Genus swings to loss after being hit by pension charges

Genus on Thursday confirmed that it swung to an interim loss as revenue remained flat as the livestock genetics specialist was hit by non-cash accounting charges and the effects of the rapid spread of African Swine Fever in China.

For the six month period ended 31 December, the FTSE 250 group producer registered a loss before tax of £6.3m, dropping from a profit of £14.3m in the same period the year before, on revenues that remained relatively flat at £238.8m.

The loss was largely driven by larger non-cash fair value movements on biological assets and a £15.7m guaranteed minimum pension equalisation charge in respect of legacy pension schemes, Genus said. Swine fever had a negative impact of approximately £3m.

Bovine revenues increased 4% in constant currency, with strong sexed genetics revenue growth of 28%, while porcine revenue declined 2% in constant currency due to fewer animal shipments in China due to swine fever. Porcine royalty revenue increased strongly 11%.

Chief executive Karim Bitar said: "Genus performed well in challenging markets and made substantial strategic progress in the first half of the 2019 fiscal year."

He hailed continued double-digit profit growth for bovine business ABS, driven by a combination of the 26% growth from Sexcel, the new high fertility sexed genetics product, and 24% growth of NuEra proprietary beef genetics.

"Genus is well placed to benefit from and drive the accelerating market trend of dairy customers using sexed and beef genetics in combination," Bitar said.

Meanwhile, the PIC division, which supplies services for pig farming, saw a profit decline in China of approximately £3m caused by an outbreak of African swine flu, though this was offset by "very strong" performances across Europe and Latin America.

Cash and cash equivalents stood at £25.0m at the end of the period, down from £27.7m at the same point the year before, while the company approved an interim dividend of 8.9p per share, an increase of 10% on last year's interim dividend.

"As anticipated, PIC was affected negatively by ASF in China but grew strongly in Europe and Latin America and we successfully commenced our strategic relationship with Møllevang Genetics. Our gene editing programme for PRRSv resistance in pigs made good progress and we have substantially increased the number of animals carrying the edit while continuing to engage constructively with regulatory authorities," said Bitar.

The company said it anticipates that its second half performance will be in line with the board's expectations in constant currency for the full year.

Analysts from Liberum said: "Outside of China the group remains in strong shape. The outlook statement suggests limited changes to consensus estimates. We expect these results to support the share price."

Genus' shares were down 2.09% at 2,154.00p at 1133 GMT.