Thursday preview: Genus reports full year results in wake of cow semen lawsuit

FTSE-250 listed animal genetics company Genus reports its full year results on Thursday in the wake of its cow semen court case.

Genus was in August was ordered by the US District Court of Wisconsin to pay at least $2m to Sexing Technologies after being found it was in infringement of two patents for sexed bovine semen processing technology.

The court ruled that Genus had materially breached the confidentiality obligations under its 2012 semen sorting agreement with Sexing Technologies. The group will have to pay ongoing royalties to Sexing Technologies on the commercialisation of the patents.

Numis said it expects an update from Genus on the court case in its full year results and on the future strategy for the launch of its own semen sorting technology, including upfront fees and a royalties payable to Sexing Technologies. The broker also anticipates that Genus will touch on the ongoing roll-out of its bovine IVF platform.

Numis expects earnings before interest, tax, depreciation and amortisation of £57.4m, up from last year’s £53.5m, on sales of £405.6m, compared to £398.5m in 2015.

“Genus reports fiscal year 2016 results on Thursday 8 September and we expect discussion on the market backdrop for the business - the outlook for hog and dairy markets given relatively tough markets for producers of late with hog and milk prices under pressure, albeit input feed prices are low, and therefore the outlook for 2017 appears more favourable.”

The broker noted that Smithfield, the largest global hog producer reported a 18.5% drop in sales from its hog segment and a 2% fall in US hog volumes sold.

“We note Genus's resilience through its royalty model (now 83% of hog volumes) based on long term contracts and helps protect against shorter term unfavourable market swings Genus PIC (pigs) contributed nearly 70% of group adjusted operating profit in H1 2016,” Numis said.

Thursday 08 September

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