Genus full-year revenue rises, profits remain static

(Sharecast News) - Agricultural biotechnology firm Genus reported 10% growth in group revenue in its preliminary results on Thursday, to £689.7m, or 16% when translated to constant currency rates. The FTSE 250 company said its adjusted operating profit, including joint ventures, increased 10% to £85.8m for the 12 months ended 30 June.

Its investment in research and development jumped 19%, with 66% of the increase directed towards gene editing, specifically in anticipation of launching pigs resistant to the porcine reproductive and respiratory syndrome virus (PRRSv).

That project, according to Genus, was progressing exceptionally well.

Despite those strong performance indicators, adjusted profit before tax (PBT) remained static at £71.5m, and was down 8% at constant currency rates.

Furthermore, the firm highlighted a 124% escalation in net finance costs.

Statutory profit before tax decreased 19% to £39.4m, influenced by a £16.9m reduction in the non-cash fair value of the company's biological assets.

On the financial stability front, Genus exhibited a healthy cash flow, underscored by a free cash inflow of £18.2m, marking a significant improvement from the £13.5m outflow reported in 2022.

That shift was put down to a record high adjusted EBITDA, diminished working capital outflows, and reduced capital expenditure.

With a robust cash conversion rate of 105%, the company comfortably surpassed its target of 90%.

The net debt-to-EBITDA ratio also improved, now standing at 1.6x, which was within its targeted range of 1.0x to 2.0x.

Concurrently, Genus's net debt increased slightly to £195.8m from £185.0m at the end of 2022.

In terms of shareholder returns, the full-year dividend remained constant at 32.0p per share, supported by 2.7x adjusted earnings cover.

Strategically, Genus's said in terms of its endeavours in PRRSv-resistant pigs, it successfully completed submissions to the US Food and Drug Administration (FDA) ahead of its projected timeline, with approvals expected by the first half of 2024.

Furthermore, it said it was navigating regulatory pathways in Colombia, Brazil, and China, securing permissions to import PRRSv-resistant pigs for evaluations within China.

The establishment of PIC's state-of-the-art elite farms in Canada, Brazil, and China further accentuated its growth-oriented approach.

Its digital initiative, GenusOne, meanwhile saw extensive deployment across Europe and was currently being rolled out in Latin America.

In alignment with global sustainability goals, Genus registered a reduction in carbon dioxide emissions, slashing primary intensity ratios by 36% and reducing scope 1 and 2 emissions by 14% compared to 2019 levels.

"The group achieved a strong operational performance despite ongoing challenging market conditions for producers in several important markets," said chief executive officer Jorgen Kokke.

"Revenues grew in all regions and both PIC and ABS delivered profit growth.

"This also enabled us to deliver record adjusted EBITDA and good cash flow for the group."

Kokke said growth in research and development investments, primarily due to the strategically important gene editing work and expansion of PIC's elite farms, as well as higher interest costs, resulted in adjusted profit before tax consistent with the prior year.

"In fiscal year 2024 we expect to perform in line with our medium-term growth expectations in constant currency.

"Based on the recent strengthening of sterling against certain key currencies and higher interest rates in the current year, we expect modest growth in adjusted profit before tax in actual currency.

"The board remains confident in the group's strategy and the many opportunities for Genus."

At 1041 BST, shares in Genus were down 5.55% at 2,094p.

Reporting by Josh White for Sharecast.com.