Interim Results
Genus PLC
07 June 2006
FOR IMMEDIATE RELEASE 7 June 2006
GENUS plc
Interim Results for the twelve months ended 31 March 2006
Genus plc, the world leading animal genetics company, which has changed its year
end to 30 June, announces interim results for the twelve months to 31 March
2006.
2006 2005
Restated for
FRS17
(see note 11)
Highlights (Adjusted)
Operating profit* from Continuing £16.9m £10.4m
Operations
Profit before tax from Continuing £13.4m £7.5m
Operations (note 2)
Earnings (note 8) £9.0m £6.9m
Basic EPS (note 8) 20.8p 19.0p
Highlights (Statutory)
Group turnover £219.4m £183.2m
Operating profit £6.3m £9.2m
Exceptional items, goodwill £13.1m £1.7m
amortisation and discontinued
operations losses
Profit before tax £1.1m £8.1m
Basic EPS (4.3)p 16.3p
• Group
- Operating profit from Continuing Operations* was up £6.5m (63%) to
£16.9m (2005: £10.4m)
o Operating profit* for the historical Genus businesses, before
unallocated costs, was up £3.2m (25%) to £16.1m (2005: £12.9m)
o Operating profit of £6.7m* from the Sygen business (acquired in
December 2005), before unallocated costs, was ahead of plan
- Sygen acquisition synergies exceeding original expectations
- Adjusted basic EPS of 20.8p was up 9% (2005: 19.0p)
- Net debt of £124m was better than plan
- Non-core and low margin veterinary and dental wholesaling operations divested
for £8.1m in cash.
*before exceptional items and goodwill amortisation
Bovine Genetics Division
- Sales of £96.9m were up 16% (2005: £83.6m), reflecting 11% volume
growth and improvements in price mix
- Record operating profit before goodwill amortisation and exceptional
items of £13.1m, was up 22.4% (2005: £10.7m)
- Three new high ranking bulls were added to the stud, including the top
ranked bull in USA
- £2.8m has been invested in four acquisitions in Australia, in line
with the strategy to expand in semen retailing - market share now 45%
Porcine Genetics Division
- Operating profit before goodwill amortisation and exceptional items
for four months post-acquisition period was £7.3m compared with £4.6m in the
equivalent prior year period
- Strong post-acquisition operating cash generation
- £1m investment in nucleus farm in Russia was sanctioned
Other businesses
- Animal Health and Development Consulting increased operating profit,
before goodwill amortisation and exceptional items, by 43% to £3.0m (2005:
£2.1m)
- Loss-making Shrimp business to be sold. Agreement reached in principle
to sell Brazilian shrimp business to an MBO team
Commenting on prospects Richard Wood, Chief Executive, said:
'Since our last results statement, we have achieved a momentous change for
Genus. The successful acquisition of Sygen in December 2005 has positioned Genus
as the world's leading animal genetics company, adding research opportunities
across the existing Group and across more species. We have concentrated on the
integration of Sygen and synergies of the acquisition since December and are
pleased to report these have exceeded our initial expectations.
'Additionally, the original Genus businesses have reported record results. We
have increased operating profit across Bovine Genetics, Animal Health and
Development Consulting in spite of variable conditions across international
markets and we have sold off two, non - core operations.'
'Overall, we view Group prospects positively and we look forward to the year
ahead with the many opportunities for the enlarged Group.'
Contact:
Richard Wood, Chief Executive Tel: 01256 347101
David Timmins, Finance Director Tel: 01256 347102
Charles Ryland/Suzanne Brocks
Buchanan Communications Limited Tel: 020 7466 5000
CHAIRMAN'S STATEMENT
Overview
I am very pleased to report, in this second interim results statement covering
the 12 months to 31 March 2006, that the acquisition of Sygen International plc
('Sygen') has been most successful and that the historical businesses of Genus
had a record year. Sygen International plc, the porcine and shrimp genetics
company, was acquired on 2 December 2005 for a consideration, excluding fees, of
£189m. This acquisition has positioned Genus as the world's leading animal
genetics company and enables research and development expenditure to be spread
throughout the Group and across more species. I am also very pleased to report
that the integration of the acquired businesses is progressing well and that the
synergy savings estimated at the time of acquisition are now expected to be
exceeded. The acquisition was financed by a placing of 16.9 million new ordinary
shares at 325p per share, the company receiving net proceeds of £53m, and new
bank borrowing facilities of £180m.
During the reporting period, in line with our stated strategy, we divested two
non-core businesses in order to release cash and to focus management resource on
the integration of the Sygen businesses. In addition, as already reported, we
closed a small non-core consulting business to enable Development Consulting to
become a fully stand-alone business.
Results
For the 12 month period ended 31 March 2006, Group turnover increased by 19.8%
to £219.4m (2005: £183.2m). Group turnover for Continuing Operations increased
by £64.0m to £177.9m (2005: £113.9m) after reflecting both the Sygen acquisition
and the disposals in the reported period. Of this increase, £48.5m was from
Sygen.
Bovine Genetics' turnover increased by 15.9% to £96.9m (2005: £83.6m). Turnover
in the continuing operation of Animal Health, primarily the licensed veterinary
pharmaceutical business, increased by 14.7% to £7.8m (£6.8m) and Development
Consulting increased its turnover by 3% to £24.7m (£24.0m).
Operating profit from Continuing Operations was £16.9m (before exceptional items
and goodwill amortisation) and increased by £6.5m (62.5%) over the previous year
(2005: £10.4m). Sygen contributed £5.3m. Bovine Genetics delivered a record
operating profit of £13.1m (before exceptional items and goodwill amortisation),
an increase of £2.4m (22.4%) over the previous year (2005: £10.7m).
The effective rate of tax on adjusted earnings was 33% (2005: 30%). This
increase mainly reflects the expected higher tax rate of the acquired business.
Adjusted earnings (note 8), increased by £2.1m (30%) to £9.0m (2005: £6.9m).
Adjusted earnings per share increased by 1.8p (9%) to 20.8p (2005: 19.0p). This
increase was achieved after the first time adoption of FRS17, which reduced
after tax earnings by £0.6m (2005 restated: £0.4m) equivalent to 1.4p per share
(2005 restated: 1.3p per share). Adjusted earnings is also stated after the
non-cash expense for the Long Term Incentive Plan ('LTIP'), which has increased
by £0.7m to £0.8m (2005: £0.1m) to reflect the more favourable outlook of the
Group following the successful Sygen acquisition.
Exceptional items totalling £1.7m within operating profit, principally comprised
£0.7m relating to the integration and restructuring of Sygen and, as already
reported, £0.9m relating to the restructuring of the UK bovine operation and the
closure of non-core consulting operations.
As part of our objective to divest non-core businesses, we sold the Group's
non-core veterinary wholesaling business on 28 October 2005 for £7.1m in cash.
Prior to disposal, we recorded a goodwill impairment charge of £2.2m in the 6
month results to 30 September 2005. The loss recorded on disposal was £1.9m. On
22 February 2006, the Group's non-core dental wholesaling business was sold for
£1m cash. The profit on disposal of £0.2m was offset by a £0.7m goodwill
write-off to produce a loss of £0.5m and is also recorded after operating
profit, giving a total loss on disposal of discontinued business of £2.4m.
After a thorough review, the Board has decided to divest the loss-making shrimp
business to concentrate resources and investment on the much larger bovine and
porcine businesses. In accordance with accounting standards, the net tangible
assets of the shrimp business were valued on acquisition on the basis of
existing use. However, following the decision to divest, an asset impairment
charge of £2.3m has been made in the period.
The exceptional costs, loss on discontinued operations, asset impairment in the
shrimp business and goodwill amortisation, reduced the Group's operating profit
from Continuing Operations by £10.6m (of which approximately £9.4m was non-cash)
from £16.9m to £6.3m (2005: £9.2m). Profit before tax was £1.1m (2005: £8.1m)
reflecting the loss on sale of non-core discontinued operations and the higher
interest charge resulting from the acquisition debt financing. Basic loss per
share was 4.3p (2005: profit 16.3p).
During the year, a one-off profit of £755,000 was realised, principally from the
disposal of two properties in the Bovine division.
Cash & Net Debt
A strong second half performance from Bovine Genetics and from Porcine Genetics
since acquisition, increased cash flow from operating activities for the twelve
months ended 31 March 2006. After adjusting for £5.7m payments made in respect
of fair value adjustments, cashflow from operating activities was £12.6m (2005:
£9.4m).
On 26 October 2005, the Company secured credit facilities from Barclays Bank
totalling £180m. These comprised a £110m term loan and a £70m multi-currency
revolving credit facility. Disposal proceeds of £8.1m from the two non-core
divestments in Animal Health reduced debt.
Two residual properties from Animal Health have since been sold after the period
end for £1.5m, realising a profit of £0.8m, which will be recognised in the
period to 30 June 2006.
Prior to the period end, £10m had been repaid to the bank, so reducing the term
loan. Net debt reduced from a peak of £130m to £124m by the period end, which
was better than plan.
Dividend
In line with previous years and our stated dividend strategy, the Board does not
recommend an interim dividend due to the high cost of distribution to the
relatively large number of shareholders. As previously reported, the Company has
changed its accounting reference date to 30 June. The Board currently expects to
recommend a final dividend when the results of the fifteen month period to 30
June 2006 are known.
World Agricultural Markets
Market conditions have been stable in the USA for both bovines and porcines.
Milk production was up by 5% on last year as cow numbers rose. Beef prices fell
as farmers put surplus animals to market early in order to protect against
increasing feed prices.
US pig prices were 15% lower than last year but, with prices still between $40
and $50/cwt, most producers remained profitable.
Conditions remained favourable in Latin America for milk producers but the
extensive outbreak of foot and mouth disease in Brazil has severely curtailed
beef and pig exports so that prices fell sharply. There was some pricing
'over-spill' into Argentina.
In Europe, farmer concern over the EU price support mechanism, introduced in
2005, remains but response has been less acute and markets have returned to more
normal levels. However, the change in price support and the established pattern
of lower milk prices, prevailing for the last few years, is driving farmers to
increase their operations or opt out of the business. As a result, cow numbers
are falling as smaller farmers leave the industry. The larger farmers are, of
course, the most important for the future of Genus. Following the announcement
of the lifting of the export ban on UK animals, prices for calves are rising
steeply.
Many Far Eastern markets have been depressed in the porcine sector, particularly
the large Chinese market.
The world market for shrimps has continued to be depressed, despite the
imbalance in supply and demand, because of the various outbreaks of disease last
year.
Progress with the integration of Sygen
Following completion of the acquisition on 2 December 2005, the Sygen Board left
the business. We undertook an extensive communication exercise with all staff
and established a new, integrated, geographical business structure. We have
since undertaken a careful review of all business sectors. No material
information about the business was discovered that had not been identified
during the comprehensive due diligence process.
As a result of the reviews, we are concentrating on four main areas:-
1. Research & Development
• Reset priorities using commercial targeting.
• Overlapping infrastructures being combined to create a fundamental
research facility of excellence in Wisconsin whilst reducing cost.
2. Synergy Cost Savings
• Begun to merge back offices in the USA with other regions to follow.
• Announced the closure of the Sygen operations in Kentucky and the move
of sales and sales support staff for porcines to offices close to Nashville,
Tennessee.
• Closed the Sygen offices in Oxford, transferring most of the UK
operating staff to the Genus offices in Nantwich, Cheshire. Continuing head
office staff have been transferred to the Genus head office in Basingstoke.
3. Investment in Core Business
• Investing £1m in a nucleus porcine herd and operations in Russia.
4. SyAqua Strategy
• Announced the divestment of the SyAqua shrimp business.
• Secured intellectual property and potentially saleable parent lines.
Bovine Genetics - 44% of Group Turnover
In stable market conditions the increases to the sales force in the USA, Canada
and Europe, both this year and last year, drove up sales volume by 11% to 10.5
million doses. The new high ranking bulls added to the stud from the
increasingly successful R&D programme helped increased average prices, rising by
12% in the beef sector and by 10% in dairy. Operating margins increased to 13.5%
from 12.8% in the prior year as a result of higher average selling prices and
efficiency improvements, which more than offset the impact of sales growth
occurring in lower priced markets. Operating profit before exceptional items and
goodwill amortisation of £13.1m was up 22.4% (2005: £10.7m).
We have made further progress in developing our retail business in Australia by
adding four more small acquisitions to the one completed in 2004/5. As a result,
we increased our market share from 33% to 45% and placed the business in a good
position to take advantage of the new selling season which is just beginning.
Notable amongst a number of successes in Europe has been the growth of sales and
profits in Italy. Last year the business introduced the contract 'Reproductive
Management Service' successfully pioneered with large farmers in the USA,
whereby customers sign-up for a contract mating service for their cows. Computer
based mating programmes are used and the service binds the customer to use Genus
bulls and insemination services in order to achieve measurable improvements in
fertility for the herd. In its first year of operation in Italy, more than
10,000 cows have been contracted for the service and this has increased sales by
18% to £3.9m. (2005: £3.3m).
In Latin America, operating profit was flat because of foot and mouth disease in
Brazil but the Mexican business remained strong and the new Argentinian
operation made a small profit in its first year.
Porcine Genetics - 21% of Group Turnover (4 Months Only)
In the four months since Genus acquired this business it has performed ahead of
both budget and the same period last year. The main drivers have been higher
royalty income in the USA and reduced operating costs in all regions. These have
more than offset a softening of pig meat prices in the USA and very low prices
in the Far East. Operating profit before exceptional items and goodwill
amortisation for the period since acquisition was £7.3m.
The European business has also benefited strongly from lower operating costs and
has been profitable throughout the period. We are considering further
reorganisation aimed at improving profitability commencing with the Spanish
operations. We will be making these changes in the new financial year. With
sales at a similar level to the USA, Europe had been loss-making for several
years because of the fragmented nature of the market.
In the growing Latin American market, an outbreak of foot and mouth disease has
temporarily reduced the contribution from the joint venture in Brazil but the
Mexican and Chilean businesses remained strong.
Far Eastern markets have been depressed all year, suffering from disease
outbreaks, over-supply and resultant low pig meat prices. However, the
businesses remained profitable. Both the subsidiary and joint venture in China
suffered reversals. Although profitable overall, they were substantially down on
last year. Nevertheless, the Far East is the area with the highest growth
potential in the long-term because of population density, the increasing level
of protein consumption and the massive number of pigs farmed. However, most of
the farms are small and inefficient and it will take time before the industry
consolidates into the large units similar to those which are the principal
customers for porcines in the USA and Europe.
The other area of high growth potential is Eastern Europe. In this market new
money is being diverted into large intensive pig units and we believe that
opportunities exist to grow with that change by investing selectively in
countries as new farms are established. In this regard, we have recently
sanctioned an investment of £1m to set up a nucleus farm in Russia adjacent to a
newly established farm customer. The investment will protect our intellectual
property and reduce transport costs from alternative supply sources in Poland
and the Czech Republic.
Shrimp Genetics - 1% of Group Turnover (4 Months Only)
Despite moving quickly to reduce costs, the shrimp business has accrued losses
in its first four months of Genus ownership before coming into the main selling
season. However, we believe it is unlikely that profits from the selling season
will be sufficient to offset losses in the full year to June 2006. The operating
loss before exceptional items and goodwill amortisation for the period since
acquisition was £0.7m.
Having reviewed the prospects for the business carefully, we have decided that
our efforts and investments are better directed at achieving the growth and
synergies available in the larger bovine and porcine businesses. The shrimp
market is volatile and customers are not yet prepared to pay for the added-value
potential from expensive research, all of which is of a long-term nature in any
event. Accordingly, we have decided that the business should be divested at the
earliest opportunity. Indeed, we have already secured agreement, in principle,
to sell the Brazilian shrimp business to an MBO team. We are actively exploring
offers for the other shrimp businesses.
Research & Development
On an historical basis, Genus & Sygen together have spent £16.4m per year on R&
D. The majority of expenditure, in both cases, has been on the development of
elite animals by traditional selection processes. This has produced a successful
and competitive product range in both bovines and porcines.
In this regard, Boar 380 is making strong in-roads into world markets and will
maintain porcine's competitive edge over the next few years. For Europe and the
Far East, it will be important that new lines are selected from the extensive
porcine nucleus programmes for development to meet the niches in the European
amalgamation of these very varying product markets.
The increasing success of the bull selection programme has been reported over
the last two years, following changes to the process made in 2000/1. These
changes have resulted in a significant strengthening of the stud this year. (It
takes 5 years to develop and test a new bull.) In particular, we are pleased to
announce that a new bull, called Bolton, entered the US ranking as number one.
Bolton is very highly rated in terms of the production and lifespan potential of
his daughters and is likely to sell well at high prices worldwide.
The newly amalgamated R&D programme will continue to invest most of its
expenditure on traditional selection programmes.
In the fundamental research which augments this selection process, Sygen
concentrated most expenditure on genomics whilst Genus spread its investment
across a number of projects, including sexed semen, health, fertility and, most
importantly, semen physiology.
The new combined programme will maintain the same target list but the proportion
of expenditure will be more evenly split and overlap reduced so that cost
productivity will be improved and all projects will target both porcine and
bovine sectors.
We are in the process of creating a new centre of excellence for this research
in the extensive Genus laboratories in Wisconsin, USA.
Animal Health - 23% of Group Turnover
This division had a most successful year achieving an operating profit from
continuing operations, before goodwill amortisation, of £1.9m, some 35% higher
than last year, despite having divested the low margin veterinary wholesaling
business for £7.1m in cash on 28 October 2005. The property assets not sold with
the business are now being divested. All but one have recently been sold and the
£1.5m proceeds and £0.8m book profit will be recorded in our 15 month results to
30 June 2006.
The residual licensed pharmaceutical business increased its year on year sales
by 6% to £7.0m and its operating profit of £1.9m was 12% higher than last year
(2005: £1.7m). Both sales and profit growth have arisen from the successful
launch of a number of small new products together with a stalwart defence of
established products against aggressive competition.
Development Consulting - 11% of Group Turnover
The business had a good year, generating an operating profit of £1.1m, 38%
higher than last year (2005: £0.8m), despite the disruption arising from the
nearby Buncefield Oil Depot explosion on 11 December 2005.
The team proved its expertise in project management for which it earns its
overseas consultancy contracts, by operating a virtual office for a few weeks
and then by relocating to new temporary offices, while, at the same time,
winning both new contracts and contract extensions.
As announced in November, we closed all non-core consultancy offices during the
first half year. As a result, the Development Consulting business is now fully
stand-alone and can be divested at the appropriate time.
Employees
I am pleased to have the opportunity of welcoming all the Sygen staff as new
members of the Genus team and am looking forward to working with them to achieve
an even more substantial future for the enhanced Group.
During the process of the acquisition, existing Genus staff performed well,
achieving record results. I would like to thank them for their efforts during
this period of great change and much opportunity for the Company.
Outlook
We are confident that the enlarged group will meet market expectations in the
period to June 2006.
For the year ahead, our new bulls, continued strength of the porcine lines and
the savings made in operating expenses, should support strong profit growth,
despite softening markets limiting volume growth.
We believe the new emphasis on research targeting will hasten and broaden the
chance of a commercial breakthrough. The areas of likely savings anticipated
from the integration of Sygen have been confirmed and implementation is ahead of
both plan both in time and quantum. As a result, the group will be materially
stronger and more competitive than either business could have been alone.
Summarised Group Profit and Loss Account
Year ended 31 March 2006
Continuing Operations Discontinued Unaudited Audited
Before Exceptional Operations Year Year
exceptional items and (note 4) ended ended
items and goodwill 31/3/06 31/3/05
goodwill amortisation Restated
amortisation for FRS 17
(note 11)
£000 £000 £000 £000 £000
Turnover
Continuing operations 129,346 - - 129,346 113,904
Acquisitions (note 12) 52,727 52,727 -
---------- ---------- -------- --------- ---------
182,073 - - 182,073 113,904
Discontinued operations
(note 4) - - 41,477 41,477 69,345
---------- ---------- -------- --------- ---------
Group and share of
joint ventures 182,073 - 41,477 223,550 183,249
Less share of joint
ventures (4,197) - - (4,197) -
---------- ---------- -------- --------- ---------
Group Turnover 177,876 - 41,477 219,353 183,249
---------- ---------- -------- --------- ---------
---------- ---------- -------- --------- ---------
Adjusted operating
profit (note 11) 16,944 - (32) 16,912 10,931
Amortisation of
goodwill - (4,189) (166) (4,355) (1,747)
Exceptional impairment
of goodwill - - (2,239) (2,239) -
Exceptional impairment
of net assets (note 3) - (2,342) - (2,342) -
Other exceptional items
(note 3) - (1,663) - (1,663) -
---------- ---------- -------- --------- ---------
Operating profit
(note 2) 16,944 (8,194) (2,437) 6,313 9,184
Of which;
- Continuing
operations 11,616 (2,491) - 9,125 8,850
- Acquisitions 5,328 (5,703) - (375) -
---------- ---------- -------- --------- ---------
16,944 (8,194) - 8,750 8,850
- Discontinued
operations (note 4) - - (2,437) (2,437) 334
---------- ---------- -------- --------- ---------
Group operating
profit 16,944 (8,194) (2,437) 6,313 9,184
Share of operating
profit of joint
ventures 350 - - 350 -
Total operating profit: 17,294 (8,194) (2,437) 6,663 9,184
Group and share of
joint ventures
Loss on sale of
discontinued operations
(note 4) (2,427) -
Profit on disposal of
fixed assets 755 298
Net interest payable and
similar charges (note 5) (3,924) (1,386)
--------- ---------
Profit on ordinary
activities before
taxation 1,067 8,096
Tax on profit on
ordinary activities
(note 6) (2,936) (2,193)
--------- ---------
(Loss) / profit on
ordinary activities
after taxation (1,869) 5,903
Dividend (note 7) (23) (2,788)
--------- ---------
Retained (loss) / profit
for the financial period (1,892) 3,115
========= =========
(Loss)/earnings per share
- adjusted basic (note 8) 20.8p 19.0p
- adjusted diluted (note 8) 20.4p 18.7p
- basic (note 8) (4.3)p 16.3p
- diluted (note 8) (4.3)p 16.1p
Dividend per
share - 7.5p
SUMMARISED GROUP BALANCE SHEET
At 31 March 2006
Unaudited at Audited
31 March at 31 March
2006 2005
Restated
for FRS 17
(note 11)
£000 £000
Fixed assets
Intangible assets 177,958 26,062
Tangible assets 39,324 16,697
Investments:
- Joint ventures 3,772 -
- Other 1,195 269
--------- --------
222,249 43,028
--------- --------
Current assets
Stocks 21,487 17,396
Debtors 53,448 36,846
Cash at bank and in hand 19,692 7,559
--------- --------
94,627 61,801
Creditors: Amounts falling due within one
year (63,660) (48,479)
--------- --------
Net current assets 30,967 13,322
--------- --------
Total assets less current liabilities 253,216 56,350
Creditors: Amounts falling due after more
than one year (128,032) (282)
Provisions for liabilities and charges (7,734) (923)
--------- --------
Net assets excluding pension liabilities 117,450 55,145
Pension liabilities (16,019) (6,643)
--------- --------
Net assets 101,431 48,502
--------- --------
Capital and reserves
Called up share capital 5,522 3,726
Share premium account 92,136 39,899
Treasury shares (186) (128)
Profit and loss account 3,959 5,005
--------- --------
Equity shareholders' funds (note 10) 101,431 48,502
--------- --------
SUMMARISED GROUP CASH FLOW STATEMENT
Year ended 31 March 2006
Unaudited Audited
Year Year
ended ended
31/3/06 31/3/05
£000 £000
Net cash inflow from operating activities
(note 9) 6,897 9,403
Returns on investments and servicing of
finance (3,658) (1,119)
Taxation (3,139) (2,823)
Capital expenditure and financial investments 1,726 (4,096)
Acquisitions (196,034) (2,225)
Disposals 6,152 -
Equity dividends paid (2,859) (2,298)
------------ -----------
Net cash outflow before management of liquid
resources and financing (190,915) (3,158)
Issue of ordinary share capital 56,832 2,938
Capital element of finance lease payments (494) (949)
Increase / (decrease) in borrowings 132,530 (2,595)
------------ -----------
Net cash inflow / (outflow) from financing 188,868 (606)
------------ -----------
Decrease in cash in the period (2,047) (3,764)
============ ===========
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
Unaudited Audited
Year Year
ended ended
31/3/06 31/3/05
£000 £000
Decrease in cash in the period (2,047) (3,764)
Repayment of loan notes - 1,637
New long term loans (133,890) (437)
Repayment of bank loans 1,360 1,395
New finance leases (71) (154)
Cash balances acquired with subsidiaries 17,380 -
Repayment of capital element of finance lease
contracts 565 1,103
------------ -----------
Change in net debt resulting from cash flows (116,703) (220)
Exchange differences and other non-cash
movements 99 210
------------ -----------
Movement in net debt in the period (116,604) (10)
Net debt at 1 April (7,468) (7,458)
------------ -----------
Net debt at 31 March (124,072) (7,468)
------------ -----------
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
Unaudited Audited
Year Year
ended 31/3/06 ended
31/3/05
Restated
for FRS 17
£000 £000
(Loss)/Profit for the period (1,892) 5,903
Exchange adjustments 3,161 (176)
FRS 17 actuarial loss, net of deferred tax (3,094) (982)
-------- --------
--------
Total recognised gains and losses relating to the
period (1,825) 4,745
Prior year adjustment - Impact of FRS17 adoption
(note 11) (6,643) -
-------- --------
Total recognised gains and losses since last annual
report (8,468) 4,745
======== ========
Notes to the interim results
1 Basis of preparation
The interim results, which are unaudited, have been prepared on the basis of the
accounting policies set out in the Group's statutory accounts for the year ended
31 March 2005, except for the first time adoption of Financial Reporting
Standard (FRS) 17, 'Accounting for Retirement Benefits' which the company
adopted on 1 April 2005. The adoption of FRS 17 gives rise to a prior period
adjustment, details of which are given in note 11.
The interim results are unaudited and do not constitute statutory accounts as
defined in section 240 of the Companies Act 1985. The financial information
relating to the year ended 31 March 2005 is derived from the statutory accounts
which have been delivered to the Registrar of Companies. The report of the
auditors on those accounts was unqualified and did not contain a statement under
section 237 (2) or 237 (3) of the Companies Act 1985.
The interim results were approved by the Board of Directors on 7 June 2006.
2 Segmental analysis
Turnover Operating profit before goodwill
amortisation and exceptional items
Unaudited Audited Unaudited Audited
Year Year Year Year
ended ended ended ended
31/3/06 31/3/05 31/3/06 31/3/05
Restated Restated
for FRS 17 for FRS 17
(note 11) (note 11)
£000 £000 £000 £000
Area of activity
Group and share of
joint ventures:
Bovine Genetics 96,934 83,575 13,095 10,719
Porcine
Genetics 50,730 - 7,340 -
Development
Consulting 24,658 23,954 1,088 792
Animal Health 7,840 6,850 1,937 1,354
Unallocated
costs - - (5,845) (2,506)
Less: Share of
joint ventures
(Porcine
Genetics) (4,197) - - -
--------- --------- --------- ---------
Continuing
operations
before Shrimp
Genetics 175,965 114,379 17,615 10,359
Shrimp Genetics 1,997 - (671) -
--------- --------- --------- ---------
Continuing
operations 177,962 114,379 16,944 10,359
Inter-segmental
sales (86) (475) - -
Discontinued
operations 41,477 69,345 (32) 572
--------- --------- --------- ---------
Total 219,353 183,249 16,912 10,931
--------- --------- --------- ---------
2 Turnover and segmental analysis continued
Operating Profit
Unaudited Audited
Year Year
ended ended
31/3/06 31/3/05
Restated
for FRS 17
(note 11)
£000 £000
Area of activity
Group and share of joint ventures:
Bovine Genetics 11,073 9,727
Porcine Genetics 4,362 -
Development Consulting 1,056 761
Animal Health 1,500 868
Unallocated Costs (5,845) (2,506)
Less: Share of joint ventures (Porcine Genetics) (350) -
--------- ----------
Continuing operations before Shrimp Genetics 11,796 8,850
Shrimp Genetics (3,046) -
--------- ----------
Continuing operations 8,750 8,850
Discontinued (2,437) 334
--------- ----------
Total 6,313 9,184
--------- ----------
Turnover Operating Profit
Unaudited Audited Unaudited Audited
Year Year Year Year
ended ended Ended ended
31/3/06 31/3/05 31/3/06 31/3/05
Restated Restated
for FRS 17 for FRS 17
(note 11) (note 11)
Geographical region of origin £000 £000 £000 £000
Group and share of joint ventures:
United Kingdom 72,430 68,675 5,912 6,640
Europe 20,823 5,063 1,663 1,632
North America 63,104 32,373 5,492 332
Rest of the world 25,802 8,266 1,878 2,752
Unallocated costs - 2 (5,845) (2,506)
Less: Share of joint ventures
(Porcine Genetics) (4,197) - (350) -
--------- --------- --------- ---------
Continuing operations 177,962 114,379 8,750 8,850
Inter-segmental sales (86) (475) - -
Discontinued 41,477 69,345 (2,437) 334
--------- --------- --------- ---------
Total 219,353 183,249 6,313 9,184
--------- --------- --------- ---------
Porcine Genetics. United Kingdom includes £2.2m of turnover and £(0.4)m of
operating profit, the Europe region includes £15.4m of turnover and £0.1m of
operating profit, the North America region includes £21.7m of turnover and £2.9m
of operating profit, the Rest of the world region includes £11.4m of turnover
and £1.8m of operating profit, all relating to the acquisition of Sygen
International plc during the period (see note 12).
Shrimp Genetics. The Rest of the World region includes £2.0m of turnover and
£(3.0)m of operating loss, relating to Shrimp Genetics acquired with the
acquisition of Sygen International plc during the period (see note 12).
2 Turnover and segmental analysis continued
Discontinued turnover and operating profit derives from the veterinary product
and dental wholesale distribution businesses (formerly part of the Animal Health
division) and originating in the United Kingdom.
Turnover
Unaudited Audited
Year Year
ended ended
31/3/06 31/3/05
Restated
for FRS 17
(note 11)
£000 £000
Geographical region of destination
United Kingdom 46,576 43,552
Europe 37,332 19,652
North America 52,481 24,522
Rest of the world 41,487 26,178
--------- ---------
Continuing operations 177,876 113,904
Discontinued 41,477 69,345
--------- ---------
Total 219,353 183,249
--------- ---------
Discontinued turnover was made to customers in the United Kingdom.
Unaudited Audited
Year Year
ended ended
31/3/06 31/3/05
Restated
for FRS 17
(note 11)
£000 £000
Analysis of continuing operations
Turnover 177,876 113,904
-------- --------
Operating profit:
Group and share of joint ventures 17,294 8,850
Net interest payable and similar charges (3,924) (1,386)
-------- --------
Profit before taxation on continuing operations before
exceptional items and goodwill amortisation 13,370 7,464
-------- --------
3 Other exceptional items
Other exceptional items of £1,663,000 in the year to March 2006 comprise
£704,000 relating to the integration and restructuring of the Porcine Genetics
business, £456,000 relating to costs associated with the closure of the
Strategic Consulting business, £470,000 relating to the restructuring of the
Group's UK Bovine operation and £33,000 relating to integration of Shrimp
Genetics.
Following the decision to divest the SyAqua Shrimp Genetics business, an
exceptional impairment of net assets charge of £2,342,000 has been recognised in
operating profit in the period, to write down the carrying value of the net
assets of this business segment to its estimated recoverable amount, excluding
any future operating losses and costs of disposal.
4 Discontinued Operations
On 28 October 2005 the Group completed the divestment of its non-core veterinary
product wholesale business for a total of £7.1 million in cash. For the year
ended 31 March 2005 the business employed 125 staff and generated turnover of
£66 million and an operating profit of £0.4 million before allocation of central
costs, on net assets of £6 million.
On 22 February 2006 the Group completed the divestment of its non-core dental
product wholesale business for a total of £1m in cash. For the year ended 31
March 2005 the business employed 16 staff and generated turnover of
approximately £3.0m and an operating profit of £0.1m before allocation of
central costs, on net assets of £0.8m.
5 Net interest payable and similar charges
Unaudited Audited
Year Year
ended ended
31/3/06 31/3/05
£000 £000
Interest payable on bank loans and overdrafts 3,760 1,036
Interest payable on loan notes - 39
Finance charges payable under finance lease and hire
purchase contracts 12 43
Amortisation of debt issue costs 181 72
Net interest cost in respect of pension schemes 141 183
Other similar charges 19 13
--------- ---------
Total interest and similar charges payable 4,113 1,386
Bank interest receivable (181) -
Other interest receivable (8) -
--------- ---------
Total interest receivable (189) -
--------- ---------
Net interest payable 3,924 1,386
--------- ---------
6 Taxation
The taxation charge for the period is based on the estimated effective tax rate
for the full year of 32.9% (2005: 30%). The total tax charge for the period has
been reduced by a credit of £690,000 in respect of prior years, and a credit of
£531,000 in respect of exceptional items.
7 Dividends
The dividend charged in the period ended 31 March 2006 of £23,000 represents the
final dividend for the year ended 31 March 2005 on new shares issued subsequent
to the year end.
8 Earnings per share
The basic earnings per share is based on a loss after tax for the period of
£1,869,000 (31/3/2005: profit: £5,903,000) and the weighted average number of
ordinary shares in issue of 43,034,326 (31/3/2005: 36,208,931).
The adjusted earnings per share of 20.8p (31/3/2005: 19.0p) is based on adjusted
earnings as set out below and the weighted average number of ordinary shares in
issue.
Unaudited Audited
Year Year
ended ended
31/3/06 31/3/05
Restated
for FRS 17
£000 £000
Profit before tax 1,067 8,096
Add: Impairment of goodwill 2,239 -
Impairment of SyAqua assets 2,342 -
Operating exceptional items 1,663 -
Goodwill amortisation 4,355 1,747
Loss on sale of discontinued operations 2,427 -
(Profit)/loss on disposal of properties (755) (298)
Less: taxation (2,936) (2,193)
--------- --------
10,402 7,352
Less: Associated taxation on adjustments (747) (179)
Tax credits relating to prior years (690) (300)
--------- --------
Adjusted earnings 8,965 6,873
--------- --------
The diluted earnings per share is based on a loss for the period of £1,869,000
(31/3/2005: profit: £5,903,000) and on 44,025,615 (31/3/2005: 36,755,735)
diluted weighted average ordinary shares, calculated as follows:
Unaudited Audited
Year Year
ended ended
31/3/06 31/3/05
000's 000's
Basic weighted average number of shares 43,034 36,209
Dilutive potential ordinary shares:
Employee share options 992 547
---------- ----------
44,026 36,756
---------- ----------
9 Reconciliation of operating profit to net cash flow from operating activities
Unaudited Audited
Year Year
ended ended
31/3/06 31/3/05
Restated
for FRS 17
£000 £000
Operating profit 6,313 9,184
Long term incentive plan expense 779 102
Depreciation 4,544 3,549
Amortisation of milk quota 7 8
Amortisation of goodwill 4,355 1,747
Exceptional impairment of goodwill 2,239 -
Exceptional impairment of net assets 2,342 -
Difference between pension charge and cash (880) -
contributions
Increase in stocks (1,671) (1,262)
Decrease/(increase) in debtors 5,042 (3,520)
(Decrease) in creditors (16,173) (405)
------------- -----------
Net cash inflow from operating activities 6,897 9,403
------------- -----------
10 Reconciliation of Group shareholders' funds
Unaudited Audited
Year Year
ended ended
31/3/06 31/3/05
Restated
for FRS 17
£000 £000
(Loss)/profit for the period (1,869) 5,903
Dividends (23) (2,788)
--------- ----------
(1,892) 3,115
Other recognised gains and losses relating to the period
(net) 67 (1,158)
Movements in share capital 53,975 2,938
2004 Performance share plan 779 102
--------- ----------
Net additions to shareholders' funds 52,929 4,997
Opening shareholders' funds (originally £55,145,000
before 48,502 43,505
deducting prior year adjustment of £6,643,000)
--------- ----------
Closing shareholders' funds 101,431 48,502
--------- ----------
11 Adoption of Financial Reporting Standard (FRS) 17, 'Accounting for Retirement
Benefits'.
The Company has made a prior period adjustment as a result of its adoption in
the period of Financial Reporting Standard (FRS) 17, 'Accounting for Retirement
Benefits'.
The adjustment to opening profit and loss account reserves amounts to £5,200,000
at 31 March 2004, representing the FRS 17 net pension liability at that date. In
accordance with the transitional arrangements of FRS 17, full disclosure of the
scheme deficit, the assumptions used in the valuation of the scheme and the
impact its full adoption would have on the Group's profit and loss account,
balance sheet and statement of total recognised gains and losses has been made
in the Company's report and accounts for the year ended 31 March 2005.
For information purposes additional information on the impact on certain profit
and loss account items of adopting FRS 17 has been given below.
Unaudited Audited
Year Year
ended ended
31/3/06 31/3/05
£000 £000
Adjusted operating profit
Before FRS 17 17,684 11,389
Impact of FRS 17 (740) (458)
----------- -----------
As reported / restated 16,944 10,931
----------- -----------
Interest charge
Before FRS 17 (3,972) (1,203)
Impact of FRS 17 (141) (183)
----------- -----------
As reported / restated (4,113) (1,386)
----------- -----------
Adjusted EPS
Before FRS 17 22.2p 20.3p
Impact of FRS 17 (1.4)p (1.3p)
----------- -----------
As reported / restated 20.8p 19.0p
----------- -----------
12 Acquisitions
On 2 December 2005 the company purchased 100% of the issued share capital of
Sygen International plc for a total cash consideration of £192.4m. The total
provisional adjustments required to the book values of the assets and
liabilities of Sygen International plc in order to present the net assets at
fair values in accordance with group accounting principles were £18.3m, details
of which are set out below, together with the resultant amount of goodwill
arising. The purchase has been accounted for as an acquisition.
From the date of acquisition to 31 March 2006 Sygen International plc
contributed £48.5m to turnover, £5.7m to profit before interest and goodwill
amortisation, and £5.8m to profit before goodwill amortisation, but after
interest. Sygen International contributed £1m to the group's net operating cash
flows, paid £0.3m in respect of interest and £0.4m in respect of taxation.
12 Acquisitions continued
In the last financial year to June 2005, Sygen International plc made a profit
after tax and minority interests of £3.2m. The summarised profit and loss
account for the period from 1 July 2005 to 2 December 2005 shown on the basis of
the accounting policies of Sygen International plc prior to the acquisition are
as follows:
£000
Turnover 60,855
Operating Profit before exceptional items 3,688
Exceptional items (8,124)
-------
Operating loss (4,436)
-------
Loss before taxation (4,265)
Taxation (1,300)
-------
Loss attributable to shareholders (5,711)
Exchange adjustments 4,178
-------
Total recognised losses for the period (1,533)
-------
Exceptional items include £6.2m in respect of advisors fees incurred by Sygen on
sale of their business to Genus and £1.2m in respect of fees relating to an
aborted acquisition.
Fair value table
Sygen International Book Revaluations Accounting Other Provisional
plc acquisition value policy fair value
alignment
£000 £000 £000 £000 £000
Fixed assets
Intangible
fixed assets 9,474 (9,474) -
Tangible fixed
assets 28,346 (157) 28,189
Investments in
joint ventures 4,662 4,662
Current assets
Stock 7,835 (857) (16) 6,962
Debtors 18,201 133 18,334
Cash 17,380 17,380
-------- --------- --------- ------ ----------
Total assets 85,898 (10,488) - 117 75,527
-------- --------- --------- ------ ----------
Creditors
Creditors (16,871) (689) (7,288) (24,848)
Provisions
- Surplus property (2,826) (246) (3,072)
- Post
retirement
benefit
liabilities (5,174) (3,921) (9,095)
- Sale of
businesses (2,007) (2,007)
Restructuring (690) (690)
Taxation
- Current/prepaid (2,615) 420 (2,195)
- Deferred (2,031) 3,842 1,811
Loans (473) (473)
Total creditors (32,687) (246) (4,610) (3,026) (40,569)
-------- --------- --------- ------ ----------
Net assets 53,211 (10,734) (4,610) (2,909) 34,958
Goodwill 157,441
----------
192,399
----------
----------
Consideration
satisfied by: 192,399
Cash (including acquisition cost of
£3,566,000) ----------
12 Acquisitions continued
The book value of the assets and liabilities have been taken from the management
accounts of Sygen International plc at 2 December 2005 (the date of acquisition)
at actual exchange rates on that date. The fair value adjustments are
provisional and will be finalised in the 2007 financial statements when the
detailed acquisition investigation has been completed.
INDEPENDENT REVIEW REPORT TO GENUS plc
Introduction
We have been instructed by the company to review the financial information for
the twelve months ended 31 March 2006 which comprises the Summarised Group
Profit and Loss Account, Group Statement of Total Recognised Gains and Losses,
Summarised Group Balance Sheet, Summarised Group Cash Flow Statement,
Reconciliation of Net Cash Flow to Movement in Net Debt and the related notes 1
to 12. We have read the other information contained in the interim report and
considered whether it contains any apparent misstatements or material
inconsistencies with the financial information.
This report is made solely to the company having regard to guidance contained in
Bulletin 1999/4 issued by the Auditing Practices Board. Our work has been
undertaken so that we might state to the company those matters we are required
to state to them in an independent review report and for no other purpose. To
the fullest extent permitted by the law, we do not accept or assume
responsibility to anyone other than the company, for our work, for this report,
or for the conclusions we have formed.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are also responsible for ensuring that the accounting policies and presentation
applied to the interim figures are consistent with those applied in preparing
the preceding annual accounts except where any changes, and the reasons for
them, are disclosed.
Review work performed
We conducted our review in accordance with the guidance contained in Bulletin
1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A
review consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial
data, and based thereon, assessing whether the accounting policies and
presentation have been consistently applied, unless otherwise disclosed. A
review excludes audit procedures such as tests of controls and verification of
assets, liabilities and transactions. It is substantially less in scope than an
audit performed in accordance with United Kingdom Auditing Standards and
therefore provides a lower level of assurance than an audit. Accordingly we do
not express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the year ended 31
March 2006.
Deloitte & Touche LLP
London
7 June 2006
Financial Calendar
Financial period end 30 June 2006
Announcement of preliminary results September 2006
Annual General Meeting November 2006
Full and final dividend payment November 2006
This information is provided by RNS
The company news service from the London Stock Exchange
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