Genus H1 revenue rises, although breeding division slows

Genus’ half year revenue rose and although its ABS breeding division was "disappointing", the animal genetics firm expects overall performance for the 2017 financial year to be in line with guidance.

Revenue for the six months ended 31 December 2016, grew 18%, or 3% on a constant currency basis, to £222.1m, primarily due to increased pig breeding stock sales in China and continued royalty growth from PIC, Genus' porcine division.

This resulted in a 5% rise in pre-tax profit to £25.1m, but was down 10% at constant currency following a planned increase in research and development expenditure.

While and operating profit of £24.5m, was up 3%, but fell 11% at constant currency and basic earnings per share increased 6%, but was down 9% on constant currency to 30.5p.

Net cash flow from operating activities rose to £8.3m from £5.6m, which reflects typical first half cash conversion of adjusted operating profit of 55% and lower cash taxes.

Net debt widened to £109.0m from £88.2m, which including adverse foreign exchange translation of £15m year to year, represented 1.6 times earnings before interest, tax, depreciation and amortisation (EBITDA)

PIC performed well with profits up 9% in constant currency, 28% in actual currency, with particular strength in China, but Genus ABS, its breeding division, saw its profits fall 30% in constant currency, down 22% in actual currency, due to lower volumes particularly in North America and Asia.

Chief executive Karim Bitar said: "PIC continued to perform strongly but results in ABS were disappointing in challenging market conditions, particularly in North America and Asia… we increased our research and development investment significantly in the period to drive our long-term growth strategy, although as expected this held back financial performance during the first half.

"We expect to make further progress during the second half of the year and anticipate that our full year performance will be in line with expectations."

Separately Genus also announced that entered into a strategic partnership with Hermitage, a pig breeding company, to supply porcine genetics in several markets.

PIC will buy the genetic rights and intellectual property of Hermitage, which will become a supply chain and distribution partner for PIC.

It will also buy certain Hermitage customer relationships such as in Russia, the US and several European countries. The deal is expected to close by the end of March.