Genus reports mixed full year, warns of currency headwinds
By Josh White
Date: Thursday 05 Sep 2024
(Sharecast News) - Genus reported strategic progress amid challenging market conditions, particularly in China, in its preliminary full-year results on Thursday, although it warned of potential currency headwinds going forward.
The FTSE 250 animal genetics company reported a mixed financial performance, with structural changes contributing to stronger results in the second half of the year ended 30 June.
In the latter half of the year, Genus recorded an adjusted operating profit, including joint ventures, of £40m - a 15% year-on-year increase in constant currency.
That was aided by £9.4m in management actions.
In contrast, the first half saw a 17% decline, bringing the full-year adjusted operating profit, including joint ventures, to 3% lower in constant currency and 9% lower in actual currency.
Adjusted profit before tax fell 8% in constant currency to £59.8m, while statutory profit before tax plunged 86% to £5.5m, due to a reduction in the value of biological assets and exceptional expenses of £24.6m.
Genus introduced a new cash conversion metric, achieving 71%, up from 53% in 2023.
Net debt increased to £248.7m, maintaining a ratio of 2.0x adjusted EBITDA.
Genus said it made significant strategic progress, after the ABS division implemented its value acceleration programme (VAP), which improved margins and cash generation, delivering a £7.3m profit benefit in 2024, with more savings expected in 2025.
The company also completed a review of its research and development, focusing on key work streams and achieving £2.4m in savings this year.
Notably, Genus made progress on its PRRS-resistant pig (PRP) programme, with favourable regulatory decisions in Brazil and Colombia and ongoing discussions with the US FDA, which was expected to approve the product by 2025.
The company also submitted applications to Canadian and Japanese regulators.
Divisional performance varied, as PIC saw resilient growth outside China, with royalty revenue increasing by 4% in constant currency.
However, PIC China's operating profit dropped 60% due to market difficulties and supply chain investments.
Meanwhile, ABS faced challenges, particularly in China, but the VAP programme helped mitigate profit declines.
Looking ahead, Genus said it expected stable or improving market conditions, with solid profit growth from PIC and a recovery in ABS profits in 2025.
However, the company remained cautious about China's market and anticipated currency headwinds of £8m to £9m if current exchange rates persisted throughout the next financial year.
"Genus made significant progress against its strategic priorities during the 2024 financial year," said chief executive officer Jorgen Kokke.
"I am confident that our decisive actions to structurally strengthen the group will yield significant benefits in the years to come."
Kokke said that in the 2025 period, the company would continue to execute against its strategic priorities, adding that it expected 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, and we now expect a currency headwind of approximately £8m to £9m in 2025, if current exchange rates continue throughout the fiscal year."
At 1011 BST, shares in Genus were down 3.24% at 1,735.95p.
Reporting by Josh White for Sharecast.com.
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