joint ventures decreased by 2%² in constant currency predominantly due to performance in China and increased PRP investment, partially offset by tight cost management across the business. Strategically important royalty revenues increased 4%² in constant currency and grew in every region other than Asia.

ABS's adjusted operating profit decreased by 3% in constant currency. Demand for Sexcel, our proprietary bovine sexed product, continued to increase, as well as our IntelliGen third party sexed processing, however there was weakness across many markets, particularly China and Brazil. As mentioned above, management initiated ABS's Value Acceleration Program during the year to structurally improve margins, ROIC¹ and cash generation¹.

Statutory Profit Before Tax

The table below reconciles adjusted profit before tax to statutory profit before tax:

	2024	2023
	£m	£m
Adjusted Profit Before Tax	59.8	71.5
Operating loss attributable to non-controlling interest	(0.9)	(0.4)
Net IAS 41 valuation movement on biological assets in JVs and associates	14.6	3.6
Tax on JVs and associates	(5.7)	(3.9)
Adjusting items:
Net IAS 41 valuation movement on biological assets	(23.2)	(16.9)
Amortisation of acquired intangible assets	(5.8)	(7.7)
Share-based payment expense	(7.0)	(6.0)
Other gains and losses	(1.7)	2.7
Exceptional items	(24.6)	(3.5)
Statutory Profit Before Tax	5.5	39.4

 

Statutory profit before tax was £5.5m (2023: £39.4m), reflecting the lower adjusted profit performance, higher interest expense, higher share-based payment expenses and higher net exceptional items. The net IAS 41 valuation uplift on biological assets in JVs was principally caused by the stocking of Genesis, a PIC JV farm in Brazil, but this was offset by a reduction in the Group's net IAS 41 valuation on biological assets comprising a £20.2m uplift (2023: £24.9m reduction) in porcine biological assets, principally due to the restocking of Aurora, our genetic nucleus farm in Canada, following an upgrade to the farm facilities and health status, along with stocking of the Ankang and LuoDian farms in China, and a £43.4m reduction (2023: £8.0m uplift) in bovine biological assets, reflecting lower forecast sales volume growth and rationalisation of bulls. Share-based payment expense was £7.0m (2023: £6.0m). These reconciling items are primarily non-cash, can be volatile and do not correlate to the underlying trading performance in the year.

Exceptional Items

There was a £24.6m net exceptional expense in the year (2023: £3.5m net expense), which includes legal fees, settlement and related costs of £10.4m (2023: £4.5m) primarily related to a settlement agreement reached with STgenetics on litigation matters. As part of ABS's on-going Value Acceleration Programme, significant one-off expenses were recognised in relation to staff redundancies (£3.0m), fixed asset and inventory write downs (£1.1m) and consultancy fees (£1.9m). Staff redundancy costs of £0.7m were recognised in relation to changes made as a result of the R&D strategic review completed in the year. £7.4m of exceptional cost was professional fees, primarily incurred in relation to potential corporate transactions which are no longer active.

Net Finance Costs

Net finance costs increased to £18.3m (2023: £14.3m), primarily due to interest rate rises during the year. Average interest rates in the period increased to 6.20% (2023: 4.94%), raising the cost of like-for-like borrowings by £2.9m. Average borrowings increased by 3% to £234.4m (2023: £226.9m) resulting in a further £0.3m increase in interest costs in the year. The interest rate increases were mitigated by the company's fixed interest cover, which reduced the impact of rate increases to the above levels by £2.3m (2023: £1.0m). 

Amortisation costs in the year were £0.9m (2023: £1.1m) and within other interest there was IFRS 16 finance lease interest of £2.8m (2023: £1.2m) and both a discount interest unwind on the Group's pension liabilities and put options totalling £0.5m (2023: £0.5m). Foreign interest in the year was an income of £0.4m (2023: £0.2m expense).

Taxation

The statutory profit tax charge for the period, including share of income tax of equity accounted investees of £8.8m (2023: £11.5m), represents an effective tax rate (ETR) of 78.6% (2023: 26.6%). The increase in the statutory ETR of 52 points results primarily from an increase of 18.8% in the impact of fixed withholding taxes as a percentage of the lower statutory profit, an increase of 45.1% in non-deductible expenses due to the disallowance for tax of advisor fees on increased corporate transaction activity, less the favourable (13.5)% impact of changes in judgements on deferred tax balances, movements in provisions and prior year credits.

The adjusted profit tax charge for the year of £16.8m (2023: £15.9m) represents an ETR on adjusted profits of 28.1% (2023: 22.2%). In the current year, the adjusted tax charge has benefitted by 2.6% from the above mentioned changes in judgements on deferred tax balances, movements in provisions and prior year credits and increased by 2.6% from increases in withholding taxes and non-deductible expenses in the year. In the prior year, the Group adjusted ETR benefitted by 6.2% due to the initial recognition of deferred tax assets in respect of losses forward in the Group's subsidiaries in Australia and France. The expected adjusted profit for the Group in FY25 is in the range of 26-28%.

Earnings Per Share

Adjusted basic earnings per share reduced by 23% (15% reduction in constant currency) to 65.5 pence (2023: 84.8 pence) as PIC ex-China growth and management actions across ABS and R&D were offset by China, volume trends in ABS and higher interest expenses. Basic earnings per share on a statutory basis were 12.0 pence (2023: 50.8 pence), taking into account the factors above and higher share-based payment expenses and higher net exceptional items.

Biological Assets

A feature of the Group's net assets is its substantial investment in biological assets, which under IAS 41 are stated at fair value. At 30 June 2024, the carrying value of biological assets was £349.7m (2023: £364.7m), as set out in the table below:

	2024	2023
	£m	£m
Non-current assets	297.4	318.2
Current assets	32.3	23.8
Inventory	20.0	22.7
	349.7	364.7
Represented by:
Porcine	267.4	242.7
Dairy and beef	82.3	122.0
	349.7	364.7

 

The movement in the overall balance sheet carrying value of biological assets of £15.0m includes the effect of an exchange rate translation decrease of £1.4m. Excluding the translation effect there was:

·    a £26.0m increase in the carrying value of porcine biological assets, due principally to the restocking of Aurora, our genetic nucleus farm in Canada, following an upgrade to the farm facilities and health status, along with stocking of the Ankang and LuoDian farms in China; and

·    a £39.6m decrease in the bovine biological assets carrying value, primarily reflecting lower forecast sales volumes and rationalisation of bulls.

The historical cost of these assets, less depreciation, was £80.9m at 30 June 2024 (2023: £83.4m), which is the basis used for the adjusted results. The historical cost depreciation of these assets included in adjusted results was £15.3m (2023: £13.4m).

Retirement Benefit Obligations

The Group's retirement benefit obligations at 30 June 2024 were £6.6m (2023: £6.9m) before tax and £5.4m (2023: £5.6m) net of related deferred tax. The largest element of this liability now relates to some legacy unfunded pension commitments dating prior to Genus's acquisition of PIC.

Robust investment strategies mean our two main defined benefit obligation schemes have remained in sound financial positions. Prior to any IFRIC 14 amendments, both the Dalgety Pension Fund and our share of the Milk Pension Fund reported IAS 19 surpluses. 

Cash Flow

	2024	2023
Free Cash flow	£m	£m
Adjusted EBITDA	108.9	110.6
Cash received from joint ventures	4.7	2.6
Working capital	(11.2)	(12.3)
Biological assets	(9.6)	(11.1)
Net capital expenditure	(24.0)	(32.8)
Lease repayments	(13.7)	(11.1)
Adjusted cash from operating activities	55.1	45.9
Exceptional items	(17.9)	(7.1)
Pension contributions, provisions & other	(1.4)	(1.4)
Interest and tax paid	(39.0)	(28.3)
Free cash flow inc. lease repayments	(3.2)	9.1

 

Adjusted cash from operating activities of £55.1m (2023: £45.9m) comprised broadly similar adjusted EBITDA of £108.9m (2023: £110.6m) but with significantly lower net capital expenditure of £24.0m (2023: £32.8m), as planned. Free cash outflow, including lease repayments, of £3.2m (2023: £9.1m inflow) was impacted by a higher year on year cash outflow of £10.8m in relation to exceptional items along with increased interest and tax payments.

	2024	2023
Cash conversion %	£m	£m
Adjusted Operating profit inc. JV	78.1	85.8
Adjusted cash from operating activities	55.1	45.9
Cash conversion %	71%	53%

 

To improve our measurement of cash flow performance we have introduced a new cash conversion key performance indicator which incorporates investments in biological assets, capital expenditure, lease repayments  and cash received from joint ventures. This new metric aligns with our management reporting and the operational management of cash flows in Genus's business. Under this new metric, cash flow conversion in FY24 was 71% (FY23: 53%) and our new annual target for cash flow conversion is at least 70%, which we expect to meet in the coming year.

The cash inflow from investments, including joint venture loans, was £nil (2023: £0.7m outflow), with proceeds primarily from the sale of NMR shares of £4.6m being offset by loan investments in our China joint ventures of £2.2m, to increase production capacity, and £2.9m to purchase the remaining 61% shareholding in Xelect Limited, a leading provider of specialist genetics and breeding management services to the aquaculture industry.

Net Debt and Credit Facilities

Net debt increased to £248.7m at 30 June 2024 (2023: £195.8m) was impacted by a Free cash outflow of £3.2m, dividend payments of £21.0m and a net increase in lease liabilities of £26.2m, primarily from new farm leases in China. The ratio of net debt to adjusted EBITDA as calculated under our financing facilities at the year-end increased to 2.0 times (2023: 1.6 times) which remains in line with our medium-term objective of having a ratio of net debt to EBITDA of between 1.0 - 2.0 times. At the end of June 2024, interest cover was at 8 times (2023: 10 times).

At the balance sheet date, the Company's credit facilities comprised a £190m multi-currency revolving credit facility ('RCF'), and a USD170 million RCF. The original term of the facility was for three years to 24 August 2023. The Company and its lenders extended the maturity date of the total facilities to 24 August 2024 and 24 August 2025 respectively. A further one-year extension to 24 August 2026 was signed on 31 July 2024. The Company's credit facility at 30 June 2024 also included a remaining balance of £39m from the facility's £100m uncommitted accordion option. On 21 August 2024, £28.2m of the remaining £39m accordion feature in the Group Facility Agreement was made available by the Group's lenders. This additional amount was requested in part to replace a £17m reduction in headroom following the planned departure of one of the syndicate banks. This bank withdrew from the facility on 23 August 2024 at the end of the first facility extension period as part of a strategy to concentrate on clients with substantial operations in their homeland.  Following these changes, £208.2m and USD161.0m RCFs are available to 24 August 2025, reducing to £186.4m and USD141.5m of facilities for the final extension to 24 August 2026. The Company is planning to establish a new multi-year facility during the second half of FY25.

Net debt as calculated under our financing facilities excludes IFRS 16 lease liabilities up to a cap of £30m but includes bank guarantees. On 30 June 2024, the Group had headroom of £106.7m (2023: £118.7m) under its available credit facilities.

Capital allocation priorities and return on adjusted invested capital

Our capital allocation prioritises the investment of cash in areas that will deliver future earnings growth and strong cash returns on a sustainable basis. This includes investment for organic growth as a first priority through investment in our existing businesses, including capital expenditure in infrastructure, innovation in new products and the development of our people. We supplement organic growth with value enhancing acquisitions in current and adjacent market niches, aligned with our purpose. This brings new technology, intellectual property and talent into the Group and expands our market reach, keeping Genus well-positioned in growing markets over the long term.

The return on adjusted invested capital, as defined in the alternative performance measures glossary, was lower at 11.5% (2023: 14.7%), reflecting a decrease in adjusted operating profit including joint ventures after tax to £56.2m (2023: £66.8m), due to the 9% decrease in adjusted operating profit including joint ventures and a 5.9 point increase in the adjusted effective tax rate. Adjusted invested capital increased by 8% to £489.5m (2023: £455.0m), predominantly due to £24.2m of new leases in the year related to two farms in China.

Dividend

Recognising the importance of balancing investment for the future with ensuring an attractive return for shareholders, the Board is recommending a final dividend of 21.7 pence per ordinary share, consistent with the prior year final dividend. When combined with the interim dividend, this will result in an unchanged total dividend for the year of 32.0 pence per ordinary share (2023: 32.0 pence per share). Dividend cover from adjusted earnings decreased to 2.0 times (2023: 2.7 times).

It is proposed that the final dividend will be paid on 6 December 2024 to the shareholders on the register at the close of business on 8 November 2024.

¹ Adjusted results are the Alternative Performance Measures ('APMs') used by the Board to monitor underlying performance at a Group and operating segment level, which are applied consistently throughout. These APMs should be considered in addition to statutory measures, and not as a substitute for or as superior to them. For more information on APMs, see the APM Glossary

² Constant currency percentage movements are calculated by representing the results for the year ended 30 June 2024 at the average exchange rates applied to adjusted operating profit for the year ended 30 June 2023

 

Genus PIC - Operating Review

	Actual currency				Constant currency
Year ended 30 June	2024	2023*	Change		Change
	£m	£m	%		%
Revenue	352.5	368.1	(4)		(1)
Adjusted operating profit pre-product development	141.6	145.3	(3)		1
Porcine product development expense	38.0	36.6	4		8
Adjusted operating profit exc JV	93.8	98.4	(5)		(2)
Adjusted operating profit inc JV	103.6	108.7	(5)		(2)
Adjusted operating margin exc JV	26.6%	26.7%	(0.1)pts		(0.2)pts

* Prior year period restated. Please see Note 2 of the notes to the condensed set of Financial Statements changes of reportable segments

In many parts of the world, pork producers made losses in the first half of FY24 but benefitted from improving economic conditions in the second half. In North America, after the worst period of financial losses across the industry since the 2008-2010 financial crisis, pork producers recorded small profits. The picture was similar in China, where the pork production industry registered aggregate profits in the second half, following many years of aggregate losses. Lower feed costs in the second half of the fiscal year improved margins for Latin American producers. In contrast to other regions, producers in Europe were profitable throughout FY24, benefitting from high prices due to tight supply following the contraction of the region's breeding herd in previous years.  

Against this backdrop, PIC's revenue decreased 1% in constant currency. This was predominantly due to the performance in China and lower breeding stock sales in North America. Strategically important royalty revenues increased 4% in constant currency and grew in every region other than Asia. Costs were managed tightly with constant currency savings in production and supply chain offset by a planned £2.6m increase in PRP costs and a £1.6m increase in IT and other support function costs. Adjusted operating profit excluding JVs decreased 2% in constant currency at a margin of 26.6%. JV income decreased £0.5m in actual currency (a decrease of £0.4m in constant currency). Adjusted operating profit including JVs decreased 2% in constant currency.

PIC's product development teams continued to strengthen genomic selection and accelerate progress on target traits, delivering $4.39 of genetic profit gain in the year which exceeded its target of $3.80. In addition, PIC took further steps to embed digital phenotyping tools across our facilities and contracted elite farms. During the year, PIC also made significant strides in cementing its sustainability leadership by receiving ISO certification for its Life Cycle Assessments ("LCAs"). These LCAs demonstrate that using PIC full programme genetics delivers an approximately 7% reduction in greenhouse gas emissions, water consumption and land usage relative to industry average genetics in North America and Europe.

Significant PRP progress was also made during the year. From a regulatory perspective, PIC received favourable determinations from Brazil (26 April 2024) and Colombia (5 October 2023) and continues to engage positively with the US FDA. Concurrent submissions to Canadian and Japanese authorities have also begun. Testing of live PRP animals in China is expected to start in FY25, with PIC receiving the first ever license to import gene-edited animals into the country. Market acceptance activities have also been ramped up to engage the wider pork supply chain ahead of North American commercialisation.

 

 

Year ended 30 June 2024	Revenue	Royalty Revenue	Volumes (MPEs)	Adjusted Operating Profit*
Actual Currency
PIC Total	£352.5m(-4%)	£177.4m (+0%)	202.2m (+3%)	£103.6m (-5%)
Constant Currency
NAM	-6%	+4%	0%	+5%
LATAM	+10%	+6%	+4%	+3%
EMEA	+2%	+9%	+7%	+13%
ASIA	+13%	-8%	-3%	-37%
Asia ex-China	-10%	+5%	+3%	-5%

NB: Growth rates compared to the same period last year

* Including JVs. Prior year period restated; please see Note 2 of the notes to the condensed set of Financial Statements changes of reportable segments

Regional Trading Commentary

North America achieved an adjusted operating profit increase of 5%*, supported by a 4%* increase in royalty revenues from existing customers despite the tough trading environment. Total revenue decreased by 6%* as a result of lower sales of new breeding stock. Over the year the U.S. breeding herd declined slightly but production continued to grow, benefitting from stable herd health and higher productivity. Pork producers made losses in the first half of the fiscal year, but started generating profits in the second half as prices improved and feed costs reduced. Export volumes were also strong in the second half of the year, with sales growth to Mexico and South Korea more than offsetting declines to China, Japan and Canada.

Latin America increased adjusted operating profit by 3%*, supported by a 6%* increase in royalty revenue. This was despite the impact of currency instability in Argentina, and reduced JV income by £0.5m* from our joint venture with Agroceres. Royalty volumes in Chile and Colombia were particularly strong, driven by improved productivity of customers in the region. In Brazil, declining feed costs and strong export volumes drove further increases in production and enhanced margins for producers. In Mexico, higher pork prices and lower feed costs in the second half of the fiscal year helped producers improve profitability.

Europe had an excellent year and grew market share, achieving a 13%* increase in adjusted operating profit on royalty revenue growth of 9%*. Performance in Spain, Germany and Italy was particularly strong with both volume and price growth. The EU breeding herd began to stabilise in the second half of the fiscal year after significant contraction in prior periods due to economic, geopolitical and regulatory challenges. As a result of the herd contraction, pork prices remained above averages seen in 2019 to 2023 with producers generally achieving positive margins. Export volumes and domestic pork meat consumption, however, continued to struggle as a result of relatively high prices, geopolitical events and on-going disease challenges such as African Swine Fever ("ASF").

Asia saw adjusted operating profit decrease by 37%* driven predominantly by a 60%* reduction in PIC China due to the challenging trading conditions and higher supply chain costs.  Excluding China, customers in the rest of Asia were impacted by disease outbreaks with adjusted operating profit decreasing 5%* despite royalty revenue growth of 5%*. Chinese pork producers endured a challenging first half of the fiscal year as pig prices remained below the cost of production. There were signs of improving profitability in the second half as the Chinese pig price to feed ratio climbed and remained above 6x (a proxy for industry break-even) from April 2024. However, Chinese producers remain cautious after many years of industry losses. Herd health continues to be a challenge for producers across the region, with ASF and PRRS the two most challenging diseases. During the year, PIC China's commercial focus on building recurring royalty revenue gained strong traction, leading to agreements with 13 new royalty customers, doubling the number of royalty customers PIC China has to 26. It typically takes 2-4 years for royalty revenues from new royalty customers to reach production maturity.

* Constant currency growth rate compared to the same period last year

Genus ABS - Operating Review

	Actual currency				Constant currency
Year ended 30 June	2024	2023*	Change		Change
	£m	£m	%		%
Revenue	314.9	321.6	(2)		4
Adjusted operating profit pre-product development	37.3	43.6	(14)		(3)
Bovine product development expense	23.3	24.9	(6)		(3)
Adjusted operating profit	14.0	18.7	(25)		(3)
Adjusted operating margin	4.4%	5.8%	(1.4)pts		(0.4)pts

* Prior year period restated. Please see Note 2 of the notes to the condensed set of Financial Statements changes of reportable segments

Bovine producers experienced a challenging period across all regions. Dairy producers generally had a tougher year than beef producers as global milk prices proved less robust than beef prices. In China, demand for dairy genetics was significantly impacted by reduced consumer demand coinciding with increased dairy production from prior year farm expansions. Latin America was also challenging as a result of currency instability in Argentina and weak demand from Brazilian beef producers. Global dairy producer migration from conventional to sexed and beef-on-dairy genetic strategies continued, with a strong increase in sexed adoption in Latin America in particular. Whilst growth of sexed adoption has slowed in some developed markets, IntelliGen continued to achieve growth from further global adoption and new customer wins on both technology transfers and third party processing.

During the year, management initiated ABS's Value Acceleration Programme. This comprehensive programme will structurally improve margins, ROIC and cash generation. Actions being taken include organisational structure change, redeployment of resources to higher returning markets and customers, a more robust sales and operational planning process, and stronger pricing mechanisms and governance. In FY24 these actions delivered c.£10m of annualised efficiencies and savings, of which £7.3m were realised in-year. Exceptional costs of £6.0m associated with these actions were recognised in FY24. ABS will continue to drive and embed further improvement with Phase 2 of the Value Acceleration Programme in FY25 to build a stronger and more sustainably profitable Bovine business.

Amidst tough markets, ABS revenue increased 4% in constant currency. Strong pricing governance and mix offset a volume decrease of 6%, comprising a 12% decrease in dairy conventional volumes, a 6% decrease in beef conventional volumes and a 3% increase in sexed volumes. Controllable costs decreased versus the prior year but were offset by inventory provisions and other supply chain impacts of £3.1m. Adjusted operating profit decreased 3% in constant currency at a margin of 4.4%.

From a product development perspective, ABS continued to strengthen its range of proprietary dairy genetics. ABS's current Jersey and polled Holstein genetics are market leaders and ABS currently markets 12 of the top 30 Jersey sires for Cheese Merit and 18 of the top 20 homozygous polled Holstein sires for Net Merit. The pipeline of dairy bulls yet to reach the market has the potential to strengthen these market-leading positions. In Beef, the proprietary NuEra genetic programme continues to exceed genetic improvement targets with product performance trials continuing to demonstrate the superior performance of these genetics in customer systems. ABS also initiated pioneering Life Cycle Assessments for beef to show how its elite genetics reduce an animal's carbon footprint.

 

Year ended 30 June 2024	Revenue	Volume (m straws)	Adjusted Operating Profit*
Actual Currency
ABS Total	£314.9 (-2%)	24.8m (-6%)	£14.0m (-25%)
Constant Currency
NAM	+2%	-6%	+5%
LATAM	+13%	-6%	+31%
EMEA	+7%	+4%	+6%
ASIA	-13%	-12%	-24%

NB: Growth rates compared to the same period last year

* Prior year period restated. Please see Note 2 of the notes to the condensed set of Financial Statements changes of reportable segments

Regional Trading Commentary

North America saw volumes decrease by 6%, comprising a 21% reduction in dairy conventional volumes, a 9% decrease in beef volumes, and a more robust 3% increase in sexed volumes. Dairy conventional volumes were challenged by producers' continued transition to a sexed and beef-on-dairy strategy as well as market contraction due to better herd fertility. Despite this revenue increased by 2%*, driven by strong price management, and adjusted operating profit increased 5%*, also reflecting actions taken in VAP Phase 1 to improve profitability of products and services to certain customers. Within this result, Intelligen performed well with volume and operating profit increasing on new contract wins. In the second half of the year, highly pathogenic avian influenza was confirmed in the US dairy herd, however the impact on producer productivity and consumer demand has been limited.

Latin America saw volumes decrease by 6%, with a 6% increase in sexed volumes offset by a 9% decrease in dairy conventional volumes and an 8% decrease in beef volumes. Dairy volumes were driven by increased penetration of sexed volumes in Gene Advance accounts as well as increased market adoption of sexed and beef-on-dairy strategies. Beef volumes were challenging, especially in Brazil, where macroeconomic weakness continued to impact demand. Despite this, strong mix and pricing drove a 13%* increase in revenue. Cost management actions also helped expand operational gearing to drive a 31%* increase in adjusted operating profit, albeit this was tempered in actual currency by Argentine currency devaluation.  

EMEA saw volumes increase by 4%, with a 5% decrease in dairy conventional volumes being more than offset by a 3% increase in beef volumes and a 13% increase in sexed volumes. Market headwinds in Northern Europe impacted farmer profitability but this was offset by strong growth in France, Ukraine, South Africa and some distributor markets. Targeted pricing initiatives and improved mix also helped drive a 7%* increase in revenue. Adjusted operating profit increased by 6%*, a marginally lower level than revenue growth, due to wage inflation in the region.

Asia saw volumes decrease by 12%, comprising a 13% decrease in dairy conventional volumes, a 19% decrease in beef volumes and a 7% decrease in sexed volumes. China was the key driver as a material reduction in dairy and dairy product consumption coincided with an increase in production from farm expansions in prior years. This resulted in milk prices dropping below the cost of production and milk processors taking substantial action to restrict milk collections. The resulting impact on producer profitability significantly reduced demand for elite dairy genetics. Sexed volumes were also particularly impacted as Chinese dairy farmers sought to contract production. In Australia, beef prices remained at low levels which led to weak demand for beef genetics. Against this backdrop, revenues decreased by 13%* and adjusted operating profit by 24%*.

* Constant currency growth rate compared to the same period last year

Research and Development - Operating Review

	Actual currency				Constant currency
Year ended 30 June	2024	2023*	Change			Change
	£m	£m	%			%
Gene editing	6.3	7.4	(15)			(11)
Other research and development	15.5	17.4	(11)			(8)
Net expenditure in R&D	21.8	24.8	(12)			(9)

* Prior year period restated. Please see Note 2 of the notes to the condensed set of Financial Statements changes of reportable segments

During the year, Genus completed a strategic review of its R&D activities. The goal was to ensure that all early-stage projects align to Genus's strategy, have a compelling commercial opportunity, are deliverable, and lead to a balanced portfolio overall. As a result of this review R&D stopped work on around a third of its projects. Resources have either been reallocated to key workstreams or realised as savings. In FY24 these savings amounted to £2.4m and R&D continues to expect £5m of annualised savings in FY25. Genus recognised £0.7m of exceptional costs associated with the R&D strategic review in FY24. Overall net expenditure in R&D decreased by 9% in constant currency reflecting the initial impact of R&D's strategic review.

R&D continued to make good progress across a number of its programmes in FY24, with the immediate focus being to bring PRP to market and leverage our IntelliGen sexing technology to drive profitable growth in ABS.

As noted in the PIC operating review, we made encouraging PRP regulatory progress in the year. We received favourable determinations from Brazil (April 2024) and Colombia (October 2023) and continue to engage positively with the US FDA. Concurrent submissions to Canadian and Japanese authorities have also begun. Testing of live PRP animals in China is expected to start in FY25, with PIC receiving the first ever license to import gene-edited animals into the country.

During the year, ABS commercially launched Sexcel Male Beef which was enabled by iterative improvements to our IntelliGen technology. Sexcel Male Beef is a novel product that applies sexing technology to beef-on-dairy genetics to produce high male skew straws of semen. Male beef calves are more attractive to the beef industry for their faster growth rates and greater muscle mass. Sexcel Male Beef therefore adds to our portfolio of value-adding products for our customers.

 

genus risk management

 

Genus is exposed to a wide range of risks and uncertainties as it fulfils its purpose of helping farmers produce high quality meat and milk more efficiently and sustainably, which increases the availability of safe and affordable animal protein for consumers.

 

Some of these risks relate to our business operations, while others relate to future commercial exploitation of our leading-edge R&D programmes. We are also exposed to global economic and political risks such as trade restrictions attributed to the on-going conflicts in Russia-Ukraine, the Middle East, and trade restrictions attributed to disease outbreaks like Avian Flu in the US which can restrict the movement of our products.

 

As part of our continuous risk management process we monitor current and emerging internal and external risks and where appropriate we reflect the changes in principal risks or on our group risk register.

 

Emerging Risks

This year our reviews of emerging risks focused on:

•     the impact of general elections in the UK and upcoming US presidential election; and

•     disease outbreaks, specifically Avian Flu in the US.

 

Changes to principal risk names

We have changed the principal risk name of the following risks to better reflect the nature of the risks as follows:

•     Capturing value through acquisitions was renamed to Capturing value through Corporate Transactions to cover all M&A activity, investments, or divestments; and

•     Sustainability to climate change to reflect the focus on climate-related impacts.

 

In reviewing our principal risks, we have made the following changes to better reflect the evolving risk landscape. We increased three risks:

·    Developing Products with Competitive Advantage, to reflect the increased bovine market consolidation and competition for elite genetics;

·    Hiring and Retaining Talented People reflecting the global economic challenges and the fight for talent, and our ABS Value Acceleration programme and the impact of significant change for the organisation; and

·    Cyber Security to the reflect the increased risk attributed to the rapid development and use of Artificial Intelligence by malicious actors.

We decreased our Protecting IP to reflect our strong process of protecting our IP, supported by the settlement of a long-term dispute with STgenetic.

 

From our broad risk universe, we have identified 11 principal risks, which we regularly evaluate based on an assessment of the likelihood of occurrence and the magnitude of potential impact, together with the effectiveness of our risk mitigation controls.

 

 

 

Risk			Risk description			How we manage risk			Risk change in FY24
Strategic Risks
DEVELOPING PRODUCTS WITH COMPETITIVE ADVANTAGE			·   Development programmes fail to produce best genetics for customers. ·   Increased competition to secure elite genetics.			Dedicated teams align our product development to customer requirements. We use large-scale data and advanced genomic analysis to make sure we meet our breeding goals. We frequently measure our performance against competitors in customers' systems, to ensure the value added by our genetics remains competitive. We also partner with universities and other bodies to further our developments. This includes the life cycle assessments being undertaken for our porcine and bovine genetics to demonstrate the value of our products.				Increased. Bovine market consolidation, competition, and downturn has put pressure on maintaining our genetic lead. However, our analysis and benchmarking continue to support the competitiveness of our genetic improvements in porcine, demonstrated by new royalty customers in China.
CONTINUING TO SUCCESSFULLY DEVELOP INTELLIGEN TECHNOLOGY			·   Failure to manage the technical, production and financial risks associated with the continued advancement of the IntelliGen business.			Our continued advancement of the technology and its deployment to new markets and customers is supported by dedicated internal resources and agreements with suppliers. We work with key customers on technological and performance improvements and to ensure optimum performance we provide maintenance and specialist training to our customers and continuously monitor productivity.				No Change. We have improved our technology, expanded the number of machines and our customer base this year and maintain optimal performance. This year we concluded a long-term patent dispute with STgenetics, bringing the case to a close.
DEVELOPING AND COMMERCIALISING GENE EDITING AND OTHER NEW TECHNOLOGIES			·   Failure to develop successfully and commercialise gene editing technologies due to technical, intellectual property ('IP'), market, regulatory or financial barriers. ·   Competitors secure 'game- changing' new technology. ·   Consumer acceptance of gene edited proteins.			We stay aware of new technology opportunities through a wide network of academic and industry contacts. Our Genus Portfolio Steering Committee oversees our research, ensures we correctly prioritise our R&D investments and assesses the adequacy of resources and the relevant IP landscapes. We have formal collaboration agreements with key partners, to ensure responsible exploration and development of technologies and the protection of IP. The Board is updated regularly on key development projects.				No Change. Key initiatives continue to progress through the R&D life cycle, which includes the commercial viability of the product with the businesses, and we maintain the high level of investment needed to bring the end products to market. We work closely with regulators to make sure our products meet exacting standards. We are actively working with the US FDA to obtain regulatory approval for our PRRSv-resistant pigs (PRP) in 2025.
CAPTURING VALUE Coporate transactions			·   Failure to identify appropriate investment, merger, and divestment opportunities or to perform sound due diligence. ·   Failure to successfully integrate an acquired business.			We have a rigorous process to evaluate market opportunities aligned with our strategic plans, Values, and our aim to accelerate growth and create value for our shareholders, with all material projects being reviewed and approved by the Board. We also have a structured post-acquisition integration process focused on maximising value.				No Change. This year we acquired the remaining shares of Xelect, our aquaculture business in Scotland and have integrated it into our operations.
SUCCEEDING IN GROWTH MARKETS			·   Failure to appropriately develop our business in China and other growth markets.			Our organisation blends local and expatriate executives, supported by the global species teams, to allow us to grow our business in key markets, while managing risks and ensuring we comply with our global standards and comply with sanctions. We also establish local partnerships where appropriate, to increase market access.				No change. The ongoing global macroeconomic conditions, continuing conflicts with Russia-Ukraine and Israel-Palestine continue to limit growth opportunities. However, in the second half of the year we have gained new royalty customers in China, a sign of our competitive porcine products. We are also exploring opportunities in Southeast Asia. The risks to our business in Russia are described in note 4.

 

 

 

Risk			Risk description			How we manage risk			Risk change in FY24
Strategic Risks continued
cLIMATE CHANGE			·   Failure to lead the market in efficient and sustainable animal protein production and help our customers to meet the challenge of producing meat and milk the same way  as climate change increases demand to reduce carbon emissions. ·   Failure to fulfil our commitment to reduce the environmental impact of our own operations and implement our Climate Change Policy and TCFD reporting.			We have a global sustainability strategy and Climate Change Policy that are approved, and regularly reviewed, at Board level. Our Sustainability Committee oversees the implementation of the strategy and the annual objective setting process as well as monitoring progress using key performance indicators and our sustainability risk register. We have developed our 2030 emissions reduction plan (and 2050 net zero plan) and developed quantifiable, robust performance indicators in relation to life cycle carbon reduction (per generation) of pigs, beef and dairy cows.				No Change. There is increasing regulation and demand for transparency and accuracy of reporting on sustainability targets. We continue to develop our reporting capability to enable better accuracy. There is an increase in carbon cost and a notable change in more frequent weather-related events across the globe.   Our carbon reduction plans are on track to meet our 2030 goals and we have achieved a significant reduction in our intensity measures since 2019.
Operational Risks
PROTECTING IP			·   Failure to protect our IP could mean Genus-developed genetic material, methods, systems and technology become freely available to third parties.			We have a global, cross-functional process to identify and protect our IP. Our customer contracts and our selection of multipliers and joint venture partners include appropriate measures to protect our IP. We maintain IP appropriate landscape watches and where necessary conduct robust 'freedom to operate' searches, to identify third-party rights to technology.				Decreased. We continue actively to protect our IP by filing patents attributed to our R&D activity.   This year we concluded a long-term patent dispute with STgenetics.
ENSURING BIOSECURITY AND CONTINUITY OF SUPPLY			·   Loss of key livestock, owing to disease outbreak. ·   Loss of ability to move animals or semen freely (including across borders) due to disease outbreak, environmental incident or international trade sanctions and disputes. ·   Lower demand for our products, due to industry-wide disease outbreaks.			We have stringent biosecurity standards, with independent reviews throughout the year to ensure compliance. We investigate biosecurity incidents, to ensure learning across the organisation. We regularly review the geographical diversity of our production facilities, to avoid over-reliance on single sites.				No change. There continue to be global supply chain challenges driven by the current economic climate, increased trade sanctions, disease outbreaks and the continued spread of ASF, especially in China.
HIRING AND RETAINING TALENTED PEOPLE			·   Failure to attract, recruit, develop and retain the global talent needed to deliver our growth plans and R&D programmes.			We have a robust talent and succession planning process, including annual assessments of our global talent pool and active leadership development programmes. The Group's reward and remuneration policies are reviewed regularly, to ensure their market competitiveness, and we have a long-term retention incentive scheme. We work closely with several specialist recruitment agencies, to identify candidates with the skills we need.				Increased. The global economic challenges, the fight for talent, and our ABS Value Acceleration Programme increase the risk of employee turnover. However we have been able to attract and promote key talent to critical leadership roles for our ABS and PIC businesses.

 

 

 

Risk			Risk description			How we manage risk			Risk change in FY24
Operational Risks continued
CYBER SECURITY			·   Failure to adequately detect and mitigate a malicious cyber-attack by internal or external activists and the ability to quickly recover. ·   Failure to properly protect our data and systems from an attack.			We utilise a flexible multi-layered approach that focuses on employee awareness and training, policies, software, and a third-party 24/7 monitoring Security Operations Centre and follow ISO 27001 standards [and have cyber security insurance]. We continue to  improve our systems and data backup procedures and harden our servers to further strengthen our resilience and have a programme focused on continuous cyber security improvements. We have entered our final phase of our GenusOne programme which further strengthens our operational controls and IT security as we move to the cloud.				Increased. The rapid development and use of Artificial Intelligence by malicious actors increases the intensity and frequency for attacks to occur.   To mitigate these risks, we partner with our third-party Security Operations Centre to alert us of potential attacks, employ continuous employee awareness training, and have robust policies in place to mitigate any IT security incidents.
Financial Risks
MANAGING AGRICULTURAL MARKET AND COMMODITY PRICES VOLATILITY			·   Fluctuations in agricultural markets affect customer profitability and therefore demand for our products and services. ·   Increase in our operating costs due to commodity pricing volatility. ·   Longer-term influence of climate factors on the cost and availability of agricultural inputs (animal feed). ·   Geopolitical tensions and on-going conflicts in Russia-Ukraine, and the Middle East impacts agricultural markets.			We continuously monitor markets and seek to balance our costs and resources in response to market demand. We actively monitor and update our hedging strategy to manage our exposure. Our porcine royalty model and extensive use of third-party multipliers mitigates the impact of cyclical price and/or cost changes in pig production.				No Change. There continues to be slow economic recovery and global inflationary pressures have eased but cost pressures remain. Agricultural input prices are stabilising or reducing for producers in many of our markets. China has seen a small increase in pig prices and a reduction of input costs

 

 

 

 

 

 

Group Income Statement

For the year ended 30 June 2024

 

	Note		2024 £m	2023 £m
REVENUE	3		668.8	689.7
Adjusted operating profit	3		67.0	74.6
Adjusting items:
- Net IAS 41 valuation movement on biological assets	11		(23.2)	(16.9)
- Amortisation of acquired intangible assets	10		(5.8)	(7.7)
- Share-based payment expense			(7.0)	(6.0)
			(36.0)	(30.6)
Exceptional items (net)	4		(24.6)	(3.5)
Total adjusting items			(60.6)	(34.1)
OPERATING PROFIT			6.4	40.5
Share of post-tax profit of joint ventures and associates retained	13		19.1	10.5
Other gains and losses	5		(1.7)	2.7
Finance costs	6		(22.2)	(15.4)
Finance income	6		3.9	1.1
PROFIT BEFORE TAX		5.5		39.4
Taxation	7		(3.1)	(7.6)
PROFIT FOR THE YEAR			2.4	31.8
ATTRIBUTABLE TO:
Owners of the Company			7.9	33.3
Non-controlling interest			(5.5)	(1.5)
			2.4	31.8
EARNINGS PER SHARE
Basic earnings per share	8		12.0p	50.8p
Diluted earnings per share	8		11.9p	50.5p

 

	Note	2024 £m	2023 £m
Alternative Performance Measures
Adjusted operating profit		67.0	74.6
Adjusted operating loss attributable to non-controlling interest		0.9	0.4
Pre-tax share of profits from joint ventures and associates excluding net IAS 41 valuation movement		10.2	10.8
Adjusted operating profit including joint ventures and associates		78.1	85.8
Net finance costs	6	(18.3)	(14.3)
Adjusted profit before tax		59.8	71.5
Adjusted earnings per share
Basic adjusted earnings per share	8	65.5p	84.8p
Diluted adjusted earnings per share	8	65.0p	84.2p

 

Adjusted results are the Alternative Performance Measures ('APMs') used by the Board to monitor underlying performance at a Group and operating segment level, which are applied consistently throughout. These APMs should be considered in addition to statutory measures, and not as a substitute for or as superior to them. For more information on APMs, see APM Glossary.