preliminary results investor presentation year ended 30 ... · % change 2017 £m 2016 £m actual...
TRANSCRIPT
PRELIMINARY RESULTS
Investor Presentation
Year ended 30 June 2017
Disclaimer
This presentation has been prepared by Genus (“Genus” or “the Company”) and has not been independently
verified. Genus is solely responsible for the contents of this document and has taken all reasonable care to
ensure that the facts stated herein are true and accurate in all material respects and that there are no material
facts the omission of which would make misleading any statement in this document whether of fact or opinion.
While the information contained in this presentation has been provided in good faith, neither the Company, nor
any of their advisers, representatives, officers, agents or employees makes any representation, warranty or
undertaking, express or implied, in respect of this presentation and no responsibility or liability is accepted by
any of them as to the accuracy, completeness or reasonableness of the information provided. The issue of this
presentation to the recipient does not create any obligation on the part of the issuer to provide the recipient
access to any additional information or to update this presentation or any additional information or to correct
any inaccuracies in this presentation or any additional information which may become apparent. The recipient
should conduct its own investigation into the Company and of any other information contained in the
presentation.
This presentation is for information purposes only and does not constitute, and shall not be interpreted as,
either an offer for sale, prospectus, invitation to subscribe for shares or debentures in the Company, or as the
basis of a contract.
This presentation has been prepared on the basis that it will only be made available to investment professionals
and is thereby exempt from the provisions of s21 of the Financial Services and Markets Act 2000.
2
Overview
Bob Lawson
Chairman
3
Strong strategic progress and solid financial results
> Results in line with expectations
− Profit before tax up 13% (1% lower in constant currency)
− Strong free cash flow
− Earnings per share 69.4p, up 14% (unchanged in constant currency)
> Strong strategic progress
− Hermitage agreement and growing PIC royalties
− Gene editing progress
− Sexcel™ launched
> Dividend increased 10% to 23.6p per share
4
Financial results
Stephen Wilson
Finance Director
5
Results
% Change
2017 2016 Actual Currency
Constant Currency £m £m
Revenue 459.1 388.3 18% 6%
Adjusted operating profit 55.1 49.3 12% (1)%
Attributable to non-controlling interest (2.1) (1.4) (50)% (19)%
Adjusted share of JV profits 7.1 6.4 11% (10)%
Adjusted operating profit (inc JV) 60.1 54.3 11% (2)%
Finance costs (3.7) (4.6) 20% 18%
Adjusted profit before tax 56.4 49.7 13% (1)%
Adjusted earnings per share (pence) 69.4 60.7 14% -
Dividend per share (pence) 23.6 21.4 10%
Year ended 30 June 2017
6
Volume growth
Year ended 30 June 2017
7
5%
9%
6%
4% 4%
0%
2%
4%
6%
8%
10%
2013 2014 2015 2016 2017
Porcine Volume growth (%)
5% 5% 6%
(6%)
1%
(6%)
(4%)
(2%)
0%
2%
4%
6%
2013 2014 2015 2016 2017
Dairy & Beef Volume growth (%)
Adjusted operating profit – by business unit
% Change
2017 £m
2016 £m
Actual Currency
Constant Currency
Genus PIC 94.8 78.0 22% 7%
Genus ABS 21.3 22.0 (3)% (13)%
Operating units 116.1 100.0 16% 2%
Research and Development (43.8) (34.4) (27)% (12)%
Central costs (12.2) (11.3) (8)% 5%
Adjusted operating profit inc JV 60.1 54.3 11% (2)%
Year ended 30 June 2017
8
> Asia now included in global PIC and ABS business units
> Continued growth in profit up 7% and royalty revenues up 5%
− Volumes up 4%, with 77% under royalty (+1 pt, +3 pts excluding China)
> Overall volumes unchanged in North America and Latin America
− Significant new stockings in North America support future royalty growth
− Latin America; strong profit performance in Mexico (+11%) offsets impact of instability in Venezuela
> Europe profit up 26% from royalty growth and business transformation
− Hermitage initial contribution encouraging
> Asia volumes up 20% and profit up 60% with growth in all countries
− Strong product performance in buoyant market helped China to 80%+ profit growth
Genus PIC
% Change
2017 £m
2016 £m
Actual Currency
Constant Currency*
Revenue 249.5 207.5 20% 7%
Adjusted operating profit exc JV 87.7 71.7 22% 8%
Adjusted operating profit inc JV 94.8 78.0 22% 7%
Adjusted operating margin exc JV 35.2% 34.6% 0.6pts 0.3pts
Year ended 30 June 2017
9
* All % changes are in constant currency unless otherwise stated
% Change
2017 £m
2016 £m
Actual Currency
Constant Currency*
Revenue 195.9 172.8 13% 2%
Adjusted operating profit 22.3 23.3 (4)% (15)%
Adjusted operating profit less NCI** 21.3 22.0 (3)% (13)%
Adjusted operating margin 11.4% 13.5% (2.1)pts (2.1)pts
Genus ABS
> ABS volumes up 1% with stronger second-half performance (+8%) in improving markets
− Strong sexed volume growth of 10%, beef volumes 3% lower in challenging markets
> Europe volumes up 6% and profit up 8% benefiting from actions taken in 2016 and 2017
> Latin America profit up 41% with continued action to increase prices (+11%)
− Volumes 2% lower primarily due to weak beef markets
> North America profit down 12%, including impact from weaker beef markets
− Focus on improving commercial execution in large dairy enterprises
> Double digit volume growth in IVB driven by US; strong first year in Mexico
− Remaining 49% shares of IVB acquired ahead of schedule
Year ended 30 June 2017
10
* All % changes are in constant currency unless otherwise stated ** NCI = Non-controlling Interest
% Change
2017 £m
2016 £m
Actual Currency
Constant Currency*
Gene editing 3.5 0.9 289% 251%
Other research 8.4 7.1 18% 2%
Porcine product development 16.6 13.5 23% 7%
Bovine product development 15.3 12.9 19% 6%
Research and Development inc NCI** 43.8 34.4 27% 12%
> Gene editing investment of £3.5m as planned
− PRRSv programme platform capability build; pregnancies for first generation of gene edited pigs created
> Other research up 2%; continued activities in genomic evaluation, core informatics and IP
> Porcine product development up 7%
− Increased spend from lower by-product market prices and increased animal volumes
> Bovine product development up 6%
− GSS manufacturing and launch preparation costs in excess of £2m partially offset by efficiencies in bull development costs through De Novo and other initiatives
Genus R&D
Year ended 30 June 2017
11
* All % changes are in constant currency unless otherwise stated ** NCI = Non-controlling Interest
Statutory income statement
2017 2016 Variance £m £m £m
Adjusted operating profit exc JV 55.1 49.3 5.8
Net IAS 41 valuation movement (1.1) (17.1) 16.0
Amortisation of intangibles (8.7) (6.1) (2.6)
Share-based payments (4.6) (3.8) (0.8)
Exceptional items - Pension related 5.7 44.2 (38.5) - Litigation (5.3) (6.9) 1.6 - Acquisition and integration (0.6) (0.2) (0.4) - Other (including restructuring) (2.3) (0.8) (1.5)
Operating profit 38.2 58.6 (20.4)
- Share of post-tax profit of JVs 6.2 6.9 (0.7) - Net finance costs (3.7) (4.6) 0.9
Profit before tax 40.7 60.9 (20.2)
Year ended 30 June 2017
12
Cash flow
2017 2016 Variance £m £m £m
Adjusted operating profit exc JV 55.1 49.3 5.8
Depreciation and amortisation 11.5 8.4 3.1 Adjusted EBITDA 66.6 57.7 8.9
Working capital (1.1) 1.1 (2.2) Biological assets (5.7) (3.8) (1.9) Pension deficit repair, exceptionals and other (13.5) (11.7) (1.8) Net cash inflow from operating activities 46.3 43.3 3.0 Cash conversion % 84% 88% (4)Pts
Interest and tax paid (11.7) (13.3) 1.6 Capital expenditure (18.9) (18.6) (0.3) Cash received from joint ventures 8.3 3.4 4.9 Other 1.4 0.9 0.5 Free cash flow 25.4 15.7 9.7
Acquisitions and investments (30.0) (7.2) (22.8) Dividends (13.5) (12.2) (1.3) Net cash flow (18.1) (3.7) (14.4)
Net Debt 111.6 89.7 21.9
Year ended 30 June 2017
13
Strong financial position
2017 2016 £m £m
Owners’ equity 399.3 374.5
Net Debt 111.6 89.7
Key Financial ratios: - Return on adjusted capital 19.9% 19.1% - Gearing 28% 24% - Net debt to EBITDA 1.5x 1.4x - Interest cover 37x 35x - Dividend cover 2.9x 2.8x
> Dividend up 10%
> £74m headroom on bank facilities
Year ended 30 June 2017
14
Business update
Karim Bitar
Chief Executive
15
Strong strategic progress
16
> ABS
− Leveraging De Novo, launching Sexcel™, growing IVB
− Improving commercial execution
− Launching NuEra™ proprietary beef genetics
> PIC
− Growing in key markets and segments, particularly in China
− Hermitage integration and partnership on track
> R&D
− Continuing to strengthen proprietary technology platform
17
Strengthening competitive position and execution focus
Dairy
Managing performance Strategic progress
More focused execution under new leadership Leveraging competitive strengths
Making own genetics
Sexing with proprietary
technology
Producing embryos with our sexed
genetics
NORTH AMERICA
• Implementing turnaround
• Growing IVB USA
LATIN AMERICA
• Improved value capture
• Strong start for IVB Mexico
ASIA
• China: Growing direct business
• India: Producing elite genetics, strengthening indirect channel
EMEA
• Improved volume and performance
• Growing product offering
Geographical split indicative of internal segmentation of territories – not all countries shown are served by ABS
18
Genus ABS launches Sexcel – September 1st, 2017
19
Dairy
“Bottom line, it gets heifers pregnant. No matter what you’re dealing with. No matter what time of year you’re breeding” US customer
“I am very impressed with my experience with Sexcel – we have seen an 8% increase in conception rates” UK customer
“ABS genetics in Sexcel gives me confidence in the future animals that will enter into my herd” Italian customer
Sexcel launch – customer field trial experience
20
Strategic progress in India Dairy
Producing India’s leading temperate
and indigenous
genetics locally
Sexing temperate and indigenous
genetics locally with our
proprietary sexing technology
ABS STRYKER #1 Holstein bull in India
ABS TYSON #1 Jersey bull in India
ABS REDHU #1 Murrah bull in India
21
Strong IVB performance Beef Dairy
>100% Volume growth in IVB USA
Genus ownership of IVB to further accelerate growth
100%
Growing presence
with large enterprise dairies in the US and Latin America
Volume growth refers to embryos produced by IVB in the US
22
Launching NuEra proprietary beef genetics Beef
Product focus on customer
profitability, not breeds, proven through trials
Breeding proprietary animals to
profit-focused indices
Serving progressive beef & dairy herds with terminal beef and
cross-bred genetics
Creating value for our customers...
...through proprietary genetic improvement
…focusing on key markets and segments
Efficiency, Profitability, Sustainability
23
PIC continues to deliver strategic growth Pork
Volumes based on market pig equivalents; geographical split indicative of internal segmentation of territories – not all countries shown are served by PIC
• Three new top 20 North American accounts won
% volumes under royalty
% volumes under royalty
• Key account growth in Brazil
• Developing Colombian franchise business
• China: Three new royalty customers
• Royalty growth in Russia and the Philippines
• Key account growth in Spain
• Hermitage growth
North America EMEA
Latin America Asia
% volumes under royalty
% volumes under royalty
96% 96% 96% 97%
FY14 FY15 FY16 FY17
65% 64% 73% 77%
FY14 FY15 FY16 FY17
38% 59% 64% 63%
FY14 FY15 FY16 FY17
35% 46% 41% 50%
FY14 FY15 FY16 FY17
24
Hermitage integration on track Pork
Growing with key customers
Integrating genetic programmes
Strategic partnership – multiplication, distribution
> Growing key account presence in Europe
> Successfully transitioned key customer relationships
> Hermitage distributing PIC genetics under royalty in key markets
> Hermitage producing PIC genetics under contract
> Integrating Hermitage genes into PIC gene pool
> Customers to access stronger products
25
China – aligning with our global business model and performing strongly
Pork
Royalty customers
Previous
FY17+
Note: FY17+ customers includes one customer signed in July 2017; royalty customer map shows operational location for 8 royalty customers in total
> Three new royalty customers
> Trebled royalty income in FY17
Supply chain
> Growing our overall capacity
> Continuing to transition production to contracted multiplication
100%
49% 46%
28% 28% 30%
12%
51% 54%
49% 48%
45%
26%
23% 24% 25%
62%
2,970
8,270 7,900 8,650 8,305
7,970
13,770
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
FY12 FY13 FY14 FY15 FY16 FY17 FY18(F)
Owned JV Multiplication GGPs TOTAL
Genus strategy
GENOMIC SELECTION GENE EDITING
SHARED PROPRIETARY TECHNOLOGY PLATFORM
GENETIC IMPROVEMENT
Pork
Dairy
Beef
BIOSYSTEMS ENGINEERING
GENOME SCIENCE
26
27
Genomic selection: delivering continuous improvement
Dairy Pork Beef
> De Novo one year in: ~trebled size of ABS breeding programme
> De Novo consistently producing high quality genetics
> New global brand for proprietary beef offering
> New tailored indices and Beef x Dairy products supporting price-to-value initiatives
> DNA-based selection continues to deliver
> Integration of Hermitage genes underway
Source of new Holstein bulls in the US
20
40
60
80
100
120
140
Relationship based genomic selection starts
PIC Genetic Index
1% 20% 23% ~40%
FY15 FY16 FY17 FY18(F)
ABS Internal/ De Novo Independent breeders
28
PRRSv resistance progress
FY16 FY17
£0.9m expense £3.5m expense
First pregnant sows carrying edited embryos
The PRRSv programme is an investigational programme relating to resistance to Porcine Reproductive and Respiratory Syndrome Virus; INAD refers to Investigational New Animal Drug application with the US Food and Drug Administration for the investigational PRRSv programme. The information included on this page reflects Genus plc’s research and development pipeline and is not intended for promotional purposes. All timing, including any relevant regulatory approvals, are purely indicative, and any regulatory approvals are subject to the success of ongoing research, the development of clear regulatory review pathway by the relevant regulatory authorities and the approval by the regulators of any new animal drug application.
Molecular scissor IP licence
Gene editing company co-founded
Building regulatory capability Molecular scissor optimisation work
begins
US FDA - INAD issued
CD163 IP licence
Molecular scissors optimised for CD163
29
Development programme for PRRSv resistance
Yrs 1-2 Yrs 2-5 Yrs 5+
Creating founder animals
Amplify founder animals by breeding
Prepare and submit key country regulatory dossiers
Development stage testing
Regulatory approvals
Tech
nic
al &
o
per
atio
nal
R
egu
lato
ry
Lau
nch
The PRRSv programme is an investigational programme relating to resistance to Porcine Reproductive and Respiratory Syndrome Virus; INAD refers to Investigational New Animal Drug application with the US Food and Drug Administration for the investigational PRRSv programme. The information included on this page reflects Genus plc’s research and development pipeline and is not intended for promotional purposes. All timing, including any relevant regulatory approvals, are purely indicative, and any regulatory approvals are subject to the success of ongoing research, the development of clear regulatory review pathway by the relevant regulatory authorities and the approval by the regulators of any new animal drug application.
current
US FDA INAD issued
Scale & launch
CD163 IP licence
Molecular scissor technology licence Te
chn
olo
gy
Scissors optimised for CD163 edit
Summary and outlook
30
> ABS
− Leveraging De Novo, launching Sexcel, growing IVB
− Improving commercial execution
− Launching NuEra proprietary beef genetics
> PIC
− Growing in key markets and segments, particularly in China
− Hermitage integration and partnership on track
> R&D
− Continuing to strengthen proprietary technology platform
> Expect to perform in line with our expectations for FY18
Appendices
31
Market dynamics – output prices
SOURCE: Genus analysis using constant currency
32
Brazil US
China
EU Russia
0.5
1.0
1.5
2.0
2.5
3.0
3.5
Aug 14 Aug 15 Aug 16 Aug 17
Pork - Key Markets (£ per kg)
Brazil
US
China
Russia India
15
20
25
30
35
40
45
50
Aug 14 Aug 15 Aug 16 Aug 17
Dairy - Key Markets (Pence per litre)
EU
Market dynamics - input costs
33
SOURCE: Genus analysis using constant currency
CBOT Soybean
LIFFE Wheat
0
50
100
150
200
250
300
350
400
Aug 14 Aug 15 Aug 16 Aug 17
LIFFE Wheat and CBOT Soybean (£ per tonne)
Brazil
US
China
EU
0
50
100
150
200
250
300
Aug 14 Aug 15 Aug 16 Aug 17
Corn - Key Markets (£ per tonne)
Return on adjusted capital
34
2017 2016 £m £m
Adjusted operating profit inc JV 60.1 54.3
Tax rate 25.0% 25.8%
Adjusted operating profit after tax 45.1 40.3
Equity attributable to owners of the company 399.3 374.5
Add back :
Net debt 111.6 89.7
Pension liability 40.9 44.5
Related deferred tax (8.5) (9.6)
Deduct :
Biological assets (less historic cost) (323.8) (311.9)
Goodwill (104.7) (86.0)
Related deferred tax 111.7 109.7
Adjusted invested capital 226.5 210.9
Return on adjusted invested capital 19.9% 19.1%
Year ended 30 June 2017
> Genus’ geographic profile can lead to translational currency impacts
> We monitor key rates against GBP
> Latest spot rates would indicate a £0-1m gain for FY18 compared with average FY17 rates
FY17 FY17 Spot @ Profit
Average
Closing
04 Sep 17
Sensitivity £m*
US Dollar 1.27 1.30 1.30 2.0 Euro 1.16 1.14 1.09 1.0 Brazilian Real 4.11 4.30 4.06 0.9 Mexican Peso 24.6 23.5 23.1 1.2 Chinese Yuan 8.67 8.81 8.45 0.9 Russian Rouble 77.6 77.0 74.9 0.2
Exchange rate sensitivity
35
* - 12 month operating profit impact given a +/- 10% movement in exchange rate, based on FY17 results