25th Feb 2014 14:26
LONDON (Alliance News) - Genus PLC Tuesday reported a slight drop in profits for the first half of the year due to acquisition costs and investments it made in China, but revenues rose thanks to its recently acquired pork business in Brazil and a significant improvement in its cattle breeding business.
The animal genetics company warned of a hit from the recent strength of sterling and a virus affecting pig herds in North America, but it still decided to raise its dividend.
For the six months to December 31, 2013, Genus said revenues rose 9% at actual exchange rates to GBP181.7 million, up from GBP167.2 million for the comparable period, but reported a slight decline in pretax profit to GBP22.0 million, down from GBP22.3 million a year earlier, as the company incurred GBP1.5 million in acquisition and integration costs in the recent period and made investments in China.
The group said that while trading was in line with expectations for the first half of the year, it faces short-term headwinds from the strength of sterling, as well as a Porcine epidemic diarrhoea virus in the North American porcine industry, which it said will hit porcine revenues in the near term.
Analysts at Liberum Capital said although this problem will be short lived, because herds become immune within 5-6 weeks, during that time piglet mortality rates increase, which will hit Genus's royalty stream and delay farmer expansion plans.
"These factors introduce more uncertainty to our second half outlook. However, as a sign of the board's confidence in the group's future prospects, and the success of our strategy in driving underlying trading, the interim dividend has been raised by 10%," said Chief Executive Officer Karim Bitar in a statement.
The group raised its interim dividend by 10% to 5.5 pence per share, and reported a 11% increase in basic earnings per share to 28.4 pence.
It said revenue for the first half was boosted by an initial contribution from the acquisition of Génétiporc do Brasil, a much improved performance in Genus ABS, its large cattle breeding business, and growth from its genetically improved pig breeding stock business.
Genus said these gains were offset by lower results in China, largely due to planned investment costs associated with capacity expansion in the China porcine market.
It said the significant expansion of capacity in China will allow the group to take advantage of the considerable growth opportunities in the region.
"We continue active discussions with a number of companies in China to create further porcine joint ventures to expand our capacity in the market and signed an Memorandum Of Understanding with a large pig producer during the first half," said Bitar.
Shares in Genus are down 1.1% at 1,185.00 pence Tuesday afternoon, having fallen to its lowest level since February 2012, at 1,112.68 pence in early trading.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
Copyright © 2014 Alliance News Limited. All Rights Reserved.
Related Shares:
Genus