29th Nov 2005 07:02
Genus PLC29 November 2005 Immediate Release 29 November 2005 GENUS plc Interim Results for the six months ended 30th September 2005 Genus plc, the global Bovine Genetics company announces interim results for thesix months to 30th September 2005. Six Six months to months to 30th Sept 30th SeptGroup Highlights 2005 2004 Change Group Turnover £96.7m £91.1m +6%Profit Before Tax* £4.3m £4.1m +6%Underlying earnings (note 6) £3.5m £3.4m +3%Underlying EPS (note 6) 9.3p 9.5p -2%Profit After Tax £0.3m £2.7m -89%Basic EPS 0.7p 7.5p -91% * Before exceptional items and goodwill impairment (note 6) • Group - Underlying EPS of 9.3p (2004: 9.5p) after issuing new shares to fund the Bovine Genetics' acquisition last year - Significant positive strategic progress made:- o Disposal completed of the non-core veterinary wholesaling operation, a low margin business, for £7.2m in cash o Recommended cash offer for Sygen International plc became unconditional on 25 November 2005. • Bovine Genetics Division - Sales of £45.2m, 11% higher (2004: £40.6m) - Gains in many international markets - Underlying operating profit of £5.4m up 2% (2004: £5.3m), excluding £0.2m of consultancy wind-down losses - Stud enhanced by addition of two new high ranking bulls - Two small acquisitions made in Australia, in line with strategy to expand in semen retailing - European markets now recovered from the uncertainty created by changes in EU support mechanisms - Strong start to second half • Animal Health and Consultancy Divisions - Animal Health operating profit of £1.1m, 16% higher (2004: £0.9m), driven by licensed pharmaceutical business - Development Consulting operating profit of £0.6m, 61% higher (2004:£0.4m) on turnover up 13% on last year Commenting on prospects, Richard Wood, Chief Executive, said:- "We have pursued aggressively our strategy for creating a world-leading animalgenetics company. The acquisition of Sygen will open a new chapter in thehistory and potential for Genus. It will enable research and developmentexpenditure to be leveraged across more species, will provide organisationalsynergies and will facilitate expansion in the beef sector by using Sygen'sexpertise in selling to the integrated food chain." "Also, we have successfully divested the non-core veterinary wholesalingbusiness which provides the Group with additional cash without reducingearnings. The re-organisation of Bovine Genetics and closures in consulting willcreate operational efficiencies within the Group while creating a stand-alonesupport business. We expect the underlying business to be on plan for the fullyear." Contact: Richard Wood, Chief Executive Tel: 01256 347101David Timmins, Finance Director Tel: 01256 347102 Charles Ryland/Suzanne BrocksBuchanan Communications Limited Tel: 020 7466 5000 Chairman's Statement I am pleased to report on a period of significant strategic importance andpositive change for Genus. In line with our stated strategy of concentrating upon and building our presencein animal genetics, on 28th October 2005, we completed the sale of GenusxpressLtd, our veterinary wholesale business and, on the same day, we announced arecommended offer for Sygen, a porcine and shrimp genetics company. The offerwas declared unconditional on 25th November 2005. This acquisition willtransform Genus into the world's leading animal genetics company and opensopportunities to spread the cost of R&D across more species while affordingopportunities for achieving significant synergy savings. Also, during the reporting period, we made further strategic progress with thecontinuing businesses by increasing the sales force in Bovine Genetics, byclosing a non-core sector of the consulting business and implementing a furtherstage of streamlining in Bovine Genetics. This streamlining allowed thedivestment of a property which realised more than the one-off cost ofrestructuring. Group turnover increased by 6% to £96.7m (2004: £91.1m) underpinned by an 11%increase in Bovine Genetics' turnover to £45.2m (2004: £40.6m). On a continuingoperations basis, turnover increased by 12% to £63.3m (2004: £56.7m). Underlying operating profit of £5.4m includes a non-cash UITF17 charge of £0.2m(relating to the Executive Performance Share Plan) and wind-down losses of £0.2massociated with the closure of a small consulting business within BovineGenetics. Excluding the impacts of these items, this represents an increase of7% over the prior period's underlying operating profit. Underlying operatingprofit is defined as operating profit excluding goodwill amortisation, goodwillimpairment and exceptional items. First time adoption of FRS17 reducedunderlying operating profit by a further £0.2m in both the current period and inthe restated comparative period. Despite underlying earnings increasing by £0.1m to £3.5m (2004: £3.4m),underlying earnings per share decreased by 2% to 9.3p (2004: 9.5p) because954,000 new shares were issued to fund a Bovine Genetics' acquisition last year.Underlying earnings is defined as profit after tax excluding goodwillamortisation, goodwill impairment, exceptional items and tax credits relating toprior years. Excluding the consultancy wind-down losses of £0.2m, Bovine Genetics' operatingprofit, before goodwill amortisation, was up 2% to £5.4m (2004: £5.3m). AnimalHealth's operating profit before goodwill amortisation and impairment rose 22%to £1.1m (2004: £0.9m) and Development Consulting's operating profit beforegoodwill amortisation rose 62% to £0.6m (2004: £0.4m). The disposal of the non-core veterinary wholesaling business post period endrealised £7.2m in cash. In the six months ended 30 September 2005, this businessgenerated a turnover of £33.3m (2004: £34.3m) and an operating profit beforegoodwill amortisation and impairment of £0.2m (2004: £0.2m). This disposal hasreleased approximately £6m of working capital but resulted in a goodwillimpairment charge of £2.2m. In addition to this disposal, the Company aims torealise a further £1m in cash, less costs, from the sale of remaining assets. A strong performance in the high margin, licensed pharmaceuticals operationboosted turnover in the continuing Animal Health business by £0.6m (13%) to£5.3m (2004: £4.7m) and generated an increase in operating profit beforegoodwill amortisation of £0.2m (29%) to £0.9m (2004: £0.7m). Included in exceptional items is a restructuring charge for Bovine Genetics of£367,000, which will generate an annual cost saving of approximately £350,000p.a. and a charge amounting to £456,000 in relation to the closure of the small,non-core consultancy business, of which £82,000 is non-cash. These exceptionalcharges and the wind-down of operations reduced reported profit before tax to£1.3m compared with £4.1m for the comparative period. The current tax charge for the half year is at a rate of 31.6% on profit beforededucting that element of the goodwill charge not allowable for tax purposes. Net Debt & Dividend The Group is traditionally cash absorbing in the first half year as it funds aworking capital increase to meet the peak selling season which begins inSeptember. Free cash flow (being net cash flow before dividends, acquisitions,disposals and financing) showed a £1.6m improvement over the comparative period.Net debt rose by £4.1m to £11.6m, marginally less than at the same point lastyear, only because of the increased dividend (£2.8m) and the cash funding ofacquisitions. Since the period end, a property disposal realised net proceeds of£730,000 and resulted in a book profit of £600,000. In line with previous years and our stated dividend strategy, the Board does notrecommend an interim dividend due to the high cost of distribution to therelatively large number of shareholders. As you will be aware, the Company haschanged its accounting reference date to 30th June; the Board currently expectto recommend a final dividend when the results of the fifteen month period to30th June 2006 are known. Bovine Genetics - 46.7% of Group Turnover The sales force expansion implemented over the last 19 months in the USA, Canadaand Europe accelerated sales growth to 11% (2004: 1%) and increased our share inmany markets. This has been achieved during a period when the UK and Europeanmarkets have been gradually recovering from the uncertainty created by thepreviously announced changes in the European Community agricultural pricesupport mechanism. The improved strength of the Genus bull stud offered more added value to farmerswhich enabled the price premiums charged by Genus for semen to be increased. Market conditions remained good in the USA but were less buoyant in theBrazilian beef sector because of an outbreak of FMD, which limited the potentialfor beef exports by major customers. As a result, their buying decisions weredelayed. The accelerated increase in the number of the sales force has generated strongturnover growth, but profit growth has been delayed, largely due to theinevitable time lag in an expansion of this nature, as well as the one-offrecruitment cost. In particular, we have altered the balance between employedand agency salesmen, in favour of the former. We believe that this change willimprove branding and further increase sales in the future. Also in this halfyear, we incurred one-off additional costs as outlined in the Chairman'ssummary. We made further progress in developing our retail business in Australia with twosmall acquisitions being added to the one made last year. These have been madeagainst the background of much improved market conditions, with plentifulrainfall and strong milk prices. Overall, the Australian business is nowdeveloping well. Animal Health - 39.9% of Group Turnover We continued the strategy, begun last year, of growing the higher marginlicensed pharmaceutical business, while exiting from some very low margin bulktrade in wholesaling. Although this strategy resulted in an expected sales decline of 1.3% to £38.6m(2004: £39.1m), strong profit growth continued. Half year operating profitbefore goodwill amortisation and impairment increased by 16% to £1.1m (2004:£0.9m). In addition, in pursuit of the intended new strategic focus of the Group, theGenusxpress wholesaling business was divested for £7.2m in cash on 28th October2005. We then began the process of releasing an additional £1m in cash from thesale of the remaining assets. For the year ended 31st March 2005, Genusxpressgenerated turnover of approximately £66m and an operating profit before goodwillamortisation of £0.4m. The business utilised £6.0m in working capital. In the licensed pharmaceutical business, sales increased by 5.7% to £3.4m (2004:£3.3m). By focusing on the high margin sectors and investing in expanding thesales force, operating profit was 15% higher. Good progress continued to be made with the expansion of iDentichip sales bypromoting the second generation chip, which also measures animal temperatures.The business successfully defended its market leading position in intravenousfluids against a new agency and introduced a new environmentally friendlyhygiene product. The two new pharmaceutical products announced in March as being potentialadditions to the range, have been secured and regulatory dossiers have alreadybeen submitted to the regulatory authority. The business is now working hard to secure further new products to establish aneven stronger pipeline for future growth. Development Consulting - 13.4% of Group Turnover As a result of the increased emphasis placed by G8 governments on aid for thedeveloping world, the business continued to make strong progress in favourablemarket conditions. Turnover of £13.0m was 13% higher in the period (2004:£11.4m), a number of new contracts were won and others were extended. Partly dueto the earlier than expected phasing of some work, operating profit beforegoodwill amortisation rose 61% to £607,000 (2004: £378,000). Trading highlights included:- • Award by the EU of a four year contract for the UK and the Irish Republic to monitor the Pan-European L'Instrument Financier pour l'Environnement ("LIFE") programme, one of the key components of the EU's environmental policy. • Award by the Department for International Development ("DFID") of a contract for the Land Reform Programme for Rwanda. This was the first win achieved from the strategy announced in March which aims to build business based upon the Prime Minister's initiative, the Commission for Africa. Outlook For the second half year, European market conditions for Bovine Genetics havereturned to a more normal level. The same improvement has occurred in the UKbut, because of Genus' high market share in that market, decisions by farmers toexit farming are likely to result in slower growth in that market alone. Stronggrowth potential is expected in the large US market and the improving Australianmarket. Two new high ranking bulls, have been added to the stud and should enhance thecompetitive edge of the business and support the continuation of strong prices. As a result, Bovine Genetics' operating profit in the second half year willstrengthen and will benefit further from the restructuring carried out in thefirst half year. The slimmed down veterinary pharmaceutical division is expected to maintain itshistorical profit growth trend despite the divestment of Genusxpress. The Boardbelieves that growth will accelerate when the new product licences are approvedby the regulatory authorities. The Development Consultancy business is performing well and is currentlyexpected to be ahead of the Board's expectations for the year. Overall, we expect Genus' performance for the full year to be in line withmarket forecasts. Summarised Group Profit and Loss AccountSix months ended 30 September 2005 Continuing Operations Discontinued Unaudited Unaudited Unaudited Before exceptional Exceptional items and items and goodwill goodwill amortisation amortisation Operations Total six Total six Year months months ended ended ended 30/9/05 30/9/04 31/3/05 Restated Restated (note 9) (note 9) £000 £000 £000 £000 £000 £000 Turnover -------- -------- -------- ------- ------- -------Continuingoperations 63,322 - - 63,322 56,709 116,777 Discontinuedoperations(note 11) - - 33,332 33,332 34,345 66,472 -------- -------- -------- ------- ------- ------- 63,322 - 33,322 96,654 91,054 183,249 -------- -------- -------- ------- ------- ------- Underlyingoperatingprofit(note 9) 5,234 - 164 5,398 5,384 10,931 Exceptionalitems (note10) - (845) - (845) - -Amortisationof goodwill - (786) (119) (905) (799) (1,747)Exceptionalimpairmentof goodwill(note 11) - - (2,239) (2,239) - - -------- -------- -------- ------- ------- -------Operatingprofit (note 3) 5,234 (1,631) (2,194) 1,409 4,585 9,184 Of which; -------- -------- -------- ------- ------- -------- Continuingoperations 5,234 (1,631) - 3,603 4,529 8,977 - Discontinued operations(note 11) - - (2,194) (2,194) 56 207 -------- -------- -------- ------- ------- ------- Profit/(loss) on disposal offixed assets 125 (3) 298Net interest payable and similarcharges (269) (461) (1,386) ------- -------Profit on ordinary activities before taxation 1,265 4,121 8,096 Tax on profit on ordinary activities(note 4) (1,010) (1,465) (2,193) ------- ------- -------Profit on ordinary activitiesafter taxation 255 2,656 5,903 Dividend(note 5) (22) - (2,788) ------- ------- ------- Retained profit for the financialperiod 233 2,656 3,115 ======= ======= ======= Earnings per share - underlying(note 6) 9.3p 9.5p 19.0p- basic (note 6) 0.7p 7.5p 16.3p - diluted (note 6) 0.7p 7.4p 16.1p Dividend pershare - - 7.5p GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES Unaudited Unaudited Unaudited Total six Total six months months Year ended ended ended 30/9/05 30/9/04 31/3/05 Restated Restated £000 £000 £000 Profit for the period 255 2,656 5,903 Exchange adjustments 3,191 557 (176)FRS 17 actuarial loss, net of deferred tax - - (982) -------- -------- --------Total net recognised gains for the period 3,446 3,213 4,745Prior year adjustment - Impact of FRS17adoption (note 9) - (5,200) (5,200) -------- -------- -------- --------Total recognised gains and losses relating to the period 3,446 (1,987) (455) ======== ======== ======== SUMMARISED GROUP BALANCE SHEETAt 30 September 2005 Unaudited at Unaudited 30 September 31 March 2005 2004 2005 Restated Restated (note 9) (note 9) £000 £000 £000 Fixed assets Intangible assets 24,764 26,797 26,062Tangible assets 16,020 15,944 16,697Investments 379 244 269 -------- -------- --------- 41,163 42,985 43,028 -------- -------- ---------Current assets Stocks 19,128 18,005 17,396Debtors 41,981 39,480 36,846Cash at bank and in hand 4,292 4,722 7,559 -------- -------- --------- 65,401 62,207 61,801 Creditors: Amounts falling due within oneyear (42,210) (49,308) (48,479) -------- -------- ---------Net current assets 23,191 12,899 13,322 -------- -------- --------- Total assets less current liabilities 64,354 55,884 56,350 Creditors: Amounts falling due after morethan one year (4,275) (474) (282) Provisions for liabilities and charges (728) (1,003) (923) -------- -------- --------- Net assets excluding Pension liabilities 59,351 54,407 55,145 Pension liabilities (6,539) (5,362) (6,643) -------- -------- --------- Net assets 52,812 49,045 48,502 -------- -------- --------- Capital and reserves Called up share capital 3,821 3,658 3,726 Share premium account 40,530 39,180 39,899 Treasury shares (186) (128) (128) Profit and loss account 8,647 6,335 5,005 -------- -------- ---------Equity shareholders' funds (note 8) 52,812 49,045 48,502 -------- -------- --------- SUMMARISED GROUP CASH FLOW STATEMENT Six months ended 30 September 2005 Unaudited Unaudited Unaudited Six months Six months Year ended ended ended 30/9/05 30/9/04 31/3/05 £000 £000 £000 Net cash inflow from operating activities(note 7) 299 1,339 9,403Returns on investments and servicing offinance (557) (459) (1,119)Taxation (1,246) (1,893) (2,823)Capital expenditure and financialinvestments 429 (1,663) (4,096)Acquisitions and disposals (1,084) (1,699) (2,225)Equity dividends paid (2,816) (2,299) (2,298) -------- -------- ---------Net cash outflow before management ofliquidresources and financing (4,975) (6,674) (3,158)Financing (837) 624 (606) -------- -------- ---------Decrease in cash in the period (5,812) (6,050) (3,764) ======== ======== ========= RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT Unaudited Unaudited Unaudited Six months Six months Year ended ended ended 30/9/05 30/9/04 31/3/05 £000 £000 £000 Decrease in cash in the period (5,812) (6,050) (3,764)Repayment of loan notes - 1,637 1,637New long term loans - (437) (437)Repayment of bank loans 1,320 - 1,395New finance leases (71) (83) (154)Repayment of capital element of financelease contracts 314 587 1,103 -------- -------- ---------Change in net debt resulting from cashflows (4,249) (4,346) (220)Exchange differences 100 107 210 -------- -------- ---------Movement in net debt in the period (4,149) (4,239) (10)Net debt at 1 April (7,468) (7,458) (7,458) -------- -------- ---------Net debt at 30 September / 31 March (11,617) (11,697) (7,468) -------- -------- --------- Notes to the Report 1 Accounting policies The interim results, which are unaudited, have been prepared on the basis of theaccounting policies set out in the Group's statutory accounts for the year ended31 March 2005, except for the first time adoption of Financial ReportingStandard (FRS) 17, "Accounting for Retirement Benefits". 2 Basis of preparation These accounts are unaudited and do not constitute statutory accounts as definedin section 240 of the Companies Act 1985. The financial information relating tothe year ended 31 March 2005 is extracted from the statutory accounts which havebeen delivered to the Registrar of Companies. The report of the auditors onthose accounts was unqualified. On 1 April 2005 the Company adopted Financial Reporting Standard (FRS) 17,"Accounting for Retirement Benefits". The adoption of FRS 17 gives rise to aprior period adjustment, details of which are given in note 9. As required byFRS 3 "Reporting Financial Performance" comparative figures have been restated. Other than the adoption of FRS 17 the interim results have been prepared on thebasis of the accounting policies set out in the report and accounts for the yearended 31 March 2005. The interim results were approved by the Board of Directors on 29 November 2005. 3 Segmental analysis Turnover and operating profit attributable to acquisitions completed in theperiod are not considered material and have not been shown separately. Operating Profit before goodwill Turnover amortisation and exceptional items Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Six Six Year Six Six Year months months months months ended ended ended ended ended ended 30/9/05 30/9/04 31/3/05 30/9/05 30/9/04 31/3/05 Restated Restated Restated Restated (note 9) (note 9) £000 £000 £000 £000 £000 £000Area ofactivity BovineGenetics 45,180 40,585 83,575 5,227 5,276 10,719 Consultancy 12,957 11,442 23,954 612 378 792 Animal Health 5,258 4,734 9,723 892 732 1,481 Unallocatedcosts - - - (1,497) (1,177) (2,506) -------- -------- --------- -------- -------- --------Continuing operations 63,395 56,761 117,252 5,234 5,209 10,486 Inter-segmental sales (73) (52) (475) - - - Discontinued 33,332 34,345 66,472 164 175 445 -------- -------- --------- -------- -------- -------- Total 96,654 91,054 183,249 5,398 5,384 10,931 -------- -------- --------- -------- -------- -------- Operating Profit Unaudited Unaudited Unaudited Six months Six months Year ended ended ended 30/9/05 30/9/04 31/3/05 Restated Restated (note 9) (note 9) £000 £000 £000Area of activity Bovine Genetics 3,980 4,855 9,727 Consultancy 597 362 761 Animal Health 557 489 995 Unallocated costs (1,531) (1,177) (2,506) -------- -------- --------Continuing operations 3,603 4,529 8,977 Discontinued (2,194) 56 207 -------- -------- --------Total 1,409 4,585 9,184 -------- -------- -------- Turnover Operating Profit Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Six Six Year Six Six Year months months months months ended ended ended ended ended ended 30/9/05 30/9/04 31/3/05 30/9/05 30/9/04 31/3/05 Restated Restated Restated Restated (note 9) (note 9) £000 £000 £000 £000 £000 £000Geographical region oforiginUnited Kingdom 36,557 35,052 71,548 2,613 3,446 6,767 Rest of Europe 2,679 2,305 5,063 853 658 1,632 North America 18,539 15,400 32,373 52 281 332 Rest of theworld 5,620 4,004 8,266 1,616 1,321 2,752 Unallocatedcosts - - 2 (1,531) (1,177) (2,506) -------- -------- -------- -------- -------- --------Continuing operations 63,395 56,761 117,252 3,603 4,529 8,977 Inter-segmentalsales (73) (52) (475) - - - Discontinued 33,332 34,345 66,472 (2,194) 56 207 -------- -------- -------- -------- -------- -------- Total 96,654 91,054 183,249 1,409 4,585 9,184 -------- -------- -------- -------- -------- -------- Discontinued turnover and operating profit derives from the veterinary productdistribution business (formerly part of the Animal Health division), which wasdivested after the period end. Its turnover and operating profit originated inthe United Kingdom. Turnover Unaudited Unaudited Six months Six months Year ended ended ended 30/9/05 30/9/04 31/3/05 Restated Restated (note 9) (note 9)Geographical region of destination £000 £000 £000 United Kingdom 22,938 23,607 46,425 Rest of Europe 10,911 8,764 19,652 North America 13,805 11,812 24,522 Rest of the world 15,668 12,526 26,178 -------- -------- --------Continuing operations 63,322 56,709 116,777 Discontinued 33,332 34,345 66,472 -------- -------- -------- Total 96,654 91,054 183,249 -------- -------- -------- Discontinued turnover was made to customers in the United Kingdom. 4 Taxation The taxation charge for the period is based on the estimated effective tax ratefor the full year of 31.6% (2004: 30%). The total tax charge for the period hasbeen reduced by a credit of £300,000 in respect of prior years. 5 Dividends The dividend charged in the period ended 30 September 2005 of £22,000 representsthe final dividend for the year ended 31 March 2005 on new shares issuedsubsequent to the year end. 6 Earnings per share The basic earnings per share is based on a profit after tax for the period of£255,000 (30/9/2004: £2,656,000; 31/3/2005: £5,903,000) and the weighted averagenumber of ordinary shares in issue of 37,477,628 (30/9/2004: 35,565,000; 31/3/2005: 36,208,931). The underlying earnings per share of 9.3p (30/9/2004: 9.5p) is based on theunderlying earnings as set out below and the weighted average number of ordinaryshares in issue. Unaudited Unaudited Unaudited Six months Six months Year ended ended ended 30/9/05 30/9/04 31/3/05 Restated Restated £000 £000 £000 Profit before tax 1,265 4,121 8,096 Add: Impairment of goodwill 2,239 - - Operating exceptional items 845 - - -------- -------- --------Profit before tax, exceptional items andgoodwill impairment 4,349 4,121 8,096 Add: Goodwill amortisation 905 799 1,747 (Profit) / loss on disposal of properties (125) 3 (298) Less: Taxation (1,010) (1,465) (2,193) -------- -------- -------- 4,119 3,458 7,352 Less: Associated taxation on adjustments (319) (94) (179)Tax credits relating to prior years (300) - (300) -------- -------- --------Underlying earnings 3,500 3,364 6,873 -------- -------- -------- The diluted earnings per share is based on a profit for the period of £255,000(30/9/2004: £2,656,000; 31/3/2005: £5,903,000) and on 38,123,589 (30/9/2004:36,023,000; 31/3/2005: 36,755,735) diluted weighted average ordinary shares,calculated as follows: Unaudited Unaudited Unaudited Six months Six months Year ended ended ended 30/9/05 30/9/04 31/3/05 000's 000's 000's Basic weighted average number of shares 37,478 35,565 36,209Dilutive potential ordinary shares:Employee share options 646 458 547 -------- -------- -------- 38,124 36,023 36,756 -------- -------- -------- 7 Reconciliation of operating profit to net cash flow from operating activities Unaudited Unaudited Unaudited Six months Six months Year ended ended ended 30/9/05 30/9/04 31/3/05 Restated Restated £000 £000 £000 Operating profit 1,409 4,585 9,184Depreciation 1,612 1,740 3,549Amortisation of milk quota 4 4 8Amortisation of goodwill 905 799 1,747Impairment of goodwill 2,239 - -Deferred government grants (1) (1) (2)Increase in stocks (890) (1,772) (1,262)Increase in debtors (3,841) (5,117) (3,518)(Decrease)/increase in creditors (1,138) 1,101 (303) -------- -------- -------- 299 1,339 9,403 -------- -------- -------- 8 Reconciliation of Group shareholders' funds Unaudited Unaudited Unaudited Six months Six months Year ended ended ended 30/9/05 30/9/04 31/3/05 Restated Restated £000 £000 £000 Profit for the period 255 2,656 5,903Dividends (22) - (2,788) -------- -------- -------- 233 2,656 3,115 Other recognised gains and losses relatingto the period 3,191 557 (1,158)Movements in share capital 668 2,327 2,9382004 Performance share plan 218 - 102 -------- -------- --------Net additions to shareholders' funds 4,310 5,540 4,997 Opening shareholders' funds 48,502 43,505 43,505 -------- --------- As previously stated - 48,705 48,705- Prior year adjustment (note 9) - (5,200) (5,200) -------- -------- -------- -------- --------Closing shareholders' funds 52,812 49,045 48,502 -------- -------- -------- 9 Prior year adjustment The Company has made a prior period adjustment as a result of its adoption inthe period of Financial Reporting Standard (FRS) 17, "Accounting for RetirementBenefits". The adjustment to opening profit and loss account reserves amounts to £5,200,000at 31 March 2004, representing the FRS 17 net pension liability at that date. Inaccordance with the transitional arrangements of FRS 17, full disclosure of theassumptions used in the valuation of the scheme deficit and the impact its fulladoption would have on the Group's profit and loss account and statement oftotal recognised gains and losses for the year ended 31 March 2005 and on itsbalance sheet at 31 March 2005 has been made in the Company's report andaccounts for the year ended 31 March 2005. For information purposes additional information on the impact on certain profitand loss account items of adopting FRS 17 is given below. Unaudited Unaudited Unaudited Six months Six months Year ended ended ended 30/9/05 30/9/04 31/3/05 £000 £000 £000Underlying operating profitAs previously reported 5,574 5,613 11,389Impact of FRS 17 (176) (229) (458) -------- -------- --------As reported / restated 5,398 5,384 10,931 -------- -------- -------- Interest chargeAs previously reported (593) (459) (1,186)Impact of FRS 17 324 (2) (200) -------- -------- --------As reported / restated (269) (461) (1,386) -------- -------- -------- Underlying EPSAs previously reported 9.1p 9.9p 20.3pImpact of FRS 17 0.2p (0.4p) (1.3p) -------- -------- --------As reported / restated 9.3p 9.5p 19.0p -------- -------- -------- 10 Exceptional items Exceptional items of £845,000 in the six months to September 2005 principallycomprises £456,000 relating to costs associated with the closure of the BovineGenetics division's Strategic Consulting business and £367,000 relating to therestructuring of the Group's UK breeding operation. 11 Post balance sheet events (i) Divestment of veterinary product distribution businessOn 28 October 2005 the Group completed the divestment of its non-core veterinaryproduct distribution business for a total of £7.2 million in cash. For the yearended 31 March 2005 the business employed 125 staff and generated turnover ofapproximately £66 million and an operating profit of £0.4 million beforeallocation of central costs, on tangible net assets of £6 million. Following thetransaction Genus expects to realise a further £1 million from the sale of netassets not included in the sale of the business. In the light of this disposal, after the period end, the results of thisbusiness have been shown as discontinued operations. In addition, an exceptionalgoodwill impairment charge of £2,239,000 has been recognised in operating profitin the period, to write down the carrying value of the goodwill associated withthe business to its recoverable amount. (ii) Recommended offer for Sygen plcOn 28 October 2005 the Group announced it had reached agreement on the terms ofa recommended cash offer for the acquisition of Sygen International plc for apurchase consideration of £187 million, excluding fees. The offer was approvedby the Company's shareholders at an Extraordinary General Meeting on 25 November2005 and the offer was declared unconditional on that date. Sygen Internationalplc applies a combination of quantitative genetics and biotechnology to pig andshrimp breeding in 30 countries on six continents, and for the year ended 30June 2005 generated turnover of £134 million and an operating profit of £9.7million before exceptional items and amortisation of goodwill, on net assets of£54 million. INDEPENDENT REVIEW REPORT TO GENUS plc Introduction We have been instructed by the company to review the financial information forthe six months ended 30 September 2005 which comprises the Summarised GroupProfit and Loss Account, Group Statement of Total Recognised Gains and Losses,Summarised Group Balance Sheet, Summarised Group Cash Flow Statement,Reconciliation of Net Cash Flow to Movement in Net Debt and the related notes 1to 11. We have read the other information contained in the interim report andconsidered whether it contains any apparent misstatements or materialinconsistencies with the financial information. This report is made solely to the company having regard to guidance contained inBulletin 1999/4 issued by the Auditing Practices Board. Our work has beenundertaken so that we might state to the company those matters we are requiredto state to them in an independent review report and for no other purpose. Tothe fullest extent permitted by the law, we do not accept or assumeresponsibility to anyone other than the company, for our work, for this report,or for the conclusions we have formed. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare also responsible for ensuring that the accounting policies and presentationapplied to the interim figures are consistent with those applied in preparingthe preceding annual accounts except where any changes, and the reasons forthem, are disclosed. Review work performed We conducted our review in accordance with the guidance contained in Bulletin1999/4 issued by the Auditing Practices Board for use in the United Kingdom. Areview consists principally of making enquiries of group management and applyinganalytical procedures to the financial information and underlying financialdata, and based thereon, assessing whether the accounting policies andpresentation have been consistently applied, unless otherwise disclosed. Areview excludes audit procedures such as tests of controls and verification ofassets, liabilities and transactions. It is substantially less in scope than anaudit performed in accordance with United Kingdom Auditing Standards andtherefore provides a lower level of assurance than an audit. Accordingly we donot express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 September 2005. Deloitte & Touche LLP Chartered AccountantsSouthampton29 November 2005 Financial CalendarSecond Interim period end (covering 12 months to March 2006) 31 March 2006Announcement of second interim results June 2006Financial period end (covering 15 months to June 2006) 30 June 2006Announcement of 15 month period results September 2006Annual General Meeting November 2006Full and final dividend payment November 2006 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Genus