15th Feb 2024 12:21
(Alliance News) - Genus PLC on Thursday saw around GBP200 million wiped off its market value after warning annual pretax profit would miss expectations by some margin.
Shares in the Basingstoke, England based animal genetics biotechnology company focused on cattle and pig farms plunged 19% to 1,720.81 pence each on Thursday in London. In early exchanges, they fell as low as 1,478p.
Genus expects to report adjusted pretax profit for the financial first-half ended December 31 of GBP29 million on revenue of GBP334 million, in line with expectations.
But, it highlighted "challenging markets", in its dairy and beef cattle arm, ABS, where volumes decrease 6%.
"Demand for dairy genetics in China was particularly impacted due to a double-digit decline in the dairy herd", it said.
Genus said it had undertaken changes to the leadership structure, integration and simplification of ABS's supply chains, targeted pricing initiatives and cost efficiencies.
Nonetheless, Genus said it expects financial year 2024 adjusted pretax profit to be not less than GBP58 million.
Liberum analyst Seb Jantet explained this meant annual pretax profit would be around 20% below his forecast.
He noted that trading conditions at ABS were tough in November’s AGM statement but, "judging by today’s unscheduled trading update, things have got worse over the last few months".
He said with ABS volumes down 6% on the back on continued pressure on consumers, particularly in China, a cost reduction programme, "won’t be enough to offset that degree of headwind".
The Liberum analyst said this would "weigh on the shares".
However, Jantet still thinks that the reason for owning the shares is the long-term structural growth both from genetic improvement and the resistant pig programme.
"But we suspect this will come as cold comfort to investors".
"We lower our price target to 3000p [from 3,675p], reducing the multiple we use to value the core business, but acknowledge that it may take some time for the shares to reach this level", he concluded.
Liberum retained a 'buy' rating on Genus.
By Jeremy Cutler, Alliance News reporter
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