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Genus plc / Annual Report 2020
Inspiring innovation in animal genetic improvement
> by partnering
with farmers
to transform
how we nourish
the world
EXPANDING PRODUCTION TO MEET
CUSTOMER DEMAND
GROWING OUR PRESENCE IN EUROPE p.20
p.24
p.28
PROGRESSING THE DEVELOPMENT
OF PRRSV-RESISTANT PIGS
1
CONTENTS
STRATEGIC REPORT
2020 Highlights
02
04 Genus at a Glance
06
08
10
12
14 Market Overview
16
Chairman’s Statement
Chief Executive’s Review
Business Model
Stakeholder Engagement
Strategic Framework and
Key Performance Indicators
18 Divisional Reviews
30
34
38
43 Non-Financial Information Statement
Financial Review
People and Culture
Sustainability Report
44
and Section 172 Statement
Principal Risks and
Uncertainties
47 Going Concern and
Viability Statement
48
50
52
CORPORATE GOVERNANCE
Chairman’s Letter
Board of Directors
and Company Secretary
Genus Executive
Leadership Team
Corporate Governance Statement
The Board
The Board’s Year in Review
Nomination Committee Report
Audit & Risk Committee Report
Directors’ Remuneration Report
54
54
56
60
65
70
93 Directors’ Report
94
Directors’ Responsibilities
FINANCIAL STATEMENTS
Independent Auditor’s Report
95
102 Group Income Statement
Group Statement of
103
Comprehensive Income
Group Statement of Changes
in Equity
104
107
105 Group Balance Sheet
Group Statement of
106
Cash Flows
Notes to the Group
Financial Statements
Parent Company
Balance Sheet
Parent Company Statement
of Changes in Equity
Notes to the Parent Company
Financial Statements
164
163
165
175
ADDITIONAL INFORMATION
Five-Year Record –
Consolidated Results
176 Alternative Performance
Measures Glossary
185 Glossary
IBC Advisers
STRATEGIC REPORT
2
2020
HIGHLIGHTS
1 Adjusted results are the Alternative Performance
Measures (‘APMs’) used by the Board to monitor
underlying performance at a Group and operating
segment level, which are applied consistently
throughout. These APMs should be considered
in addition to, and not as a substitute for or as
superior to statutory measures. For more
information on APMs, see the APM Glossary.
2 Constant currency percentage movements are
calculated by restating the results for the year
ended 30 June 2020 at the average exchange rates
applied to adjusted operating profit for the year
ended 30 June 2019.
GROUP REVENUE
£551.4m
2019: £488.5m
2016: £388.3m
2018: £470.3m
2017: £459.1m
ADJUSTED PROFIT BEFORE TAX1
£71.0m
2018: £58.5m
2019: £61.0m
2017: £56.4m
2016: £49.7m
FREE CASH FLOW1
£35.2m
2018: £24.3m
2019: £10.0m
2017: £25.4m
2016: £15.7m
Genus plc / Annual Report 2020
STATUTORY PROFIT BEFORE TAX
£51.5m
2016: £60.9m
2017: £40.7m
2019: £9.9m
2018: £7.8m
ADJUSTED BASIC EARNINGS PER SHARE1
85.4p
2019: 73.2p
2018: 75.9p
2017: 69.4p
2016: 60.7p
DIVIDEND PER SHARE
29.1p
2018: 26.0p
2017: 23.6p
2019: 27.7p
2016: 21.4p
3
>
STRONG REVENUE GROWTH OF 13% IN ACTUAL
AND CONSTANT CURRENCY2
Excellent performance in PIC, our porcine genetics business,
with revenue up 17%2; royalty revenues grew 11%2 with growth
in all regions
> High breeding stock sales and royalties in China drove PIC volume
>
>
growth of 13%, 6% excluding China
Strong revenue growth in ABS, our bovine genetics business, of 9%2,
driven by Sexcel®, our sexed product
ABS volume growth of 8%, with sexed volumes up 47% and
beef up 17%
VERY STRONG ADJUSTED PROFIT BEFORE TAX
(‘PBT’)1, UP 22% IN CONSTANT CURRENCY (UP 16%
IN ACTUAL CURRENCY); STATUTORY PBT AT £51.5M
>
Adjusted operating profit including joint ventures and excluding
gene editing1 up 17%2
> Double digit adjusted operating profit growth1 in PIC (up 25%2)
>
>
and ABS (up 12%2); R&D investment increased 17%2
Statutory PBT includes a £15.8m uplift in net IAS 41 biological asset
valuation and £19.2m of exceptional costs, compared with a reduced
asset valuation and higher exceptional costs in the prior year
Foreign currency translation impact on adjusted PBT of £3.4m
primarily reflecting weakness in LATAM currencies
STRONG CASH GENERATION, EARNINGS
AND DIVIDENDS, AND NEW REVOLVING CREDIT
FACILITY (‘RCF’)
>
Strong free cash flow1 of £35.2m, net debt1 of £102.6m (inc £24.7m
IFRS 16 adoption), net debt to EBITDA1 of 0.9x
> New enlarged credit facility completed 24 August 2020; £150m
>
>
multicurrency RCF, a USD125m RCF and a USD20m bond and
guarantee facility for a three-year term with two one-year
extension options
Very strong financial position with high operating cash flows and
significant borrowings headroom enables flexibility to invest further
in growth
Statutory earnings per share increased to 62.4p from 12.4p in
the prior period; adjusted earnings per share1 up 23% in constant
currency (up 17% in actual currency); dividend up 5% with 2.9x
adjusted earnings cover1
GOOD STRATEGIC PROGRESS DESPITE COVID-19
> During the COVID-19 pandemic Genus has been committed to
the health and safety of its people, customers and communities
throughout its global markets
>
>
> More than doubled size of PIC China’s supply chain to capture
opportunity of re-stocking post African Swine Fever (‘ASF’)
PIC’s collaboration with Beijing Capital Agribusiness Co. Ltd (‘BCA’)
is progressing well with receipt of the first milestone payment of
USD7m (net income £3.2m) received in January 2020
Expanded sexed product capacity including new sites, and driving
performance through continued technology improvements
Completed a two year trial of NuEra®, our beef-on-dairy genetics
demonstrating a material value proposition for the beef industry
Continued progress as planned with the Porcine Reproductive
Respiratory Syndrome virus (‘PRRSv’) development programme,
first Food and Drug Administration (‘FDA’) filing completed
>
>
> Market leading genetic portfolio across the Group enabling broad
based market share gains
STRATEGIC REPORT
4
GENUS AT A GLANCE
Producing genetically
superior breeding animals
What we do
REVENUE1
ADJUSTED OPERATING PROFIT
INCLUDING JOINT VENTURES1,2
Genus is a world-leading
animal genetics company.
We partner with farmers to transform how
we nourish the world – a mission that is
important to a sustainable future.
We do this by breeding better pigs and
cattle, so farmers can produce high-quality
meat and milk more efficiently and
sustainably. We accurately select animals
with desirable characteristics and use
them to breed subsequent generations.
Examples of desirable characteristics include
feed efficiency, disease resistance, growth
rate, protein and fat content, and fertility.
How we do it
We analyse animals’ DNA
and look for markers that we
know are linked to desirable
characteristics, which help
farmers to raise healthier and
more productive animals.
We then select animals with the strongest
genetic profile from our proprietary and
partner herds and breed them to produce
even better offspring, in a continuous
cycle. We distribute these genetically
superior animals to our customers in
the form of breeding animals, semen
or embryos.
We also own technology that enables us
to screen and process semen for desirable
traits, such as female gender for the dairy
market, and license-in technology to make
precise, desirable gene edits to animals’
DNA, which we are employing in our
product development programmes.
Our focus is on progressive, sustainable
farmers, who are best placed to realise
the benefit that superior genetics and
technologies can have.
See p.38
£298.8m
£237.6m
£124.3m
£32.5m
INVESTING TO STRENGTHEN OUR POSITION
£119m
in FY20
£m
120
100
80
60
40
20
00
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
Research & Development3
Capital Expenditure4
Acquisitions & Investments
1 Revenue and Adjusted Operating Profit Including Joint Ventures exclude R&D revenues and costs.
2 For more information on APMs see Glossary.
3 Includes IntelliGen capitalised development expenses.
4 Includes biological asset cash movements and finance lease payments.
Genus plc / Annual Report 2020 5
Serving pork, dairy and beef farmers globally
Genus’s leading porcine and bovine animal breeding divisions, PIC and ABS,
deliver leading genetics to tens of thousands of farmers globally.
PORK
PIC, our global porcine genetics business, sells
genetically superior sows, boars and semen to
farmers, so they can breed pigs with desirable
characteristics for pork production. We also
provide technical services and advice to farmers,
to maximise the performance of our breeding
animals in their farms.
PIC owns over 10 elite pure-bred pig lines,
housed in strategically located facilities around the
world. These herds are bred out into much larger
breeding herds in over 500 predominantly
sub-contracted ‘multiplication’ farms around
the world. PIC boars are also housed in about 400
boar studs globally, where semen is collected for
distribution to customers and multiplication herds.
PIC genetics are sold under the PIC brand through
direct sales channels and strategic partners.
See p.18
DAIRY AND BEEF
ABS, our global bovine genetics business, sells bull
semen and embryos so farmers can use artificial
insemination to breed calves with desirable
characteristics for milk and beef production. ABS’s
highest-quality semen is often sold in sexed form,
which greatly increases the probability of a female
calf. ABS also provides technical services to
farmers, to maximise the performance of their
animals bred with our genetics.
ABS breeds genetically elite bulls in the US, Europe
and Latin America. The best bulls come to one of
ABS’s six production studs, where their semen is
collected for distribution as a frozen ‘straw’ of
semen or used to create embryos for sale.
ABS genetics are sold through direct sales
channels and strategic partners under the ABS
brand. In the UK and France, they are sold under
long-established Genus and Bovec brands.
See p.22
40+
Countries with sales presence1
75+
Countries with sales presence3
1 Including through
franchises, distributors
and joint ventures.
2 MPEs refers to market
pig equivalents, a
standardised measure
of our customers’
production of slaughter
animals that contain
our genetics.
3 Including through
distributors.
4 Dairy, Beef and sorted
units of semen and
embryos delivered or
produced for customers.
171m
MPEs2
2,500+
Customers
21m
Cattle inseminations and embryo transfers4
50,000+
Customers
STRATEGIC REPORT
6
CHAIRMAN’S STATEMENT
A business in
excellent shape
Bob Lawson
I am pleased to be
handing over to my
successor with the
Group in excellent
shape.
This is my final report to you as Chairman
of Genus, as I will be retiring from the Board
at the conclusion of the Company’s Annual
General Meeting in November. I have been
proud to play a part in the transformation
of this outstanding business and to see first-
hand its evolution into the world leading
animal genetics company that it is today.
The need Genus meets is fundamentally the
same as when I joined the Board in 2010: our
genetics help farmers to produce animal protein
more efficiently and sustainably and in doing
so, we help to nourish the world. The successful
execution of our strategy, including significant
investment in ground-breaking research and
innovative technologies over many years, means
that our portfolio of genetic products and
services has never been in better shape. This
is allowing us to support progressive livestock
farmers more effectively than ever before. We
have also successfully adjusted our business
model over time, to enable Genus to share
in the value we create for our customers.
Reflecting over the last ten years, I have
been pleased to observe the evolution of
the Company and highlight three areas.
The first is the culture which has transitioned
from operating in silos focused on species
and/or country to a unified, cooperative and
universal approach focused on providing
an unequalled service to customers.
The second has been the transformation
and effectiveness of R&D. It now operates
at the forefront of our chosen areas and the
combination of our relationships with leading
universities and our much enhanced in-house
expertise will deliver sustainable benefits that
will continue to secure our global leadership.
The third and final observation is again
associated with culture. Genus has transitioned
from a UK centric view of the world to a true
global business with significant activities in the
important major and emerging economies of the
world. As you will note on page 50 the leadership
team is not only cohesive but now embraces
multiple nationalities and backgrounds.
Genus plc / Annual Report 2020 7
Genus now employs over 3,100 people
worldwide, each of whom has played their
part in our performance this year. On behalf
of the Board, I want to thank them for their
commitment and dedication to serving our
customers, and to wish them all every success
on the next stage of the Group’s journey.
The Group continues to invest for the future,
in particular in our leading genetics and our
R&D platform innovations. At the same time,
we recognise the needs of our shareholders,
and having paid an interim dividend of 9.4p
per share, an increase of 6% over the prior
year, the Board is now recommending a
final dividend of 19.7p per share. This will
give a total dividend of 29.1p, up 5% from
the 27.7p paid in respect of FY19. The final
dividend will be paid on 11 December
2020, to shareholders on the register at the
close of business on 20 November 2020.
While the Group has been able to successfully
adapt to COVID-19, the full impact of the
pandemic on our customers and end consumers
is not yet clear. Even so, I am confident that
Genus has transformed into an agile and
responsive business that will adapt and prosper
in years to come. It has been a privilege to
lead the Board and to work with the Genus
team for over a decade. The quality of the
people, genetics, technology, services and
R&D innovation pipeline position the Company
for future success. I leave Genus with a degree
of personal sadness but with the knowledge
that I have been extremely fortunate to have
been part of a great organisation which
has an exciting future. That future will be
delivered by an exceptional Board under Iain’s
leadership and a magnificent global team.
Bob Lawson
Chair of the Board
7 September 2020
All of these factors have contributed to this
year’s strong financial performance, despite
volatile markets caused by African Swine Fever
and COVID-19. Demand from China meant
that PIC had an excellent year and was the
primary driver of our growth. ABS performed
well, maintaining its growth trend, with strong
demand for sexed genetics and higher beef
volumes. Overall, the Group’s adjusted profit
before tax increased by 16% in constant
currency (13% in actual currency) and reached
a new record of £71.0m. Statutory PBT was
£51.5m (2019: £9.9m). While COVID-19 presented
some operational challenges to us in the second
half of FY20, we have responded well and the
business has continued to operate safely.
I am therefore pleased to be handing over to
my successor, Iain Ferguson, with the Group in
excellent shape. Iain joined us on 1 July 2020
as a Non-Executive Director and Chairman
Designate. His substantial Board experience, as
well as his commercial, science and agribusiness
expertise, make him the ideal person to
maintain the growth momentum the business
has generated and to lead the Board through
the next chapter of Genus’s development.
Iain will be ably supported by our executive
team. As I noted in my report to you last year,
Stephen Wilson became Chief Executive in
September 2019 and we continue to benefit
from his deep knowledge of the business
and its strategy, built up during more than
six years as Group Finance Director. Alison
Henriksen joined the Board in January
2020 to take up Stephen’s former role.
Her commercial and financial expertise is
already proving invaluable to the Group.
The Board plays a key role in challenging and
approving the Group’s strategy and overseeing
its implementation. During the year, we
once again held our annual strategy session,
focusing on the strategic direction and goals
for the Group and its business units (see page
56 for more information). The Board also
pays careful attention to the Group’s culture
and the employee Your Voice survey results,
since we know that it is the employees that
are at the heart of the Company’s successes
(see page 36). Genus has a long-standing
set of values and I am pleased that our
people continue to live by them each day.
STRATEGIC REPORT
8
CHIEF EXECUTIVE’S REVIEW
A successful strategy
and consistent vision
Stephen Wilson
Performance in the year
was strong, with record
adjusted profit before
tax.
This is my first report to you as the Chief
Executive of Genus, having taken up the
position in September 2019, after more
than six years as Group Finance Director,
and it is a true privilege to lead this
Company. Genus provides a vital service to
an essential industry and in doing so plays
a key role in helping to nourish the world.
We have a fantastic team of talented, expert
and passionate people and our portfolio
of elite animal genetics is the strongest
it has ever been.
Our current position reflects the success of
our ongoing strategy over recent years , which
is to increase genetic control and product
differentiation, deliver value in key markets and
segments, and share in the value delivered. Our
consistent vision of ‘Pioneering animal genetic
improvement to help nourish the world’ and our
strong core values drive all that we do. At the
same time, we must continue to adapt to a
changing world, so we are placing even greater
emphasis on environmental sustainability, both
in the way we run the business and in the
benefits our genetics deliver in enabling more
sustainable production of high-quality animal
protein. Innovation is another important area
of focus. Genus has always been an innovative
company but the biological sciences move
quickly and we need to ensure we remain at the
forefront of applying new ideas in our industry
to the benefit of our customers.
The Group showed its resilience following
the outbreak of the COVID-19 pandemic. This
disrupted protein supply chains and some of our
customers experienced unprecedented market
price and demand volatility.
I am proud of the way our people responded
to the many challenges and we have been able
to keep operating essentially uninterrupted
throughout the crisis, while continually focusing
on protecting the health of our employees and
other stakeholders.
GROUP PERFORMANCE
Performance in the year was strong, with
revenue increasing by 13%, and adjusted
profit before tax growing 16% (22% in
constant currency), to a record £71.0m.
Genus plc / Annual Report 2020 Genus PIC was the major contributor to that
growth, as it benefited as expected from strong
demand in China as large producers expanded
to fill the supply shortfall caused by African
Swine Fever in 2019. Europe and Latin America
also contributed strong growth, resulting in
PIC’s adjusted operating profit including joint
ventures being 25% higher in constant currency.
Strategically important porcine royalty revenue
was up 11% in constant currency, with growth in
all regions, contributing to total porcine revenue
increasing by 17% in constant currency.
Genus ABS achieved volume growth of 8% and
adjusted operating profit growth of 12% in
constant currency. This was driven mainly by the
growth in sexed product, with sexed volumes up
47%, and continued growth in the use of beef
genetics in dairy herds, with global beef volumes
up 17%. ABS benefited from our investment in
sales capability and the shift to long-term
partnership accounts, particularly in the US.
Performance was also particularly strong in
Brazil, Russia, India and China.
R&D is the lifeblood of our business and we
increased net investment by 19% (17% in
constant currency) as planned, largely driven
by increased investment in porcine product
development as we look to further strengthen
our proprietary genetics and build capacity for
future growth. We will continue to increase
investment in gene editing and IntelliGen®
production capacity, as well as further
developing our R&D pipeline.
CONTINUED STRATEGIC PROGRESS
Our strategic investments in our proprietary
pork, dairy and beef breeding programmes and
our leading sexing technology continue to reap
rewards and we advanced our strategy on a
number of fronts during the year. Our PRRSv
resistance programme made progress as
planned and we received our first milestone
payment from BCA, our collaboration partner
on PRRSv in China. Also in China, we were able to
more than double PIC’s supply chain capacity,
primarily by using our customers’ systems
and joint ventures to multiply our genetics,
positioning Genus to provide elite genetics to
more large commercial farms in the country.
Meanwhile, our porcine R&D is delivering
historically high rates of genetic improvement,
supporting business growth and market
share gains.
In ABS, we opened further production capacity
in Wisconsin to support the ongoing growth in
sexed semen volumes, which continue to
outperform. In addition, we opened further new
state of the art barns to house our elite genetics.
Our bovine product development is expanding
its industry leading position in Holstein dairy
genetics and we used a two year long product
trial through the commercial beef supply chain
to validate the superior growth, feed efficiency
and yields provided by our beef genetics
programme. The results of this trial showed the
significant benefits of our genetics.
The implementation of Genus One, our new
enterprise system, is progressing well. We
achieved our first major ‘go live’ in PIC North
America and are well progressed on roll outs
19.7p
Final dividend per share
29.1p
Total dividend for the year per share
5%
Total dividend increase
INSPIRING INNOVATION
FOR A MORE SUSTAINABLE WORLD
Our consistent vision of ‘Pioneering animal
genetic improvement to help nourish the
world’ and our strong core values drive all
that we do. At the same time, we must
continue to adapt to a changing world, so we
are placing even greater emphasis on
environmental sustainability, both in the way
we run the business and in the benefits our
genetics deliver in enabling more sustainable
production of high-quality animal protein.
Driving genetic improvement p.38
Reducing our carbon footprint p.41
Energy efficiency
p.42
9
to further business areas over the coming year.
Ultimately when fully implemented we will reap
benefits through leveraging one global system
in our operations.
PEOPLE
As announced on 29 June 2020, Bob Lawson
will be standing down as Chairman at the AGM
in November 2020. On behalf of the Board and
all of my Genus colleagues, I want to thank him
warmly for his wise counsel and great leadership
during his ten years on the Board. He has played
an integral role in Genus’s transformation into
the world-leading company it is today. I also
want to welcome Iain Ferguson, who joined the
Board in July 2020 and will become Chairman
after the AGM. We are already benefiting from his
very relevant experience and counsel.
The other change to the Board of Directors
and membership of GELT during the year was
the appointment of Alison Henriksen as Chief
Financial Officer. Alison joined us in January
2020 and her commercial and financial expertise
is already proving highly valuable to us. I also
want to thank Janet Duane, our Financial
Controller, who very ably stepped up to be
acting CFO in the period before Alison joined us.
As previously reported, Dr Elena Rice joined us
as Chief Scientific Officer and Head of Research
and Development in July 2019.
Genus employs more than 3,100 people around
the world. I want to thank them all for their
contribution to our success this year, particularly
so in the environment resulting from COVID-19.
We are fortunate that our people could continue
to carry out their roles during the pandemic and
no government aid for wages was sought. While
our business is animal genetic improvement,
we only succeed because of the talents and
dedication of our people. The global Your Voice
survey we conducted in November showed that
employee engagement remains high and we
continue to nurture our positive and inclusive
culture and to attract new talent to support our
strategic objectives.
OUTLOOK
The full impact of COVID-19 on the world
economy and consumer incomes remains
unclear although economic forecasts suggest
that many sectors will be heavily impacted
for some time, creating economic recession in
many countries. The pandemic has also caused
operational challenges for elements of the
animal protein value chain, most notably meat
processors in the US which are likely to continue
for some time, leading to challenging conditions
for some of our customers through at least the
remainder of 2020. Greater currency headwinds
are also anticipated in FY21. However, Genus’s
business model and strategy has again
demonstrated its robustness and we anticipate
further growth in constant currency in the
business in the coming year and to perform in
line with our expectations.
Stephen Wilson
Chief Executive
7 September 2020
STRATEGIC REPORT
10
BUSINESS MODEL
Producing and delivering
superior animals to farmers
CREATE DIFFERENTIATED AND SUSTAINABLE PROPRIETARY GENETIC SOLUTIONS
Produce genetically superior
breeding animals
OUR STRENGTHS
AND RESOURCES
SHARED PROPRIETARY
TECHNOLOGY PLATFORM
GLOBAL POSITION
Genus is uniquely placed as a global player,
with leading brands and market positions,
which strengthen through acquisitions and
partnerships
GENOME SCIENCE
We understand the links between DNA
and animals’ observable characteristics,
and how we can influence them
ELITE ANIMALS
We own elite porcine and bovine herds, which
produce animal proteins more efficiently, with
traits farmers value
GENOMIC SELECTION
We breed successive generations of
animals by using DNA analysis to select
superior parents in our breeding herds
BIOSYSTEMS ENGINEERING
We use technology to interrogate and
select cells, such as in our semen sexing
technology
GENE EDITING
We are developing more sustainable,
disease-resistant breeding animals by
making precise changes to their genes
REPRODUCTIVE BIOLOGY
We perform IVF matings to select both
female and male parents for superior
offspring, and we have active R&D
workstreams in multiple advanced
reproductive technologies
PROPRIETARY TECHNOLOGY
We are a technology leader in our field.
We harness leading genetic and breeding
technologies, which we develop in-house
and through strategic partnerships
CUSTOMER RELATIONSHIPS
We serve over 50,000 customers globally,
including world-leading meat and milk
producers
EXPERT PEOPLE
We have over 100 PhD qualified employees
and relationships with leading research
institutions
SUPPLY CHAIN AND DISTRIBUTION
We have production facilities in key locations
worldwide, coupled with sales forces and
agents in over 80 countries
FINANCIAL STRENGTH
Our cash generative businesses and strong
financial position allow us to invest for
the future
LINK TO STRATEGY
Create differentiated and
sustainable proprietary genetic
solutions
Serve progressive protein
producers effectively
Share in the value delivered
See p.16
Genus plc / Annual Report 2020 11
SERVE PROGRESSIVE PROTEIN PRODUCERS EFFECTIVELY
SHARE IN THE VALUE DELIVERED
Deliver improved breeding
animals to farmers
Price according to
the value delivered
We have a global supply chain that efficiently delivers genetics to
customers while mitigating risk for us, for example through our use of
third-party multipliers. Our technical teams then help our customers
to realise genetic improvement on-farm.
GENETICS PRIMARILY SOLD ON MULTI-YEAR
ROYALTY AGREEMENTS
Superior pigs with traits farmers value
BOARS IN STUD
40,000+
boars producing semen
CUSTOMER
171m
MPEs produced
EXPANSION HERDS
c.500,000
GGP/GP animals with our genetics
under genetic management1
1 GGP/GP refers to great grandparent/grandparent
of a commercial slaughter pig.
GENETICS PRICED ACCORDING
TO INDICES OF GENETIC MERIT
STUDS AND LABS
21m
semen straws and
embryos delivered or
produced for customers
800+
superior dairy and
beef bulls with traits
farmers value
CUSTOMER
7–8m
dairy and beef
calves born
DELIVERING FOR
OUR STAKEHOLDERS
CUSTOMERS
We help our customers to breed animals
that are healthier and more productive,
so they produce better meat and milk,
more efficiently and sustainably. Pricing
according to the value we deliver on-farm
helps to build trust with our customers
CONSUMERS
We make safe, healthy and nutritious
animal protein more affordable to help
feed the world
COMMUNITIES & ENVIRONMENT
We make farming more sustainable
by reducing the use of feed and other
resources required to produce the same
amount of meat and milk, reducing
greenhouse gas emissions over time
PEOPLE
We employ over 3,100 people globally,
who all help to deliver our vision of
nourishing the world
INVESTORS
By sharing in the value we deliver to
customers, we generate returns for
our investors
STRATEGIC REPORT
12
STAKEHOLDER ENGAGEMENT
Engaging with
our stakeholders
OUR STAKEHOLDERS
WHY WE ENGAGE
HOW WE ENGAGE
Customers &
Consumers
Board representative:
All Directors
Employees
Board representatives:
Lesley Knox
Lykele van der Broek
Our customers depend on
our genetics to improve
their businesses and their
profitability. We look to
understand their needs
and to help them make
the most of our products
and services.
We look to better
understand end-consumer
requirements and
preferences.
Our people play a crucial
role in helping us pursue
our strategic goals and
uphold the core values that
underpin our organisation.
We engage, equip and
support them to achieve
their full potential while
building our business.
> The Board typically visits key customers when Board meetings are held
outside the UK, although this year’s visit to Brazil was cancelled due to
COVID-19
> Regular Board updates on targeted customers and customer wins
> Regular customer visits as part of our service offering, enabling our
teams to work closely with customers to better understand their needs
> Board engagement with different levels of the supply chain (albeit
limited by COVID-19), including meeting with meat packers and
processors to understand what they look for in genetics to meet
consumer demands, such as lean animal weight
> Keeping under review growth of alternative non-animal proteins,
in light of consumer preference
> Direct engagement by Workforce Engagement Directors at town hall
meetings
> Employee Your Voice survey
> Chief Executive video update, manager-led updates and updates via
intranet following results announcements
> Leadership calls and quarterly manager briefings
> Regular internal communications from management
> Launch of new employee-led resource group (AWAKE – Advancing
Women’s Advocacy, Knowledge & Empowerment) to empower women
to contribute to their full potential
> Health and safety training programme and regular updates/briefings
Shareholders
Board representative:
Bob Lawson
We maintain strong
relationships with
shareholders, ensuring they
understand our strategy,
progress and performance
and that we understand
how they view our business.
Communities &
Environment
Board representative:
Lysanne Gray
We look to be a responsible
citizen within our
communities, offering local
recruitment, responding
to crises and supporting
charities. We also look to
minimise our impact on the
environment.
> Investor roadshows, led by the Chief Executive and Chief Financial
> Shareholder interest in environmental performance (see below)
> New Remuneration Policy approved by shareholders, and made
Officer
> Results announcements, presentations and live webcasts
> AGM and trading update in November 2019
> Annual Report
> Regular news flow on key developments in the business
> Engagement with investors regarding new executive Remuneration
Policy and the appointment of the Chairman Designate
> A range of placement and employment opportunities offered for
> Potential impact of climate change on the business and our
> The Board scrutinised management’s plans to achieve climate
students and apprentices
> Support for charities close to local businesses
> Providing educational support for agriculture and animal science
programmes
> Investing in activities designed to reduce greenhouse gas emissions,
consistent with our Climate Change Policy
communities
change targets and approved Climate Change Policy, targets, strategy
> Need to respond as required to local emergencies
and actions to deliver targets
> The Board will monitor implementation of the climate change plan
and progress against targets
> Lysanne Gray appointed as the Board’s Sustainability Sponsor (see
page 43)
> Supported India flood response (see page 38)
> Supported local charities including food banks in short supply of
meat proteins, as a result of the economic impact of COVID-19
> Need for new ways of working to support customers during COVID-19
> Introduced virtual sales and advice for customers during the
> Bespoke Customer Genetics advice
pandemic
due to COVID-19
> Worked with customers to manage the impacts on their operations
> Providing bespoke Customer Genetics advice designed to improve
phenotypic and genotypic characteristics of the herd
> Key points raised from town halls included:
– How best to share knowledge across businesses
> Action plans tasked to GELT members to deliver outcomes from the
survey, with the plans forming part of GELT performance objectives
–
Implementation of IT infrastructure and how best to utilise it
> Board to continue monitoring progress against key points raised
– Dialogue around understanding customers
– Strategic priorities
– Learning and development
– Reward and recognition
> Ensuring safe working environments, in line with local governmental
advice across all facilities
> Introduced global jobs framework structure enabling local salary
> Introduced bespoke management development programmes for
first time people managers and senior leaders
> Improvement areas raised in the Your Voice survey:
benchmarking
> Overseeing how management deals with the impact of COVID-19
on employees
effective from, November 2019
Genus plc / Annual Report 2020 13
The Group actively engages with its stakeholders, to keep them updated and ensure we understand
their priorities. The Board carries out some engagement directly, while other engagement occurs during
the running of the business, with the Board being kept informed through reports from management.
The table below describes our key stakeholders and examples of engagement during the year and
actions which arose.
KEY ISSUES IDENTIFIED
ACTIONS ARISING
> Need for new ways of working to support customers during COVID-19
> Bespoke Customer Genetics advice
> Introduced virtual sales and advice for customers during the
pandemic
> Worked with customers to manage the impacts on their operations
due to COVID-19
> Providing bespoke Customer Genetics advice designed to improve
phenotypic and genotypic characteristics of the herd
> Key points raised from town halls included:
– How best to share knowledge across businesses
–
– Dialogue around understanding customers
– Strategic priorities
Implementation of IT infrastructure and how best to utilise it
> Improvement areas raised in the Your Voice survey:
– Learning and development
– Reward and recognition
> Action plans tasked to GELT members to deliver outcomes from the
survey, with the plans forming part of GELT performance objectives
> Board to continue monitoring progress against key points raised
> Ensuring safe working environments, in line with local governmental
advice across all facilities
> Introduced global jobs framework structure enabling local salary
benchmarking
> Introduced bespoke management development programmes for
first time people managers and senior leaders
> Health and safety training programme and regular updates/briefings
> Overseeing how management deals with the impact of COVID-19
on employees
> Investor roadshows, led by the Chief Executive and Chief Financial
> Shareholder interest in environmental performance (see below)
> New Remuneration Policy approved by shareholders, and made
effective from, November 2019
We look to be a responsible
> A range of placement and employment opportunities offered for
> Potential impact of climate change on the business and our
> The Board scrutinised management’s plans to achieve climate
communities
> Need to respond as required to local emergencies
change targets and approved Climate Change Policy, targets, strategy
and actions to deliver targets
> The Board will monitor implementation of the climate change plan
and progress against targets
> Lysanne Gray appointed as the Board’s Sustainability Sponsor (see
page 43)
> Supported India flood response (see page 38)
> Supported local charities including food banks in short supply of
meat proteins, as a result of the economic impact of COVID-19
Customers &
Consumers
Board representative:
All Directors
Employees
Board representatives:
Lesley Knox
Lykele van der Broek
Our customers depend on
our genetics to improve
their businesses and their
profitability. We look to
understand their needs
and to help them make
the most of our products
and services.
We look to better
understand end-consumer
requirements and
preferences.
Our people play a crucial
role in helping us pursue
our strategic goals and
uphold the core values that
underpin our organisation.
We engage, equip and
support them to achieve
their full potential while
building our business.
> The Board typically visits key customers when Board meetings are held
outside the UK, although this year’s visit to Brazil was cancelled due to
COVID-19
> Regular Board updates on targeted customers and customer wins
> Regular customer visits as part of our service offering, enabling our
teams to work closely with customers to better understand their needs
> Board engagement with different levels of the supply chain (albeit
limited by COVID-19), including meeting with meat packers and
processors to understand what they look for in genetics to meet
consumer demands, such as lean animal weight
> Keeping under review growth of alternative non-animal proteins,
in light of consumer preference
> Direct engagement by Workforce Engagement Directors at town hall
meetings
> Employee Your Voice survey
> Chief Executive video update, manager-led updates and updates via
intranet following results announcements
> Leadership calls and quarterly manager briefings
> Regular internal communications from management
> Launch of new employee-led resource group (AWAKE – Advancing
Women’s Advocacy, Knowledge & Empowerment) to empower women
to contribute to their full potential
Shareholders
Board representative:
Bob Lawson
We maintain strong
relationships with
shareholders, ensuring they
understand our strategy,
progress and performance
and that we understand
how they view our business.
Officer
> Results announcements, presentations and live webcasts
> AGM and trading update in November 2019
> Annual Report
> Regular news flow on key developments in the business
> Engagement with investors regarding new executive Remuneration
Policy and the appointment of the Chairman Designate
Communities &
Environment
Board representative:
Lysanne Gray
citizen within our
communities, offering local
recruitment, responding
to crises and supporting
charities. We also look to
minimise our impact on the
environment.
students and apprentices
> Support for charities close to local businesses
> Providing educational support for agriculture and animal science
programmes
> Investing in activities designed to reduce greenhouse gas emissions,
consistent with our Climate Change Policy
STRATEGIC REPORT
14
MARKET OVERVIEW
Feeding the world
more sustainably
Drivers
CONSUMPTION OF ANIMAL PROTEIN
continues to grow as the global population
expands and urbanises, and seeks a more
varied and nutritious diet. Pork, milk and beef
consumption are forecast to grow by 1–2% p.a.
in the next decade.
INCREASING COMPETITION FOR RESOURCES
such as land and water puts pressure on farmers
to become more efficient, including through
the use of genetically superior animals and new
technologies.
GROWING CONSUMER AWARENESS
is driving demand for high-quality, healthier and
more sustainable products, which are produced
with fewer drugs . This increases farmers’
demand for genetically superior breeding
animals, which are more efficient and resilient. In
the future, gene editing and other breakthrough
technologies may provide farmers with breeding
animals that are fully resistant to some of the
most devastating diseases globally.
FARMS ARE BECOMING LARGER AND
MORE TECHNIFIED
Progressive farmers typically measure
performance in more detail. This means they
better understand and can benefit from the
efficiency benefits of genetically superior
breeding animals and optimised breeding
strategies, such as combining the use of sexed
dairy and beef semen on dairy herds to
maximise profit.
Trends
CONSOLIDATION OF ELITE BREEDING HERDS
Elite breeding bulls and pigs are bred from
genetically elite breeding herds. The increasing
use of costly technology and the scale required
to keep pace with industry leaders is driving
consolidation of these herds. As genetics
consolidate, some breeders are choosing to
form strategic alliances with competitors, so
they can offer their customers superior genetics.
ADOPTION OF SEXING TECHNOLOGY
Using sexed semen is a more efficient and
sustainable use of dairy animal genetics.
Adoption of semen sexing technology with elite
ABS germplasm is growing fast across dairy
herds, as it enables farmers to efficiently
produce more productive heifers. The
production of female offspring with sexed
semen means the rest of the herd can be bred
with beef semen, to maximise the meat quality
of the resulting calf.
BREAKTHROUGH TECHNOLOGY AND DATA
The animal genetics industry is pursuing
innovative solutions to improve productivity and
to tackle animal disease and suffering. These
include using data and health-focused breeding
indices, as well as breakthrough technologies
such as gene editing and advanced reproductive
biology techniques. Progressive farmers are also
increasingly looking to digital technologies,
which provide data and insight to support
decision making.
Position
Genus is a world leader in animal genetic
improvement. We have a global commercial
platform with critical mass. We are also the
only listed porcine and bovine genetics
company globally, giving us strategic access
to finance. Our competitors are largely private
companies and farmer-owned cooperatives,
many of which are regionally focused.
MARKET SHARE > PIC2
8
1
7
2
3
4
5
6
1 PIC
2 Competitor 1
3 Competitor 2
4 Competitor 3
5 Competitor 4
6 Competitor 5
7 Internal programmes
8 Other
16%
7%
6%
3%
2%
2%
11%
53%
BREEDERS FEATURED IN
TOP 200 HOLSTEIN BULL RANKINGS1
MARKET SHARE > ABS3
Each generation of farmers has
developed innovative breeding
methods to raise animals more
efficiently and humanely. The
continued adoption of selective
breeding and adoption of new
technologies will help farmers
to meet the growing global
demand for food.
107
95%
48%
30
Number of
breeders featured
Top 20 breeders’
share of top bulls
2008
2020
1
2
3
4
5
6
11%
8%
8%
4%
3%
3%
63%
7
1 Competitor 1
2 ABS
3 Competitor 2
4 Competitor 3
5 Competitor 4
6 Competitor 5
7 Other
1 Source: Genus analysis; US Holstein breeders represented in the Top 200 NM$ rankings by birth year; 2020 data based on Top 200
2 Source: Government agencies, local independent pork organisations, Genus estimates. Market shares represent the estimated
Holsteins active using August 2020 data from the Council on Dairy Cattle Breeding.
Source: Genus analysis; US Holstein breeders
represented in the Top 200 NM$ rankings by birth year;
2019 data based on Top 200 Holsteins active using April
2019 data from the Council on Dairy Cattle Breeding.
share of pig production in top pig production markets.
3 Source: Government agencies, local bovine genetics and agriculture organisations, Genus estimates. Market shares represent the
estimated share of combined dairy and beef volumes in ABS’s Top 29 target markets for dairy and Top 8 target markets for beef.
Genus plc / Annual Report 2020 15
US DAIRY COW INVENTORY BY HERD SIZE
100%
80%
60%
40%
20%
0%
1992
500+
1997
2002
2007
2012
2017
100–499
1–99
Source: USDA.
EXPANSION OF LARGE PIG PRODUCERS IN CHINA
(which has accelerated post ASF)
50
40
30
20
10
0
~40%
~35%
Dec 19
Dec 20
~10%
Dec 18
Sows – Top 50 pig producers (m)
Sows – Rest of China
Source: Rabobank, Independent Consultants, Genus analysis.
ABS GENETICS SALES VOLUMES TO US DAIRY FARMERS
100%
80%
60%
40%
20%
0%
2016
2017
2018
2019
2020
Dairy Sexed
Beef x Dairy
Dairy Conventional
STRATEGIC REPORT
16
STRATEGIC FRAMEWORK AND KEY PERFORMANCE INDICATORS
Creating, delivering
and sharing in the value
We harness innovative
technologies to create
genetically superior animals
for progressive farmers,
and link our pricing to
the performance of our
products on-farm.
Strategic priorities
What does
success look like?
CREATE DIFFERENTIATED AND
SUSTAINABLE PROPRIETARY GENETIC
SOLUTIONS
We harness the latest technologies and talent to
continuously improve the genetics of our own
herds and resulting product offering. We protect
our unique position by carefully selecting who
we sell our genetics and technology to, and on
what terms.
GENETIC GAIN
Creating better breeding animals
for farmers, measured against
indices comprising economic
traits that help to drive farmers’
productivity and sustainability.
See p.17
SERVE PROGRESSIVE PROTEIN PRODUCERS
EFFECTIVELY
We focus our offering on progressive livestock
farmers, who are data driven and results
focused. We tailor our products and services
to maximise their performance on their farms.
We serve different markets in different ways
to manage cost and risk effectively.
VOLUME GROWTH
Growing volumes, particularly with
progressive livestock farmers.
See p.17
SHARE IN THE VALUE DELIVERED
We aim to capture an appropriate share of the
value we deliver to customers, aligning our
interests with theirs. We demonstrate the value
of our genetics on farm through validation trials
and data, and link our pricing to genetic indices
and our customers’ productivity.
PROFITABILITY
Generating profit resulting from
the performance of our products
in customers’ systems.
See p.17
KEY TO RISKS
1
2
3
Developing products
with competitive advantage
Continuing to successfully
develop IntelliGen technology
Developing and commercialising
gene editing technologies
4 Capturing value through acquisitions
5 Growing in emerging markets
6 Protecting IP
7
Ensuring biosecurity
and continuity of supply
8 Hiring and retaining talented people
9
Managing agricultural market
and commodity prices volatility
10 Funding pensions
Genus plc / Annual Report 2020 17
Risks
Key performance indicators
3
7
4
8
1
5
9
2
6
10
PORCINE GENETIC IMPROVEMENT INDEX (US$)
2020
2019
2018
2017
2016
3.63
3.24
2.82
2.76
3.13
NET MERIT RANKINGS (GENOMIC AND DAUGHTER
PROVEN BULLS)
2020
40
24
Proven
Genomic
2019
2018
2017
2016
24
42
15
17
17
19
18
37
Measures the genetic improvement we achieve in our porcine nucleus herds,
which ultimately filters down to our customers’ farms.
Monitors how many of our bulls are highly ranked, based on economically
relevant traits for farmers.
DEFINITION: The index measures the
marginal improvement in customers’
US$ profitability, per commercial
pig per year, on a rolling three-year
average. Prior years’ index ratings have
been updated, to reflect the latest
results from genomic selection and the
economic values of pork production.
PERFORMANCE: Genus continues
to deliver high rates of genetic
improvement through improving
technical processes for genomic
evaluation, crossbred performance
testing and expanding the elite
nucleus populations.
DEFINITION: The number of our
generally available Holstein bulls listed
in the top 100 Genomic Net Merit US$
rankings for genomically tested sires
and the top 100 Net Merit rankings for
daughter proven sires.
PERFORMANCE: Genus continues to
maintain a leadership position with its
strength in genomic bulls, which over
time will become daughter proven
bulls. This is mainly driven by the
large proportion of high-quality bulls
sourced from our proprietary breeding
programme, De Novo1.
1 De Novo Genetics LLC is 51% owned by Genus.
3
7
4
8
1
5
9
2
6
10
PORCINE VOLUME GROWTH (%)
DAIRY AND BEEF VOLUME GROWTH (%)
2020
2019
0
2018
2017
2016
6% excluding China
5% excluding China
8
4
4
13
2020
2019
2018
2017
2016
8
6
5
1
-6
Tracks the growth in the number of commercial pigs with PIC genetics globally.
Tracks our global unit sales growth in dairy and beef.
DEFINITION: The change in volume of
both direct and royalty animal sales,
using a standardised MPEs measure
of commercial slaughter animals that
contain our genetics.
PERFORMANCE: Porcine volumes
grew by 13% to 171 million MPEs.
China’s volumes were particularly
strong due to a sharp increase in
customer breeding projects following
the ASF outbreak in the prior year.
Excluding China, volumes were up 6%
with strong growth in Brazil, Germany
and Spain. Volumes under royalty
contracts grew by 8% with all regions
contributing.
DEFINITION: The change in dairy,
beef and sorted units of semen and
embryos delivered or produced for
customers in the year.
the use of beef-on-dairy genetics,
supporting a 17% increase in global
beef volumes.
PERFORMANCE: Bovine volumes
improved 8% to 21.2 million units, with
strong growth in Latin America and
Asia and all regions contributing. Sexed
volumes were up 47%, reflecting strong
growth in Sexcel, which also influenced
3
7
4
8
1
5
9
2
6
10
ADJUSTED OPERATING PROFIT PER MARKET
PIG EQUIVALENT (£)
2020
2019
2018
2017
2016
0.51
0.61
0.60
0.56
0.61
2020
2019
2018
2017
2016
BOVINE ADJUSTED OPERATING PROFIT PER DOSE (£)
Monitors porcine profitability by unit.
Monitors bovine profitability by dose.
DEFINITION: Net porcine adjusted
operating profit globally, expressed
per MPE. Results include our share
of Agroceres PIC, our Brazilian
joint venture.
PERFORMANCE: Adjusted operating
profit per MPE was £0.61, up £0.01
(up £0.02 in constant currency). This
was primarily due to strong breeding
stock sales in China and global royalty
contract growth partially offset by
investments to expand the global
nucleus elite farm network.
DEFINITION: Bovine adjusted
operating profit globally, expressed per
dose of semen or embryo delivered or
produced for customers.
0.55
0.50
0.48
0.52
0.34
PERFORMANCE: Adjusted operating
profit per dose was £0.55, up £0.05
(up £0.12 in constant currency). This
was due to the strong sales growth of
our premium Sexcel product, while
also lowering its production costs to
manufacture, and leveraging the world
class sales and product development
platforms.
STRATEGIC REPORT
18
DIVISIONAL REVIEW / GENUS PIC
Accelerating
growth
Business Priorities
SHORT TERM
>
MEDIUM TERM
>
LONG TERM
Enhance resilience of supply
and distribution in China,
through our partnership
and joint venture
arrangements.
Expand and strengthen our
range of elite genetic
facilities around the world.
Successfully bring
PRRSv-resistant
animals to market.
Strategic Progress in 2019/20
CREATE
DIFFERENTIATED
AND SUSTAINABLE
PROPRIETARY
GENETIC
SOLUTIONS
> Accelerated rates of
genetic gain for all
traits, including our
focus on piglet
survivability and total
carcass value.
> Established our PIC800
boar, which integrates
the best Duroc genetics
from PIC and Møllevang,
as the world’s leading
Duroc terminal sire.
> Expanded our range of
elite genetic facilities to
enhance resilience of
supply for customers
around the world.
> Began our strategic
collaboration with BCA
to research, develop and
commercialise PRRSv-
resistant pigs in China.
SERVE
PROGRESSIVE
PROTEIN
PRODUCERS
EFFECTIVELY
SHARE IN
THE VALUE
DELIVERED
> Continued to increase
the use of royalty
contracts, with notable
progress in China, where
25% of our business is
now conducted on this
basis.
> Launched CBV Max, the
programme providing
our most elite genetics,
in Europe.
> Conducted a further 36
product trials, involving
over 76,500 pigs, to
demonstrate the
superior performance of
PIC products in
customer production
systems.
> Agreed a joint venture
with Shanxi Daxiang to
expand and strengthen
our supply chain in
China.
> Grew revenue in North
America by 3%, through
increased sales of both
male (PIC800) and
female (Camborough)
products.
> Increased volume
growth in Europe by
10%, aided by offering
complementary PIC and
Møllevang product lines
to customers across the
region.
> Grew profits in Latin
America by 23% as we
continued to capture
more genetic value per
pig and won more
accounts.
> Increased profits in Asia
by 225%, aided by
resurgence of demand in
China following the
impact of African Swine
Fever ('ASF').
DR BILL CHRISTIANSON
CHIEF OPERATING OFFICER
Genus PIC
MARKET
Throughout FY20 ASF caused volatility and
fundamental shifts in global supply and demand
for pork and porcine genetics. The occurrence of
the COVID-19 pandemic in the second half of the
year also significantly disrupted the supply chain
dynamics for pork producers, most notably in
the US.
In Asia, ASF continued to spread. China had
previously housed around half the world’s sow
herd but ASF reduced China’s sow herd by more
than 50%, causing a pork supply gap of 17–23
million tons in Asia. In response, China increased
pork imports from all major exporting regions
and is expected to account for 40% of global
imports in 2020 (source: USDA). Local pig and
pork prices have risen strongly, with Chinese pig
prices more than 3.5 times US prices in May 2020.
High prices and government policies incentivised
Chinese producers to expand production and
re-stock farms. Despite this, Chinese pork
production is expected to decline 15–20% in 2020.
In Vietnam, the spread of ASF has largely
stabilised but pork production is around 19%
lower than the prior year. In the Philippines, pork
production is estimated to be 9% lower, with ASF
spreading within backyard farms.
Increased Chinese demand and US-China trade
disputes had made US pork markets volatile
before the onset of COVID-19. US meat processing
plants emerged as COVID-19 hotspots, with
shutdowns sharply reducing pork production.
With more pigs than slaughter capacity, US pig
prices fell steeply. US producers’ responses
included sow herd reductions. Although US pork
exports have been very strong, with Q1 2020 up
40% versus the prior year, driven by China,
political tensions with China over the origin of
COVID-19, coupled with a sluggish food-service
recovery and higher retail pricing, have depressed
overall pork demand and producer margins in Q2.
In July 2020 there were 5.8% more market pigs in
the US than in the previous year due to the
backlog from processing plants not operating at
capacity, which suggests that trading conditions
for pig farmers will be challenging for at least the
remainder of 2020.
In Latin America, Brazil had benefited from
increased exports to China before COVID-19
occurred. In Q2 2020, Brazil saw a high increase of
COVID-19 cases and experienced similar meat
processing difficulties as the US. However, export
demand remains robust, with pork production
forecast to increase 4% in 2020 versus 2019.
Genus plc / Annual Report 2020 19
substantially increased multiplication capacity
during the year and also expanded its supply
chain through its joint venture relationship with
New Hope, and a new joint venture initiated with
Shanxi Xin Daxiang Animal Husbandry Co., Ltd.
These investments will aid further growth in the
future. Adjusted operating profits in franchises
across Asia were up by 43% in constant currency.
However, these growth areas were partially
offset by an adjusted operating profit decline of
76% in the Philippines, due to the outbreak of
ASF in 1H and the impact of COVID-19 in 2H. The
swine industry in many parts of the Philippines
remains unstable.
Overall, PIC’s long-term global strategy of
ongoing investments in product supply and
differentiation is generating significant
competitive advantages, enabling Genus PIC to
better serve customers, mitigate global market
risks and support future growth.
Our long term strategy is
delivering significant competitive
advantages.
Europe was an early beneficiary of Chinese
demand following ASF, with EU pork exports
expected to rise nearly 10% in 2020. However,
slaughter plants became COVID-19 hotspots in
Q2 2020, leading to higher volatility in the
market. ASF is an additional risk and it has been
reported in Poland, 10km from the German
border. Germany is a top European producer and
exporter and if ASF spreads in Germany this
could affect neighbouring countries in the
instance that exports might be prohibited.
China has seen strong demand for breeding
stock as producers repopulate. Many producers
have used slaughter pigs to restock, thereby
reducing their productivity. This will create a
longer term demand for elite genetics. COVID-19
has not led to a major reduction in demand for
porcine genetics, but if sow herds in the
Americas or Europe do decline this will impact
breeding stock demand and royalties.
PERFORMANCE
Genus PIC delivered very strong results, despite
volatile market conditions for its customers in
certain markets. Adjusted operating profits
including joint ventures were £124.3m, up 25% in
constant currency. Volumes were up 13%, with all
regions contributing. Revenue was 17% higher in
constant currency, primarily due to stronger
breeding stock sales and royalty revenue.
also affected by customer credits in relation to an
historical issue arising from a few contract farm
locations. Royalty revenue saw modest growth
during the year of 1% and sireline market share also
grew, underpinned by the introduction of the
Duroc PIC800, which is demonstrating strong
results in customer systems. New damline
customer wins in the year will lead to further
market share growth in future periods.
Latin American adjusted operating profits
improved by 23% in constant currency, with
double digit growth in nearly all countries. Growth
was particularly strong in Brazil during the period,
as a result of market share gains assisted by strong
industry exports to China. Royalty revenues and
volumes across the region were up 9%.
Adjusted operating profit in Europe was up by
27% and revenues rose by 29% in constant
currency. Strong market prices helped fund
customer breeding projects and the business
has continued to benefit from its proven strategy
to focus on key customers and expand royalty
sales. The highest growth in the period was in
Russia, Spain and Germany, with Russia having
now grown into PIC Europe’s largest market, led
by high share in large key accounts. PIC’s
partnerships with Hermitage Genetics and
Møllevang continue to add significant value to
PIC’s global business.
In North America, adjusted operating profits were
flat for the year in constant currency, after
recording 5% growth in the first half. The closure of
some processing plants during the second half, in
response to COVID-19 outbreaks, resulted in a
backlog of pigs awaiting slaughter and a moderate
reduction in customer investment in breeding
herds. Second half adjusted operating profits were
Asia’s performance improved significantly by
225% in constant currency over the prior year,
primarily due to a sharp increase in customer
breeding projects in China, with positive
conditions in that country as described in the
market section above. In addition, royalty
revenue grew strongly in China (up 168%) and
accounted for 25% of volume there. PIC China
Year ended 30 June
Revenue
Adjusted operating profit exc JV
Adjusted operating profit inc JV
Adjusted operating margin exc JV
Actual currency
Constant
currency change
2020
£m
298.8
113.3
124.3
37.9%
2019
£m
253.7
93.1
100.6
Change
%
18
22
24
%
17
21
25
36.7%
1.2pts
1.2pts
STRATEGIC REPORT
20
CASE STUDY / GENUS PIC
> Growing our
presence in Europe
Our partnership with Møllevang
is delivering real benefits and we
look forward to further progress
in Europe.
Bill Christianson
Chief Operating Officer, Genus PIC
Genus plc / Annual Report 2020 21
Our strategic partnership with Møllevang,
one of Denmark’s leading pig breeding
companies, began in 2018. The relationship
has been highly successful, helping us
to target and support new European
customers for PIC.
In March 2020, PIC announced a strategic
relationship with Otrada, Russia’s largest
independent porcine genetics distributor.
The relationship makes Otrada the exclusive
distributor of PIC Møllevang lines in Russia,
Kazakhstan and Belarus. Otrada chose PIC as
its partner based on our demonstrably superior
global genetics programme, the strength of
our genetic and technical services and the
ability to implement a royalty programme that
would turn Otrada’s customers into partners.
The first animals using Møllevang semen were
born in August 2020.
PIC’s relationship with Gesing Tierzucht is also
going from strength to strength. Gesing is a
nationwide distributor in Germany, which has
historically been a key market for Danish
genetics. PIC’s attractions as a partner to Gesing
included our ability to meet specific customer
needs through our outstanding global genetic
programme, our long-term investments in R&D
and our flexible approach to working with
distribution partners. Since PIC’s distribution
agreement with Gesing began in July 2018,
Gesing has doubled its sales volumes.
“PIC’s genetic and technological leadership as
well as its global scale are a complementary fit
for Otrada’s deep understanding and experience
of the Russian market,” says Patrick Hoffmann,
CEO and main shareholder of Otrada. “Together,
we can offer our customers access to new PIC
lines with world-class genetic potential and
support them locally in turning this potential
into actual performance.”
STRATEGIC REPORT
22
DIVISIONAL REVIEW / GENUS ABS
Partnering with
producers
JERRY THOMPSON
CHIEF OPERATING OFFICER
Genus ABS Beef
Business Priorities
SHORT TERM
>
MEDIUM TERM
>
LONG TERM
Drive further growth in sales
of sexed dairy and beef
genetics to dairies in target
markets around the world
and continue to validate
value created.
Complete Leeds facility in
US, with new bull housing
to leverage our leading
product development
programme.
Secure more comprehensive
genetic programmes with
performance-based pricing
aligned with customer
goals.
DR NATE ZWALD
CHIEF OPERATING OFFICER
Genus ABS Dairy
Strategic Progress in 2019/20
CREATE
DIFFERENTIATED
AND SUSTAINABLE
PROPRIETARY
GENETIC
SOLUTIONS
SERVE
PROGRESSIVE
PROTEIN
PRODUCERS
EFFECTIVELY
SHARE IN
THE VALUE
DELIVERED
> Established our
> Increased the number
> Began introducing a
new contractual model
for key account
partners, aligning their
interests with ours
through pricing based
on results achieved
through comprehensive
genetic programmes
developed to meet
their goals.
> Continued to validate
the economic benefits
delivered by NuEra Beef
Genetics, demonstrating
significant added value
for players across the
beef supply chain in
head-to-head
competitor trials.
strongest-ever line-up
of industry-leading dairy
genetics, including
record numbers of Icon
Sires™, with a strong
pipeline of new sires and
elite females coming
through our genetic
nucleus.
> Continued to strengthen
NuEra Genetics, our
proprietary beef range,
increasing the number
of bulls with high
genetic merit moving
into production.
> Grew global sales
volume of sexed
genetics (including
Sexcel, our proprietary
product) by 47%,
proprietary NuEra beef
genetics by 58% and
Beef InFocus (our global
beef-on-dairy brand)
by 21%.
of customers who work
exclusively with ABS by
tailoring packages of
products and services
to meet the needs of
producers in different
countries.
> Continued to build
presence with North
America customers
through our whole-herd
genetic strategy, based
on sexed dairy and beef
genetics. Sales volumes
of sexed genetics and
Beef InFocus grew by
42% and 30%
respectively.
> Developed digital
platforms as a more
effective and efficient
way of serving small and
medium customers in
Latin America, securing
hundreds of new
customers.
> Launched new Beef
InFocus proprietary
indices in North America
and Latin America.
MARKET
Both dairy and beef markets have been affected
by government lockdowns around the world, to
manage the COVID-19 pandemic. In Europe,
dairy prices dropped throughout March and
April 2020, although they have started to show
signs of recovery as foodservice channels
reopen. In North America dairy prices also saw
significant volatility, as they fell to around 40%
below the July 2019 peak by May 2020, before
recovering sharply in June. Global volatility is
expected to continue as countries and their
economies continue to react to the aftermath
of COVID-19 impacts.
Milk production in the U.S., Europe and Australia
was slightly above prior year levels in the first
quarter of 2020, with output across the seasonal
period in New Zealand consistent with the prior
year. Output was down moderately in Brazil,
as currency fluctuations compressed
producer margins.
Despite global economic challenges, the
Chinese Government has encouraged all
Chinese citizens to consume 300g of dairy
products per day, more than triple the current
average consumption. However, the country’s
high inventories of whole milk powder will likely
lead to a decline in imports in the immediate
future. In India, the unregulated dairy sector was
significantly affected by COVID-19, forcing further
consolidation. Growth in liquid milk has
supported the expansion of packaged dairy
products in the regulated sector.
In the U.S., beef processing facilities capacity
were affected by COVID-19 shut-downs,
increasing prices for beef being processed,
but reducing cattle prices. Australian beef
production saw an overall reduction in supply,
leading to fewer exports and prices that were
stable and then rose moderately through Q2
of 2020. Lower beef production in Brazil was
mirrored by lower demand.
Genus plc / Annual Report 2020 23
In Asia, adjusted operating profit was up 59%
and volumes by 5%, with trading activity
increasing in China following a period of vertical
integration among customers, as dairy
processors acquired farms. Sexed volumes were
up 98%, with India achieving record results up
133% after a new IntelliGen production facility
for the State of Uttar Pradesh started operation,
more than offsetting disruption early in the
year caused by flooding of the Genus India
Brahma facility.
Overall, the increasing customer adoption of
Sexcel, along with our leading dairy genetics
portfolio and our NuEra proprietary beef
offering, mean we anticipate continued positive
progress into next year.
By providing industry-leading
genetics and services
we help progressive producers
maximise profitability.
In Europe, beef prices have fallen moderately
since the onset of the global pandemic,
underpinned by disruption in trade from export
markets such as Ireland and Poland. By the end
of June 2020, these prices had largely recovered
in line with the prior year as demand of food
service and retail normalised.
Consolidation within the bovine genetics
segment was less prevalent than in the prior
year but an increasing number of partnerships
have been developing between dairy genetic
companies as growing and progressive
profit-focused customers demand access to
elite dairy, beef and sexed semen.
PERFORMANCE
ABS adjusted operating profits increased by
12%, with volumes up 8% and revenues up 9%
in constant currency, as customers continued
the shift from conventional to sexed and beef
genetics. Sexed volumes grew by 47%, reflecting
Sexcel’s continued success. Increased use of
beef genetics in dairy herds supported 17%
growth in global beef volumes. Globally,
COVID-19 has created dynamic and challenging
market conditions for our customers but overall
demand for ABS product has been resilient.
This has been aided by the salesforce focus
on obtaining 100% of customers’ business and
the introduction of new partnership based
contract structures.
In North America, revenue grew by 10%
and adjusted operating profit increased by
12% in constant currency. Previous strategic
investments to strengthen key account
management gained traction, with new
customer wins. Volumes were up by 7%,
gaining market share, and sexed volumes were
up 42% as the high growth of Sexcel continued.
Beef volumes rose 20%, supported by
proprietary NuEra genetics selected for
cross-bred beef-on-dairy performance. Embryo
volumes increased slightly, as a new dedicated
IVB laboratory for a key customer account
became fully operational.
Europe achieved volume growth of 8% and
revenue growth of 2%, with adjusted operating
profit flat against prior year in constant currency.
Business conditions in Italy and France were
particularly challenging, as COVID-19 lockdowns
reduced salesforce mobility and customer
access. Sexed semen volumes grew 42%, with
the UK, Ireland and the European distributor
business seeing the strongest growth. The trend
of dairy customers using sexed genetics,
coupled with beef genetics for a portion of the
herd, led to beef volumes increasing by 10%.
In Latin America, revenues grew by 20% and
adjusted operating profit increased by 35% in
constant currency, with Brazil and Argentina
particularly strong. In a challenging environment
from COVID-19, Brazil achieved good success
through innovative digital sales campaigns
whilst robust pricing policies and cash collection
in Argentina helped to mitigate the impacts of
inflation and currency devaluation. Volumes in
Latin America overall increased by 12%, as
customers embraced digital technologies to
engage and transact with ABS’ sales team. Sexed
volumes increased by 24% and beef volumes by
18%, utilising NuEra genetics, selected for
cross-bred performance of North American
sires with tropical cows.
Year ended 30 June
Revenue
Adjusted operating profit
Adjusted operating margin
Actual currency
Constant
currency change
2020
£m
237.6
32.5
13.7%
2019
£m
222.6
29.9
13.4%
Change
%
7
9
%
9
12
0.3pts
0.4pts
STRATEGIC REPORT
24
CASE STUDY / GENUS ABS
> Expanding
production to meet
growing customer
demand
We are well positioned to support
rising customer demand for our
elite sexed genetics.
Nate Zwald
Chief Operating Officer, ABS Dairy
Genus plc / Annual Report 2020 25
Our sexed semen product Sexcel has been
an outstanding success, with strong and
rapidly growing customer demand.
By June 2019, it became apparent that demand
for Sexcel would soon outstrip the ability of our
IntelliGen business to supply it. IntelliGen quickly
put together a team to address the issue and
developed a comprehensive proposal to
increase capacity.
The plan added new stations to IntelliGen’s
existing facilities and accelerated completion
of the new production facility in Dekorra, USA.
By bringing in seasoned employees from other
operations and implementing lessons from past
deployments, we halved the time from first
production to full capacity. We also employed
improved technology and leveraged our supply
chain to deploy advancements as quickly as
possible and with the highest quality. Finally,
we enhanced our existing process through our
focus on relentless improvement, reducing
changeover times between bulls and improving
production methods.
The result was a step change in production
capacity. Between December 2019 and June
2020, we grew output by over 55%, to effectively
support the next stage of Sexcel’s growth.
STRATEGIC REPORT
26
DIVISIONAL REVIEW / GENUS R&D
Pioneering
technology for
protein production
Business Priorities
SHORT TERM
>
MEDIUM TERM
>
LONG TERM
Continue to improve our
proprietary sexing
technology, with emphasis
on enhancing fertility,
efficiency and accuracy.
Gain regulatory acceptance
of PRRSv-resistant pigs in
target markets around the
world.
Harness data and advanced
reproductive technology to
produce new health traits
and accelerate genetic gain.
Strategic Progress in 2019/20
GENE
EDITING
GENDER
SKEW
REPRODUCTIVE
BIOLOGY
> Produced gene-edited
pigs that demonstrate
resistance to PRRSv
and made our first
submissions for
regulatory approval (in
China and the U.S.).
> Commenced knowledge
transfer with BCA, our
strategic partners, to
inform their work to
develop PRRSv-resistant
pigs in China.
> Expanded our scope of
work with Kansas State
University to explore
whether gene editing
can help to combat
other diseases in pigs,
particularly swine
influenza.
> Produced live beef
calves from embryos
containing edits
intended to improve
resilience to Bovine
Respiratory Disease,
with testing to come
in FY21.
> Increased IntelliGen
(sexed semen
technology) production
capacity to help ABS
meet global demand for
Sexcel and introduced
a new microfluidic chip,
to improve the
performance of our
industry-leading
technology.
> Continued to expand
our network of
IntelliGen Technologies
laboratories, which now
number eight owned
and licensed facilities
across four continents.
> Established a new
programme to
strengthen our current
capabilities and embryo
manipulation
techniques while
developing new
technology, with initial
emphasis on bovine in
vitro fertilization.
DATA
STRATEGY
> Enhanced the
management,
integration and
advanced analytics of
internal and external
scientific data, to
accelerate product
development and
enhance the service we
provide to customers.
DR ELENA RICE
CHIEF SCIENTIFIC OFFICER AND HEAD OF R&D
Genus R&D
PERFORMANCE
Net research and development investment
increased by 17% in constant currency, as Genus
pursued key strategic initiatives to further
strengthen its proprietary differentiated
offerings. The Group will continue to increase
its investment in the following areas: gene
editing, primarily under the PRRSv programme;
genome science and specifically scientific data
capabilities; biosystems engineering; and
reproductive biology where new initiatives are
being taken.
Porcine product development expenditure
increased by 55%, as a result of the incremental
costs of growing our elite nucleus farm network,
costs to address a disease outbreak in a Canada
farm and the substantial deterioration of the
North American lean hog market, which
impacted by-product margins compared to the
prior year. The underlying growth was 32%
excluding costs of £4.4m of a non-repetitive
nature. We continue to deliver historically high
rates of genetic improvement, as we focus on
improving technical processes for genomic
evaluation, crossbred performance testing and
expanded elite nucleus populations. The
integration of germplasm from the Møllevang
acquisition continued as planned and the
expansion of our nucleus farm network has
improved access to elite animals across our
global customer base.
Bovine product development expenditure
increased by 2%, as Genus continues to produce
an industry leading Holstein dairy bull portfolio,
driving strong volume growth in ABS. The De
Novo joint venture is producing more than 50%
of these animals and the strong pipeline of
young bulls and pregnancies will help sustain
our leadership position. Beef product
development further strengthened our portfolio
of proprietary NuEra genetics, by enhancing
genomic evaluation and increasing testing and
validation to demonstrate differentiated value to
customers. The initial results of commercial full
cycle trials of NuEra genetics are encouraging.
The NuEra Genetics programme produced more
than 20% of the total global beef units sold.
Genus plc / Annual Report 2020 27
We are helping customers to
produce animal protein more
efficiently, profitably and
sustainably
than ever before.
During the period we continued to invest in
IntelliGen technology and expanded our Sexcel
production manufacturing capacity to meet
increasing demand and to provide differentiated
genetic offerings globally. We also successfully
brought into production our second external
customer site in India and further expanded the
global IntelliGen footprint, through technology
licensing with customers and external customer
service. IntelliGen production sites around the
world, both Genus’s and customer owned, now
total eight, compared with six in the prior year.
Net gene editing expenditure decreased by 30%
in the period, mainly due to net income of £3.2m
recognised for a milestone payment received
from our Chinese partner, BCA. Excluding BCA
income, gene editing expenditures grew by 14%
due to investment in the PRRSv resistance
project. We internalised our capability for
producing gene edited animals, to increase
efficiency and timeliness for both the PRRSv
resistance programme and other potential
future projects. We have been working well
with the FDA and completed the first submission
in the approval process, and initiated
conversations on regulatory and market
acceptance in other key global markets. Active
communication and planning with BCA has
meant we have made progress in the initial
steps of working together in China.
Other research and development expenditure
remained in line with the prior year. This
included work on our bioinformatics platform,
genome science, external collaborations and
intellectual property protection in a variety of
discovery areas. We are planning to increase our
investment in discovery areas as well as gene
editing as we move closer towards
commercialisation.
Year ended 30 June
Porcine product development
Bovine product development
Gene editing
Other research and development
Net expenditure in R&D1
1 Excluding profit attributable to non-controlling interest.
Actual currency
Constant
currency change
2020
£m
28.9
20.9
5.2
10.2
65.2
2019
£m
18.4
20.0
7.3
9.0
54.7
Change
%
57
4
(29)
13
19
%
55
2
(30)
10
17
STRATEGIC REPORT
28
CASE STUDY / GENUS R&D
> Progressing the
development
of PRRSv-
resistant pigs
Developing pigs that are resistant
to this devastating disease will
make the Chinese pork industry
more sustainable.
Dr Elena Rice
Chief Scientific Officer and Head of R&D
Genus plc / Annual Report 2020 29
We are applying ground-breaking gene
editing technology to develop pigs resistant
to PRRSv, a devastating and incurable
porcine disease.
In May 2019, we announced a strategic
collaboration with BCA in China, to research,
develop, register and market PRRSv-resistant
pigs. BCA owns a leading Chinese animal protein
genetics business and has a deep understanding
of the country’s porcine sector. Pork is the single
most important source of animal protein for
Chinese people. Obtaining regulatory approval
in China for PRRSv-resistant pigs will help to
create a more sustainable Chinese pork industry
and enable future imports from other countries
where production and consumption of
PRRSv-resistant pigs may also be approved by
the regulators.
In the last 12 months, we have made substantial
progress in our venture with BCA. This includes
building the team in China and designing and
planning cutting-edge animal production and
laboratory facilities that will enable the research
and testing needed to support the regulatory
approval process in China. We were able to make
significant progress during this initial phase,
even during the COVID-19 outbreak, by using a
combination of remote information exchange
and the joint efforts of our North American
research and PIC China team to support the BCA
group. In addition, we held initial discussions
with the Ministry of Agriculture and Rural Affairs,
to understand the pathway for approval and to
begin dialogue and information sharing.
These exciting developments further support
Genus in our continuing efforts to validate the
technology, achieve regulatory approval in
the US and other countries, and gain market
acceptance by the food chain and consumers.
STRATEGIC REPORT
30
FINANCIAL REVIEW
Strong performance from
a resilient business
In the year ended 30 June 2020, Genus achieved
a strong financial performance whilst operating
in unique circumstances during the second half
of the financial year caused by the COVID-19
pandemic.
Alison Henriksen
We achieved strong
profit growth,
supporting a significant
increase in R&D
investment.
The resilience of our operations was reflected in
revenue growth of 13% in both constant and actual
currency. Adjusted operating profit growth including
joint ventures was 22% in constant currency (17% in
actual currency). Notably, this was after a significant
planned increase in R&D investment of 17% in constant
currency (19% in actual currency to £65.2m) primarily
to fund expansion in our porcine nucleus herds.
Excluding gene editing costs, adjusted operating profit
including joint ventures increased by 17% in constant
currency and adjusted profit before tax was up 22%
(16% in actual currency).
On a statutory basis, profit before tax was £51.5m
(2019: £9.9m). The difference between statutory and
adjusted profit before tax principally reflected the
uplift in the non-cash fair value net IAS 41 biological
asset movement versus a decrease last year.
Basic earnings per share on a statutory basis were
62.4 pence (2019: 12.4 pence).
Genus continues to report adjusted results as
Alternative Performance Measures (‘APMs’) used by
the Board to monitor underlying performance at a
Group and operating segment level, which are
applied consistently throughout. These APMs should
be considered in addition to, and not as a substitute
for or as superior to statutory measures. For more
information on Genus’s APMs, see the Glossary.
The effect of exchange rate movements on the
translation of our overseas profits was to reduce the
Group’s adjusted profit before tax for the year by £3.4m
compared with 2019, primarily from weakness in Latin
American currencies. All growth rates quoted are in
constant currency unless otherwise stated. Constant
currency percentage movements are calculated by
restating the results for the year ended 30 June 2020
at the average exchange rates applied to adjusted
operating profit for the year ended 30 June 2019.
REVENUE
Revenue increased by 13% in both constant and
actual currencies to £551.4m (2019: £488.5m). PIC
achieved strong revenue growth of 17% in constant
currency (up 18% in actual currency), underpinned
by high breeding stock sales and royalties in China as
customers replenished ASF impacted herds. Our
strategically important royalty revenue was up 11%,
with growth in all regions. In ABS, revenue was up 9%
in constant currency (7% in actual currency), with
growth in all regions. Sexed product revenue growth
of 35% was ahead of our expectations due to
continued strong uptake of Sexcel, our high-fertility
sexed genetics product.
Genus plc / Annual Report 2020 31
Change
%
13
447
n/a
420
403
5
81.2
FINANCIAL REVIEW
Year ended 30 June
Revenue
Operating profit exc JVs
Operating profit inc JVs exc gene editing
Profit before tax
Free cash flow
Basic earnings per share (pence)
Dividend per share (pence)
1 n/m = not meaningful.
Adjusted results
Actual currency
2020
£m
551.4
65.3
81.2
71.0
35.2
85.4
2019
£m
488.5
57.7
72.2
61.0
10.0
73.2
Change
%
13
13
12
16
252
17
Constant
currency
change
%
13
16
17
22
n/m1
23
Statutory results
Actual currency
2020
£m
551.4
47.6
n/a
51.5
62.4
29.1
2019
£m
488.5
8.7
n/a
9.9
12.4
27.7
ADJUSTED OPERATING PROFIT INCLUDING JVS
ADJUSTED OPERATING PROFIT INCLUDING JVS EXCLUDING
GENE EDITING INVESTMENT (£M)
90
80
70
60
50
55.2
FY16
72.2
68.1
63.6
FY17
FY18
FY19
FY20
Adjusted operating profit including JVs excluding gene editing
Gene editing investment
PIC performed very strongly with adjusted operating profit including joint
ventures up 25% in constant currency, benefiting from strong demand in
China, despite volatile conditions for our customers in some markets, most
notably the US. Volumes were up 13% (6% excluding China) with all regions
contributing. Brazil had particularly strong growth, whilst Russia has now
grown to become our largest European market.
ABS also had a strong year with adjusted operating profit increasing 12%,
and volume growth of 8%. Sexcel continued to demonstrate that it is the
sexed product of choice for progressive dairy farmers, driving overall sexed
volume growth of 47%. Despite the challenging market conditions brought by
the COVID-19 pandemic, strong adjusted operating profit growth was
achieved in all regions except Europe. Latin America benefited from
innovative digital sales campaigns and in Asia growth was notable in India
where our IntelliGen third party production facilities are performing strongly.
Central costs increased by 41% in constant currency reflecting recruitment
costs associated with key board and leadership positions, a fall in the value
of a listed investment, and increased bonuses following the strong financial
performance in the year ended 30 June 2020. The majority of the increase
in central costs is not expected to recur annually.
Actual currency
Constant
currency
change
Year ended 30 June
Adjusted Profit Before Tax1
Genus PIC
Genus ABS
R&D
Central costs
Adjusted operating profit
incl. JVs
Net finance costs
Adjusted profit before tax
2020
£m
124.3
32.5
(65.2)
(15.6)
76.0
(5.0)
71.0
2019
£m
100.6
29.9
(54.7)
(10.9)
64.9
(3.9)
61.0
Change
%
24
9
(19)
(43)
17
(28)
16
%
25
12
(17)
(41)
22
(28)
22
1 Includes share of adjusted pre-tax profits of joint ventures and removes share of adjusted profits
of non-controlling interests.
Exchange rates
US Dollar/£
Euro/£
Brazilian Real/£
Mexican Peso/£
Chinese Yuan/£
Russian Rouble/£
Average
Closing
2020
1.26
1.14
5.74
26.08
8.89
85.17
2019
1.29
1.13
4.99
25.04
8.83
84.93
2020
1.24
1.10
6.77
28.52
8.75
88.19
2019
1.27
1.12
4.89
24.40
8.72
80.30
Adjusted operating profit including joint ventures was £76.0m (2019:
£64.9m), reflecting a high growth rate of 22% in constant currency as
mentioned above. Within this, Genus’s share of adjusted joint venture
operating profits was higher at £11.3m (2019: £7.6m), primarily due to
strong results in the PIC Agroceres JV in Brazil and our JV in China. Amounts
attributable to non-controlling interests remained broadly consistent at
£0.6m (2019: £0.4m). Our gene editing investment, which is primarily
focused on creating resistance in pigs against the devastating PRRSv
disease, increased £1.1m as planned to £8.4m, however the net investment
reported is £5.2m (2019: £7.3m) as it includes recognition of net income of
£3.2m in relation to the first milestone payment received from our BCA
collaboration in China. Excluding our gene editing investment, adjusted
operating profit including joint ventures increased by 17% in constant
currency to £81.2m (2019: £72.2m), which exceeded our medium-term
objective to achieve growth of 10%.
STRATEGIC REPORT
32
FINANCIAL REVIEW CONTINUED
STATUTORY PROFIT BEFORE TAX
The table below reconciles adjusted profit before tax to statutory profit
before tax:
Adjusted Profit Before Tax
Operating profit attributable to non-controlling
interest
Net IAS 41 valuation movement on biological
assets in JVs and associates
Tax on JVs and associates
Adjusting items:
Net IAS 41 valuation movement on biological
assets
Amortisation of acquired intangible assets
Share-based payment expense
Exceptional items
Statutory Profit Before Tax
2020
£m
71.0
0.6
(0.1)
(2.3)
15.8
(8.5)
(5.8)
(19.2)
51.5
2019
£m
61.0
0.4
(1.1)
(1.4)
(14.7)
(9.5)
(3.0)
(21.8)
9.9
Our statutory profit before tax was £51.5m (2019: £9.9m), reflecting the
increase in the underlying trading performance and the uplift in the
non-cash fair value net IAS 41 biological asset movement. Within this, there
was a £13.2m uplift (2019: £1.9m reduction) in porcine biological assets and
a £2.6m uplift (2019: £12.8m reduction) in bovine biological assets, due to
certain fair value model estimate changes. Share-based payment expense
was £5.8m (2019: £3.0m). These reconciling items tend to be non-cash, can
be volatile and do not correlate to the underlying trading performance in
the period.
EXCEPTIONAL ITEMS
There was a £19.2m net exceptional expense in the year (2019: £21.8m
expense), which included a charge of £16.4m (2019: £5.0m) reflecting legal
fees of £5.6m (2019: £5.0m) and £10.8m for damages and costs in relation
to Genus ABS’s litigation with STGenetics (‘ST’). A provision of £10.5m has
been recognised in the year ended 30 June 2020 in respect of these
damages, see note 3 to the financial statements for more details. Also
included are charges of £2.1m (2019: £0.7m) in relation to acquisition
activities and other items which include £0.8m of fees relating to our
strategic porcine collaboration in China with BCA and an insurance receipt
from a legacy environmental claim. In the prior year the majority of the
exceptional expense was a net charge of £15.2m in respect of legacy
pension schemes related to GMP equalisation.
NET FINANCE COSTS
Net finance costs of £5.0m (2019: £3.9m), included £2.9m (2019: £3.3m) of
interest payable on bank loans and overdrafts. This was favourable to the
prior year due to lower average borrowing levels as the share placement in
the previous year took place mid-way through that year. Interest rates were
broadly comparable at 2.56% (2019: 2.50%). Pension interest was also
lower in the year at £0.4m (2019: £0.9m) due to the decreased pension
deficit at 30 June 2019.
These gains were outweighed by £1.0m of interest payable on leases mainly
as a result of the impact of IFRS 16 adoption and £0.5m in relation to the
discounting on the Group’s put options over the equity of De Novo and PIC
Italia, which were originally recognised as financial liabilities on a present
value basis.
TAXATION
The tax charge on adjusted profits for the period is £15.6m (2019: £14.8m),
which represents an adjusted effective tax rate of 22.0% (2019: 24.3%). The
decrease in the rate from prior year reflects a greater weighting of profit
from China benefiting from an effective tax rate (‘ETR’) of 11.7%, which
reduced the Group ETR from prior year by c3%. The adjusted effective tax
rate of 22.0% is greater than the underlying UK tax rate of 19% mainly due
to the application of higher overseas tax rates which uplifts the Group tax
rate by 2.9%, net of the benefit from operations in China and also due to
higher withholding taxes incurred when dividends are remitted between
group companies and higher provision of deferred tax on undistributed
earnings. The current year adjusted tax rate also benefits by 1.7% from
changes in tax rates during the period reflected in the revaluation of the
UK deferred tax assets. The outlook for the Group ETR is in the range of
23%–24% consistent with the current year excluding this one-off change
of rate benefit.
The tax charge for the period of £12.9m on the statutory profit (2019: £4.6m)
represents an effective tax rate of 24.0% (2019: 40.7%). The high statutory
tax charge in the previous period was a consequence of the exceptional UK
pension expense relating to Guaranteed Minimum Pension equalisation
and the IAS 41 fair value expense which reduced statutory profit in the prior
period by c£30m, increasing the effective charge for fixed items such as
withholding tax expenses as a percentage (12%) of the remaining profit.
EARNINGS PER SHARE
Adjusted basic earnings per share increased by 17% (23% in constant
currency) to 85.4 pence (2019: 73.2 pence) as a result of the strong trading
performance and lower tax rate. Basic earnings per share on a statutory
basis were 62.4 pence (2019: 12.4 pence), reflecting the strong trading
performance and an uplift in the non-cash fair value net IAS 41 biological
asset movement.
BIOLOGICAL ASSETS
A feature of the Group’s net assets is its substantial investment in biological
assets, which under IAS 41 are stated at fair value. At 30 June 2020 the
carrying value of biological assets was £370.2m (2019: £346.2m restated), as
set out in the table below:
Non-current assets
Current assets
Inventory
Represented by:
Porcine
Dairy and beef
2020
£m
310.1
39.8
20.3
370.2
242.7
127.5
370.2
(Restated)
2019
£m
287.1
40.1
19.0
346.2
228.5
117.7
346.2
The balance sheet comparatives for the years ended 30 June 2019 and
30 June 2018 have been restated by £20.5m to update an input used in
the valuation of our porcine biological assets that was not in line with
operational data. There has been no effect on the Group Income Statement
or the Group Statement of Cash Flows. Further information is provided
in note 2 to the financial statements.
The movement in the overall balance sheet carrying value of biological
assets of £24.0m includes the effect of exchange rate translation increases
of £5.4m. Excluding the translation effect there was:
> a £9.3m increase in the carrying value of porcine biological assets,
due principally to an increase in the pure-line valuation (driven by an
increase in the percentage of animals going for breeding sales and
a reduction in the Pure line risk adjusted discount rate); and
> a £9.3m increase in the bovine biological assets carrying value,
primarily due to current estimates of projected sales volumes.
The historical cost of these assets, less depreciation, was £57.5m at 30 June
2020 (2019: £58.2m), which is the basis used for the adjusted results. The
historical cost depreciation of these assets included in adjusted results
was £11.0m (2019: £9.4m).
Genus plc / Annual Report 2020 33
RETIREMENT BENEFIT OBLIGATIONS
The Group’s retirement benefit obligations at 30 June 2020 were £18.1m
(2019: £24.2m) before tax and £14.6m (2019: £19.8m) net of related deferred
tax. The largest element of this liability relates to the multi-employer Milk
Pension Fund, which we account for on the basis of Genus being
responsible for 86% of the scheme (2019: 86%).
During the year, contributions payable in respect of the Group’s defined
benefit schemes amounted to £8.4m (2019: £7.6m).
Despite the impact of COVID-19 on asset valuations and lower bond yields
during the year, robust investment strategies for our two main defined
benefit obligation schemes have limited the current financial impact. Both
the Dalgety Pension Fund (‘DPF’) and our share of the Milk Pension Fund
(‘MPF’) reported IAS 19 surpluses, prior to any IFRIC 14 amendments.
CASH FLOW
Cash generated by operations of £82.9m (2019: £48.4m) represented cash
conversion of 127% (2019: 84%) of adjusted operating profit excluding joint
ventures, or 115% excluding the impact of adopting IFRS 16. The strong
conversion of adjusted operating profit to cash is aligned to our medium
term objective to achieve conversion of at least 90%. The increase was
primarily due to the strong trading performance and a continued focus
on working capital management.
Capital expenditure cash flows of £35.4m (2019: £28.3m) included higher
IntelliGen capital expenditure for the new production locations in
Wisconsin as well as investment in state-of-the-art new bull housing
and in Genus One, a single global enterprise system, where the rollout is
progressing well. Cash inflows from joint ventures were higher at £3.7m
(2019: £3.4m). After interest and tax paid, total free cash flow was £35.2m
(2019: £10.0m).
The cash outflow from investments was £0.1m (2019: £22.7m), with deferred
consideration payments being offset by net return of capital from one of our
Chinese joint ventures (Xianyang Yongxiang Agriculture Technology Co. Ltd).
The net cash inflow after investments and dividends was £16.9m (2019:
£37.0m) with the prior year benefiting from a 5% equity placement of 3.1m
shares which raised proceeds of £66.5m net of fees to provide flexibility to
pursue future growth opportunities.
Cash flow (before debt repayments)
Cash generated by operations
Interest and tax paid
Capital expenditure
Cash received from JVs
Other
Free cash flow
Acquisitions and investments
Dividends
Share placement
Net cash flow (before debt repayments)
2020
£m
82.9
(17.1)
(35.4)
3.7
1.1
35.2
(0.1)
(18.3)
0.1
16.9
2019
£m
48.4
(15.0)
(28.3)
3.4
1.5
10.0
(22.7)
(16.8)
66.5
37.0
A new and enlarged credit facility agreement with a syndicate of eight
banks was signed post year end on 24 August 2020. The new facility
consists of a £150m multi-currency RCF, a USD125m RCF and a USD20m
bond and guarantee facility. The term of the new facility is for three years
with an option to extend the maturity date before the first and second
anniversaries of the signing date for a further year. The facility also includes
an uncommitted £100m accordion option which can be requested on a
maximum of three occasions over the lifetime of the facility to fund the
Group’s business development plans.
The Group’s financial position and borrowing ratios remain very strong,
with sufficient cash flows available to fund internal investments and debt
finance available to pursue external acquisition opportunities. At the end
of June 2020 interest cover was at 32 times (2019: 34 times). EBITDA, as
calculated under our financing facilities includes cash received from joint
ventures and historical cost depreciation of biological assets. The ratio of
net debt to EBITDA on this basis improved to 0.9 times (2019: 1.0 times) with
both lower net debt on a frozen GAAP basis and an increased EBITDA. This
level of leverage is just below our medium term objective of having a ratio
of net debt to EBITDA of between 1.0–2.0 times.
The Group has adopted the IFRS 16 ‘Leases’ standard from 1 July 2019 using
the modified retrospective approach and has recognised the cumulative
effect of applying IFRS 16 at the 1 July 2019 transitional date and the prior
period will not be restated.
The impact on the opening balance sheet as at 1 July 2019 was to recognise
a right of use asset and corresponding lease liability of £26.6m. Profit
before tax has not changed materially, however operating profit in FY20 has
increased by £0.7m (due to the depreciation expense being lower than the
operating lease expense it replaces) offset by increased finance charges on
the higher liability. IFRS 16 also requires a reclassification of cash outflow
from operations of £7.6m to net cash used in financing activities, however
the overall impact to the Group is cash flow neutral.
RETURN ON ADJUSTED INVESTED CAPITAL
We measure the Group’s return on adjusted invested capital on the basis of
adjusted operating profit including joint ventures after tax, divided by the
operating net assets of the business, stated on the basis of historical cost,
excluding net debt and pension liability. This removes the impact of IAS 41 fair
value accounting, the related deferred tax and goodwill. The return on adjusted
invested capital was higher at 21.0% after tax (2019: 18.9%), reflecting the
strong profit growth and lower tax rate, partially offset by an increased asset
base from the right of use asset adjustment under IFRS 16 mentioned above.
Excluding the impact of IFRS 16 adoption the return on adjusted invested
capital would have been 22.8%.
DIVIDEND
The Board has recommended a final dividend of 19.7 pence per ordinary
share, an increase of 5% over the prior year final dividend. When combined
with the interim dividend increase of 6%, this will result in a total dividend
for the year of 29.1 pence per ordinary share, an increase of 5% for the year.
Dividend cover from adjusted earnings remains strong at 2.9 times (2019:
2.6 times) and is in line with our Board’s intention to maintain a progressive
dividend within a target adjusted earnings cover range of 2.5–3.0 times.
It is proposed that the final dividend will be paid on 11 December 2020 to the
shareholders on the register at the close of business on 20 November 2020.
NET DEBT AND NEW CREDIT FACILITY
Net debt increased to £102.6m at 30 June 2020 (2019: £79.6m), primarily due
to the £24.7m impact of adopting IFRS 16.
At the end of June 2020 there was substantial headroom of £125.4m under
the Group’s credit facilities of £228m. Of the Group’s facilities as at 30 June
2020, £47m was due to expire in February 2021, with the remainder expiring
in February 2022.
Alison Henriksen
Chief Financial Officer
7 September 2020
STRATEGIC REPORT
34
PEOPLE AND CULTURE
Attracting and
retaining top talent
Angelle Rosata
GROUP HR DIRECTOR
Having the right people, working in a positive
and supportive culture, is key to success.
A DIVERSE AND DEDICATED TEAM
We employ more than 3,100 people in 25 countries. We are
an increasingly diverse team, united by commitment to our
Company vision and core values.
We nurture a positive and inclusive culture, built on mutual
respect and equal opportunity. This is underpinned by our
five core values, which inform behaviours expected of all
Genus employees. Our performance management process
explores what employees contribute and how they have
done so, to ensure alignment with our values.
We have made further progress on enhancing diversity.
For example, our Women’s Leadership Forum has evolved
into a global, employee-led group called AWAKE (Advancing
Women’s Advocacy, Knowledge and Empowerment). This
is developing initiatives that help female employees to
network, mentor each other and participate in professional
development programmes.
A CLEAR FRAMEWORK
We have completed a global job framework, in collaboration
with leaders and managers across the Company. This
groups similar jobs and skills, helping us to map how they fit
together and identify potential development paths within
roles and through the business. The framework brings
benefit in many areas, from talent development to
succession planning, and is helping us enhance workforce
sustainability.
ATTRACTING AND DEVELOPING TALENT
We have continued to attract new talent to strengthen our
capabilities in areas of strategic importance to the business.
We have also redeployed talent where needed, for example
in Asia, where our Global HR Director for PIC undertook an
assignment in China, helping us to recruit new local
leadership talent.
In parallel, we have continued to invest in developing
existing employees. For example, we now offer four bespoke
programmes for people managers, providing training and
support at different career stages. We have also established
a global Genus CEO Scholarship, which offers funding for a
part-time, Master’s-level business programme. The quality
of this year’s applicants was so high that we made two
awards, to colleagues in the UK and Russia.
More widely, we have invested in a new learning
management system to give all employees access to
multi-media and multi-lingual content, at any time,
on multiple devices.
ENGAGING EMPLOYEES
In November 2019, we ran our third global engagement
survey, Your Voice, to seek employee views on working at
Genus and ideas for improvement. We explain more in the
case study overleaf. This showed a further improvement in
the already high levels of engagement at Genus.
Among other engagement initiatives, our two non-executive
workforce engagement directors – Lesley Knox and Lykele
van der Broek – held breakfast discussions with employees
at sites in the UK and the U.S. These involved open
conversations about the company, working practices and
future plans. The feedback received gave Board members
valuable insight into employee views and Company culture.
HEALTH AND SAFETY
The health and safety of our employees is paramount and
we have introduced a range of measures to help protect
them from the spread of coronavirus (COVID-19). These have
included social distancing measures, personal hygiene
protocols, the provision of relevant personal protective
equipment ('PPE') by role, staggered work and break times
at our facilities and remote working from home wherever
possible.
More widely, we continue to improve health and safety in
other areas. During the year, we reduced recordable injuries
by 5% and reduced vehicle incident rates by 5%, in line with
our aim of enhancing the quality of hazard identification
in some of our higher risk areas.
GLOBAL POLICIES
We publish and regularly review a comprehensive set of
policies for our global employees, which range from our
Anti-Harassment and Diversity and Inclusion policy to
a variety of health and safety policies. These cover the
complete life cycle of an employee’s time at Genus, ensuring
all our people are treated consistently and equitably.
We support the policies with training where needed
and evaluation indicates they are being implemented
consistently. There are many ways in which employees can
raise any concerns, including a formal grievance procedure.
Any concerns reported are immediately referred to the
Group General Counsel and Company Secretary. They are
investigated and discussed with the Group HR Director,
Head of Risk Management and Internal Audit and the
Company’s Audit & Risk Committee. This process is regularly
reviewed as part of our annual Audit & Risk Committee
activity. There were no issues reported during the year.
ANTI-BRIBERY AND CORRUPTION
Our Anti-Bribery and Corruption policy, which is available to
employees on the Company’s intranet site, explains how we
act professionally, fairly and with integrity in all our business
dealings. All employees undertake mandatory annual
training on this policy and must achieve 100% in a
post-training test.
Genus plc / Annual Report 2020 35
BOARD GENDER BREAKDOWN
2
1
1 Male
2 Female
67%
33%
EXEC GENDER BREAKDOWN
2
1
1 Male
2 Female
63%
38%
WORKFORCE GENDER BREAKDOWN
2
1
1 Male
2 Female
66%
34%
The training is supported by our Whistleblowing
policy, which allows employees to anonymously
report any concerns about unethical behaviour
and explains the process for doing so. Any
concerns are immediately investigated through
the same procedure outlined above. There were
no issues reported during the year.
HUMAN RIGHTS
Genus is committed to respecting the human
rights of workers throughout our value chain
and the local communities in which we operate.
We aim to ensure that anyone who might be
affected by Genus can enjoy the human rights
described in the International Bill of Human
Rights and the ILO Declaration on Fundamental
Principles and Rights at Work.
We monitor this through the same process used
for the policies outlined earlier and there were
no issues identified during the year.
OUR VALUES
> Customer Centric
We are one team, dedicated to helping
customers thrive. We anticipate their needs
and help them seize opportunities, acting as
partners to improve quality, efficiency and
output. If we’re not adding value for our
customers, we stop and think again.
> Results Driven
We are proactive, determined to be the best we
can be and to exceed expectations. We redefine
standards for ourselves, our customers and
our industry. Every one of us takes pride in
delivering the highest level of performance.
If something can be improved, we find a simpler,
better way to do it.
> Pioneering
We are an innovative, forward-thinking company.
We have the courage and confidence to explore
new ideas and the energy and enthusiasm to
deliver them. We are creative, tenacious and
resourceful in every area of our work.
> People Focused
We are a business rooted in science but built
around our people. We inspire, challenge and
support everyone to perform, develop and
grow. We treat others with respect and we
invite views and feedback to help us improve.
> Responsible
We are ethical to our core. We feel a deep sense
of responsibility to our customers, colleagues,
animals, communities and shareholders. We
are honest, reliable and trustworthy. We mean
what we say and do what we say.
STRATEGIC REPORT
36
CASE STUDY / PEOPLE AND CULTURE
Acting on our people’s feedback
supports our aim of being a world-
class employer of talent.
Angelle Rosata
Group HR Director
Genus plc / Annual Report 2020 37
Your Voice survey
Our global engagement survey, Your
Voice, enables employees to give their
views of working at Genus and ideas
for improvement. The latest survey, in
November 2019, attracted a record number
of responses and gave us valuable insight
that has informed practical action plans.
Nearly 80% of our workforce gave us views, with
improved overall results on an already strong
base. There was positive feedback on areas such
as our strategic direction, Company culture and
management effectiveness. We also identified
areas for improvement, including learning &
development, and reward & recognition.
Each of our business units and functions
examined feedback from its employees and
developed an action plan to address priorities,
gaining input and ideas from employees as
they did so. Members of the Genus Executive
Leadership Team ('GELT') have taken ownership
of the plan for their business/function. This is
reflected in their annual performance objectives
and cascaded through local leadership teams.
GELT also identified two consistent themes –
development of people managers and reward
& recognition practices – and we are focusing
on these across the Company.
All action plans are now being implemented
and GELT is regularly reviewing progress.
STRATEGIC REPORT
38
SUSTAINABILITY REPORT
Pursuing our
Purpose
Sustainability lies at the heart of our
business. It informs our vision of pioneering
animal genetic improvement to help nourish
the world and infuses the core values that
shape our work, every day.
Inspired and guided by our purpose, we take
a long-term view that balances pursuit of
commercial interests with a commitment to
make a positive contribution to the world
around us. We care for employees, contribute to
our communities, respect the environment and
protect animal well-being. We also ensure we
are a well-run and profitable business, enabling
us to meet commitments to shareholders while
continuing to invest in areas of importance
to other stakeholders (ranging from health
& safety to climate change mitigation).
Environmental sustainability is particularly
relevant to our operations and our genetic
improvement work. We help farmers produce
meat and milk more efficiently and sustainably,
increasing the availability of high-quality,
affordable animal protein around the world.
As a result of bovine and porcine genetic
improvement, our customers use far less
land, water and other natural resources
to produce more milk or meat than they
did some decades ago. We are therefore
helping to reduce the impact agriculture has
on the environment and we will continue
to accelerate our genetic improvement
programmes as we aim to lead the market
in sustainable animal protein production.
In parallel, we will continue to reduce the
environmental impact of our own operations,
guided by our Climate Change Policy. This
policy, which is available on the Company’s
website, commits us to a 25% reduction
in greenhouse gas (‘GHG’) emissions by
2030 and becoming a net-zero emissions
business by 2050. We will use the primary
intensity ratio to report emission reductions,
and we have a range of practical activities
already underway to help us achieve this.
We fulfil our commitment by challenging
ourselves and those around us to think
differently. From small improvements
in working practices to innovations
that address stakeholder needs, we
constantly develop and explore new
ideas for enhancing our contribution and
delivering positive, sustainable change.
We translate our bold thinking into policies
and practices that underpin our operations
around the world. From core principles on
protecting animal well-being to guidelines
on supporting community causes, we
articulate expectations, provide information
and deliver training where needed to ingrain
responsible business practices across our
organisation and the people we work with.
We set and continually monitor progress using
key performance indicators (see pages 16 to 17).
We also ensure employees have multiple routes
to raise any concerns (including the independent
whistleblowing hotline explained earlier). No
material issues were reported during the year.
INSTALLATION OF NEW ANIMAL HOUSING
AND SOLAR PANELS AT DEKORRA
ANIMAL WELFARE AND ENVIRONMENT
As part of a long term plan to increase
production capacity in North America, ABS
has commenced construction of new animal
housing facilities at locations in Dekorra and
Leeds, Wisconsin. Utilising the latest building
techniques the facilities are being built to
house, clean, bed, feed and collect bulls in a low
stress environment. Following the successful
roll out of a 49kW solar array at Dekorra in
2018, further investment has been approved
for the construction of new solar panel
systems at these sites which, when completed,
aim to generate electricity equivalent to
100% of the sites’ current power usage.
COMMUNITY RESPONSE TO INDIA FLOODS
COMMUNITY
VEHICLE TELEMATICS
OPERATE SAFELY
In August, severe flooding affected the region
of Maharashtra, including at our Brahma
production facility, displacing more than 1.5
million people. The Genus team and its partners
worked tirelessly to evacuate people and
animals from the facility, and also recovered
relief materials (including medicine, dry food,
utensils and toiletries) and shared them with
the neighbouring village to help with the
rescue operation. ABS India helped a number
of families to re-build homes swept away in
the floods and provided replacement school
supplies for 300 students. Genus then set up
a relief fund to support the local community,
matching 100% of employee donations.
Combined contributions to the relief effort
from the wider Genus family totalled $52,000.
We have been partnered with Lightfoot in the
UK for over a year as our focus on safer and
more sustainable driving continues. Lightfoot
uses advanced, real-time engine analytics to
provide live, in-cab coaching to help drivers
improve both efficiency and safety – this year
we have seen a drop in the severity of road
accidents and now have a greater understanding
of driver behaviour through improved data.
FY20 also saw the introduction of a new First
Notice of Loss (‘FNOL’) service which sends
notifications to fleet management within
minutes of an incident with the necessary details
needed to provide effective and timely response.
Genus plc / Annual Report 2020 39
Sustainability
Our sustainability framework touches all aspects
of our supply chain.
FOOD QUALITY,
TRACEABILITY
& SECURITY
Advancing genetic
improvement in food-
producing animals,
through technology
and innovation.
ANIMAL WELL-BEING
Continuously improving
animal well-being
across our businesses
worldwide.
ENVIRONMENT
Reducing the
environmental impact
of protein production.
RESPONSIBLE
EMPLOYER OF CHOICE
Seek to ensure a safe
and inclusive working
environment for our
colleagues.
COMMUNITY
Proactively engage
in communities where
Genus operates.
R&D AND INNOVATION
Our scientists use
leading-edge research
and analysis to drive
genetic improvement
HOW
SUSTAINABILITY
TOUCHES OUR
SUPPLY CHAIN
CUSTOMERS AND
CONSUMERS
We deliver genetic
improvement
to benefit customers,
by disseminating
the genes rapidly
PRODUCT DEVELOPMENT
We replicate
desirable traits through
our breeding programmes,
delivering benefits for
animal well-being, customer
productivity and sustainable
protein production
SUPPLY CHAIN
We are rooted in
the communities we
work in, operating to global
health and safety standards
for our staff and global animal
well-being standards
PRODUCT VALIDATION
We evaluate and validate
our genetics in customer
operations, seeking to
deliver the next generation
of genetic improvement
STRATEGIC REPORT
40
SUSTAINABILITY REPORT CONTINUED
Progressing our
sustainability strategy
Our Sustainability Committee
contains experts from around our
global Company. The Committee
sets our sustainability strategy,
articulates annual objectives and
monitors progress.
Our progress with our sustainability strategy,
including key performance indicators where
relevant, is summarised opposite.
For more information on our work,
progress and Sustainability Committee,
please visit our dedicated website:
www.genusplc.com/responsibility.
What we do
Highlights in the year
What we plan to do next
FOOD QUALITY,
TRACEABILITY AND
SECURITY
Advancing genetic
improvement in
food-producing
animals, through
technology and
innovation
ANIMAL WELL-BEING
Continuously improve
animal wellbeing
practices across our
business worldwide
> Drove further genetic
improvement in both porcine
and bovine species
> Continued our work to
combat PRRSv in pigs and
signed a major collaboration
agreement in China
> Increased the availability of
Sexcel in target markets
around the world
> Continue driving porcine and bovine
genetic improvement and rapidly
disseminate the genetics to customers
globally
> Continue responsible development of
gene editing technology, to aid disease
resistance and animal well-being
> Explore opportunities for technology
partnerships to enhance traceability of
Genus genetics
> Continued to invest in PIC and
ABS animal housing facilities
> Continued aligning standard
operating procedures across
the PIC supply chain
> Maintained our focus on
reducing bovine stress, to
improve maternal health
> Ensure employees with animal care
responsibilities are routinely trained on
current animal care standards
> Continue investment in animal housing
facilities
> Keep reviewing and updating animal
care standards and operating
procedures, to maintain alignment with
best practice
> Audited 87.4% of PIC-owned
> Increase porcine genetic improvement
production sites
index by 19 points
ENVIRONMENT
Reduce the
environmental
impact of protein
production
> Improved feed efficiency by
0.045 kg of feed per kg of pork
> Approved Climate Change
Policy
> Continue to select beef genetics that
improve feed efficiency and reduce
greenhouse gas (‘GHG’) emissions
> Launch environmental sustainability
initiatives across the Company
consistent with Climate Change Policy
targets for GHG emission reductions
> Execute and explore opportunities for
wider deployment of renewable energy
solutions across ABS and PIC sites
> Work to address slurry and manure
management challenges by exploring
technological innovations
> Conduct environmental audits of
material facilities
> Maintain scope and measures of PIC
audits on owned production, including
80% of owned sites
> Vehicle incident rates fell
by 5%
> Reduce occupational road risk
> Reduce recordable injury frequency
> Recordable incidents dropped
rate1
by 5%
1 Recordable Injury Frequency: the number of work
related incidents that result in injury or illness, work
restriction, or require treatment other than first aid.
> Recruited 103 staff into our PIC
> Continue to respond to local community
and ABS production sites
> Enhanced our range of
placement and employment
opportunities for students
and apprentices
crises, recruit into local farms and
encourage support for charities close to
the local businesses and aligned with
our mission
RESPONSIBLE
EMPLOYER OF
CHOICE
Seek to ensure a safe
and inclusive working
environment for our
colleagues
COMMUNITY
Proactively engage in
communities where
Genus operates
Genus plc / Annual Report 2020
41
GHG EMISSIONS FOR 2020 (%)
6 7
5
4
3
2
1
1 Scope 1 Livestock
2 Scope 1 Fuel
3 Scope 1 Own Transport
4 Scope 2 Electricity and Heat
5 Scope 3 Distribution
6 Scope 3 Travel
7 Scope 3 Other
63%
8%
11%
6%
4%
6%
4%
ASSESSMENT METHODOLOGY
World Resources Institute/World Business
Council for Sustainable Development. ‘The
Greenhouse Gas Protocol: A Corporate Accounting
and Reporting Standard’
DEFRA ‘Guidance on how to measure and report
your greenhouse gas emissions’
DEFRA ‘Environmental Reporting Guidelines:
Including mandatory greenhouse gas emissions
reporting guidance’
EMISSIONS FACTOR DATA SOURCE
IPCC ‘Guidelines for National Greenhouse Gas
Inventories’
DEFRA/DECC ‘Conversion Factors for Company
Reporting’
Climate Change Policy and
Greenhouse Gas (‘GHG’) Reporting
GHG EMISSIONS REPORTING OUTCOMES
Our GHG emissions are primarily methane
produced by our animals, carbon dioxide from
consuming fuel and other materials, and from
transport.
Our total GHG emissions decreased by 0.1%
driven by small decreases in Scope 2 and 3
emissions, offset by increases in animal
emissions (driven by an increase in animal
numbers and weight per animal).
Our primary intensity ratio decreased by 3.7%
due to changes in the mix between porcine and
bovine and change in the mix of animal weights.
This measure is largely unaffected by the impact
of COVID-19.
The impact of the change in methodology and
adoption of revised IPCC factors on the 2019
emissions is as follows:.
Tonnes of CO2e
95,655
7,840
1,777
8,106
8,441
IPCC changes to emission
calculation methodology
Vehicle emissions
Inclusion of share of JVs
Slurry and
manure analysis
FY19 restated Tier 2 emissions
121,819
advance positive climate goals and identified
United Nations Sustainable Development
Goals (‘SDGs’).
As reported FY19
Tier 2 changes
In November 2019 the Board approved a Group
Climate Change Policy which, among other
things, acknowledges the reality of climate
change and recognises the lasting negative
impact it will have on our business and our
communities. We support the outcomes of the
Paris Agreement and the long-term goal to limit
the global average temperature rise to 1.5°C.
Genus has committed to take action on climate
change in a number of ways, including:
> Driving porcine and bovine genetic
improvements which support productivity
gains and improve feed efficiency, enabling
a reduction in the production of GHG
emissions per unit of milk or meat produced;
> Reducing the carbon footprint of our own
operations through developing a better
understanding of how energy is used in our
business. We are committed to the
sustainable development of new facilities and
are evaluating the use of renewable power
solutions on a number of our farms; and
> Partner and advocate for policies that
The Group’s GHG emissions have been reported
since 2013 in line with the requirements of The
Companies Act 2006.
OUR REPORTING APPROACH
During the year we have worked to refine our
methods to measure GHG emissions and
develop a Tier 2 FY19 emission baseline (FY19
Baseline). The FY19 Baseline will be used to
measure future improvements. The Tier 2
methodology analyses locational animal
management and transport in more detail
than the Tier 1 analysis previously used.
We are committed to reducing GHG emissions
in our operations and will use the ‘primary
intensity ratio’ to report emission reductions. We
aim to reduce the primary intensity ratio by 25%
by 2030. As an organisation, we also aim to have
net zero GHG emissions by 2050. This means that
even as our business grows, we are seeking to
ensure that our GHG emissions shrink.
We use operational control as our reporting
approach. We have determined and reported
the emissions we are responsible for within this
boundary and believe there are no material
omissions. As part of the review of Tier 2
methodology we now include our share of joint
venture emissions and omit some livestock held
by third parties, due to our limited authority to
introduce and implement operating policies.
STRATEGIC REPORT
42
SUSTAINABILITY REPORT CONTINUED
Climate Change Policy and
Greenhouse Gas (‘GHG’) Reporting continued
ENERGY EFFICIENCY
We continually invest in improving energy
efficiency and are focused on driving operational
change to reduce energy consumption. Our
Sustainability Committee has developed a road
map which included energy conservation and
reduction and has commitment at an Executive
level. Over the course of the last year we have
invested in energy efficiency and generation
technologies. These capital schemes include
investment in renewable energy generation
schemes, replacing coal fired boilers in China,
and improving energy efficiency measures in our
UK offices with improved controls to reduce
energy use. We use our half hourly meter data,
regular internal communication and
performance reporting to understand energy
efficiency and drive behaviour, minimise waste
and identify opportunities. We are building
online learning for all staff to understand the
importance of sustainability. We are piloting the
use of electric vehicles in our fleet, along with
dedicated site charging points.
GENUS PLC ENERGY DATA
In line with the latest government energy
and carbon reporting requirements, further
information on our energy consumption for
the last two years across Genus plc is set out
opposite. This is sourced from data for the
carbon data reported in this section and is
tracked internally on a quarterly basis. All data
is collected from metered data for electricity.
Biogas combustion information is calculated
using assumptions based on records in China
and Brazil. Fuel use is reported based on
financial records of fuel purchased. We have
applied assumptions on standard calorific
values to convert all liquid and gas fuel types
to a common energy metric (kWh) and data is
reported for the period 1 July 2019 to 30th
June 2020.
2020
2019
(restated)
% change
Emissions from
Tonnes of CO2e
Tonnes of CO2e
Scope 1 – combustion of fuel, own transport and livestock
emissions
Scope 2 – purchased electricity, steam, heat and cooling
Total Scope 1 and 2
Scope 3 – material usage and waste, third party distribution
and business travel
Total emissions
Primary intensity measure – animal weight (tonne)
Secondary intensity measure – Turnover (£m)
Primary intensity ratio – Scope 1 and 2
(tCO2e/tonne animal weight)
Secondary intensity ratio – Scope 1, 2 and 3
(tCO2e/turnover)
98,740
6,812
92,896
7,439
105,552
100,335
16,123
121,675
10,481
551.4
21,485
121,819
9,591
488.5
6.3
(8.4)
5.2
(25.0)
(0.1)
9.3
12.8
10.07
10.46
(3.7)
221
249
(11.2)
Annual emissions figures have been calculated based on actual nine-month data for July to March for travel and distribution and
ten-month data for July to April, with both extrapolated to full year.
Energy Type
Source
Units (kWh)
2020
2019
Electricity
Electricity imported
kWh
20,156,010
17,599,380
Gas Fuels
Liquid Fuels
Total
Electricity Generated from
Renewable Sources and Used on Site
Electricity Generated from
Renewables Sources and Exported
Gas Imported from the Grid
Fuel used by Plant (gas oil and diesel)
Total Energy Used (i.e. Annual
quantity of energy consumed from
activities for which the Company is
responsible, including combustion of
fuel and operation of facilities)
Total Energy Imported (i.e. Annual
quantity of energy consumed
resulting from the purchase of
electricity and gas. No imports of
heat, steam or cooling)
Proportion of energy use (UK)
Proportion of energy use (RoW)
kWh
683,000
620,000
kWh
kWh
kWh
13,000
0
9,617,802
4,491,962
18,268,089
18,003,380
kWh
48,724,901
40,714,722
kWh
kWh
kWh
29,773,812
22,091,342
1,142,815
1,264,280
47,582,086
39,450,442
Genus plc / Annual Report 2020 NON-FINANCIAL INFORMATION STATEMENT
43
The table below, and the information it refers to, is intended to help stakeholders understand our position on key non-financial matters in line with the
non-financial reporting requirements contained in Sections 414CA and 414CB of the Companies Act 2006.
Reporting
requirement
Policies and standards
which govern our approach
Risk management and
additional information
ENVIRONMENTAL MATTERS
Sustainability Framework
See page 40
EMPLOYEES
HUMAN RIGHTS
SOCIAL MATTERS
Global Employee Handbook;
Whistleblower Policy
Global Employee Handbook;
Whistleblower Policy
See pages 34 to 35
See page 35
Charitable Donations Policy
See page 40
ANTI-CORRUPTION AND ANTI-BRIBERY
Anti-Bribery and Corruption Policy
See page 34
POLICY EMBEDDING, DUE DILIGENCE AND OUTCOMES
Global Employee Handbook
See Strategic Report on pages 1 to 47
DESCRIPTION OF PRINCIPAL RISKS AND IMPACT OF
BUSINESS ACTIVITY
DESCRIPTION OF THE BUSINESS MODEL
N/A
N/A
See Principal Risks and Uncertainties
on pages 44 to 46
See Business Model on pages 10 to 11
NON-FINANCIAL KEY PERFORMANCE INDICATORS
Sustainability Framework
See page 40
SECTION 172 STATEMENT
Section 172(1) of the Companies Act 2006
imposes a general duty on every company
director to act, in good faith, in the way they
consider would be most likely to promote the
success of the company for the benefit of its
shareholders. In doing so, directors must take
into account a list of factors that include:
> the likely long-term consequences of Board
decisions;
> how the Company’s actions and behaviours
affect customers, employees, suppliers, the
community and the environment;
> the desirability of maintaining a reputation
for high standards of business conduct; and
> the need to act fairly between shareholders.
This statement explains how the Board complies
with its obligations under section 172.
MANAGING OUR STAKEHOLDER
RELATIONSHIPS
To effectively consider the impact of
decisions on our stakeholders, we must have
a good understanding of their needs and
issues. We therefore actively listen to our
stakeholders at all levels of the organisation,
to ensure we take account of and respond
to their interests. Information on how we
engage with our stakeholders, including the
Board’s direct and indirect engagement with
them, can be found on pages 12 to 13.
STANDARDS OF BUSINESS CONDUCT
The Board is aware of the need to maintain
high standards of business conduct. The Group
has a strong ethical culture, underpinned by
our values and policies, which are endorsed
by the Board. The Group also has specific
policies and procedures to prevent bribery
and corruption, as described on page 34.
ENVIRONMENTAL IMPACT
Information on the Group’s environmental
impact can be found on pages 38 to 42.
TREATING SHAREHOLDERS FAIRLY
The Company’s shares are owned by a
wide range of institutional and individual
shareholders, with no shareholder having a
majority holding or significant influence over
the Group. As a result, no situations arise
in which any shareholders can be treated
differently, ensuring fair treatment for all.
KEY BOARD DECISIONS
Examples of key Board decisions during the
year, including how the Board considered the
interests of relevant stakeholders, are set
out below.
DEFERRING ROYALTY PAYMENTS FROM CUSTOMERS IMPACTED BY COVID-19
Overview
COVID-19 has caused significant volatility in pork markets, leading to reduced capacity at meat
processing plants in North America during the year.
Long-Term Consequences
Customers are a critical stakeholder group for Genus. The impact of COVID-19 on reduction of meat
processing capacity has led to customers having to euthanise weaned pigs, sows and market pigs,
which has a direct impact on the viability of their businesses in both the near and long term. The
Board is committed to our customers’ success and has supported actions taken to secure the supply
of semen and breeding stock to minimise the impact of the pandemic on our customers.
Actions Taken
PIC offered customers in North America the opportunity to defer 50% of royalty payments for a
period of three months, collectable over the following year, which was positively received and widely
adopted in the industry.
CLIMATE CHANGE
Overview
The Board recognises that without significant thought and action, climate change will have a lasting,
negative impact on our business, our communities and the world. Climate change is important
to all of the Group’s stakeholders, including shareholders who are increasingly interested in our
environmental performance. The Board therefore decided to set out the Company’s approach to
managing its operations in view of climate change and to introduce a Climate Change Policy,
including realistic but stretching targets for emission reductions over the next decade.
Long-Term Consequences
By implementing the new Climate Change Policy, which is available on the Company’s website,
we aim to reduce our GHG emissions by 25% by 2030, against a restated 2019 baseline. Longer term,
our aim is to be carbon neutral by 2050. More information on the Group’s environmental
performance can be found on pages 38 to 42.
Actions Taken
The Board has appointed Lysanne Gray as its Sustainability Sponsor. As Chair of the Audit & Risk
Committee, she will receive regular updates from our Sustainability Committee, which will monitor
our progress against the actions identified in the Climate Change Policy.
The Board has also approved investment in renewable energy at the Dekorra site in the US, which
hopes to run exclusively on solar energy (see page 38).
STRATEGIC REPORT
44
Principal risks
and uncertainties
Genus is exposed to a wide range
of risks and uncertainties as it
fulfils its purpose of providing
farmers with superior genetics
to fulfil its vision.
Some of these risks relate to the current
business operations in our global agricultural
markets, while others relate to future
commercial exploitation of our leading-edge
R&D programmes. We are also exposed to global
economic and political risks such as trade
restrictions and Brexit. Our assessment is that
Brexit is not a principal risk for Genus.
Additionally, we also monitor emerging new
risks such as changing consumption patterns,
environmental sustainability and the emergence
of alternative proteins such as lab-based meat.
In considering our risks, we performed a detailed
assessment of the impact of the global outbreak
of COVID-19 during the second half of our
financial year. The assessment covered COVID-19
impact on our people, our customers and our
supply chain. We also assessed the short and
long term risks associated with the expected
global economic disruption affecting our
industry and the markets where we operate.
Out of this broad risk universe we have identified
ten principal risks, which we periodically
evaluate based on an assessment of the
likelihood of occurrence and magnitude of
potential impact, together with the effectiveness
of our risk mitigation controls.
The table below outlines these principal risks
and uncertainties and how we manage them.
We also identified those principal risks which are
more likely to have a short to medium-term
impact for the evaluation of our going concern
and viability assessment. This is discussed in
detail within our viability statement.
The Directors confirm that they have undertaken
a robust assessment of the principal risks and
uncertainties facing the Group. More information
on our risk management framework can be
found in the Corporate Governance Statement
on page 68.
LINK TO STRATEGY/VIABILITY ASSESSMENT
Increasing Genetic Control
and Product Differentiation
Targeting Key Markets
and Segments
Sharing in the
Value Delivered
Considered for Viability
Assessment
Genus plc / Annual Report 2020 45
Risk
Risk description
How we manage risk
Risk change in 2020
Strategic Risks
DEVELOPING
PRODUCTS WITH
COMPETITIVE
ADVANTAGE
> Development programmes fail to
produce best genetics for
customers.
> Increased competition to secure
STRATEGIC LINK
elite genetics.
CONTINUING TO
SUCCESSFULLY
DEVELOP
INTELLIGEN
TECHNOLOGY
> Failure to manage the technical,
production and financial risks
associated with the rapid
development of the IntelliGen
business.
STRATEGIC LINK
DEVELOPING AND
COMMERCIALISING
GENE EDITING AND
OTHER NEW
TECHNOLOGIES
> Failure to develop successfully and
commercialise gene-editing
technologies due to technical,
intellectual property (‘IP’), market,
regulatory or financial barriers.
STRATEGIC LINK
> Competitors secure ‘game-
changing’ new technology.
Dedicated teams align our product
development to customer requirements. We
use large-scale data and advanced genomic
analysis to ensure we meet our breeding
goals. We frequently measure our
performance against competitors in
customers’ systems, to ensure the value
added by our genetics remains competitive.
Our continued development of the technology
and its deployment to new markets is
supported by dedicated internal resources
and agreements with suppliers.
Further patent infringement proceedings
initiated by ST in the US are being vigorously
defended.
We stay aware of new technology
opportunities through a wide network of
academic and industry contacts. Our Genus
Portfolio Steering Committee (‘GPSC’)
oversees our own research, ensures we
correctly prioritise our R&D investments and
assesses the adequacy of resources and the
relevant IP landscapes. We have formal
collaboration agreements with key partners,
to ensure responsible exploration and
development of technologies and the
protection of IP. The Board is updated
regularly on key development projects.
CAPTURING VALUE
THROUGH
ACQUISITIONS
> Failure to identify appropriate
investment opportunities or to
perform sound due diligence.
> Failure to successfully integrate an
STRATEGIC LINK
acquired business.
We have a rigorous acquisition analysis and
due diligence process, with the Board
reviewing and signing off all material projects.
We also have a structured post-acquisition
integration planning and execution process.
GROWING IN
EMERGING
MARKETS
STRATEGIC LINK
> Failure to appropriately develop our
business in China and other
emerging markets.
Our organisation, blends local and expatriate
executives, supported by the global species
teams, to allow us to grow our business in key
markets, while managing risks and ensuring
we comply with our global standards. We also
establish local partnerships where
appropriate to increase market access.
No change.
No change. We continue to see strong
demand for Sexcel and continue to
implement improvements and
innovation into our technology,
improving fertility outcomes and
processing efficiency. We continue
to increase IntelliGen’s global
deployment, securing new
third-party customers.
We continue to experience patent
infringement filings as well as seeing
the progression of existing filings
during the year (see note 7).
No change. Key initiatives continue to
progress through the R&D life cycle
and we maintain the high level of
investment needed to bring the end
products to market.
No change. We continue to work
diligently to identify areas of
opportunity consistent with our
strategic plans and our aim to
accelerate growth and create value
for our shareholders.
Our experiences with post-
acquisition integration provide
a platform for integrating newly
acquired businesses.
No change.
Operational Risks
PROTECTING IP
STRATEGIC LINK
> Failure to protect our IP could mean
Genus-developed genetic material,
methods, systems and technology
become freely available to third
parties.
No change.
We have a global, cross-functional process
to identify and protect our IP. Our customer
contracts and our selection of multipliers and
joint venture partners include appropriate
measures to protect our IP. We maintain IP
landscape watches and where necessary
conduct robust ‘freedom to operate’ searches,
to identify third-party rights to technology.
STRATEGIC REPORT
46
PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
Risk
Risk description
How we manage risk
Risk change in 2020
Operational Risks continued
ENSURING
BIOSECURITY AND
CONTINUITY OF
SUPPLY
disease outbreak.
> Loss of key livestock, owing to
> Loss of ability to move animals or
semen freely (including across
borders) due to disease outbreak,
environmental incident or
international trade sanctions and
disputes.
STRATEGIC LINK
> Lower demand for our products,
due to industry-wide disease
outbreaks.
HIRING AND
RETAINING
TALENTED PEOPLE
STRATEGIC LINK
> Failure to attract, recruit, develop
and retain the global talent needed
to deliver our growth plans and R&D
programmes.
Financial Risks
MANAGING
AGRICULTURAL
MARKET AND
COMMODITY
PRICES VOLATILITY
STRATEGIC LINK
FUNDING
PENSIONS
> Fluctuations in agricultural markets
affect customer profitability and
therefore demand for our products
and services.
> Increase in our operating costs, due
to commodity pricing volatility.
> The COVID-19 outbreak in 2019
increased volatility and introduced
significant new financial and
operational pressure across
agricultural markets.
> Exposure to costs associated with
failure of third-party members of
joint and several liabilities pension
scheme.
> Exposure to costs because of
external factors (such as GMP
equalisation, RPI reform proposals,
mortality rates, interest rates or
investment values) affecting the size
of the pension deficit.
We have stringent biosecurity standards, with
independent reviews throughout the year to
ensure compliance. We investigate biosecurity
incidents, to ensure learning across the
organisation. We regularly review the
geographical diversity of our production
facilities, to avoid over-reliance on single sites.
We have a robust talent and succession
planning process, including annual
assessments of our global talent pool and
active leadership development programmes.
The Group’s reward and remuneration policies
are reviewed regularly, to ensure their
competitiveness. We work closely with a
number of specialist recruitment agencies, to
identify candidates with the skills we need.
We continuously monitor markets and seek to
balance our costs and resources in response
to market demand. We actively monitor and
update our hedging strategy to manage our
exposure. Our porcine royalty model and
extensive use of third-party multipliers
mitigates the impact of cyclical price and/or
cost changes in pig production.
We are the principal employer for the Milk
Pension Fund (‘MPF’) and chair the group of
participating employers. The fund is closed to
future service and has an agreed deficit
recovery plan, based on the 2018 actuarial
valuation. We also monitor the strength of
other employers in the fund and have retained
external consultants to provide expert advice.
Increased. This is due to the global
supply chain challenges imposed by
the COVID-19 outbreak as well as the
rising geo-political tension and
escalation of trade wars. Our
geographically diverse production
facilities and the expert knowledge of
our supply chain and commercial
teams allowed for a swift and
comprehensive response to these
challenges, which helped to reduce
their impact.
Reduced. The Group’s Finance
Director took the role of the Chief
Executive in September 2019 and we
appointed our new Chief Financial
Officer in January 2020. To date,
we have been largely successful in
recruiting and retaining the
appropriate skills at all levels to
meet our business growth plans.
Increased. The full impact of the
COVID-19 outbreak on our customers
and the global economy remains to
be seen. We have implemented
additional measures to strengthen
our monitoring processes and
continue to work very closely with
our customers to enhance our
response to both short and long
term impact.
Increased. The Trustee formalised an
investment de-risking strategy in line
with the principles agreed in the
memorandum of understanding
signed with the employers’ group in
2019. COVID-19 outbreak impacted
the financial markets and net
adverse impact on funding levels
of recent market movements is
2.6% (£13m).
Developments in RPI reform are
being monitored closely to assess
likely impacts but the actual shape of
the reform is uncertain at this point.
Genus plc / Annual Report 2020
GOING CONCERN AND VIABILITY STATEMENT
47
GOING CONCERN
As part of the Directors’ consideration of the
appropriateness of adopting the going concern
basis in preparing the financial statements,
given the uncertainty arising from COVID-19, our
cash flow and net debt projections to December
2021 have been overlaid with a number of
sensitivities to ensure we capture a severe
downside scenario ‘a COVID-19 scenario’ impact
on our profit, headroom and covenants over the
going concern period. In addition, we have
overlaid these sensitivities with reverse stress
tests on both our headroom and banking
covenants to ensure the range above and
beyond the severe downside scenario is
fully assessed.
The COVID-19 scenario sensitivities include 5%
reductions in PIC revenue, 10% reduction in ABS
volumes, 20% reduction in ABS average selling
prices, £8m working capital impact and offset by
mitigating actions including savings in costs,
reduction in dividends and postponing certain
capital spend and investments. Our mitigating
actions are all within management control
and would not impact our ability to serve
our customers.
Our headroom under these sensitivities and
reverse stress tests, including our mitigating
actions, remain adequate. Based on this
assessment, the Directors have a reasonable
expectation that the Group has adequate
resources to continue its operational existence
for the foreseeable future and for a period of at
least 12 months from the date of this report.
Accordingly, the Directors continue to adopt and
consider appropriate the going concern basis in
preparing the Annual Report.
In assessing the appropriateness of adopting the
going concern basis of preparing the financial
statements as well as in assessing viability, the
Board have taken into account:
> The uncertainty resulting from the COVID-19
pandemic, in the initial 2 year period to
June 2022, and its impact on our people,
our customers and our critical business
processes as well as the additional
mitigation actions we implemented to
reduce our exposure and minimise any
medium or long-term impact. We also
assessed those risks associated with the
expected global economic disruption which
may negatively affect our industry and the
markets where we operate.
> Genus’s results at 30 June 2020 whereby the
Group recorded adjusted profit before tax
growth of 22% in constant currency, despite
the challenges we have seen in the second
half of the 2020 fiscal year.
> Genus’s strong cash position at 30 June 2020
with free cash flow of £35.2m (2019: £10m)
and net debt of £77.9m (2019: £79.6m),
excluding an impact of £24.7m from IFRS 16
adoption, and had substantial headroom of
£125m (2019: £125.6m) under the Group’s
credit facilities of £228m.
> A new credit facility agreement with a
syndicate of eight banks was signed post
year end on 24 August 2020. The new facility
consists of a £150m multi-currency RCF, a
USD125m RCF and a USD20m bond and
guarantee facility. The term of the new
facility is for three years with an option to
extend the maturity date before the first and
second anniversaries of the signing date for a
further year. The facility also includes an
uncommitted £100m accordion option which
can be requested on a maximum of three
occasions over the lifetime of the facility to
fund the Group’s business development
plans.
> The potential use of mitigating actions
including reduction in dividends and
postponing certain capital spend and
investments.
VIABILITY
As part of the Directors’ assessment of the
Group’s viability the Board considered a number
of key factors, including our business model (see
page 10), our strategic framework (see page 16)
and carried out a robust assessment of the
principal risks facing Genus (see pages 44 to 46).
Our cash flow and net debt projections to June
2023 have been overlaid with the above
COVID-19 scenario sensitivities in the initial 2
year period to June 2022 and subsequently with
the potential impact, in severe but plausible
scenarios of selected principal risks, and in
particular the impacts of biosecurity,
agricultural markets downturn, border closures,
IntelliGen uptake, continuity of supply, customer
consolidation and increased competition.
We have considered the position if each of the
identified principal risks materialised
individually and where multiple risks occur
in parallel.
In their assessment of the Group’s viability, the
Directors have determined that a three-year
time horizon, to June 2023, is an appropriate
period to adopt. This was based on the Group’s
visibility of its product development pipeline, for
example, as a result of the genetic lag of
approximately three years between the porcine
nucleus herds and customers’ production
systems and the pipeline of young bulls.
The Board also considered the nature of the
principal risks affecting Genus, including the
agricultural markets in which it operates.
Based on this assessment, the Directors have
a reasonable expectation that the Group will be
able to continue in operation and meet its
liabilities as they fall due over the period to
June 2023.
The Strategic Report was approved by the Board
of Directors on 7 September 2020 and signed on
its behalf by:
Stephen Wilson
Chief Executive
7 September 2020
Alison Henriksen
Chief Financial Officer
7 September 2020
STRATEGIC REPORT
48
CHAIRMAN’S LETTER
Providing leadership
and oversight
Bob Lawson
Dear Shareholder
Genus has long been
a purpose-driven
Company, with a robust
culture.
Strong corporate governance is the
foundation for any successful business
and I am pleased to report that my final
Board evaluation shows that governance
standards at Genus remain high.
High-quality governance is even more
important during periods of turbulence
and the Board has continued to operate
successfully during the COVID-19
pandemic, while ensuring that our
internal controls and governance
framework remain robust in the light
of changes to working practices.
Genus plc / Annual Report 2020 49
Over the last year or so, many companies have
found themselves considering their purpose for
the first time. Genus has long been a purpose-
driven company, as shown by our vision of
pioneering animal genetic improvement to help
nourish the world. We have a robust culture that
supports this vision and you can read more
about the Board’s oversight of our culture on
page 59. The Board’s direct engagement with
our people, via our designated Workforce
Engagement Directors, is an important part
of this oversight.
This Annual Report includes our first Section 172
Statement on pages 12 to 13 and page 43.
While the requirement to report on the Board’s
engagement and decision making is new, the
Directors have always been highly engaged
and aware of their responsibilities in this regard
and have looked to balance the interests of all
stakeholders in our discussions. I am sure that
the Board will continue to develop Genus’s
governance under Iain Ferguson’s leadership,
to support the delivery of further value for all
our stakeholders.
As described in my statement on page 6 of the
Strategic Report, there were important changes
to the Board during the year. Stephen Wilson’s
appointment as Chief Executive demonstrated
the value of our succession planning, while we
were delighted to recruit a Chief Financial Officer
with Alison Henriksen’s skills and experience,
with the additional benefit of further enhancing
gender diversity on the Board. Lesley Knox, as
our Senior Independent Director, led the
recruitment process for Iain Ferguson, who
will be my successor as Chairman.
Bob Lawson
Chair of the Board
7 September 2020
Genus complied in full with the 2018 edition
of the UK Corporate Governance Code,
which was the applicable standard for
this year.
CORPORATE GOVERNANCE
50
LEADERSHIP
Board of Directors and
Company Secretary
COMMITTEE
MEMBERSHIP
BOARD
APPOINTMENT
SKILLS AND
EXPERIENCE
BOB LAWSON
Non-Executive Chairman
STEPHEN WILSON
Chief Executive
ALISON HENRIKSEN
Chief Financial Officer
LYSANNE GRAY
Non-Executive Director
LYKELE VAN DER BROEK
LESLEY KNOX
Non-Executive Director;
Workforce Engagement
Director
Senior Independent
Director; Workforce
Engagement Director
PROFESSOR
IAN CHARLES
Non-Executive Director
IAIN FERGUSON
Non-Executive Director
Chairman Designate
DAN HARTLEY
Group General Counsel
and Company Secretary
November 2010
January 2013
January 2020
April 2016
July 2014
June 2018
July 2018
July 2020
June 2014
> Significant experience of
leading international
businesses, including
through operational and
cultural changes
> Deep understanding of
listed companies and
corporate governance
> Significant experience of
risk management, audit,
business operations,
acquisitions and
disposals, and corporate
governance, gained
within the food sector
> Chartered accountant
> Six years as Group
> Over 25 years of
international experience
in finance, operating
across Europe, Australia,
Asia, the US and South
Africa
> Proven track record of
driving performance in
public and privately held
organisations, both
business to business and
business to consumer
> Qualified as Chartered
Accountant with Ernst &
Young
Finance Director at Genus
with wide-ranging
operational, strategic and
business development
responsibilities
> Extensive experience over
30 years in technology
businesses, including
finance, mergers and
acquisitions, IT
transformation and
investor relations
> International experience
living and working in
Europe and the US
> Fellow of the Chartered
Institute of Management
Accountants
CURRENT
APPOINTMENTS
Non-Executive Chairman of
Eurocell plc.
None
None
Financial Controller at
Unilever plc and Unilever NV.
Chair of Eden Research plc.
PAST
APPOINTMENTS
Chief Executive of
Electrocomponents plc;
Managing Director of Vitec
Group plc; Chairman of the
Federation of Groundwork
Trusts; Chairman of Hays plc;
and Non-Executive
Chairman of Barratt
Developments plc.
Group Finance Director of
Genus plc; Executive Vice
President and Chief
Financial Officer of Misys plc;
finance and business
development roles at IBM;
and Non-Executive Director
and Audit Committee Chair
of Xchanging plc.
Chief Financial Officer of
V.Group, a global leader in
ship management; Finance
Director, UK & Ireland and
Finance Director, Australia,
at Compass Group plc; and
Chief Financial Officer of
Specialty Fashion Group Ltd,
a former ASX listed company.
Chief Auditor of Unilever;
Chief Financial Officer of
Unilever’s global food
service business; and a
number of other senior
operational and financial
positions within Unilever.
> Vast experience of
growing companies and
working in agricultural
businesses throughout
the world, including in
emerging markets
> Entrepreneurial scientist,
> Extensive Board,
> Significant experience in
services experience, both
expertise
> Broad international,
strategic and financial
through executive and
non-executive roles
> Has advised numerous
companies including
manufacturers and
distributors of food
products, encompassing
poultry and poultry
breeding companies
with deep scientific
> More than 30 years’
governance and
leadership experience
> Strong commercial,
experience in academic
and commercial research
science and agribusiness
expertise across a range
institutions
> Current research focus is
infectious diseases, the
microbiome and its
impact on health and
well-being
of industries, with a
particular focus on
consumer goods
and food
> Deep appreciation of
capital markets and
investor sentiment
multi-jurisdictional
patent litigation, mergers
and acquisitions, patent
and technology licensing
and managing product
life cycles
> Degrees in science
and law
Co-founder and Board
Director of Longas
Technologies Pty Ltd.
Non Executive Director,
Voice of the Employee
Director and Remuneration
Committee Chair of Legal &
General plc and Chairman of
Legal & General Investment
Management Holdings.
None
Chairman of Crest Nicholson
Holdings plc; Non-Executive
Director of Personal Assets
Trust plc; Non-Executive
Director of Hallmarq
Veterinary Imaging Ltd;
Pro-Chancellor of Cranfield
University.
Member of the Board of
Management of Bayer
CropScience, a division
of Bayer AG; senior
Founder Director of British
Linen Advisers; Governor of
British Linen Bank Group;
senior roles as Dresdner
international roles including
Kleinwort Benson; solicitor
the Head of Bayer
CropScience’s BioScience
division; and President of the
Bayer HealthCare Animal
Health division.
at Slaughter & May; and
numerous non-executive
roles, including Centrica,
SAB Miller, Alliance Trust,
Hays, Scottish Provident,
Co-founder and Board
Director of Auspherix;
Director of the ithree
institute, University of
Technology, Sydney;
co-founder and Chief
Scientific Officer of Arrow
Therapeutics; founder
member of The Wolfson
Institute for BioMedical
Bank of Scotland, Grosvenor
Research at University
Group and Thomas Cook.
College London; and various
roles at Glaxo Wellcome and
Sheffield, Cambridge and
Leicester Universities.
Senior Independent Director
Senior Vice President and
of Sygen International plc;
Chairman of Berendsen plc;
Chairman of Stobart Group
Ltd; Senior Independent
International Counsel of
Shire plc; and senior and
global roles in private
practice, in the UK and
Director of Balfour Beatty plc;
the US.
Non-Executive Director of
Greggs plc; Lead
Independent Director at the
Department for Environment,
Food and Rural Affairs; Chief
Executive of Tate & Lyle plc;
General Manager of Unilever
AgriBusiness; Chair, Unilever
Plantations and Plant
Sciences Group; and Senior
Vice President, Corporate
Development at Unilever.
Genus plc / Annual Report 2020
KEY TO COMMITTEES
Member of the Nomination Committee
Member of the Remuneration Committee
Member of the Audit & Risk Committee
Committee Chair
BOARD GENDER
BREAKDOWN
1 Male
2 Female
67%
33%
2
51
1
BOB LAWSON
STEPHEN WILSON
Non-Executive Chairman
Chief Executive
ALISON HENRIKSEN
Chief Financial Officer
LYSANNE GRAY
Non-Executive Director
LYKELE VAN DER BROEK
Non-Executive Director;
Workforce Engagement
Director
LESLEY KNOX
Senior Independent
Director; Workforce
Engagement Director
PROFESSOR
IAN CHARLES
Non-Executive Director
IAIN FERGUSON
Non-Executive Director
Chairman Designate
DAN HARTLEY
Group General Counsel
and Company Secretary
November 2010
January 2013
January 2020
April 2016
July 2014
June 2018
July 2018
July 2020
June 2014
> Vast experience of
growing companies and
working in agricultural
businesses throughout
the world, including in
emerging markets
> Broad international,
strategic and financial
services experience, both
through executive and
non-executive roles
> Has advised numerous
companies including
manufacturers and
distributors of food
products, encompassing
poultry and poultry
breeding companies
> Entrepreneurial scientist,
with deep scientific
expertise
> More than 30 years’
experience in academic
and commercial research
institutions
> Current research focus is
infectious diseases, the
microbiome and its
impact on health and
well-being
> Extensive Board,
governance and
leadership experience
> Strong commercial,
science and agribusiness
expertise across a range
of industries, with a
particular focus on
consumer goods
and food
> Deep appreciation of
capital markets and
investor sentiment
> Significant experience in
multi-jurisdictional
patent litigation, mergers
and acquisitions, patent
and technology licensing
and managing product
life cycles
> Degrees in science
and law
COMMITTEE
MEMBERSHIP
BOARD
APPOINTMENT
SKILLS AND
EXPERIENCE
> Significant experience of
> Six years as Group
> Over 25 years of
leading international
businesses, including
through operational and
cultural changes
Finance Director at Genus
international experience
with wide-ranging
operational, strategic and
business development
in finance, operating
across Europe, Australia,
Asia, the US and South
> Deep understanding of
responsibilities
Africa
> Extensive experience over
> Proven track record of
listed companies and
corporate governance
> Significant experience of
risk management, audit,
business operations,
acquisitions and
disposals, and corporate
governance, gained
within the food sector
> Chartered accountant
30 years in technology
businesses, including
finance, mergers and
acquisitions, IT
transformation and
investor relations
driving performance in
public and privately held
organisations, both
business to business and
business to consumer
> Qualified as Chartered
> International experience
Accountant with Ernst &
Young
living and working in
Europe and the US
> Fellow of the Chartered
Institute of Management
Accountants
CURRENT
APPOINTMENTS
Eurocell plc.
Non-Executive Chairman of
None
None
Financial Controller at
Unilever plc and Unilever NV.
Chair of Eden Research plc.
PAST
APPOINTMENTS
Chief Executive of
Electrocomponents plc;
Managing Director of Vitec
Group plc; Chairman of the
Federation of Groundwork
and Non-Executive
Chairman of Barratt
Developments plc.
Group Finance Director of
Genus plc; Executive Vice
President and Chief
Chief Financial Officer of
V.Group, a global leader in
ship management; Finance
Financial Officer of Misys plc;
Director, UK & Ireland and
finance and business
and Non-Executive Director
and Audit Committee Chair
of Xchanging plc.
Finance Director, Australia,
at Compass Group plc; and
Chief Financial Officer of
Specialty Fashion Group Ltd,
a former ASX listed company.
Trusts; Chairman of Hays plc;
development roles at IBM;
Chief Auditor of Unilever;
Chief Financial Officer of
Unilever’s global food
service business; and a
number of other senior
operational and financial
positions within Unilever.
Member of the Board of
Management of Bayer
CropScience, a division
of Bayer AG; senior
international roles including
the Head of Bayer
CropScience’s BioScience
division; and President of the
Bayer HealthCare Animal
Health division.
None
Senior Vice President and
International Counsel of
Shire plc; and senior and
global roles in private
practice, in the UK and
the US.
Non Executive Director,
Voice of the Employee
Director and Remuneration
Committee Chair of Legal &
General plc and Chairman of
Legal & General Investment
Management Holdings.
Founder Director of British
Linen Advisers; Governor of
British Linen Bank Group;
senior roles as Dresdner
Kleinwort Benson; solicitor
at Slaughter & May; and
numerous non-executive
roles, including Centrica,
SAB Miller, Alliance Trust,
Hays, Scottish Provident,
Bank of Scotland, Grosvenor
Group and Thomas Cook.
Co-founder and Board
Director of Longas
Technologies Pty Ltd.
Co-founder and Board
Director of Auspherix;
Director of the ithree
institute, University of
Technology, Sydney;
co-founder and Chief
Scientific Officer of Arrow
Therapeutics; founder
member of The Wolfson
Institute for BioMedical
Research at University
College London; and various
roles at Glaxo Wellcome and
Sheffield, Cambridge and
Leicester Universities.
Chairman of Crest Nicholson
Holdings plc; Non-Executive
Director of Personal Assets
Trust plc; Non-Executive
Director of Hallmarq
Veterinary Imaging Ltd;
Pro-Chancellor of Cranfield
University.
Senior Independent Director
of Sygen International plc;
Chairman of Berendsen plc;
Chairman of Stobart Group
Ltd; Senior Independent
Director of Balfour Beatty plc;
Non-Executive Director of
Greggs plc; Lead
Independent Director at the
Department for Environment,
Food and Rural Affairs; Chief
Executive of Tate & Lyle plc;
General Manager of Unilever
AgriBusiness; Chair, Unilever
Plantations and Plant
Sciences Group; and Senior
Vice President, Corporate
Development at Unilever.
CORPORATE GOVERNANCE
52
LEADERSHIP CONTINUED
Genus Executive Leadership
Team (‘GELT’)
STEPHEN WILSON
Chief Executive
ALISON HENRIKSEN
Chief Financial Officer
DAN HARTLEY
Group General Counsel
and Company Secretary
ANGELLE ROSATA
Group HR Director
SKILLS AND
EXPERIENCE
> See pages 50 and 51 for
Stephen’s, Alison’s and
Dan’s biographies.
CAREER
> Deep and broad expertise
spanning resourcing,
talent management,
succession planning,
leadership development
and health and safety
> Extensive HR strategic
planning skills and
commercial acumen
> Masters in Human
Resource Development
from Vanderbilt
University
> Joined Genus in
September 2013,
following more than 20
years in the healthcare
sector
> Developed and delivered
PIC’s people strategy,
before becoming HR
Director for ABS and then
Group HR Director on
1 July 2017
DR BILL CHRISTIANSON
Chief Operating Officer,
JERRY THOMPSON
Chief Operating Officer,
DR NATE ZWALD
DR ELENA RICE
Chief Operating Officer,
Chief Scientific Officer and
Genus PIC
Genus ABS Beef
Genus ABS Dairy
Head of R&D
> Deep understanding of
> A natural entrepreneur
> Deep expertise in running
agriculture and
biotechnology, with
broad industry
knowledge and extensive
commercial and global
experience
> DVM and PhD in
Veterinary Medicine from
the University of
Minnesota
with deep industry
knowledge, commercial
skills and international
experience
> Has helped Genus
establish and grow
businesses in countries
as diverse as the UK,
Russia, India and China
> Holds a degree in
Agriculture from the
University of Plymouth
and is a graduate of
Harvard Business
School’s Advanced
Management Program
> Deep expertise and
experience of dairy
genetics, strong
commercial focus and
passion for people
development
> Board member of the
Council on Dairy Cattle
Breeding and Vice
President of the National
Association of Animal
Breeders
> Degree in Dairy Science,
MBA and PhD in Dairy
Cattle Genetics from the
University of Wisconsin
subsequently worked in
operational roles
spanning Europe, South
America and the US,
before becoming General
Manager of PIC North
America in 2007
> Led the combined ABS
and PIC business across
the Americas from 2010,
before becoming COO of
Genus PIC in 2012
working initially in the UK
and then Siberia and
Romania, before leading
PIC in Central and Eastern
Europe and then Europe
as a whole
and Asia Pacific, before
becoming COO for Genus
Asia in 2012 and then
COO for Genus ABS Beef
in July 2016
2017 after 15 years at Alta
Genetics, including ten
years as General Manager
of its US business and
more than two years as
Global Marketing Director
family’s commercial dairy
operation, Bomaz farm in
the US, which has
produced high-ranking
industry and ABS sires
> Led PIC and ABS in Russia
> Remains involved in his
R&D programmes,
regulatory science and
portfolio management
who has led the
development and
introduction of new
genetic improvement
technologies and
nurtured a portfolio of
gene editing projects
> BSc and MSc in Biology
from Moscow State
University, and PhD in
Plant Physiology and
Biochemistry from the
Timiryazev Institute of
Plant Physiology in
Moscow
Scientific Officer and
appointed to GELT on
15 July 2019
> Spent 18 years in
increasingly senior roles
within Bayer, leading
teams using pioneering
science and cutting-edge
technology to help
farmers grow food more
sustainably
> Joined Genus in 1993 and
> Joined PIC in 1992,
> Joined Genus in January
> Joined Genus as Chief
Genus plc / Annual Report 2020 53
EXEC GENDER
BREAKDOWN
1 Male
2 Female
2
62.5%
37.5%
1
STEPHEN WILSON
Chief Executive
ALISON HENRIKSEN
Chief Financial Officer
DAN HARTLEY
Group General Counsel
and Company Secretary
ANGELLE ROSATA
Group HR Director
SKILLS AND
EXPERIENCE
> See pages 50 and 51 for
Stephen’s, Alison’s and
Dan’s biographies.
CAREER
> Deep and broad expertise
spanning resourcing,
talent management,
succession planning,
leadership development
and health and safety
> Extensive HR strategic
planning skills and
commercial acumen
> Masters in Human
Resource Development
from Vanderbilt
University
> Joined Genus in
September 2013,
following more than 20
years in the healthcare
sector
> Developed and delivered
PIC’s people strategy,
before becoming HR
Director for ABS and then
Group HR Director on
1 July 2017
DR BILL CHRISTIANSON
Chief Operating Officer,
Genus PIC
> Deep understanding of
agriculture and
biotechnology, with
broad industry
knowledge and extensive
commercial and global
experience
> DVM and PhD in
Veterinary Medicine from
the University of
Minnesota
JERRY THOMPSON
Chief Operating Officer,
Genus ABS Beef
> A natural entrepreneur
with deep industry
knowledge, commercial
skills and international
experience
> Has helped Genus
establish and grow
businesses in countries
as diverse as the UK,
Russia, India and China
> Holds a degree in
Agriculture from the
University of Plymouth
and is a graduate of
Harvard Business
School’s Advanced
Management Program
DR NATE ZWALD
Chief Operating Officer,
Genus ABS Dairy
> Deep expertise and
experience of dairy
genetics, strong
commercial focus and
passion for people
development
> Board member of the
Council on Dairy Cattle
Breeding and Vice
President of the National
Association of Animal
Breeders
> Degree in Dairy Science,
MBA and PhD in Dairy
Cattle Genetics from the
University of Wisconsin
> Joined Genus in 1993 and
subsequently worked in
operational roles
spanning Europe, South
America and the US,
before becoming General
Manager of PIC North
America in 2007
> Led the combined ABS
and PIC business across
the Americas from 2010,
before becoming COO of
Genus PIC in 2012
> Joined PIC in 1992,
working initially in the UK
and then Siberia and
Romania, before leading
PIC in Central and Eastern
Europe and then Europe
as a whole
> Led PIC and ABS in Russia
and Asia Pacific, before
becoming COO for Genus
Asia in 2012 and then
COO for Genus ABS Beef
in July 2016
> Joined Genus in January
2017 after 15 years at Alta
Genetics, including ten
years as General Manager
of its US business and
more than two years as
Global Marketing Director
> Remains involved in his
family’s commercial dairy
operation, Bomaz farm in
the US, which has
produced high-ranking
industry and ABS sires
DR ELENA RICE
Chief Scientific Officer and
Head of R&D
> Deep expertise in running
R&D programmes,
regulatory science and
portfolio management
who has led the
development and
introduction of new
genetic improvement
technologies and
nurtured a portfolio of
gene editing projects
> BSc and MSc in Biology
from Moscow State
University, and PhD in
Plant Physiology and
Biochemistry from the
Timiryazev Institute of
Plant Physiology in
Moscow
> Joined Genus as Chief
Scientific Officer and
appointed to GELT on
15 July 2019
> Spent 18 years in
increasingly senior roles
within Bayer, leading
teams using pioneering
science and cutting-edge
technology to help
farmers grow food more
sustainably
CORPORATE GOVERNANCE
54
CORPORATE GOVERNANCE STATEMENT
The Board
Almost all of our Directors have held leadership positions in
international companies, with several having run businesses
overseas. Several of our Directors, including the Chair of
the Audit & Risk Committee, have significant financial
experience, while others have strong backgrounds in
scientific research or in leading science-based businesses.
The Board believes that all of the NEDs are independent
in character and judgement, and that there are no
relationships or circumstances that are likely to affect
(or could appear to affect) their judgement. Following the
performance evaluation described on page 58, the Board
also confirms that all the Directors continue to be effective
in their roles.
As required by the Code, all the Directors except Bob
Lawson will offer themselves for election at the next AGM.
Details can be found in the Notice of AGM.
BOARD ROLES AND RESPONSIBILITIES
To ensure we have clear responsibilities at the top of
the Company, the Board has set out well-defined roles for
the Chairman and Chief Executive. These, along with the
responsibilities of our other Directors, are summarised
in the table below.
THE BOARD’S ROLE
The Board is responsible for ensuring our long-term success.
It approves our strategy and corporate goals and monitors
our performance against them; determines that we have the
necessary resources, systems and controls to achieve our
objectives; and sets the culture and standards of behaviour
we want to see throughout Genus.
The Board is also responsible for other critical decisions.
These include approving the corporate budget; stress-
testing our scenario planning to ensuring we have the right
funding; approving material contracts, acquisitions, licences
and investments; and reporting to shareholders.
THE BOARD’S COMPOSITION
At the year end, the Board comprised five independent
Non-Executive Directors (‘NEDs’) (including the Chairman),
and two Executive Directors – the Chief Executive and the
Chief Financial Officer. This gives a majority of independent
Directors on the Board. The appointment of Iain Ferguson as
a NED and Chairman Designate on 1 July 2020 increases the
proportion of independent Directors on the Board, until Bob
Lawson’s retirement at the AGM in November 2020.
The Board comprises both well-established and newer
NEDs, as we have broadened the Board’s skills and
experience through Non-Executive appointments over
recent years. As a result, the Board has an appropriate blend
of different areas of expertise, long-standing knowledge of
the Group and its markets, and fresher perspectives. This
helps to ensure the Board provides even-handed oversight,
works in a constructive and focused manner and has the
capabilities to manage the challenges of a complex and
evolving global business environment.
Title
Individual
Responsibilities
CHAIRMAN
BOB LAWSON
CHIEF EXECUTIVE
STEPHEN WILSON
Bob’s primary responsibility is to lead the Board and ensure it operates
effectively. He achieves this in part through promoting an open culture,
which allows people to challenge the status quo, and holding meetings
with the NEDs without the Executives present. Bob also communicates
directly with shareholders.
Stephen is responsible for devising and implementing our strategy and for
managing our day-to-day operations. He is accountable to the Board for
the Group’s development, in line with its strategy, taking into account the
risks, objectives and policies set out by the Board and its Committees.
CHIEF FINANCIAL
OFFICER
ALISON HENRIKSEN
Alison is responsible for helping the Chief Executive to devise and
implement the strategy, and for managing the Group’s financial and
operational performance.
SENIOR INDEPENDENT
NED
LESLEY KNOX
Lesley provides a sounding board for the Chair and is an alternative line
of communication between the Chair and other Directors. She leads
meetings of the NEDs, without the Chair present, to appraise the Chair’s
performance, and consults with shareholders in the absence of the Chair
and Chief Executive.
NEDs
LYSANNE GRAY,
LYKELE VAN DER
BROEK, IAN CHARLES,
IAIN FERGUSON
The NEDs constructively challenge, oversee and help to progress the
execution of our strategy, the management of the Group and the
management of our governance structures, within the risk and control
framework set by the Board.
Genus plc / Annual Report 2020 55
Board and Committee structure
The diagram below shows the Board and the Committees that report to it:
BOARD COMMITTEES
AUDIT & RISK COMMITTEE
Ensures the integrity of our financial
reporting, evaluates our risk
management and internal control
system, and oversees the internal
and external auditors.
REMUNERATION COMMITTEE
Determines remuneration for our
Executive Directors and senior
management, to support our
growth strategy and deliver value
for stakeholders.
NOMINATION COMMITTEE
Reviews the Board’s structure,
size and composition and
proposes candidates for
appointment to the Board.
SUSTAINABILITY COMMITTEE
Provides direction and oversight for
continuous improvement in our
environmental sustainability, health
and safety, animal well-being and
community engagement.
COMMITTEE REPORTING TO
THE AUDIT & RISK COMMITTEE
GENUS PLC BOARD
GELT
Leads our strategic delivery and
ensures organisational alignment,
engagement and efficient execution.
GPSC
Gives us a comprehensive view of
our R&D programme and involves
our business units in prioritising our
R&D initiatives.
OTHER TEAMS REPORTING TO THE BOARD
BOARD COMMITTEES
The table below shows Board Committee membership at
the year end:
ATTENDANCE AT BOARD AND COMMITTEE MEETINGS
The table below shows how many Board and Committee
meetings each Director attended during the year.
Director
Audit & Risk Nomination Remuneration
Director
Board Nomination
Risk Remuneration
Committee
Audit &
Bob Lawson
Stephen Wilson
Alison Henriksen
Lysanne Gray
Lykele van der Broek
Lesley Knox
Ian Charles
–
–
–
C
M
M
M
M
M
–
M
M
C
M
M
–
–
M
M
C
M
M = Committee member C = Committee chair
Iain Ferguson was appointed to the Nomination and
Remuneration Committees on 1 July 2020 and will become
Chair of the Nomination Committee on Bob Lawson’s
retirement.
The Committee Chairs oversee and lead the Committees’
activities, within their terms of reference, and are
responsible for their effective operation. More information
about the roles and work of the Board Committees can be
found in their statements on pages 60 to 91, and in their
terms of reference on our website at www.genusplc.com.
Non-Executive
Chairman
Bob Lawson
Executive Directors
Karim Bitar (stepped
down 13 September
2019)
Stephen Wilson
Alison Henriksen
(appointed
13 January 2020)
Non-Executive
Directors
Lysanne Gray
Lykele van der Broek
Lesley Knox
8
2
8
4
8
8
8
62
51
41
10
41
10
10
10
21
51
21
5
5
5
6
31
61
21
6
6
6
Note: The maximum
number of meetings that
Directors could have
attended during the year:
Board 8, Nomination
Committee 10, Audit & Risk
Committee 5 and
Remuneration
Committee 6.
1
2
By invitation.
Bob Lawson did not
attend Nomination
Committee meetings
dealing with his
succession.
INFORMATION FLOW TO THE BOARD
The diagram opposite sets out our process for providing
information to the Directors, ahead of scheduled Board
meetings. This ensures our Board is well informed and the
Directors can contribute effectively to discussions.
During the year, we continued to look at how to improve the quality of
the papers going to the Board. Enhancements included changes to the
Board agenda, to indicate section 172 considerations against each item.
1
2
3
4
5
The Chairman sets
the agenda for the
meeting, with
input from the
Chief Executive
and the Group
General Counsel.
A week before the
meeting, the
agenda and Board
papers are sent to
the Directors
using a secure
electronic system.
Board meetings
take place at
least eight times
per year.
Decisions and
actions agreed at
the meeting are
monitored by the
Group General
Counsel.
The updated list
of actions
becomes part of
the agenda for
the next Board
meeting.
CORPORATE GOVERNANCE
56
THE BOARD’S YEAR IN REVIEW
Board
activities
Topic and link
to our strategy
LEADERSHIP AND
EFFECTIVENESS
LINK TO OUR STRATEGY
Stakeholders: E, S
The Board held eight scheduled meetings during the
year. At each scheduled meeting, the Board receives
updates on:
> business performance, business development,
talent development and competitive landscape
developments from the Chief Executive;
> financial performance of the business and forecasts
One Board meeting each year is usually held outside
the UK. However, due to the COVID-19 pandemic, the
Board’s planned visit to Brazil in June 2020 could not
take place. In addition to the Board meetings, the
Board also holds an annual strategy session, focusing
on the strategic direction and goals of the Group and
its business units. This took place in January 2020.
from the Chief Financial Officer; and
> corporate governance and legal issues from the
Group General Counsel and Company Secretary,
and external advisers.
The table below provides more detail of the Board’s
discussions and activities, and the outcomes
from them:
Activity
Actions arising
Monitor Board effectiveness
Internal evaluation undertaken during the year.
Monitor pipeline of senior
talent
Updated on talent initiatives and management outcomes.
Progress
Focus areas identified
(see page 59)
Internal appointment of new
Chief Executive Officer
New Chief Financial Officer and
Chairman Designate appointed
BUSINESS
DEVELOPMENT
& STRATEGY
Monitor progress against our
strategic objectives
LINK TO OUR STRATEGY
Review and approve business
activities
Stakeholders: S, C,
SC
Monitor strategic
developments
Held strategy meeting with GELT and other business leaders.
See above
Approved:
See pages 20 to 29
> Genus PIC’s contract with BCA to accelerate the use of PIC
genetics in China through the phased integration into BCA’s
facilities and their planned major expansion.
> the construction of a new PIC elite nucleus farm in Canada.
> the construction of new barns at our ABS facilities in Madison,
Wisconsin.
> Ongoing investment in our IntelliGen technology.
Received updates on:
See pages 20 to 29, 41
> Launch of the new PIC 800 Duroc sireline.
> US litigation relating to IntelliGen technology.
> Rapid growth of Sexcel sales, ABS’s high-fertility sexed
genetics.
> Continued progress with the PRRSv development programme
> Competitor activities.
> Material business development opportunities, including
summaries of due diligence.
> Sustainability strategy and the Company’s Climate Change
Policy.
> GenusOne enterprise management system transition.
> Integration of COVID-19 business adjustments and the impact
on employees and customers.
RESEARCH &
DEVELOPMENT
LINK TO OUR STRATEGY
Stakeholders: S, C
Monitor R&D progress
Received updates on:
See pages 26 to 29
> R&D programmes and material investments.
> The R&D stage gate review process for research programmes.
> The progress of material patent portfolio filings.
> The progress of PRRSv development programme and
IntelliGen improvements.
> New initiatives in the areas of reproductive technologies and
scientific data.
Genus plc / Annual Report 2020
57
Topic and link
to our strategy
Activity
Actions arising
EMPLOYEES
Review recruitment pipeline
Received updates on:
Progress
See pages 34 to 37
LINK TO OUR STRATEGY
> Key vacancies and hires including changes to the PIC China
leadership team and the Chief Financial Officer.
> Talent development in leadership below GELT level.
> Your Voice employee survey.
Stakeholders: E
Update on employee feedback Held town hall meetings with employees and designated
Non-Executive Directors.
Workforce Engagement
Directors met with employees
over breakfast at Genus UK
Head Office and ABS sites
SHAREHOLDERS
LINK TO OUR STRATEGY
Stakeholders: S
COMPANY
PERFORMANCE
AND FINANCE
LINK TO OUR STRATEGY
Monitor investor attitudes
towards Genus
Updated on meetings with shareholders, potential investors and
analysts.
See pages 12 to 13
Undertook shareholder engagement in connection with new
remuneration policy and Climate Change Policy.
See pages 70 to 91
Monitor performance against
plan
Received updates on:
See pages 30 to 33
> The operational performance of the business.
> Market conditions for each division.
> Monitored the Group’s performance against its strategy,
budget and goals.
> Scenario planning for COVID-19 and the possible impact on
financial performance.
Stakeholders: S
Review past and projected
financial performance
Approved the annual and interim results and dividends.
Approved the FY21 budget.
Monitor key financial issues
Received tax and treasury updates.
See pages 30 to 33
Monitor performance against
plan
Received pension updates.
Reviewed the Group’s financing needs and considered
fundraising options.
Reviewed and approved the refinancing of the corporate facility.
EXECUTIVE/GELT
UPDATES
Monitor business unit
performance and plans
Received monthly financial and operational performance
updates.
Received regular presentations from each business unit.
Conducted strategy session comparing performance of each
business unit against previously presented strategic goals.
Ensure strong culture of health
and safety
Reviewed FY20 targets for health and safety and reviewed
progress throughout the year.
See pages 34 to 40
Received updates from the Head of Health & Safety, including
progress against relevant KPIs.
LINK TO OUR STRATEGY
Stakeholders: E, S, C,
SC
HEALTH & SAFETY
LINK TO OUR STRATEGY
Stakeholders: E
RISK
MANAGEMENT
Monitor risk management and
control
Received regular updates on COVID-19 implications and risk
management.
See pages 44 to 46
LINK TO OUR STRATEGY
Stakeholders: S
Monitored the Group’s risk register.
Received updates on the whistleblowing hotline reports and
investigations.
Key to stakeholders: E = Employees, S = Shareholders, C = Customers, SC = Supply Chain
CORPORATE GOVERNANCE
58
THE BOARD’S YEAR IN REVIEW CONTINUED
Assessing the
Board’s effectiveness
To ensure the Board provides effective leadership to the Group, we have a three-year
evaluation cycle, using a mixture of internal and external evaluations.
YEAR 1
An external Board
effectiveness review produces
an action plan for the areas of
focus identified by the review.
YEAR 3
An internal review using
questionnaires and interviews with
the Chair of the Board.
YEAR 2
A follow-up questionnaire by the
same external consultant enables
us to monitor our progress with
the focus areas.
This was the second year of the current three-year cycle.
However, given the important changes to the composition
of the Board, with Stephen Wilson’s transition to Chief
Executive Officer, the onboarding of Alison Henriksen as
Chief Financial Officer and the search for a new NED who
could succeed the Chairman, the Board decided to perform
an internal review of the type described in year three of the
cycle. Once the new Chairman is in place after the 2020 AGM
the Board will consider whether it will begin a new cycle
in FY21.
The evaluation’s conclusions
The review showed that the Board is effective in most areas,
is well led, and the Directors challenge constructively and
effectively. The review highlighted the following key
strengths:
> a diverse, inclusive and respectful culture;
> a high level of trust and confidence in each other;
> a culture that encourages constructive debate, whilst
remaining collegiate; and
> genuine interest in and passion for the business and
its success.
The evaluation also identified the following priorities for the
Board in FY21:
> successfully transitioning to the new Chairman and
ongoing Board succession;
> obtaining greater insight into local and regional
operating environments and markets, as a result of
COVID-19;
> retaining the focus on leveraging value from R&D;
> ensuring sufficient time is available to consider
short- and long-term strategic topics and ‘out of
the box’ thinking.
Genus plc / Annual Report 2020 59
Board focus
areas for FY20
The outcomes of last year’s externally facilitated review, and the Board’s progress with addressing these
focus areas, are set out below:
Focus area
Progress
The Board will seek to nurture strategic over operational discussions,
through better management of Board agendas and presentation materials.
The Board will ensure greater focus on the Group’s research and
development pipeline and strategy during the year.
The Audit & Risk Committee’s risk management focus will increase from
oversight of operational and financial risks to include risks associated with
innovation and future opportunities.
The Nomination Committee will focus on the transition to the new Chief
Executive, and consider the skills on the Board, ensuring that the Board has
the right balance of skills to service its future strategic direction, including
with respect to future markets and seeking regulatory approval for, and
consumer acceptance of, the commercialisation of gene-edited animals.
Given the need to address the succession plan for the Chairman following
the transition to the new Chief Executive, the Chair of the Nomination
Committee will change to the Senior Independent Director.
The Board has reviewed its annual schedule of meetings to understand
better the balance of strategic, operational and governance topics
allocated to each meeting. Agendas for each meeting clearly identify topics
relating to each element of the Group’s strategy, as well as relevant
stakeholder groups impacted by each discussion topic.
The Board has received detailed updates on the research and development
pipeline and strategy twice during the year, as well as periodic updates
on key R&D programmes such as the PRRSv programme. In addition,
Ian Charles has attended meetings of management’s Global Portfolio
Steering Committee and provided feedback to the Board on discussions
at those meetings.
Refer to the Audit & Risk Committee Report on pages 64 to 69.
Refer to the Nomination Committee Report on pages 60 to 63.
The Board will review its governance procedures to ensure a detailed
after-action review is carried out after each Board meeting, and make
sure Board papers are clear, calling out progress against key topics
and alignment with strategy.
Facilitated by the Chairman, feedback has been solicited from Directors
at the conclusion of each meeting regarding the quality of papers and
presentations to ensure that they have addressed relevant strategic
topics and enabled meaningful discussion.
WORKFORCE ENGAGEMENT
In FY19, the Board appointed Lykele van der Broek and Lesley Knox as the
designated Workforce Engagement Directors. They continued to engage
with employees this year, holding a face-to-face meeting with head office
employees in early 2020, followed by a video conference with UK ABS and
Promar staff. The key points employees raised at the town hall meetings
are set out in the stakeholder engagement section on pages 12 to 13 of the
Strategic Report. The Board will continue to monitor progress made
against these points.
Looking forward, the intention is for the Workforce Engagement Directors
to work around the Group’s different sites to collect feedback and
specifically to hold face-to-face meetings with employees as part of the
Board’s programme of annual visits. While the ability to meet face-to-face
will depend on the state of the COVID-19 pandemic at the time, virtual
meetings have proven effective if site visits are not possible.
CULTURE
The Board pays careful attention to the Group’s culture, recognising that
having the right culture is crucial for achieving our strategic plans and
creating value for stakeholders.
The Board has a number of ways of understanding and monitoring the
culture around the business. In particular, these include the results of
the Group’s Your Voice employee survey and the Workforce Engagement
Directors’ interactions with employees during the year, as described above.
The Board believes that health and safety performance is another
important indicator of culture and the Directors monitor performance on
a regular basis. The Directors also meet numerous people from around the
Group during the course of the year, including members of management
who present at Board meetings and through site visits, giving them further
insight into the culture across the Group.
More broadly, the Group’s performance management process has a strong
focus on behaviours that are aligned to our values, while succession
planning at both Board level and below ensures that talent pipelines are
diverse. The Board also ensures its own culture is aligned to the culture
across the Group through the annual evaluations of the Board and its
Committees.
The Board is therefore satisfied that the Group’s culture is aligned with its
purpose, values and strategy and that our workplace policies and practices
are consistent with them.
CORPORATE GOVERNANCE
60
NOMINATION COMMITTEE REPORT
Dear Shareholder
This was a busy year for the Committee, as we focused on
succession for the Chief Executive Officer and the Chairman,
and the recruitment of a new Chief Financial Officer.
The Committee also continued its broader work on
succession planning, diversity and the mix of skills and
experience on the Board.
Lesley Knox
CHAIR OF THE NOMINATION
COMMITTEE
Lesley Knox
Chair of the Nomination Committee
7 September 2020
COMMITTEE COMPOSITION
Chair
Members
Lesley Knox
Karim Bitar (stepped down
13 September 2019)
Ian Charles
Lysanne Gray
Bob Lawson
FOCUS AREAS FOR FY20
The Board evaluation process in FY19 identified a number
of important areas for focus for FY20. These included:
> a robust process for the recruitment and transition to
the new Chief Executive;
> the identification of a new Chief Financial Officer; and
> subsequent consideration of the succession of the
Chairman of the Board.
The Committee successfully concluded its work in all three
of these areas, while continuing its ongoing reviews of
diversity.
THE COMMITTEE’S MAIN ACTIVITIES DURING THE YEAR
APPOINTMENT OF CHIEF EXECUTIVE
Following the announcement in March 2019 that Karim Bitar
would be stepping down as Chief Executive, the Committee
began an executive recruitment search, through consultants
Egon Zehnder. Egon Zehnder has no other connections with
the Group or with individual Directors.
The search process was based on existing specifications for
the role, with key criteria including:
> experience of leading a research and development
focused organisation;
> experience of running international businesses;
> successful development and implementation of
Lykele van der Broek
corporate strategy;
> strong leadership, integrity and people-development
skills;
> a purpose and values-led approach; and
> a track record of operational delivery.
The search process demonstrated that Stephen Wilson was
by far the strongest candidate. Having been on the Board
since 2013, he has a deep understanding of the operations
of Genus, its market and competitors. In addition, he was
integral to the development and execution of the
Company’s strategic and operational plans. The Committee
was therefore pleased to recommend to the Board that
Stephen should be appointed to the role.
Stephen Wilson (from September
2019)
The Committee members’ biographies, along with
information on Genus’s other Board members, can be found
on pages 50 to 51.
COMMITTEE ROLE AND RESPONSIBILITIES
The Committee is responsible for:
> making recommendations to the Board on the structure,
size and composition of the Board and its Committees;
> evaluating the balance of skills, experience,
independence, knowledge and diversity on the Board;
> succession planning for the Non-Executive and
Executive Directors and other senior executives; and
> identifying and recommending suitable candidates to
become Directors, based on merit.
The Committee has written terms of reference, which set
out the authority delegated to it by the Board. These are
available from our website: www.genusplc.com.
Genus plc / Annual Report 2020 61
APPOINTMENT OF CHIEF FINANCIAL OFFICER
The recruitment process for a new Chief Financial Officer to
replace Stephen Wilson was carried out through Spencer
Stuart, which has no other connection to the Group or to
individual Directors. Key criteria used in the search
process included:
> a proven CFO of a listed group, ideally with exposure to
research and development intensive industries and with
international experience;
> experience in a matrix structure and an ability to drive
results and seize new business opportunities;
> strong people management and collaboration skills;
> a commercial orientation; and
> an energetic, resilient and purpose-driven approach.
The search process identified Alison Henriksen as the
outstanding candidate, based on her track record of driving
performance improvements, proven ability to transfer her
financial skills between industries, experience of operating
at scale in listed international businesses and strong
personal qualities. The Committee was therefore pleased to
recommend to the Board that Alison should be appointed
as Chief Financial Officer.
APPOINTMENT OF NON-EXECUTIVE DIRECTOR AND
CHAIRMAN DESIGNATE
In line with the UK Corporate Governance Code’s stipulation
that the Chair of the Board should not remain in post
beyond nine years from the date of their appointment to the
Board, except to facilitate effective succession, the
Committee undertook a search for a new NED who could
take on the role of Chair of the Board on Bob Lawson’s
retirement at the AGM in November 2020.
The search process was led by Lesley Knox, as Senior
Independent Director, with the support of executive search firm
Russell Reynolds, which has no other connection to the Group
or individual Directors. Key criteria for the search included:
> listed board and corporate governance experience;
> experience in international businesses and technology
sectors, including sectors with significant research and
development investment;
> ability to bring independent expertise to discussion of
agribusiness, biotechnology, regulation, supply chain
and other areas;
> strong commercial and business acumen;
> experience of advising on corporate strategy and
business development; and
> ability to manage complexity.
Iain Ferguson emerged as the outstanding candidate, based
on his background as a public company chair and NED, and
as a former FTSE 100 chief executive. He has a unique blend
of Board and business leadership expertise, across a range
of industries, with extensive international experience and
strong commercial acumen. The Committee was therefore
pleased to recommend to the Board that Iain should be
appointed as a NED and Chairman Designate. The Board
considered in detail Iain’s other time commitments and was
satisfied that he will be able to commit sufficient time to
Genus in fulfilling his duties.
SUCCESSION PLANNING
The Committee has a formal three-phase succession planning process:
Assessment
Approach
Execution
The Committee reviews the Board’s
current skills and experiences across a
range of relevant areas.
This results in a skills matrix (see page
62), which identifies the skills coverage
across all Board members.
Potential skills gaps are identified, so
they can be incorporated into future
succession planning at Board and
Executive level.
Areas for ongoing Board upskilling are
identified and discussed.
The Committee applies engagement
rules for succession planning,
including:
> ensuring succession planning is in
line with the Committee’s terms of
reference;
> considering the need to replace the
skills of any departing NED; and
> filling any missing skills required for
the Company’s strategic direction.
Job specifications for the Non-
Executives and Executives are kept
up to date.
The Committee identifies the desired
skills for any new NED, for use in filling
any future vacancies on the Board.
Potential internal candidates for
promotion to Executive Director are
identified.
CORPORATE GOVERNANCE
62
NOMINATION COMMITTEE REPORT CONTINUED
BOARD SKILLS MATRIX
The table below shows the key experience and skills the Committee has identified as desirable and indicates their depth on
the Genus Board.
Majority of Directors with
medium to high experience
General experience
and skills
Board and corporate governance
Strategy
Finance, banking and capital markets
Risk, culture change and change management
Politics and public affairs
Stakeholder and customer communications
Human resources
IT systems, transformation and data/cyber security
Specific experience and skills
Science and biotechnology
Food sector
FDA regulated products
International business
US market
EMEA market
Asian market
Latin American market
DIVERSITY
Genus shares the aspirations of the Davies Review and the
Hampton-Alexander Review to promote greater
representation of females and people from a minority
ethnic background on company boards. Following the
recruitment of Alison Henriksen, at the year end three of the
seven Directors were female (43%), ahead of the 33% target
set by the Hampton-Alexander Review. There were also
three female members of GELT, comprising 38% of the total.
The gender balance of the direct reports to GELT, excluding
support staff, were 25% female and 75% male.
Our Board diversity policy aims to ensure that we consider
diversity in its broadest sense. A diverse Board has
members with different skills, backgrounds, regional and
industry experiences, races, genders and other qualities.
The different viewpoints represented on a diverse Board can
help Genus to maintain its competitive advantage. The
Board is committed to building recruitment and leadership
development programmes that capture inclusivity in our
succession planning and talent development, including a
focus on appropriate representation from female and
minority ethnic candidates. The Group has a Women’s
Leadership Forum, which was set up in FY19 to bring
together female leaders and a cross-section of other women
to develop ideas for increasing diversity and improving
working practices.
Diversity also links to our values, by being people-focused
and responsible, and by encouraging new ideas which
deliver for our customers and ultimately drive our results.
The Board, with the support of the Nomination Committee:
> considers candidates against objective criteria and with
regard to the benefits of Board diversity;
> encourages the development of high-calibre employees,
to create a pipeline of potential Executive Directors;
> considers a wide pool of candidates for appointment as
NEDs, including those with little company board
experience;
> ensures a significant portion of the long list for NED
positions are women and candidates from a minority
ethnic background; and
> only engages executive search firms which have signed
up to the voluntary Code of Conduct on gender and
ethnic diversity and best practice.
The Board complied with the policy throughout the period.
A copy of the policy can be found on our website:
www.genusplc.com.
The Committee reviewed the policy during the year and
concluded that it remained appropriate. More information
about diversity across Genus can be found in the Strategic
Report on pages 34 to 35.
Genus plc / Annual Report 2020
63
COMMITTEE EFFECTIVENESS AND FOCUS AREAS
FOR FY21
Alongside the Board evaluation process described on
page 58, we reviewed the performance of the Nomination
Committee. This identified a number of important areas of
focus for the coming year, including the successful induction
of the new Chairman of the Board, and the continued need
for proactive succession planning for key executive roles.
SERVICE CONTRACTS AND LETTERS OF APPOINTMENT
Copies of service contracts and letters of appointment
between the Directors and the Company will be available
for inspection at the Company’s registered office during
normal business hours until the conclusion of the AGM on
25 November 2020, and at the AGM from at least 15 minutes
prior to the meeting until its conclusion.
BOARD INDUCTION AND TRAINING
A good induction is a key part of ensuring new Board
members can fully contribute, so we get the most benefit
from their experience. During the year, the pandemic has
minimised travel, but the Company has sought to
supplement the induction programme with virtual
meetings. Once COVID-19 issues recede, we will review and
complement the induction programme which has already
been put in place. Our induction programme has three
main elements:
> helping our Board members to conduct themselves
effectively, through a course run by Spencer Stuart, one
of the world’s leading global executive search and
leadership consulting firms;
> ensuring our Directors understand the legal and
regulatory aspects of being a Board member; and
> an introduction to our business, through site visits and
meetings with our management teams.
INDUCTION FOR ALISON HENRIKSEN
Alison Henriksen’s induction to date has incorporated a
wide range of meetings and visits. These have included:
> meetings with all GELT members and global senior staff,
either in person or virtually;
> meetings with all Board members;
> meetings with head office staff;
> meetings with investors, the external auditor, lenders
and corporate advisers; and
> visits to the Group’s facilities at Stapeley, Cheshire,
and Ruthin, Wales.
As a result of the COVID-19 pandemic, Alison was unable
to visit Group sites in the US and other parts of the world.
These will resume when possible, along with visits to
key customers.
INDUCTION FOR IAIN FERGUSON
Having joined the Board on 1 July 2020, Iain Ferguson’s
induction is ongoing. To date, he has:
> held introductory video calls with GELT members,
attended a GELT meeting in person and held in person
meetings with the Chief Executive, Chief Financial Officer
and Group General Counsel and Company Secretary;
> held introductory video calls with Board members and
attended the July Board meeting in person; and
> held calls with corporate advisers.
Once COVID-19 restrictions are lifted, Iain will visit the Ruthin
and Stapeley facilities in the UK and the DeForest and
Hendersonville sites in the US, as well as holding meetings
with key customers.
CORPORATE GOVERNANCE
64
AUDIT & RISK COMMITTEE REPORT
Lysanne Gray
CHAIR OF THE AUDIT &
RISK COMMITTEE
Based on assessments of the effectiveness of internal
and external audit, the Committee was satisfied with the
performance of both the internal and external auditors,
while taking opportunities to further enhance the audit
services provided during the year. We also reviewed the
changes made to the internal and external audit plans, due
to COVID-19, to ensure the appropriateness of the risk
assessment and scope of work.
LYSANNE GRAY
Chair of the Audit & Risk Committee
7 September 2020
COMMITTEE COMPOSITION
Chair
Members
Lysanne Gray
Ian Charles
Lesley Knox
Lykele van der Broek
The Committee members’ biographies, along with
information on Genus’s other Board members, can be found
on pages 50 to 51.
The Board has confirmed that it is satisfied that Committee
members possess an appropriate level of independence
and relevant financial and commercial experience across
various industries relevant to the Company.
The Committee has formal terms of reference, approved by
the Board, that comply with the UK Corporate Governance
Code. These are available from our website:
www.genusplc.com. The Committee’s annual review of
these terms took place during the year.
COMMITTEE ROLE AND RESPONSIBILITIES
The Committee’s role and responsibilities include reviewing
and monitoring:
> the financial reporting process and any significant
financial reporting judgements;
> the integrity of the Group’s financial statements and
any formal announcements relating to financial
performance;
> the Annual Report, to ensure it is fair, balanced and
understandable;
> the Company’s reporting to shareholders;
> the effectiveness of the Group’s accounting systems
and control environment, including risk management
and the internal audit function; and
> the effectiveness, independence and objectivity of the
Group’s external auditor, including any non-audit
services it provides to the Group.
Dear Shareholder
The Audit & Risk Committee acts on behalf of the Board and
shareholders, to ensure the integrity of the Group’s financial
reporting, evaluate its system of risk management and
internal control, and oversee the performance of the
internal and external auditors. We have an annual work
programme that is designed to deliver these commitments,
which we followed during the year.
There was no change to the Committee’s membership this
year and I am happy to report that the membership
continues to comply with the UK Corporate Governance
Code and related guidance. All members are independent
NEDs, who bring a sound range of financial, commercial and
scientific expertise to the Committee.
All members received regular updates from the external
auditor, to ensure they continue to have current knowledge
of the accounting and financial reporting standards relevant
to the Group and the regulatory changes relevant to the
provision of external audit services.
Risk management requires continuous focus and was
proven to be critical this year with the ongoing outbreak of
COVID-19. During the year we discussed the Group’s existing
and emerging risks and ensured that the Committee and the
Board received and discussed detailed input from
management on key risks and mitigation plans. We further
discussed management’s assessment of the COVID-19
impact on internal financial controls and were satisfied
these controls continued to operate as designed. We also
received an update on the implementation of the first phase
of a Group-wide enterprise system which will further
strengthen the control environment and support control
standardisation across the Group, and continued to monitor
the development of next phases.
We have carefully considered the critical accounting policies
and judgements, the quality of disclosures and compliance
with financial reporting standards, including the adoption
of IFRS 16 ‘Leases’ and the relevant changes in Corporate
Governance Code and Companies Act requirements, and
reviewed the half-year and Annual Report, together with the
related management and external audit reports. We also
supported the Board in reviewing the going concern and
viability statements and supporting analysis and disclosure.
In May 2020 the Company received a request for information
from the Financial Reporting Council (FRC) concerning the
Annual Report and Accounts to 30 June 2019. The
Committee reviewed all correspondence in this regard. The
Company received a final letter from the FRC in August 2020,
confirming their satisfaction with the responses provided
and closure of their enquiries. As a result of these enquiries
an enhanced set of disclosures have been included in the
2020 Annual Report. The review conducted by the FRC was
based solely on the Group’s published Annual Report and
does not provide any assurance that the Annual Report is
correct in all material respects; the FRC’s role is not to verify
the information provided but to consider compliance with
reporting requirements.
Genus plc / Annual Report 2020
65
The Committee also:
> ensures that the Group maintains suitable confidential
arrangements for employees to raise concerns; and
> reviews the Group’s systems and controls for preventing
concluded that it was effective. The Committee agreed to
continue to enhance its effectiveness by further broadening
its members’ knowledge of relevant financial reporting
standards.
bribery.
The Committee reports its findings to the Board, identifying
any matters that require action or improvement, and
making recommendations about the steps to be taken.
COMMITTEE EFFECTIVENESS
Every three years the Board appoints an external consultant
to independently evaluate its performance, and that of its
Committees. The last review was performed in 2019 and
concluded that the Committee was effective in meeting its
objectives. In 2020, the Committee assessed its own
effectiveness, through a structured questionnaire, and
THE COMMITTEE’S MAIN ACTIVITIES DURING THE YEAR
During the year, the Committee held five meetings and
invited the Company’s Chairman, Chief Executive, the Chief
Financial Officer, the Group Financial Controller, the Head
of Risk Management and Internal Audit, and senior
representatives of the external auditor to attend these
meetings. The Committee also held separate private
sessions during the year with the Head of Risk Management
and Internal Audit and the external audit lead partner. At its
meetings, the Committee focused on the following topics:
FINANCIAL REPORTING
The main areas of focus and matters where the Committee specifically considered management’s judgements are set
out below:
Financial reporting area
Judgement and assumptions considered
BIOLOGICAL ASSETS VALUATION
GOODWILL
In compliance with IAS 41, Genus records its biological assets at fair value in the
Group balance sheet (£370.2m), with the net valuation movement shown in the
income statement. During the year management identified a data extraction error in
connection with the valuation of our porcine Pureline herd, whereby certain of our
records incorrectly classified some male animals going to slaughter as female. The
error dates back to inception of the herd in 2012. This in turn increased the percentage
of animals going to breeding sales which resulted in an overstatement in the valuation
of our Pureline herd. The Committee reviewed the related processes and controls in
detail and are satisfied that the root cause of the error has been identified and
resolved. The Committee is satisfied with the proposed accounting treatment and
the adjustments made to restate the FY19 and FY18 Balance Sheets. This adjustment
amounted to a £15.2m reduction in the FY18 net assets being a £20.5m reduction in
Biological assets, offset by a £5.3m decrease in deferred tax liabilities in FY18. We
consider the impact on the FY19 Income Statement and Other Comprehensive Income
to be immaterial, and these are therefore not restated. See note 2 Basis of Preparation
for additional details.
The Committee has reviewed the methodology, which has remained unchanged, and
outcomes of the biological assets valuation. The Committee debated and considered
management’s assumptions and estimates, through the current period, and
discussed and reviewed the external auditor’s report on this area, before concurring
with management’s proposals. The Committee was satisfied with management’s
accounting treatment, including the income statement increase of £13.2m in the
value of porcine biological assets and the increase of £2.6m in the value of bovine
biological assets.
Genus has £105.6m of goodwill (tested annually for impairment) on the Group balance
sheet. The Committee discussed management’s goodwill impairment review, as well as
the external auditor’s report on this area, including its assessment of management’s
models underpinning the estimates and judgements. After due challenge and debate,
the Committee was satisfied with management’s assumptions and judgements.
CORPORATE GOVERNANCE
66
AUDIT & RISK COMMITTEE REPORT CONTINUED
Financial reporting area
Judgement and assumptions considered
GOING CONCERN AND
VIABILITY STATEMENT
The Committee has reviewed the Group’s assessment of going concern over a period
of 12 months and viability over a period of three years.
PRESENTATION AND DISCLOSURE
OF EXCEPTIONAL AND ADJUSTING
ITEMS
In assessing viability, the Committee has considered the Group’s budget and strategic
plan, its capital and funding plans, its principal risks, as detailed on pages 44 to 46,
and the liquidity and capital projections over the period. The assessment also
incorporated the uncertainty and potential impact arising from COVID-19. The
Committee has also reviewed the Group’s reverse stress tests and is satisfied that this
is appropriate in supporting the Group as a Going Concern.
The Committee has concluded that the assumptions are appropriate and that the
viability statement could be provided, and advised the Board that three years was a
suitable period of review. The Committee was also satisfied with the disclosures in
relation to the appropriateness of the assessment period selected, the assumptions
made and how the underlying analysis was performed. The going concern and
viability statement is disclosed on page 47 of the report.
Genus had £37.6m of adjusting items, including £19.2m of exceptional items in the
Group income statement. The Committee considered the presentation of these items
in the financial statements, due to the nature of these items and the guidelines on the
use of alternative performance measures, issued by the European Securities and
Markets Authority. The Committee received detailed reports from management
outlining the judgements applied in relation to the disclosure of adjusting items,
which include net IAS 41 valuation movement on biological assets, amortisation of
acquired intangible assets, share-based payment expense and exceptional items. For
adjusting items, the Committee took into consideration the improvements made
concerning APM disclosures, their volatility and lack of correlation to the underlying
progress and performance of the business. Specifically for exceptional items, the
Committee took into consideration the materiality, frequency and nature of the items.
Following this detailed review and active discussion with management, the
Committee has concluded that the presentation of the financial statements is
appropriate.
Genus plc / Annual Report 2020 67
MONITORING BUSINESS RISKS
The Committee discussed the principal risks identified with
management and the external and internal auditors, along
with management’s plans to mitigate them, and received
regular detailed updates from the risk owners and their
direct reports. In addition to reviewing the principal risks,
the Committee received detailed updates on the following:
> COVID-19: the Committee considered the Company’s
assessment of risks and uncertainties relating to the
outbreak and the impact on the Company’s principal
risks. The Committee reviewed the risk mitigation
strategy designed to prioritise the safety and well-being
of staff, customers and suppliers and ensure business
continuity.
> Enterprise system: the Committee received regular
updates on the project to implement a new Group-wide
business system. The Committee also considered the
results of the implementation of the first phase of this
project and discussed the key lessons to be applied to
future phases.
> Cyber security: the Committee requested and received
updates from the Chief Information Officer on the cyber
security risk faced by the Group and the actions being
taken to strengthen infrastructure and systems security.
INTERNAL CONTROL SYSTEM
Our risk management process and system of internal control
are described in detail on page 68. The Committee reviewed
the approach to standardising financial reporting controls
and the results of the key financial controls self-assessment
process, which is performed every six months. The
Committee received an update on the impact of COVID-19
on the control environment and was satisfied that all key
controls continued to be in place throughout the financial
period. The Committee also reviewed internal audit’s findings
at each scheduled meeting and received updates on the
implementation of management’s remedial actions.
The Committee further reviewed the Group’s whistleblowing
policy and bribery prevention procedures.
The Committee conducted its annual review of the
effectiveness of the Group’s internal controls and
disclosures. The review did not identify any significant
control failings. However, Genus routinely identifies and
implements control improvement opportunities and the
Committee discussed with management various
opportunities to further strengthen the Group’s system of
internal control.
OVERSIGHT OF INTERNAL AUDIT AND EXTERNAL AUDIT
INTERNAL AUDIT
The Committee reviewed and approved the internal audit
function’s scope, terms of reference, resources and
activities. The Head of Risk Management and Internal Audit
provided regular reports to the Committee on the work
undertaken and management’s responses to proposals
made in the internal audit reports issued during the year.
The Committee continued to meet the Head of Risk
Management and Internal Audit without management being
present. The Committee reviewed and was satisfied with the
internal audit function’s performance.
EXTERNAL AUDIT
Deloitte LLP was first appointed as the Company’s external
auditor for the period ended 30 June 2006. Following a
formal tender process, Deloitte was reappointed for the
audit of the financial year ended 30 June 2016.
The Committee considers that it would be appropriate to
conduct an external audit tender by no later than 2025.
The Company has complied with the Statutory Audit
Services Order for the financial year under review.
The Committee reviewed and agreed the external auditor’s
scope of work and fees, held detailed discussions of the
results of its audit and continued to meet the external
auditor without management being present. The
Committee reviewed the external auditor’s objectivity
and independence and the Group’s policy on engaging
the external auditor to supply non-audit services. The
Committee obtained confirmation that the Revised Ethical
Standard has been complied with and received the details
of the external auditor’s non-audit services to the Group,
reviewed the nature and monetary levels of these services,
which stood at 28% of audit fees, and reviewed compliance
with the Group’s Non-Audit Services by Auditor Policy (see
note 8 to the financial statements for further details). The
Committee was satisfied that using Deloitte for such
services did not impair its independence as the Group’s
external auditor.
The Committee assessed the external auditor’s
performance in conducting the audit for the June 2019
year end, based on discussions with key finance staff and
Committee members. The questionnaires covered the
external auditor’s fulfilment of the audit plan, the auditor’s
robustness and perceptiveness in its handling of key
accounting and audit judgements, the content of the
external auditor’s reports, and cost effectiveness. The
Committee also considered any regulatory reviews
performed on the external auditor. While noting some
opportunities for further improvement, the Committee
concluded that the external auditor was effective and was
satisfied with the plan put forward by the external auditor
to respond to the opportunities for improvement identified.
CORPORATE GOVERNANCE
68
AUDIT & RISK COMMITTEE REPORT CONTINUED
QUALITY AND INTEGRITY OF OUR PEOPLE
We strive to operate with high integrity in everything we do.
Our control environment depends on high-quality people
who maintain our ethical standards. We ensure our people’s
ability and integrity through our recruitment standards,
training and consistent performance management. The
Board is informed of appointments to our most senior
management positions.
INFORMATION AND FINANCIAL REPORTING SYSTEMS
We create detailed operational budgets for the year ahead,
along with five-year strategic plans, which the Board reviews
and approves. We then monitor our performance
throughout the year, so we can address any issues. The
information we consider includes our monthly financial
results, key performance indicators and variances, updated
full-year forecasts and key business risks.
The main internal control and risk management processes
relating to our preparation of consolidated accounts are our
Group-wide accounting policies and procedures,
segregation of duties, system access controls, a robust
consolidation and reporting system, various levels of
management review and centrally defined process control
points and reconciliation processes.
INVESTMENT APPRAISAL
We control our capital expenditure through our budget
process and by having clear authorisation levels, above
which our businesses must submit detailed written
proposals to the Board for approval.
We carry out due diligence for business acquisitions and
material licences, and conduct post-completion reviews of
major projects, to ensure we identify areas for improvement
and correct any areas of underperformance or overspend.
RISK MANAGEMENT AND INTERNAL CONTROLS
RISK MANAGEMENT
The Board is responsible for our risk management system,
which is designed to identify, evaluate and prioritise the
risks and uncertainties we face. The Board sets our risk
appetite, monitors the Group’s risk exposure for our
principal risks and ensures appropriate executive ownership
for all risks. This ongoing risk management process for the
Group’s significant risks was in place for the year under
review and up to the date of approval of the Annual Report
and Accounts. Our principal risks and how we mitigate them
are summarised on pages 44 to 46.
To further assist its understanding of risk, the Board
continued its programme of visits to our local operations,
prior to being interrupted by the COVID-19 travel
restrictions. The Board received regular political, economic
and industry risk updates from the relevant business
groups. The Board performed its annual risk review in May
2020. This involved a fresh review of the types and levels
of risk facing Genus as it executes its strategy and was
designed to identify and evaluate any new or emerging
risks and ascertain whether the risk register covered all
relevant risks.
The Board also performed detailed reviews of the COVID-19
risks and received regular updates in relation to management’s
mitigation plans, both in the short and long terms.
INTERNAL CONTROL
The key elements of our internal control system are set out
below. An internal control system cannot completely
eliminate the risks we face or ensure we do not have a
material misstatement or loss.
MANAGEMENT STRUCTURE
The Board sets formal authorisation levels and other
controls that allow it to delegate authority to run our
businesses to the Chief Executive, GELT and their
management teams. Our management supplements these
controls by setting the operating standards that each
subsidiary needs for its business and location.
GELT regularly reviews our performance against strategy,
budget and a defined set of operational key performance
indicators. The Chief Executive, Group Finance Director,
Group General Counsel and Company Secretary, and Group
Financial Controller also hold monthly reviews with each
business unit.
Genus plc / Annual Report 2020 69
INTERNAL AUDIT
Our internal audit activities are provided by in-house and
external resources, under the leadership of our Head of Risk
Management and Internal Audit. During the year, Internal
Audit completed a risk-based audit programme agreed by
the Audit & Risk Committee. The Committee reviews the
results of these audits and the subsequent actions we take,
which we also communicate to the external auditor.
All business units complete risk and control self-
assessments twice a year. Internal Audit, as part of its
work programme, performs independent reviews of these
assessments to identify any deficiencies in our controls and
how we should address them. The external auditor also
provides observations on the control environment as part
of its audit work. The results are communicated to senior
management and the Audit & Risk Committee.
The Board, with the help of the Audit & Risk Committee,
reviewed the effectiveness of our internal control system, as
well as our financial, operational and compliance controls
and our risk management. The review considered our
internal control self-assessment process, which is designed
to assess compliance with our minimum control standards,
the independent internal audit programme, and the reports
management prepared when the Board approved the
interim and final results and financial statements. It also
assessed:
> whether we had identified, evaluated, managed and
controlled significant risks; and
> whether any significant weaknesses had arisen, and if so,
whether we had addressed them.
The assessment also took into account any risk or control
issues we identified through our divisional business reviews,
Board and GELT meetings, and insurers’ reviews.
We have an internal control continuous improvement work
programme and routinely identify opportunities to
strengthen our control environment and improve our risk
management capabilities. However, the Board has not
identified or been told of any significant failings in our
internal controls.
CORPORATE GOVERNANCE
70
REMUNERATION COMMITTEE REPORT
Section A – Annual statement
Strong financial performance and continued progress
against strategic priorities
AIMS OF OUR REMUNERATION POLICY
> Continued transformation into a global agricultural
Dear Shareholder
biotechnology pioneer
> Pursuit of leading-edge technology and focus on long
term innovation and opportunity to enable future
value creation for shareholders
> Sustainable robust short-term delivery of financial
performance as we invest in the future
> Ability to recognise innovation and progress, which
are crucial to securing long-term bottom-line
performance
> Ability to attract and motivate a high-quality
leadership team and drive focus and behaviours on
long term achievement in a global market for talent
> Recognise expectations of shareholders on reward
and governance
Lesley Knox
SENIOR INDEPENDENT
NON-EXECUTIVE DIRECTOR AND
CHAIR OF THE REMUNERATION
AND NOMINATION COMMITTEES
This Remuneration Report has
been prepared so it complies with
the provisions of the Large and
Medium-sized Companies and
Groups (Accounts & Reports)
(Amendment) Regulations 2013,
which set out the disclosures
required for Directors’
remuneration as at the reporting
date. The Report is also in
accordance with the
requirements of the Financial
Conduct Authority’s Listing Rules.
The Independent Auditor’s
Report states whether, in the
auditor’s opinion, the parts of
the Report that are subject to
audit have been properly
prepared in accordance with the
legislation. We have highlighted
the parts of this Report which
have been audited.
On behalf of the Board I am pleased to present the Directors’
Remuneration Report for 2020. This year the Group has
delivered strong performance across all its businesses and
continued to advance against our strategic priorities.
We were pleased with the investor response to our new
Remuneration Policy which was approved by over 93% of
our shareholders at the 2019 AGM on 14 November 2019.
The changes were designed to ensure continued alignment
with our strategy and to reflect evolving expectations from
shareholders. In this report we focus on the alignment with
the shareholder experience and how the metrics used
within reward plans act as a robust indicator of
organisational progress.
Stephen Wilson was appointed as Chief Executive in
September 2019 and his contribution has evolved further
as he has successfully established himself in the CEO role.
We also welcomed Alison Henriksen to the Board as Chief
Financial Officer and full details of her remuneration are
contained within this report.
EMPLOYEE ENGAGEMENT AND INSIGHT
Further details on our people and culture are described
within the Annual Report. Our latest all employee survey,
Your Voice, was carried out at the end of 2019 and as a
Committee (and wider Board) we discussed the responses
from employees noting their overall satisfaction with
working in the business, and the actions planned within
the business to address key findings or any concerns raised.
Lykele van der Broek and I additionally held a number of
face-to-face or virtual sessions with employees across
several locations to discuss their overall employment
experience, including the way that reward structures
cascade through the business.
All Board Directors have engaged with the wider workforce
through visits during the year and we look forward to more
of these in the future. We also considered the gender pay
position within Genus Breeding Limited, our largest UK
subsidiary, and the overall demographics and reward of
our employees across the Group.
COVID-19
Through the course of 2020 we have seen the impact of
COVID-19 and the effects of a widespread global pandemic
on societies across the world.
Our industry is an essential part of the food chain and Genus
employees have continued to perform their roles. In some
instances, this has been in the normal way at defined
company locations, but many employees have had to adapt
to alternative working arrangements from home and they
have been successfully able to provide continuity of
operations, interact with customers and ultimately realise
robust financial performance over the period. Genus has not
utilised any government schemes to provide support or
protection for employees unable to work, and has not made
any employees redundant or made changes to employee
compensation as a result of the pandemic. It is testament to
all employees that we have been able to deliver high levels
of business performance against this backdrop.
Genus plc / Annual Report 2020 71
We have also considered the impact of COVID-19 on
the future application of our Policy. We have agreed that
the existing Policy continues to be appropriate for the
organisation and will look to operate this unchanged in
the year ahead. Opportunity levels will be unchanged
under our variable plans and we have been able to set
robust performance targets against which future awards
will be assessed.
DETERMINING REWARD OUTCOMES FOR 2020
As is highlighted throughout the Annual Report, the year
has resulted in very strong financial achievement for the
business. In finalising reward outcomes, as well as the
performance metrics, we considered two overarching
themes: the experience of the wider workforce across Genus
during the year, and the experience of our shareholders.
We have always considered this read-across, but this year
we have considered in detail the impact of COVID-19 against
these stakeholder groups.
Most of our employees participate in types of variable
reward plans across the Group, often drawing upon the
same performance metrics as that used for Executive
Directors or other GELT members (or more localised
metrics reflecting the scope of responsibility of the
specific individuals). We have seen a range of performance
outcomes across different individual business units (as
would normally be the case) and we are comfortable both
that: i) there is alignment between pay and performance;
and ii) COVID-19 has not led to groups of our workforce
having material reductions or changes in reward levels from
prior years.
A key driver of our future success is making strategic
progress now in order to enable growth in the future.
As highlighted elsewhere within the report there are
numerous examples of strategic progress achieved during
2020 that demonstrate Genus as a global agricultural
biotechnology pioneer. This is seen through the pursuit of
leading-edge technology and innovation to enable future
value creation for shareholders, such as the progress in
our strategic collaboration with BCA to develop and
commercialise PRRSv resistant pigs and innovative
improvements in the technology and performance of our
IntelliGen technology to meet global demand for Sexcel.
Alongside this strategic progress and transformation, Genus
has managed to trade effectively and deliver strong financial
performance during the year. Our year end performance
shows profit growth for the year of over 16% alongside cash
generation and we have confirmed our intention to pay a
final dividend. At a time when many companies have seen
significant deterioration in their year on year performance,
we have demonstrated strong growth. This has been
reflected in our share price which has grown by 33% over
the year against a drop in the FTSE 250 of 10%.
OUTCOMES FOR EXECUTIVES
It is against this background that we have determined the
reward outcomes for each of the Executive Directors and for
all members of GELT, as well as understanding the read
across to the wider workforce. We reviewed performance
achieved against targets set for the Annual Bonus for 2020
(for Stephen Wilson and Alison Henriksen) and the
Performance Share Plan award made to Stephen Wilson
in 2017. The targets and respective levels of attainment
are disclosed in detail within the report.
ANNUAL BONUS 2020
The Committee was comfortable that the formulaic
outcome was representative of the strong underlying
performance of the business over the period and is a fair
reflection of achievement against the financial and
individual objectives that were set.
The Annual Bonus outcome (based on a combination of
financial and non-financial metrics) means that 91% of the
bonus opportunity is payable to Stephen, of which one third
is made in shares under the Deferred Share Bonus Plan
(‘DSBP’) which are deferred for three years. The award level
for Alison is also 91% of the opportunity, again with the
same deferral structure. Awards for Alison Henriksen have
been prorated, reflecting her start date midway through
the 2020 performance year.
PERFORMANCE SHARE PLAN
Awards under the Performance Share Plan (‘PSP’) granted
to Stephen in September 2017 will vest in September 2020.
These awards were linked to our EPS performance over the
three-year period. Average annual EPS growth of 8.1%
means that 44.9% of these shares will vest, and this is
disclosed within the single figure table. It is of note that the
share price between grant and vest shows an increase of
71%, and this appreciation accounts for £211k of the total
PSP figure disclosed. Under our Policy, Stephen is obliged to
retain the post-tax number of shares for a further two years
post vesting.
SUMMARY
We have focused carefully over the past year in considering
our overall business performance and the corresponding
reward outcomes across Genus. This means understanding
the way pay for performance is seen across the business,
but additionally the alignment of that performance with the
shareholder experience. We hope that the accompanying
disclosure provides more insight on our considerations as
a Committee, and how we are confident that the outcomes
demonstrated here represent robust and appropriate
implementation of our Policy agreed in 2019.
I look forward to your support at our forthcoming AGM.
If you have any feedback, I can be contacted at
remunerationchair@genusplc.com.
Lesley Knox
Senior Independent Non-Executive Director
and Chair of the Remuneration Committee
CORPORATE GOVERNANCE
72
REMUNERATION COMMITTEE REPORT CONTINUED
Section B – At a Glance 2020 (year ending 30 June 2020)
(For more detail please see pages 72 to 91)
What Executive Directors were paid in 2020:
1
2
CHIEF EXECUTIVE: KARIM BITAR
(Resigned as Chief Executive effective
13 September 2019)
CHIEF EXECUTIVE: STEPHEN WILSON
(Appointed as Chief Executive and ceased
to be Group Finance Director on
13 September 2019)
CHIEF FINANCIAL OFFICER:
ALISON HENRIKSEN
(Appointed on 13 January 2020)
BASE SALARY
£131,238
PENSION AND BENEFITS
£52,161
BASE SALARY
£550,161
PENSION AND BENEFITS
£71,972
BASE SALARY
£189,744
PENSION AND BENEFITS
£18,460
BASE SALARY AND BENEFITS
> Salary was increased for Stephen
Wilson on appointment as CEO
> Benefits include a car allowance
for each Executive Director
> Pension allowance for Stephen
Wilson was reduced to 10% of
salary on appointment to CEO.
The allowance payable for Alison
Henriksen is 6% of salary
ANNUAL BONUS
> Metrics used and weighting:
Adjusted profit before tax (50%),
Cash generation (15%), Strategic
measures (35%)
> Overall award 91% of maximum
for Stephen Wilson and 91% of
maximum for Alison Henriksen
> 33% of the total award under this
element made in shares deferred
for three years
No annual bonus was payable to Karim on
account of his notice to resign which was
received in March 2019. In addition, no
further shares vested under our
Performance Share Plan on account of his
employment ending before the scheduled
vesting date, in line with the rules of the
2014 PSP Plan.
This is in line with the Remuneration Policy
agreed in 2016 by shareholders.
COMPANY PERFORMANCE
TARGET 50%
PROFIT BEFORE TAX
CASH GENERATION
PERSONAL OBJECTIVES
75%
OVERALL
0%
% OF MAXIMUM AWARD
100%
100%
91%
100%
3
PSP
> Awards granted in September
2017 vested at 44.9% of maximum
based on average annual
adjusted earnings per share
growth achieved of 8.1%
VALUE
£507,688
INDICATIVE VALUE1
MAXIMUM
£1,130,708
1 Calculated based on the average share price for the final quarter of financial year ended 30 June 2020 (3,381p).
4
REMUNERATION BREAKDOWN
CHIEF EXECUTIVE:
KARIM BITAR
CHIEF EXECUTIVE:
STEPHEN WILSON
CHIEF FINANCIAL OFFICER:
ALISON HENRIKSEN
TOTAL
PERFORMANCE
SHARES
ANNUAL
BONUS
PENSION AND
BENEFITS
BASE
SALARY
£183K
TOTAL
£2,075K
TOTAL
NIL
NIL
£52K
PERFORMANCE
SHARES
ANNUAL
BONUS
PENSION AND
BENEFITS
BASE
SALARY
£72K
£550K
£131K
£508K
£945K
PERFORMANCE
SHARES
ANNUAL
BONUS
PENSION AND
BENEFITS
BASE
SALARY
£18K
£190K
£505K
NIL
£297K
Genus plc / Annual Report 2020 73
Section B – At a Glance 2021 (year ending 30 June 2021)
(For more detail please see pages 72 to 91)
What Executive Directors can earn in 2021 and how:
1
BASE SALARY AND BENEFITS
> Salary increases of 2% effective
September 2020
> No change to benefit provision
for 2021
CHIEF EXECUTIVE: STEPHEN WILSON
CHIEF FINANCIAL OFFICER: ALISON HENRIKSEN
BASE SALARY
£598,850
PENSION AND BENEFITS
£73,025
BASE SALARY
£406,000
PENSION AND BENEFITS
£37,150
2
ANNUAL BONUS
> Annual bonus opportunity of
175% of salary split between
profit, cash and strategic metrics
as shown
STEPHEN WILSON: MAXIMUM OF 175% OF SALARY,
TARGET AWARD OF 87.5% OF SALARY
ALISON HENRIKSEN: MAXIMUM OF 175% OF SALARY,
TARGET AWARD OF 87.5% OF SALARY
ADJUSTED PROFIT BEFORE
TAX GROWTH WEIGHTING OF 50%
CASH GENERATION WEIGHTING OF 15%
STRATEGIC MEASURES WEIGHTING OF 35%
Awards over 29,613 Genus shares
N/A
3
PSP (SEPTEMBER 2018 AWARDS)
> The vesting of these awards
depends on the adjusted earnings
per share (excluding gene editing
costs) achieved in the three
financial years ending
30 June 2021
AWARD TO STEPHEN WILSON OF 200% OF SALARY
AWARD TO ALISON HENRIKSEN OF 175% OF SALARY
5%
20%
ANNUAL ADJUSTED EPS
% OF AWARD VESTING
15%
100%
4
PSP (SEPTEMBER 2020 AWARDS)
> The vesting of these awards will
be subject to an adjusted
earnings per share growth, with
the 2023 adjusted earnings per
share being compared to the 2020
adjusted earnings per share
(excluding gene editing costs)
> 5% annual growth threshold –
20% vesting
> 15% annual growth – 100%
vesting
> Vesting levels will be calculated
based on a straight-line basis
between the above values
CORPORATE GOVERNANCE
74
REMUNERATION COMMITTEE REPORT CONTINUED
Section B – Wider Workforce Remuneration
The Committee developed the Remuneration Policy agreed by shareholders in 2019 having reviewed the wider framework for reward across the
organisation and the way that this drives alignment of individuals towards organisational goals. It receives updates annually on any material changes to
wider workforce arrangements and additionally considers employee feedback on reward matters. This is from Group-wide mechanisms (such as our Your
Voice survey) but additionally from direct interaction between designated Non-Executive Directors and employees.
Our reward principles apply to all employees within the business and are designed to ensure we can attract, motivate and retain people fundamental to
achieving our vision, and be part of a global organisation. We want people within the business engaged and delivering because they are excited by our vision,
the part they can play in this, and the difference they can make.
These principles are applied as consistently as we can, such that reward is standardised wherever possible, and delivered in line with our values. While the
quantum may vary between roles, the principle of aligning reward outcomes with performance is fundamental to the way we operate.
Reward element
BASE SALARY
BENEFITS
VARIABLE PAY
Our approach
Pay rates are determined with reference to the skill set and experience of the individual. Most pay rates are reviewed annually
across the Group, with adjustments with reference to individual performance levels, market pay competitiveness and overall
business affordability.
The countries we operate in display different practices in terms of benefit provision. Typical benefits include access to life
insurance, pension or retirement provision and may include medical cover. Our approach is driven by local market factors
(which may include legislative requirements) rather than a single common benefit offering globally.
We operate a range of annual variable reward schemes and most of our employees participate in one of these arrangements.
These include:
Annual bonus
> Based on a combination of financial performance and non-financial metrics assessed through our performance
management processes (which all employees participate in)
> Financial metrics based around profitability and cash performance
> Where metrics are consistent with those used for Executive Directors or GELT members, then the same target/
performance scale is used for everyone to drive alignment.
Production facilities – KPI plans
> Linked to the balanced scorecard of local KPIs for facility, covering metrics such as production output, health and safety,
and other defined KPIs.
Commissions
> Derived from individual sales performance of the individual.
In addition, we make discretionary awards of shares across the business annually, reflecting the contribution of the individual
and to drive future alignment with our performance.
Genus plc / Annual Report 2020 75
Section B – CEO Pay Ratio
OUR CEO PAY RATIO FOR 2020
Our CEO Pay ratio is shown below. The single figure for year ending 30 June 2020 reflects the change in CEO during the year. This means it includes salary
and benefits for Karim Bitar through to his resignation, and all applicable reward elements for Stephen Wilson from the date of his appointment as CEO
(13 September 2019) to 30 June 2020.
Year ended
30 June 2020
FTE reward
Ratio
FTE reward
Ratio
FTE reward
2,170
£25,230
86:1
£31,748
68:1
£42,426
Ratio
48:1
CEO single
figure
£000
25th percentile
Median
75th percentile
Median ratio vs
CEO target
remuneration
51:1
No elements of pay have been omitted from the calculation and pay quartiles determined as at 30 June 2020 and is calculated based on those employed at
this date. Where required, actual levels of remuneration were adjusted to create full time equivalent values by considering both the employees full time
equivalent hours and (where applicable) the proportion of the year that the individual was employed. The quartile values, split between salary and benefits
are as follows:
Salary (FTE)
Total pay and benefits
25th
percentile
Median
75th
percentile
£23,087
£26,689
£34,747
£25,230
£31,748
£42,426
The median ratio is consistent with pay and reward policies in operation within the business. Salaries are set with reference to market levels of pay, with
progression linked to experience and performance in role. The structure of reward in operation means that greater proportion of pay is linked to variable
pay in more senior roles, and will therefore fluctuate linked to business and individual performance outcomes against targets set.
OUR CEO PAY RATIO HISTORY
To provide additional context we have also shown the ratio for the previous two years. The CEO ‘single figure’ for year ending 2019 was lower than the prior
year. This reflected the decision of our previous CEO to resign from the business and forfeit any awards under our annual bonus or long-term incentive,
albeit he was still employed by Genus at the end of the financial year. For illustration we have also shown the ratios against the target level of reward we
disclosed within our Remuneration Policies as agreed by shareholders.
Year ended
30 June 19
30 June 18
CEO single
figure
25th percentile
Median
75th percentile
CEO
FTE reward
Ratio
FTE reward
Ratio
FTE reward
£815k
£24,638
33:1
£31,867
£2,549k
£24,204
105:1
£30,759
26:1
83:1
£41,792
£40,203
Ratio
20:1
63:1
Median ratio vs
target CEO
single figure
Ratio
57:1
59:1
METHOD OF CALCULATION AND RATIONALE
We have elected to use calculation Method A as outlined within the legislation. We have done this to get as accurate a picture as possible for the reward of
all our UK employees compared to the CEO. This contrasts with our disclosure on Gender Pay which focuses on our largest UK subsidiary (Genus Breeding
Limited) rather than all employees in the UK as required by the respective legislation. It ensures that the calculation is done on a full-time equivalent basis
in comparing employee reward to the CEO position.
FACTORS THAT WILL INFLUENCE CHANGES IN FUTURE RATIOS
The ratio will be calculated each year and we will disclose the resultant ratio and provide commentary and explanation as required. Key identified reasons
for future change may include some or all of the following factors:
> Share price change: recognising that a significant proportion of the CEO expected remuneration is delivered in shares vesting at future dates.
> Business performance: That the overall CEO package is more highly geared towards variable pay than most other employees within the UK business.
> Role change: The transition of our former Group Finance Director into the CEO role, which will mean that future vesting
of PSP awards vesting in 2020 and 2021 will be based on award levels and associated salary while in the Group Finance Director role.
CORPORATE GOVERNANCE
76
REMUNERATION COMMITTEE REPORT CONTINUED
Section C – Remuneration and Performance Statement
GENUS’S STRATEGY AND ITS LINK TO PERFORMANCE-RELATED PAY
Our strategy and the way this is linked to variable reward is shown below.
INCREASE GENETIC
CONTROL AND
PRODUCT
DIFFERENTIATION
TARGETING KEY
MARKETS AND
SEGMENTS
SHARING IN
THE VALUE
DELIVERED
SUCCESS
MEASURED BY
R&D AND BUSINESS
INNOVATION
LINK TO
REMUNERATION
POLICY
Strategic measures within the annual bonus
focus on key activities in pursuit of our
defined longer-term strategy
PROPRIETARY GENETIC
IMPROVEMENT AND
DISSEMINATION
POSITIONS
VOLUME GROWTH
OPERATING PROFIT
CASH CONVERSION
Strategic objectives recognise wider
progress than financial measures alone
Measured through the profit element of the
annual bonus
Over the longer term will flow into EPS, used
to determine vesting under the PSP
Measured through the cash element of the
annual bonus
PERFORMANCE COMPONENTS AND THEIR IMPACT ON REMUNERATION
2019
2020
% Impact on remuneration
Movement
Adjusted results
Revenue
Adjusted profit before tax
Generation of free cash flow
Adjusted earnings per share
Dividend per share
£488.5m
£551.4m
£61.0m
£10.0m
73.2p
27.7p
£71.0m
£35.2m
85.4p
29.1p
13
16
Input to annual bonus profit and earnings per share in PSP
Annual bonus measure
252
Annual bonus measure
17 PSP performance condition
5
Executives rewarded via dividends on shares held post vesting
Share price at year end
2,648p
3,532p
33 Determines the value of deferred bonuses and PSP awards
Values in the table are in actual currency as shown in the Annual Report. A number of adjustments are made to these for the purposes of calculating awards
under our incentive plans as described in this report and in line with our Remuneration Policy.
EXECUTIVE DIRECTORS’ ALIGNMENT TO SHARE PRICE
The table below shows the value of shares currently held by the Executive Directors and those awarded under the Deferred Share Bonus Plan (‘DSBP’),
but not yet released (on a post-tax basis). It does not include those awards under the PSP which are scheduled to vest in the future subject to Company
earnings per share performance, which have the potential to significantly increase the alignment of the Executives, subject to the resulting level of vesting.
Shares awarded
under the DSBP
(post-tax)
Total share
exposure
Indicative value on
30 June 2020
(£)1
Consequence
of a +/- £2 share
price change
(£)
13,332
86,662
2,930,029
173,323
Nil
0
0
0
Shares
owned
73,330
0
Stephen Wilson
Alison Henriksen
1 Value calculated using the average share price for the final quarter of the financial year ended 30 June 2020 (3,381p).
Conclusion
CEO is aligned to share price movement
through ordinary shareholding. CFO was
appointed into role during 2020
Genus plc / Annual Report 2020 REMUNERATION COMMITTEE REPORT CONTINUED
Section D – Annual Report on Remuneration
77
INTRODUCTION
This section of the Directors’ Remuneration Report is subject to an advisory vote at the 2020 AGM. Remuneration in respect of 2020 is determined by our
Remuneration Policy agreed by 93.4% of shareholders at the 2019 AGM. The detailed Policy, approved by shareholders at the 2019 AGM on 14 November
2019, can be found in our 2019 Annual Report which is available from our website at www.genusplc.com.
We have split this section into the following chapters to balance our formal disclosure obligations with our desire to have a clear and understandable report:
1. What the Executive Directors Were Paid in 2020.
2. What the Executive Directors Can Earn in 2021.
3. The Process the Committee Followed to Arrive at These Decisions.
4. How the Chief Executive’s Pay Compares to Shareholder Returns Over the Past Ten Years and to Employees’ Pay.
5. The Chairman and Non-Executive Directors’ Fees.
6. Details of the Directors’ Shareholdings and Rights to Shares.
7. Details of the Executive Directors’ Contracts and Non-Executive Directors’ Letters of Appointment.
1. WHAT THE EXECUTIVE DIRECTORS WERE PAID IN 2020
EXECUTIVE DIRECTORS’ SINGLE TOTAL REMUNERATION FIGURE (AUDITED)
The following table shows a single total figure of remuneration for the 2020 financial year for each of the Executive Directors and compares this figure to the
prior year.
Karim Bitar
(resigned as CEO effective 13 September 2019)
Stephen Wilson
(Ceased to be Group Finance Director and
appointed CEO from 13 September 2019)
Alison Henriksen
(appointed 13 January 2020)
Salary
and fees
£000s
Benefits1
£000s
Pension2
£000s
Subtotal
for fixed
pay
£000s
Annual
bonus3
(Core
Bonus)
£000s
Annual
bonus
(Company
Milestone)4
£000s
131
626
550
390
190
–
12
33
13
13
6
–
40
156
59
58
12
–
183
815
622
461
208
–
Nil
Nil
945
209
297
–
n/a
Nil
n/a
157
n/a
–
Subtotal
for
variable
pay
£000s
Nil
Nil
Total
£000s
183
815
1,453
2,075
1,142
1,603
297
–
505
–
PSP5
£000s
Nil
Nil
508⁵
776⁶
–
–
Year
2020
2019
2020
2019
2020
2019
1 Benefits included an annual car allowance of £20,000 for Karim Bitar and £12,000 for Stephen Wilson and Alison Henriksen respectively. Insured benefits include life assurance, private medical insurance
and a medical screen.
2 Executive Directors receive a cash allowance in lieu of pension, which is shown in the Pension column. The percentage contribution payable to Stephen Wilson was reduced on appointment to CEO
(from Group Finance Director) from 15% of salary to 10% of salary. Alison Henriksen receives a pension contribution of 6% of salary.
3 Bonus earned includes the part of the award which is deferred into Company shares.
4 All awards made under the Company Milestone element of the bonus for 2019 (under the previous Remuneration Policy) are made in shares deferred for three years.
5 The value of the PSP is determined by the number of awards vesting in relation to performance in the period ended 30 June 2020. Dividend equivalents are not added to awards made under the PSP. The
value shown for 2020 is based on the average share price for the final three months of the 2020 financial year (which was 3,381p). This compares to the share price at grant of 1,973p (+71%). Of the value
shown for the CEO, £211k is attributable to share price appreciation between award and vesting.
6 The 2019 values shown as estimated in the previous Annual Report have been restated to reflect the actual value at point of vesting. The share price was 2,850p on 16 September 2019 when awards
vested for Stephen Wilson.
HOW THE BONUSES FOR 2020 WERE CALCULATED
ANNUAL BONUS
The 2020 bonuses for Executive Directors were calculated by reference to performance against a challenging sliding scale of profit, cash flow and strategic
measures. Targets were set by the Committee to exclude the costs of gene editing in line with our Remuneration Policy. This was a decision by the
Committee (as was the case in prior years) to ensure that management’s reward was not unfairly affected by decisions to make the right long-term
investment decisions on behalf of the business.
The following results were achieved for each element of the annual bonus incentive.
Bonus target1
Strategic objective
Adjusted profit before tax
Year-on-year profit growth
Generation of free cash flow
Strategic measures
Generate cash for
reinvestment and dividend
To build the foundation
for future growth
Proportion
of salary
(maximum)2
87.50%
26.25%
Actual 2020
performance
Threshold
(0% award)
Target
(50% award)
Stretch
(full award)
£79.5m
£26.9m
£68.3m
£16.7m
£75.1m
£19.7m
£78.5m
£22.7m
Extent to which
targets were met
(%)
100%
100%
61.25%
See table
Chief Executive 75%
Chief Financial Officer 75%
1 The financial elements of the bonus are payable on a straight-line basis between each threshold, target and stretch level.
2 Prior to any proration of awards for Alison Henriksen who joined on 13 January 2020.
CORPORATE GOVERNANCE
78
REMUNERATION COMMITTEE REPORT CONTINUED
Section D – Annual Report on Remuneration
1. WHAT THE EXECUTIVE DIRECTORS WERE PAID IN 2020 CONTINUED
STRATEGIC MEASURES
The Committee reviewed and discussed achievement against targets set for strategic measures for each Executive Director in determining overall award
levels. Performance against these targets is disclosed retrospectively, as follows:
THEME
OBJECTIVE
Strategy Development and Execution Expand the Company’s position as the leader in animal genetics
Innovation
Leadership
Continue strengthening R&D technology capabilities and commercial relevance and implement new IT technologies
to support Company performance
Demonstrate leadership skills and adding value and direction to the organisation whilst developing internal talent/
bench strength
Culture and Engagement
Fostering a positive and inclusive culture and increasing employee engagement at all levels
Sustainability
Make Genus an industry leader in sustainability
Performance against these targets is disclosed retrospectively, as follows:
Executive Director
Stephen Wilson
Key achievements in the year
Strategy Development
and Execution
> Growth in PIC North America market share
> Expansion of supply chain in PIC China
> Growth of Sexcel and IntelliGen business measured through both volume growth and
third-party customers
> Progress demonstrating value of proprietary NuEra beef genetics
Leadership and Culture
> Recruitment of new CFO and induction of both CFO and CSO
> Improvement in people engagement scores (measured through the Your Voice survey)
> People Strategy presented to Board at January strategy session and endorsed by Board
Innovation
> Good progress on PRRSv resistance development
> Successful go-live of next stage of our enterprise system ‘GenusOne’ across PIC North America.
Sustainability
> Comprehensive plan reviewed and agreed with Board covering full scope of Genus activities
from genetics to operational delivery
Executive Director
Key achievements in the year
Payout against
maximum
75%
Payout against
maximum
Alison Henriksen Strategy Development
> In light of COVID-19 shaped rapid approach to assess macro risks, monitor strategic and
75%
and Execution
operational impacts providing regular updates to the Board
> Enhanced cost and cash focus across the Group, embedding in the FY21 Budget and
performance management processes a shift in areas of emphasis for reporting and reviews
Leadership and Culture
> Completed virtual induction, connecting widely across the businesses, with the Board,
investors, lenders and advisers
> Led senior finance leadership through refresh of strategic vision for Finance and creation
of community, setting plan for development of new target operating model in FY21
Innovation
> Supported go live of Genus One in PIC North America
> Influenced proposals on way to support continued growth and efficiencies of IntelliGen
production
Sustainability
> Reviewed and approved investments in sustainable energy
As a result of this performance, the total annual bonus awarded to the Executive Directors was:
Karim Bitar
Stephen Wilson
Alison Henriksen2
Extent to which targets were met
Annual Bonus – Cash
Annual Bonus – Deferred Shares1
Annual bonus
n/a
91%
91%
Nil
£629,899
£197,730
Nil
£314,949
£98,865
1 The number of shares awarded will be calculated in September 2020 when bonuses are paid. One-third of bonus payable is deferred into Genus shares for three years.
2 Awards for Alison Henriksen have been pro-rated to reflect her joining part-way through the 2020 performance year
HOW THE PERFORMANCE SHARE PLAN FIGURE WAS CALCULATED IN THE SINGLE TOTAL REMUNERATION TABLE
Stephen Wilson’s PSP award granted on 13 September 2017 was subject to a performance condition, based on the growth in adjusted earnings per share
from 2017 to 2020. The range of targets applicable to the award, which had a value of 175% of salary at grant was as follows:
Average annual growth in adjusted earnings per share1
Less than 5% per annum
5% per annum
15% per annum
1 Straight line vesting between the points in the above table.
% of award
Vesting
Nil
20%
100%
Genus plc / Annual Report 2020 79
1. WHAT THE EXECUTIVE DIRECTORS WERE PAID IN 2020 CONTINUED
The Committee set targets to calculate the long-term award after excluding gene editing costs incurred during the performance period, to avoid an
unintended impact on the Executives’ remuneration whilst making long-term decisions in support of value creation. This is consistent with the approach
previously communicated to shareholders within our Policy and as taken in each of the last three years.
The adjusted 2020 earnings per share after the cost of share-based payments and adjusting for costs relating to gene editing was 84.6p. This represents
an average annual growth in adjusted earnings per share of 8.1% compared to the comparable 2017 adjusted earnings per share figure (after the cost of
share-based payments). The resulting level of vesting is therefore 44.9% of maximum1. Stephen Wilson’s award was over a maximum of 33,443 shares,
so the actual level of vesting is 15,016 shares and these will vest on 13 September 2020.
The Company’s average share price for the period from 1 April 2020 to 30 June 2020 was 3,381p, meaning that the value shown for these awards within the
single figure table is £507,688 for Stephen Wilson.
£659,830
£363,567
£211,424
£507,688
£296,264
£700,000
£600,000
£500,000
£400,000
£300,000
£200,000
£100,000
£0
Value at
award
Value of
shares not
vesting
Value
of shares
vesting
Share price
growth of
shares vesting
Value at
30 June 2020
1 The average annual earnings per share growth including gene editing costs after share-based payments was 7.6% and the associated vesting level would have been 41.1% of maximum.
JOINING AWARD
A joining award over 22,435 Genus shares was made to Alison Henriksen on joining the business to bring her onto the in-flight cycle in line with our agreed
Remuneration Policy. These are shares that will vest in 2022 subject to EPS performance (with identical performance metrics to those awarded to the CEO
on 11 September 2019). The share price used to calculate awards was based on that when Alison joined the business in January 2020. As with awards to the
CEO, any shares that vest as a result of Company performance achieved will be subject to a two-year additional holding period post vesting, subject to the
ability to sell shares to settle tax liabilities at the point of vesting.
MATERIAL CONTRACTS
There were no other contracts or arrangements during the financial year in which a Director of the Company was materially interested and/or which were
significant in relation to the Group’s business.
PAYMENTS FOR LOSS OF OFFICE AND PAYMENTS TO FORMER DIRECTORS (AUDITED)
There were no payments for loss of office in the year or to any former Directors of the business.
DISCRETION
No discretion was applied by the Committee to outcomes under the variable plans and awards determined against targets set by the Committee.
2. WHAT THE EXECUTIVE DIRECTORS CAN EARN IN 2021
A summary of this chapter is given on page 73.
BASE SALARY
In line with other UK employees, the date of salary review is 1 September 2020. Any change is considered against changes made to the wider workforce.
BENEFITS
The Executive Directors receive benefits including a car allowance, life assurance, an annual medical screen and private medical insurance.
PENSION
On appointment to the CEO role in September 2019, the pension allowance payable to Stephen Wilson reduced to 10% of salary (from 15%). Alison
Henriksen receives a pension allowance of 6% of salary, consistent with our stated policy to align rates for new hires to the wider workforce.
CORPORATE GOVERNANCE
80
REMUNERATION COMMITTEE REPORT CONTINUED
Section D – Annual Report on Remuneration
2. WHAT THE EXECUTIVE DIRECTORS CAN EARN IN 2021 CONTINUED
PERFORMANCE-RELATED ANNUAL BONUS
The structure for variable remuneration for Executive Directors for 2021 will be as follows:
ANNUAL BONUS
Value of bonus
Performance measures
A maximum of 175% of salary for the Chief Executive Officer and Chief Financial Officer based on profit, cash
generation and strategic measures. On-target value of 87.5% of salary.
Adjusted profit before tax
Cash generation
Strategic Measures
50% of opportunity
15% of opportunity
35% of opportunity
Calibration of profit target
No bonus is payable in respect of profit unless the prior year’s result is exceeded. Thereafter, the bonus award is
determined on the following basis:
Growth on prior year adjusted before tax1
0%
10% growth delivers
15% growth delivers
Straight-line payout between performance points.
1 In constant currency and excluding gene editing costs.
Pay-out
(profit element)
0%
50%
100%
Calibration of cash generation target The cash target is the budgeted figure, with a specific range of £3m below the target and £3m above. Specific
Calibration of strategic measures
Bonus deferral
Malus and Clawback
numbers were set (rather than a percentage range) to ensure Executives are focused on actual cash generation.
The target set and resulting performance achieved will be disclosed in the Annual Report next year.
Specific measurable targets have been set against this category linked to our strategic priorities identified by the
Board for the year ahead. It would be commercially sensitive to disclose them in advance. We will retrospectively
disclose performance against these targets in the subsequent Annual Report.
One-third of any bonus award will be deferred by way of shares for three years and will vest subject to continued
employment, other than in certain leaver circumstances.
The Committee can apply malus to deferred bonuses and clawback any element of paid bonuses that should not
have been awarded or paid, in the event of a material misstatement of the Group’s annual results or other
substantive reason.
LONG-TERM INCENTIVES
Awards to be granted in September 2020 will be granted under the 2019 PSP Plan approved by shareholders on 14 November 2019. Stephen Wilson will be
granted an award over shares worth 200% of salary and Alison Henriksen an award over shares worth 175% of salary. Grants will be determined in line with
the Plan Rules, using annual salary as at the point of grant to determine awards. Awards granted will continue to require the Executive to retain the after-tax
number of shares vesting in September 2023 for two years. Enhanced clawback and malus provisions will apply to these awards as outlined within our
Remuneration Policy, including for reputational damage and corporate failure.
The performance targets for the awards to be granted in September 2020 will relate to average annual growth in adjusted earnings per share, measured
over three years and excluding gene editing costs. The range of targets for the 2021 awards (scheduled to be made in September 2020) is as follows:
Average annual growth in adjusted earnings per share1
Less than 5% per annum
5% per annum
15% per annum
Straight-line vesting between performance points.
Vesting
(% award)
0%
20%
100%
1 Growth in adjusted earnings per share over the three-year performance period will be calculated on a simple average annual growth rate after the cost of share-based payments and excluding gene
editing costs.
The Committee continues to believe that using adjusted earnings per share is an appropriate measure of long-term performance of the business, and this is
consistent with awards granted over the past few years. The Committee believes the above performance range is appropriately challenging, that they
incentivise Executives to deliver the Company’s growth strategy and are therefore aligned with shareholders’ interests. They also adhere to the principles of
transparency and simplicity, to maximise the incentive provided to participants by the 2019 PSP.
The Committee will be able to scale back vesting based on earnings per share performance if it does not consider the vesting result to be consistent with
the progress achieved against the Company’s strategy during the performance period. This is considered appropriate to broaden the Executive team’s
focus beyond financial performance.
Genus plc / Annual Report 2020 81
3. THE PROCESS THE COMMITTEE FOLLOWED TO ARRIVE AT THESE DECISIONS
The Committee complies with the UK Corporate Governance Code. It makes recommendations to the Board, within agreed terms of reference, on
remuneration for the Executive Directors and other members of GELT. The Committee’s full terms of reference are available on the Company’s website
at www.genusplc.com.
During 2020, the Committee comprised:
Director
Lesley Knox (Chair)
Lykele van der Broek
Lysanne Gray
Ian Charles
Bob Lawson
Independent
Attendance
at meetings
Yes
Yes
Yes
Yes
Yes
6/6
6/6
6/6
6/6
6/6
None of the Committee members has any personal financial interest (other than as shareholders), conflicts of interests arising from cross-directorships or
day-to-day involvement in running the business. The Chief Executive and the Chief Financial Officer attend meetings at the Committee’s invitation but are
not present when their own remuneration is being discussed. The Committee is supported by the Group HR Director, Group Reward Director, Finance and
Company Secretariat functions.
During the year, the Committee continued to use PricewaterhouseCoopers (‘PwC’) for advice it considers is of value, objective and independent. PwC’s
fees were £50,750 for its remuneration advice to the Committee. PwC were appointed by the Committee following a competitive tender process and their
performance and independence as advisers is regularly reviewed. PwC is a member of the Remuneration Consultants Group and complies with its Code of
Conduct. Separate teams within PwC provide unrelated advisory service to the Group, including taxation, international assignments and actuarial advice
to the Group.
During the year to 30 June 2020, the Committee met six times and considered the following matters:
JULY 2019
> Shareholder feedback from
consultation process.
> Finalisation of proposed new
Policy and messaging to
shareholders.
JULY 2019
> Pay review for GELT members.
> Review of Directors’
Remuneration Report.
SEPTEMBER 2019
> Approval of the Directors’
Remuneration Report for 2018.
> Determination of Annual Bonus
awards in respect of 2019.
> Testing of the performance
conditions and approval of the
vesting levels of long-term share
incentive awards granted in 2016.
> Approval of long-term share
incentive awards under the
Company’s PSP and the
associated performance targets.
> Review of shareholdings by
Executive Directors and GELT.
> Approval of PSP for senior
leadership and review of share
dilution.
NOVEMBER 2019
> Discussion of shareholder voting
on the Annual Remuneration.
JUNE 2020
> Discuss approach to target
setting for 2021.
> AGM season review and update.
> Overview of wider reward
practice across the FTSE 250.
> Review of remuneration
reporting and AGM season
insight.
> Determine remuneration details
for new CFO hire.
APRIL 2020
> Update on COVID-19 and
associated reward
considerations.
> Discussion of CEO Pay Ratio
reporting requirements and
indicative analysis for Genus.
> Discussion of gender pay findings
within Genus Breeding Limited
and wider reward approach in
Genus.
HOW SHAREHOLDERS’ VIEWS ARE TAKEN INTO ACCOUNT
We consulted with shareholders ahead of proposing our existing Remuneration Policy to shareholders at our 2019 AGM which received high levels of
shareholder support. The results of the most recent vote were as follows:
For
Against
Total number of shares in respect of which votes were validly made
Votes withheld
Vote on Directors’
Remuneration Report (advisory)
Vote on Directors’
Remuneration Policy (binding)
Total number
of votes
44,735,774
714,612
45,450,386
409,372
% of
votes cast
Total number
of votes
% of
votes cast
98.4
1.6
100
42,801,233
3,046,755
45,847,988
11,770
93.4
6.6
100
CORPORATE GOVERNANCE
82
REMUNERATION COMMITTEE REPORT CONTINUED
Section D – Annual Report on Remuneration
3. THE PROCESS THE COMMITTEE FOLLOWED TO ARRIVE AT THESE DECISIONS CONTINUED
HOW EMPLOYEES’ PAY IS TAKEN INTO ACCOUNT
While the Company does not consult employees on matters of Directors’ remuneration, the Committee does take account of the policy for employees
across the workforce when determining the Remuneration Policy for Directors.
The Group Reward Director facilitates this process, presenting to the Committee reward structures and approach across the organisation including the
way reward levels are set with reference to internal and external factors and how performance metrics align with those used for GELT members (including
Executive Directors). The process also includes sharing feedback received through staff engagement surveys that include questions on pay, as well as
consulting employees informally on their views of the current overall Remuneration Policy. Additionally, discussions on reward have formed part of
dialogue between the nominated non-executive directors and employees as part of wider engagement activity as outlined elsewhere in the Annual Report.
This forms part of the feedback provided to the Committee and is used to assess the Remuneration Policy’s ongoing effectiveness and the changes that
should be made.
When setting the Executive Directors’ base salaries, the Committee compares the salary increases proposed for each Executive Director within those
proposed for employees in their geographical location, as well as considering the typical increase proposed across our UK business and the wider Group.
4. HOW THE CHIEF EXECUTIVE’S PAY COMPARES TO SHAREHOLDER RETURNS OVER THE PAST TEN YEARS AND TO EMPLOYEES’ PAY
TOTAL SHAREHOLDER RETURN
The following graph shows the Company’s performance measured by total shareholder return (‘TSR’), compared with the TSR performance of the FTSE 250
Index. The FTSE 250 Index was selected as it represents a broad equity market of which the Company is a member.
TEN YEARS OF TOTAL SHAREHOLDER RETURN
)
£
(
)
d
e
s
a
b
e
r
(
R
S
T
600
500
400
300
200
100
0
June 10
June 11
June 12
June 13
June 14
June 15
June 16
June 17
June 18
June 19
June 20
Genus
FTSE 250
As required under the reporting regulations, the table below shows the ‘single figure’ pay for the Chief Executive over the same period, to allow comparison
between variability in reward and the shareholder experience over the same period.
Richard Wood
Karim Bitar
20111
2012
20122
2013
2014
2015
2016
2017
2018
Total remuneration (£000s)
£2,383
£231
£1,776
Annual bonus (% of max)
Total PSP vesting (% of max)
94%
88%
88%
77%
–
–
£868
31%
–
£877
£1,622
£1,704
£2,856
£2,549
32%
–
99%
26%
78%
34%
59%3
79%
64%3
56%
Stephen
Wilson
2020
2020
£183
£2,075
Nil4
Nil5
91%
44.9%
2019
£815
Nil4
Nil5
Year ended 30 June 2020
1 PSP vesting relates to all awards that were tested early on cessation of employment.
2 Includes payment (as previously disclosed) for loss of annual bonus (£163,000) and the value of restricted stock (£755,000) granted to compensate him for loss of value forfeit on joining Genus.
3 Includes the award under the Company Milestone element of the annual bonus under the previous Remuneration Policy.
4 No awards were payable following the decision of Karim to resign from the business.
5 Vesting was nil as Karim’s employment cessation date was before scheduled vesting of PSP awards.
Genus plc / Annual Report 2020
83
4. HOW THE CHIEF EXECUTIVE’S PAY COMPARES TO SHAREHOLDER RETURNS OVER THE PAST TEN YEARS AND TO EMPLOYEES’ PAY CONTINUED
DIRECTOR REMUNERATION COMPARED TO GENUS EMPLOYEES
REMUNERATION RECEIVED (% CHANGE FROM 2019 TO 2020)
Salary/fees
%
Benefits
%
Annual bonus
%
Stephen Wilson – Chief Executive
Alison Henriksen – Chief Financial Officer
Bob Lawson – Chairman
Lykele van der Broek
Lysanne Gray
Ian Charles
Lesley Knox
UK comparators1
2%
n/a
0%
n/a
158%
n/a
n/a
n/a
n/a
n/a
n/a
2.3%
0%
124%
1 This is derived by considering all employees of Genus plc on 30 June 2020 (excluding Directors) and calculating on an FTE basis changes in salary, benefits and bonus compared to the previous year.
DISTRIBUTION STATEMENT
Employee costs (£m)
Distributions to shareholders1
1 Includes dividends and share buy-backs.
5. THE CHAIRMAN AND NON-EXECUTIVE DIRECTORS’ FEES
Fees payable to the Non-Executive Directors per annum are as follows:
Position
Chairman
Audit & Risk Committee/Remuneration Committee Chairs
Adviser to Global Portfolio Steering Committee (‘GPSC’)
Base Non-Executive Director fee
2019
2020
£157m
£16.8m
£179m
£18.3m
%
change
14%
9%
2018
fees
2019
fees
2020
fees
£160,000
£160,000
£160,000
£60,000
£60,000
£65,000
£65,000
£55,000
£55,000
£60,000
£65,000
£55,000
The responsibilities of chairing the Audit & Risk and Remuneration Committees result in an additional fee of £5,000, giving the Chairs of these Committees a
total fee of £60,000. Fees will continue at this level for the coming year.
On 29 June we announced that Bob Lawson would retire from the business at the 2020 AGM and would be replaced by Iain Ferguson. Iain will receive a
pro-rated fee based on £55,000 for the period from appointment through to the 2020 AGM and will then receive a fee as Chairman of £230,000 per annum.
This fee was determined following a review of market data. The current Chairman’s fees have been at the same level since 2015.
CORPORATE GOVERNANCE
84
REMUNERATION COMMITTEE REPORT CONTINUED
Section D – Annual Report on Remuneration
5. THE CHAIRMAN AND NON-EXECUTIVE DIRECTORS’ FEES CONTINUED
TOTAL SINGLE FIGURE OF REMUNERATION (AUDITED) FOR 2019 AND 2020 ARE AS FOLLOWS:
Non-Executive Directors
Bob Lawson
Lykele van der Broek
Lysanne Gray
Ian Charles
Lesley Knox
Total
Fees
£000s
160
160
55
55
60
60
721
55
631
55
410
385
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
Taxable
expenses
£000s
Benefits
£000s
30
11
6
1
–
1
–
–
–
2
36
15
1
–
5
4
–
–
–
–
–
–
6
4
Total
£000s
191
171
66
60
60
61
72
55
63
57
452
404
1 Includes back payments for membership of respective Committees not received during 2019.
The Non-Executive Directors’ taxable expenses are travel expenses related to their role and have been grossed up for tax where applicable, in line with
HMRC rules.
6. DETAILS OF THE DIRECTORS’ SHAREHOLDINGS AND RIGHTS TO SHARES
DIRECTORS’ SHAREHOLDINGS (AUDITED)
At the year-end, the Directors had the following interests in the Company’s shares:
Bob Lawson
Stephen Wilson
Alison Henriksen
Ian Charles
Lykele van der Broek
Lysanne Gray
Lesley Knox
Total
At
30 June 2020
Number
8,557
73,330
–
–
3,750
–
2,000
87,637
% of
salary
held1
n/a
497%
0%
n/a
n/a
n/a
n/a
Shareholding
guideline2
n/a
200%
200%
n/a
n/a
n/a
n/a
Unvested
DSBP
awards at
30 June 2020
Number
Unvested
PSP awards
held at
30 June 2020
Number
n/a
n/a
25,154
104,722
0
n/a
n/a
n/a
n/a
22,435
n/a
n/a
n/a
n/a
25,154
127,157
At
30 June 2019
Number
8,557
56,754
–
–
3,750
–
2,000
71,061
1 Based on the combined number of beneficially held shares and the net of tax DSBP awards held and the average closing share price over the three months to 30 June 2020 of 3,381p.
2 Executive Directors are expected to work towards achieve a shareholding of 200% of salary as set out in the Remuneration Policy agreed by shareholders in 2019.
There were no changes in the Directors’ interests between 30 June 2020 and the date of this report.
COMPANY SHARE PRICE
The market price of the Company’s shares on 30 June 2020 was 3,532p and the lowest and highest share prices during the financial year were 3,672p and
2,506p respectively.
PERFORMANCE SHARE AWARDS GRANTED IN 2020 (AUDITED)
The awards granted under the 2019 PSP were as follows:
Executive
Stephen Wilson
Alison Henriksen2
Number of shares
comprising award
Face/maximum value of awards
at grant date (% salary)1
% of award
vesting at threshold
Performance
period
41,666
22,435
£1,180,000 (200%)1
£700,000 (175%)2
20
20
01.07.19–30.06.22
01.07.19–30.06.22
1 The closing average share price over the three days prior to the award being granted has been used to determine the maximum face value of the awards. This was 2,832p for Stephen Wilson (award granted
on 11 September 2019).
2 In line with joining arrangements for Alison Henriksen, an award of 22,435 shares was granted on 7 April 2020. The price used was the prevailing price on the date of joining (3,120p). The timing difference
was due to market restrictions in place between joining the business and April 2020.
Genus plc / Annual Report 2020 85
6. DETAILS OF THE DIRECTORS’ SHAREHOLDINGS AND RIGHTS TO SHARES CONTINUED
The awards were granted as nil-cost share options and vesting will be subject to achieving a challenging sliding scale of adjusted earnings per share
growth target and a strategic underpin, consistent with our Remuneration Policy. The adjusted earnings per share growth performance target for the
above awards is:
Average annual growth in adjusted earnings per share1
Less than 5% per annum
5% per annum
15% per annum
Straight-line vesting between performance points
Vesting
(% award)
0%
20%
100%
1 Growth in adjusted earnings per share over the three-year performance period will be calculated on a simple average annual growth rate after the cost of share-based payments and adjusted for gene
editing costs in line with previous awards.
DEFERRED BONUS AWARDS GRANTED IN 2020 (AUDITED)
The following DSBP awards were granted in relation to the 2019 annual bonus:
Executive
Stephen Wilson
Number of
shares
comprising
award
Face value
of awards at
grant date1
7,382
£209,058
These awards are not subject to any further performance conditions and will normally vest in full on 11 September 2022, subject to continued service.
1 The closing average share price over the three days prior to the award being granted has been used to determine the maximum face value of the awards. This was 2,832p (award granted on
11 September 2019).
SUMMARY OF SCHEME INTERESTS (AUDITED)
At 30 June 2020, the Executive Directors had the following beneficial interests in share awards and share options:
KARIM BITAR
Grant date
Award
Vesting period
14 September 2016
PSP 14 September 2016 to 14 September 2019
14 September 2016
DSBP 14 September 2016 to 14 September 2019
13 September 2017
PSP 13 September 2017 to 13 September 2020
13 September 2017
DSBP 13 September 2017 to 13 September 2020
09 October 2018
09 October 2018
PSP
DSBP
9 October 2018 to 9 October 2021
9 October 2018 to 9 October 2021
Total
STEPHEN WILSON
Grant date
Award
Vesting period
14 September 2016
PSP 14 September 2016 to 14 September 2019
14 September 2016
DSBP 14 September 2016 to 14 September 2019
13 September 2017
PSP 13 September 2017 to 13 September 2020
13 September 2017
DSBP 13 September 2017 to 13 September 2020
09 October 2018
09 October 2018
PSP
DSBP
09 October 2018 to 09 October 2021
09 October 2018 to 09 October 2021
11 September 2019
PSP 11 September 2019 to 11 September 2022
11 September 2019
DSBP 11 September 2019 to 11 September 2022
Share price
at grant
At
30 June 2019
Number
Granted
in year
Number
1,884p
1,884p
1,973p
1,973p
2,317p
2,317p
58,186
6,973
56,404
20,629
55,225
13,956
211,373
–
–
–
–
–
–
–
Lapsed
in year
Number
(58,186)
(6,973)
(56,404)
(20,629)
(55,225)
(13,956)
(211,373)
Exercised
in year
Number
At
30 June 2020
Number
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Share price
at grant
At
30 June 2019
Number
Granted
in year
Number
Lapsed
in year
Number
Exercised
in year
Number
At
30 June 2020
Number
1,884p
1,884p
1,973p
1,973p
2,317p
2,317p
2,832p
2,832p
34,500
4,725
33,443
10,213
29,613
7,559
–
–
–
–
–
–
–
–
41,666
7,382
(7,280)
(27,220)
–
–
–
–
–
–
–
(4,725)
–
–
–
–
–
–
–
–
33,443
10,213
29,613
7,559
41,666
7,382
Total
120,053
49,048
(7,280)
(31,945)
129,876
CORPORATE GOVERNANCE
86
REMUNERATION COMMITTEE REPORT CONTINUED
Section D – Annual Report on Remuneration
6. DETAILS OF THE DIRECTORS’ SHAREHOLDINGS AND RIGHTS TO SHARES CONTINUED
ALISON HENRIKSEN
Grant date
07 April 2020
Total
Award
PSP
Vesting period
Share price
at grant
At
30 June 2019
Number
07 April 2019 to 11 September 2022
3,120p
–
–
Granted in
year
Number
22,435
22,435
Lapsed
in year
Number
Exercised
in year
Number
At
30 June 2020
Number
–
–
–
–
22,435
22,435
In relation to the share awards to Stephen Wilson granted on 11 September 2019, the closing average share price over the three days prior to 11 September 2019
(the grant date for the PSP awards) of 2,832p was used to determine the number of shares comprising individual awards. The award for Alison Henriksen was
made using the prevailing share price at the date when she joined the business in January 2020 of 3,120p.
The performance targets applying to the PSP awards made during the year are as described above. An earnings per share range also applied to awards
made in 2018 and 2017 to Stephen Wilson. No further performance conditions apply to DSBP awards other than continued employment with the business.
DILUTION
The aggregate dilution of all relevant share incentives is 3.93% as at 30 June 2020, which is less than the permissible 10% in ten years dilution limit.
7. DETAILS OF THE EXECUTIVE DIRECTORS’ CONTRACTS AND NON-EXECUTIVE DIRECTORS’ LETTERS OF APPOINTMENT
Appointment date
Current contract date
Expiry date
Notice period (months)
12 December 2012
13 September 2019
13 January 2020
14 November 2019
n/a
n/a
12 (from Company), 6 (from Executive)
12 (from Company), 6 (from Executive)
Director
Executives
Stephen Wilson
Alison Henriksen
Non-Executives
Bob Lawson
11 November 2010
4 September 2020
25 November 2020
Lykele van der Broek
1 July 2014
4 September 2020
Lysanne Gray
Lesley Knox
Ian Charles
Iain Ferguson
1 April 2016
1 June 2018
1 July 2018
1 July 2020
1 April 2019
1 June 2018
1 July 2018
1 July 2020
1 July 2023
1 April 2022
1 June 2021
1 July 2021
1 July 2023
1
1
1
1
1
6
Genus plc / Annual Report 2020 REMUNERATION COMMITTEE REPORT CONTINUED
Section E – Summary of Directors’ Remuneration Policy
87
KEY DESIGN/PHILOSOPHY OF OUR REMUNERATION POLICY APPROVED BY SHAREHOLDERS AT THE 2019 AGM
WHAT WE ARE TRYING TO ACHIEVE
HOW WE ARE LOOKING TO ACHIEVE IT
> Continued transformation into a global agricultural biotechnology
pioneer
> Pursuit of leading-edge technology and focus on long term innovation
and opportunity to enable future value creation for shareholders
> Sustainable robust short-term delivery of financial performance as we
> Draw upon the aspects of our current policy that are already working
> Include strategic measures within annual bonus assessment whilst
increasing the focus on financial metrics
> Reduction to pension contribution levels permitted within the policy
> Introduction of a post-cessation shareholding requirement and enhanced
invest in the future
malus and clawback provisions
> Ability to recognise innovation and progress, which are crucial to
securing long-term bottom-line performance
> Ability to attract and motivate a high-quality leadership team and drive
focus and behaviours on long term achievement in a global market
for talent
> Recognise expectations of shareholders on reward and governance
CORPORATE GOVERNANCE
88
REMUNERATION COMMITTEE REPORT CONTINUED
Section E – Summary of Directors’ Remuneration Policy
BELOW IS A SUMMARY OF THE REMUNERATION POLICY APPROVED BY SHAREHOLDERS AT THE 2019 AGM
EXECUTIVE DIRECTORS’ POLICY TABLE
Base salary
Benefits
Pension
Annual bonus
Performance Share Plan
Shareholding
PURPOSE
To provide
competitive fixed
remuneration that
will attract and retain
employees with the
experience
necessary to develop
and execute our
strategy.
OPERATION
Payable in cash.
Reviewed annually
by the Committee
with any change
effective from
1 September.
Factors considered
when reviewing
salary include:
> Salary increases
awarded to other
employees in the
country where
the individual is
based
> Comparable
salaries when
benchmarked
against relevant
market
comparators
(both in the UK
and
internationally)
> The experience of
the individual and
the nature of the
contribution
they are making
and their
responsibilities
> Overall Group
performance and
wider economic
conditions.
To provide a
competitive range
of benefits to drive
engagement and
commitment to Genus.
To provide a
competitive Company
contribution that
enables effective
retirement planning.
To motivate and incentivise
delivery of annual
performance targets
covering a combination of
financial and strategic
measures.
To incentivise
Executives to achieve
superior returns to
shareholders over a
three-year period, to
retain key individuals
and align with
shareholder interests.
To align Executives and
shareholders.
Directors may
participate in the
Company Pension Plan
(a defined contribution
arrangement) or an
alternative pension
saving vehicle that the
Company may provide.
Alternatively, the
Company may provide
a cash supplement
in lieu of pension
contributions into
a scheme.
Only base salary is
pensionable.
One third of the annual
bonus is deferred into
Company shares for a
period of three years,
subject to continued
service. The remaining
award is payable in cash.
Malus and clawback
provisions exist for awards
made under the Annual
Bonus.
A dividend equivalent
provision enables
dividends to be paid
(in cash or shares) on
deferred shares that vest.
See explanatory notes
for further details on the
operation including leaver
provisions.
Awards scheduled to
vest three years from
grant, subject to
continued employment
and satisfaction of
challenging three-year
performance targets.
Following vesting the
post-tax number of
vested shares must be
held for at least a
further two-year period.
A dividend equivalent
provision enables
dividends to be paid
(in cash or shares) on
shares that vest.
Malus and clawback
provisions may apply
for a period of three
years.
See explanatory notes
for further details on
the operation including
leaver provisions.
Benefits generally
include a car allowance
and insured benefits
(e.g. life assurance and
private medical
insurance).
Where additional
benefits are offered in
a particular location
(or across the Group)
Executive Directors are
typically eligible to
receive those benefits
on similar terms. These
could include access to
employee discounts or
salary sacrifice benefits.
Directors may
participate in a Share
Incentive Plan (‘SIP’) or
any other all employee
share scheme on the
same terms as other
employees.
Where Executive
Directors are recruited
from overseas or
required to relocate
(including on an
international
assignment), benefits
such as travel and
relocation costs and tax
equalisation
arrangements may be
provided.
Executives are required
to achieve a
shareholding of 200% of
salary. It is expected that
this is achieved within
five years of
appointment, and that
this shareholding is
generated through
retention of at least half
of the shares that vest
under the Deferred
Share Bonus Plan and
Performance Share
Plans.
Once met, individuals
are expected to maintain
at least this level of
shareholding and it will
be reviewed by the
Committee annually.
A post cessation
shareholding policy will
apply for Executive
Directors that requires
100% of shareholding for
24 months following
cessation (or actual
applicable shareholding
in place at point of
leaving if lower).
This will apply
considering shares
awarded in respect of
2020 and beyond
(including to any new
appointments), and we
will not amend existing
conditions for current
awards. Malus and
clawback provisions
exist beyond cessation
of employment, and in
certain leaver situations
the expected share
treatment would
continue to drive
ongoing alignment
between the individual
and share price
performance.
Genus plc / Annual Report 2020 Base salary
Benefits
Pension
Annual bonus
Performance Share Plan
Shareholding
89
The car allowance is
capped under the
Policy at £20,000 per
annum.
An allowance will be
made available in line
with the rate available
to the wider workforce.
Maximum opportunity of
200%.
n/a
Maximum annual award
of 200% of salary (300%
of salary in exceptional
circumstances, such as
recruitment).
Maximum permitted
under the Policy will be
10% of salary.
The value of insured
benefits will vary each
year, based on the cost
of the premiums paid,
and will be reflected
within the respective
single figure table for
the year.
MAXIMUM
There is no set
maximum, but
changes are typically
in line with the wider
workforce.
Individual changes
may be made at the
discretion of the
Committee outside
of these levels by
exception. This could
include the following
situations:
> Significant
change in
responsibility
> Change in the
Group’s size and
complexity
> To enable salary
progression for
newly appointed
Directors as they
develop in role.
CORPORATE GOVERNANCE
90
REMUNERATION COMMITTEE REPORT CONTINUED
Section E – Summary of Directors’ Remuneration Policy
Base salary
Benefits
Pension
Annual bonus
Performance Share Plan
Shareholding
PERFORMANCE
CONDITIONS
n/a
n/a
n/a
n/a
Bonus awards are subject
to achievement against a
sliding scale of challenging
financial and strategic
objectives, which the
Committee sets each year
to reflect priorities for the
year ahead.
Awards vest based on
three-year performance
against a challenging
range of targets,
aligned with the
delivery of the
Company’s long-term
strategy.
The specific performance
measures are reviewed
every year to ensure they
continue to support the
Company’s strategy.
Financial measures govern
the majority of the bonus
and are typically linked to
key performance indicators
(e.g. profit and cash
generation).
Strategic measures reflect
key areas of importance
identified by the
Committee in advance.
For financial performance
targets are based on a
graduated scale. The level
of payment at threshold is
set annually but will not
exceed 25% of maximum.
Full awards are for
substantial outperformance
against targets set.
The Committee has
discretion to adjust the
bonus outcome in light of
overall underlying
performance. Any
adjustment will be
disclosed within the
following Annual Report
on Remuneration.
Once set, performance
measures and targets are
expected to remain
unaltered. The exception
would be if events were to
occur which, in the opinion
of the Committee, made it
appropriate to make
adjustments to ensure that
the scheme operates as
originally intended.
Financial targets
(including adjusted
earnings per share
growth) will determine
the vesting of a majority
of awards granted in
any year.
The threshold level of
vesting is 20% of the
maximum. For
performance between
threshold and
maximum, awards vest
on a straight-line basis.
The Committee has
discretion to scale back
(but not scale up)
vesting, if the Group’s
performance over the
period is not
considered to reflect
the progress made
against strategic
business targets.
The Committee will
review performance
conditions annually,
specifically the range of
earnings per share
targets and the metrics
and weightings applied
to each element of the
PSP. Any revisions to the
metrics and/or
weightings will only
take place if it is
necessary because of
developments in the
Company’s strategy
and, where these are
material, following
dialogue with the
Company’s major
shareholders.
Genus plc / Annual Report 2020 91
NON-EXECUTIVE DIRECTORS’ REMUNERATION POLICY
The table below outlines the approach to remuneration for the Chairman and non-executive directors. Neither the Chairman nor other non-executive
directors participate in any bonus or share plans. All Non-Executive Directors have specific terms of engagement. Their appointment is for a fixed term of
three years and is subject to one month’s notice of termination by either the Company or the Non-Executive Director, and to annual re-election at the
Company’s AGM in accordance with the UK Corporate Governance Code.
Fees
PURPOSE
To provide compensation that attracts high-calibre individuals and reflects their experience and knowledge.
OPERATION
Payable in cash.
The Committee determines the Chairman’s fee.
The Board periodically reviews Non-Executive Directors’ fees.
Additional fees are paid to Non-Executive Directors who chair a Board Committee or advise the GPSC and to the Senior Independent
Director (‘SID’).
No Directors take part in meetings where their own remuneration is discussed.
Fees are based on the time commitments involved in each role and set with reference to the fees paid in other similarly sized UK listed
companies.
MAXIMUM
Any increase in Non-Executive Director fees may be above the level awarded to employees, given that they are only reviewed periodically
and may need to reflect any changes to time commitments or responsibilities.
The periodic review may result in an increase beyond the fees currently payable.
Non-Executive Directors also receive reimbursement of reasonable expenses incurred in connection with Company business and the
Company may settle any tax incurred in relation to these. The fees payable for 2020 are stated on page 84.
Approved by the Board and signed on its behalf by:
Lesley Knox
Chair of the Remuneration Committee
7 September 2020
CORPORATE GOVERNANCE
92
DIRECTORS’ REPORT
INFORMATION INCORPORATED BY REFERENCE
The following information required to be included in a
Directors’ Report is provided elsewhere in the Annual
Report and is incorporated into the Directors’ Report
by cross reference.
Details of the Company’s employee share schemes are set
out in note 30. In connection with these schemes, the Genus
plc Employee Benefit Trust holds shares in the Company
from time to time and abstains from voting in respect of
any such shares.
Dan Hartley
GROUP GENERAL COUNSEL AND
COMPANY SECRETARY
Content
Directors
Dividends
Financial results
Greenhouse gas emissions and energy
consumption
Location
Pages 50 to 51
Page 33
Pages 30 to 33
Pages 41 to 42
Research and Development activities
Pages 26 to 27
Financial risk management
Pages 30 to 33
Future developments in the business
Pages 14 to 29
For additional information on capital risk management
including financial instruments, see note 26.
AUTHORITY TO ACQUIRE THE COMPANY’S OWN SHARES
The Directors may only buy back shares to the extent
authorised by the shareholders in general meeting.
The current power to buy back shares was granted by
shareholder resolution at the 2019 AGM and a new authority
is being sought at the 2020 AGM within the limits set out in
the notice of meeting, that is up to a nominal value of
£650,937 (representing 10% of the Company’s current
issued share capital).
Directors’ interests
Engagement with employees,
customers, suppliers and others
Pages 84 to 86
Pages 12 to 13
The Company did not buy back any shares under the
authority granted at the 2019 AGM, from the date of that
AGM up to the date of this report.
Post balance sheet events
Note 41
EQUAL OPPORTUNITIES/EMPLOYEES WITH
DISABILITIES
Genus values diversity and aims to make best use of
everyone’s skills and abilities. We are therefore committed
to equal opportunities at every stage of our employees’
careers. Our policy on employees with disabilities is to fully
and fairly consider people with disabilities for all vacancies.
We interview and recruit people with disabilities and
endeavour to retain employees if they become disabled
while they work for us. Where possible, we will retrain
employees who become disabled and adjust their working
environment, so they can maximise their potential.
POLITICAL CONTRIBUTIONS
The Group does not make political contributions.
SHARE CAPITAL
Note 31 gives details of the Company’s issued share capital
and any movements in the issued share capital during
the year.
The Directors may only issue shares to the extent authorised
by the shareholders in general meeting. The current power
to allot shares was granted by shareholder resolution at the
2019 AGM and a new authority is being sought at the 2020
AGM within the limits set out in the notice of meeting, that
is up to a nominal value of £4,339,585.33 (representing
two-thirds of the Company’s current issued share capital).
The Company has one class of ordinary share, with the
rights set out in the Articles of Association. All issued shares
are fully paid and each share has the right to one vote at the
Company’s general meetings. There are no specific
restrictions either on the size of a holding or on the transfer
of shares, which are both governed by our Articles of
Association and prevailing legislation. No person has any
special rights of control over the Company’s share capital.
SUBSTANTIAL SHAREHOLDINGS
As at 1 September 2020, we were aware of the following
material interests in the Company’s ordinary shares:
Fund Manager
Shareholding
Baillie Gifford
Aberdeen Standard Investments
BlackRock
Columbia Threadneedle
Investments
Vanguard Group
Lansdowne Partners
5,365,801
4,693,262
2,954,083
2,860,994
2,616,150
1,818,267
%
8.24
7.21
4.54
4.40
4.02
2.79
There have been no material changes in shareholding since
30 June 2020.
No other person has notified an interest in the Company’s
ordinary shares, which is required to be disclosed to us.
PROVISION OF INFORMATION TO THE COMPANY’S
AUDITOR
Each of the Directors at the date of approval of this Annual
Report confirms that:
> so far as the Director is aware, there is no relevant audit
information of which the Company’s auditor is unaware;
and
> the Director has taken all the steps that he or she ought
to have taken as a Director in order to make himself or
herself aware of any relevant audit information and to
establish that the Company’s auditor is aware of that
information.
This confirmation is given and should be interpreted in
accordance with the provisions of section 418 Companies
Act 2006.
Genus plc / Annual Report 2020 93
APPOINTMENT OF AUDITOR
Deloitte LLP has expressed its willingness to continue in
office as auditor and a resolution to reappoint it will be
proposed at the forthcoming AGM.
DIRECTORS’ INDEMNITIES
The Company has made qualifying third-party indemnity
provisions for the benefit of its Directors which were made
during the year and remain in force at the date of this report.
CONFLICTS OF INTEREST
The Company has procedures for managing conflicts of
interest. If a Director becomes aware that they or any of
their connected parties have an interest in an existing or
proposed transaction with Genus, they should notify the
Chairman and the Company Secretary in writing or at the
next Board meeting. Controls are in place to ensure that any
related-party transactions involving Directors, or their
connected parties, are conducted on an arm’s length basis.
Directors have an ongoing duty to update the Board on
any changes to these conflicts.
REQUIREMENTS OF THE LISTING RULES
Details of the Company’s long-term incentive schemes
can be found in the Directors’ Remuneration Report on
pages 70 to 91.
Approved by the Board and signed on its behalf by:
Dan Hartley
Group General Counsel and Company Secretary
7 September 2020
CORPORATE GOVERNANCE
DIRECTORS’ RESPONSIBILITY STATEMENT
We confirm that to the best of our knowledge:
> the Financial Statements, prepared in accordance with the relevant
financial reporting framework, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company and the
undertakings included in the consolidation taken as a whole;
> the Strategic Report includes a fair review of the development and
performance of the business and the position of the Company and the
undertakings included in the consolidation taken as a whole, together
with a description of the principal risks and uncertainties that they
face; and
> the Annual Report and Financial Statements, taken as a whole, are fair,
balanced and understandable, and provide the information necessary
for shareholders to assess the Company’s position, performance,
business model and strategy.
Approved by the Board and signed on its behalf by:
Stephen Wilson
Chief Executive
7 September 2020
Alison Henriksen
Chief Financial Officer
7 September 2020
94
DIRECTORS’ RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report and the
Financial Statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare Financial Statements for
each financial year. Under that law, the Directors are required to prepare
the Group Financial Statements in accordance with International Financial
Reporting Standards (‘IFRSs’) as adopted by the European Union and
Article 4 of the IAS Regulation and have chosen to prepare the Parent
Company Financial Statements in accordance with Financial Reporting
Standard 101 ‘Reduced Disclosure Framework’. Under company law, the
Directors must not approve the financial statements unless they are
satisfied that they give a true and fair view of the state of affairs of the
Company and of the profit or loss of the Company for that period.
In preparing the Parent Company Financial Statements, the Directors are
required to:
> select suitable accounting policies and then apply them consistently;
> make judgements and accounting estimates that are reasonable
and prudent;
> state whether Financial Reporting Standard 101 ‘Reduced Disclosure
Framework’ has been followed, subject to any material departures
disclosed and explained in the Financial Statements; and
> prepare the Financial Statements on the going concern basis, unless it
is inappropriate to presume that the Company will continue in business.
In preparing the Group Financial Statements, International Accounting
Standard 1 requires that Directors:
> properly select and apply accounting policies;
> present information, including accounting policies, in a manner that
provides relevant, reliable, comparable and understandable
information;
> provide additional disclosures when compliance with the specific
requirements in IFRSs are insufficient to enable users to understand
the impact of particular transactions, other events and conditions on
the entity’s financial position and financial performance; and
> make an assessment of the Company’s ability to continue as a
going concern.
The Directors are responsible for keeping adequate accounting records
that are sufficient to show and explain the Company’s transactions and
disclose with reasonable accuracy at any time the financial position of the
Company and enable them to ensure that the Financial Statements comply
with the Companies Act 2006. They are also responsible for safeguarding
the assets of the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company’s website.
Legislation in the UK governing the preparation and dissemination of
Financial Statements may differ from legislation in other jurisdictions.
Genus plc / Annual Report 2020 INDEPENDENT AUDITOR’S REPORT
To the Members of Genus plc
95
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS
1. Opinion
In our opinion:
> the financial statements of Genus plc (the ‘Parent Company’) and its subsidiaries (the ‘Group’) give a true and fair view of the state of the
Group’s and of the Parent Company’s affairs as at 30 June 2020 and of the Group’s profit for the year then ended;
> the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards (‘IFRSs’) as
adopted by the European Union;
> the Parent Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting
Practice, including Financial Reporting Standard 101 ‘Reduced Disclosure Framework’; and
> the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the Group
financial statements, Article 4 of the IAS Regulation.
We have audited the financial statements which comprise:
> the Group Income Statement;
> the Group Statement of Comprehensive Income;
> the Group and Parent Company Statements of Changes in Equity;
> the Group and Parent Company Balance Sheets;
> the Group Statement of Cash Flows; and
> the related notes 1 to 41 and C1 to C20.
The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law and IFRSs as adopted by the
European Union. The financial reporting framework that has been applied in the preparation of the Parent Company financial statements is applicable law
and United Kingdom Accounting Standards, including FRS 101 ‘Reduced Disclosure Framework’ (United Kingdom Generally Accepted Accounting Practice).
2. Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those
standards are further described in the auditor’s responsibilities for the audit of the financial statements section of our report.
We are independent of the Group and the Parent Company in accordance with the ethical requirements that are relevant to our audit of the financial
statements in the UK, including the Financial Reporting Council’s (the ‘FRC’s’) Ethical Standard as applied to listed public interest entities, and we have
fulfilled our other ethical responsibilities in accordance with these requirements. The non-audit services provided to the Group and Parent Company for the
year are disclosed in note 8 to the financial statements. We confirm that the non-audit services prohibited by the FRC’s Ethical Standard were not provided
to the Group or the Parent Company.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
3. Summary of our audit approach
Key audit matters
The key audit matters that we identified in the current year were:
> Valuation of Biological Assets under IAS 41 ‘Agriculture’; and
> Valuation of Goodwill attributed to the ABS cash-generating unit.
Within this report, key audit matters are identified as follows:
Newly identified
Increased level of risk
Similar level of risk
Decreased level of risk
Materiality
Scoping
Significant changes in our
approach
The materiality that we used for the Group financial statements was £3.0m which was determined on the basis of Profit
before Tax (‘PBT’), excluding the impact of exceptional items and the net IAS 41 valuation movement on biological
assets.
Our audit scope covered 12 components. Of these, nine were subject to a full scope audit, and three were subject to
specified procedures. Our testing achieved coverage of 76% of Revenue, 81% of Net Assets and 83% of PBT, excluding
the impact of exceptional items and the net IAS 41 valuation movement on biological assets.
Our key audit matters remain consistent with the prior year. In the current year we performed a full scope audit in
respect of PIC China (2019: specified procedures), reflecting a significant increase in the component’s contribution to
the Group. PIC Philippines was removed from our Group audit scope, reflecting an overall decline in the component’s
contribution to the Group. Specified procedures were no longer required in respect of the Irish component following
the unwind of the structure in the year.
FINANCIAL STATEMENTS
96
INDEPENDENT AUDITOR’S REPORT CONTINUED
To the Members of Genus plc
4. Conclusions relating to going concern, principal risks and viability statement
4.1. Going concern
We have reviewed the Directors’ statement in note 2 to the financial statements about whether they
considered it appropriate to adopt the going concern basis of accounting in preparing them and their
identification of any material uncertainties to the Group’s and Parent Company’s ability to continue to do
so over a period of at least 12 months from the date of approval of the financial statements.
We considered as part of our risk assessment the nature of the Group, its business model and related
risks including where relevant the impact of the COVID-19 pandemic and Brexit, the requirements of the
applicable financial reporting framework and the system of internal control. We evaluated the Directors’
assessment of the Group’s ability to continue as a going concern, including challenging the underlying
data and key assumptions used to make the assessment, and evaluated the Directors’ plans for future
actions in relation to their going concern assessment.
We are required to state whether we have anything material to add or draw attention to in relation to that
statement required by Listing Rule 9.8.6R(3) and report if the statement is materially inconsistent with our
knowledge obtained in the audit.
4.2. Principal risks and viability statement
Based solely on reading the Directors’ statements and considering whether they were consistent with the
knowledge we obtained in the course of the audit, including the knowledge obtained in the evaluation of
the Directors’ assessment of the Group’s and the Company’s ability to continue as a going concern, we
are required to state whether we have anything material to add or draw attention to in relation to:
> the disclosures on pages 44 – 46 that describe the principal risks, procedures to identify emerging
risks, and an explanation of how these are being managed or mitigated;
> the Directors’ confirmation on page 47 that they have carried out a robust assessment of the principal
and emerging risks facing the Group, including those that would threaten its business model, future
performance, solvency or liquidity; or
> the Directors’ explanation on page 47 as to how they have assessed the prospects of the Group, over
what period they have done so and why they consider that period to be appropriate, and their
statement as to whether they have a reasonable expectation that the Group will be able to continue in
operation and meet its liabilities as they fall due over the period of their assessment, including any
related disclosures drawing attention to any necessary qualifications or assumptions.
We are also required to report whether the Directors’ statement relating to the prospects of the Group
required by Listing Rule 9.8.6R(3) is materially inconsistent with our knowledge obtained in the audit.
Going concern is the basis of preparation of
the financial statements that assumes an
entity will remain in operation for a period of
at least 12 months from the date of approval
of the financial statements.
We confirm that we have nothing material to
report, add or draw attention to in respect of
these matters.
Viability means the ability of the Group to
continue over the time horizon considered
appropriate by the Directors.
We confirm that we have nothing material to
report, add or draw attention to in respect of
these matters.
5. Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current
period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included
those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters.
Valuation of Biological Assets under IAS 41 ‘Agriculture’
Key audit matter
description
The Group carries biological assets at fair value in line with the requirements of IAS 41 ‘Agriculture’. Discounted cash flow
analyses are performed in determining the valuation. As at 30 June 2020, the Group held total biological assets (excluding
those recognised in inventory) of £349.9m (2019: £327.2m restated).
Certain of the assumptions included within management’s valuation models are subject to estimation uncertainty, and
accordingly, require the exercise of a significant degree of judgement. We deem these assumptions to represent potential
areas in which management could seek to fraudulently manipulate the financial statements.
In planning our audit we identified the following management assumptions as being the most significant in the determination
of the valuation of each species:
Bovine: the future growth rates in semen sales; the Biological Asset Value discount factor; the forecast weighted average age
of bulls producing saleable semen; and the discount rate applied.
Porcine: the percentage of pureline offspring retained, sold or slaughtered and the discount rates applied to the forecast cash
flows.
In the course of our audit, management alerted us to a historic error in the extraction of the input data used to determine the
valuation of the Pureline herd (Porcine); management corrected this in the financial statements through a restatement of the
comparative information.
Details of the restatement recorded, the key source of estimation uncertainty identified, the Group’s accounting policy, and
the biological assets held are disclosed in notes 2, 4 and 16 to the financial statements. The Audit & Risk Committee has
included their assessment of the restatement and key audit matter on page 65.
Genus plc / Annual Report 2020 97
How the scope of our
audit responded to the
key audit matter
In responding to the identified key audit matter we completed the following audit procedures:
> obtained an understanding of controls relevant to the review and approval of the valuation of biological assets;
> assessed the appropriateness of the logic and mechanical accuracy of the valuation models prepared and the
methodology applied by management for compliance with the requirements of IAS 41 ‘Agriculture’;
> made enquiries of management to understand the rationale applied in the determination of key assumptions and any
changes year on year;
> challenged the appropriateness of key assumptions applied within the underlying forecasts prepared by management,
with consideration given to historical forecasting accuracy, availability of third-party benchmarking data (where
appropriate);
> substantively tested the current sales age data and benchmarked forecast trends in the age of bulls producing saleable
semen (Bovine);
> substantively tested the underlying transactional data underpinning third-party semen sales and inspected the related
contracts (Bovine);
> substantively tested the reasonableness of management’s forecasts with regard to the percentages of offspring to be
retained, sold or slaughtered with reference to historic transaction data, and further, considered the appropriateness of
the forward looking assumption applied (Porcine);
> involved our internal valuation specialists in our consideration as to the appropriateness of the discount rate applied by
management in determining the fair value of biological assets;
> understood the root cause of the data extraction error identified by management in respect of the Pureline herd and the
resultant restatement recorded. Specifically, we reviewed the procedures undertaken by management in quantifying the
error and the reasonableness of conclusions made in accordance with the requirements of IAS 8 ‘Accounting Policies,
Changes in Accounting Estimates and Errors.’ Substantive audit procedures, including consideration of third-party
scientific evidence, were performed in respect of the underlying transactional data used to determine the accuracy and
completeness of the error; and
> assessed the completeness and accuracy of disclosures made within the financial statements in accordance with IAS 41
‘Agriculture’, IAS 8 ‘Accounting Policies, Changes in Accounting Estimates and Errors’, and IAS 1 ‘Presentation of Financial
Statements’.
Key observations
We are satisfied that the valuation of biological assets and the related disclosures are appropriate.
Valuation of Goodwill attributed to the ABS cash-generating unit
Key audit matter
description
Management is required to assess the carrying value of goodwill and perform a full impairment review in accordance with the
requirements of IAS 36 ‘Impairment of Assets’ on an annual basis, or more frequently if an indicator of impairment exists. As at
30 June 2020, the Group held goodwill of £105.6m (2019: £106.3m) with £31.5m (2019: £33.3m) attributable to ABS.
Certain of the assumptions included within management’s valuation models, principally the short-term future growth rate
and discount rate applied, are subject to estimation uncertainty, and accordingly, require the exercise of a significant degree
of judgement. We deem these assumptions to represent potential areas in which management could seek to fraudulently
manipulate the financial statements.
Details of the key source of estimation uncertainty identified, the Group’s accounting policy; and the goodwill held are
disclosed in notes 2, 4 and 14 to the financial statements. The Audit & Risk Committee has included their assessment of the
key audit matter on page 65.
How the scope of our
audit responded to the
key audit matter
In responding to the identified key audit matter we completed the following audit procedures:
> obtained an understanding of controls relevant to the review and approval of the valuation of goodwill attributed to ABS;
> assessed the appropriateness of the logic and mechanical accuracy of the valuation models prepared and the
methodology applied by management for compliance with the requirements of IAS 36 ‘Impairment of Assets’;
> made enquiries of management to understand the rationale applied in the determination of key assumptions and any
changes year on year;
> challenged the appropriateness of assumptions applied in determining the short-term future growth rate within the
underlying forecast prepared by management; with consideration given to historical forecasting accuracy, availability of
third-party benchmarking data (where appropriate), and the reasonableness of management’s projections with regard to
relatively new revenue streams;
> involved our internal valuation specialists in our consideration as to the appropriateness of the discount rate applied by
management in determining the valuation of goodwill attributed to ABS;
> reviewed the sensitivities modelled by management, and performed our own independent sensitivity analyses based on
the outcomes of the procedures identified above in order to consider the adequacy of disclosures made; and
> assessed the completeness and accuracy of disclosures made within the financial statements in accordance with IAS 36
‘Impairment of Assets’.
Key observations
We are satisfied that the assumptions applied by management in their assessment as to the valuation of goodwill attributed
to the ABS cash generating unit and the related disclosures made are appropriate.
FINANCIAL STATEMENTS
98
INDEPENDENT AUDITOR’S REPORT CONTINUED
To the Members of Genus plc
6. Our application of materiality
6.1. Materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a reasonably
knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work and in evaluating the results of our
work.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Materiality
£3.0m (2019: £2.3m)
£2.5m (2019: £1.8m)
Group financial statements
Parent company financial statements
Basis for determining materiality
Rationale for the benchmark applied
5% (2019: 5%) of Profit before Tax excluding the
impact of exceptional items and the net IAS 41
valuation movement on biological assets.
The increase in materiality reflects the improved
trading performance of the Group.
We have used an adjusted profit-based measure
on which to determine materiality. This is
considered appropriate to avoid distortion that
could otherwise arise due to non-recurring items
and IAS 41 fair value movements.
1% (2019: 1%) of net assets.
The increase in materiality is in line with the
increase in Group materiality.
Net assets was selected as an appropriate
benchmark for determining materiality, as the
Company acts primarily as a holding company.
PBT excl. exceptional
items and the net
IAS 41 valuation movement
on biological assets £54.9m
Group materiality
£3.0m
Component
materiality range
£1.0m to £1.4m
Audit & Risk Committee
reporting threshold
£150k
6.2. Performance materiality
We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and undetected misstatements
exceed the materiality for the financial statements as a whole. Group performance materiality was set at 70% of Group materiality for the 2020 audit (2019:
70%). In determining performance materiality, we considered the following factors:
> our cumulative knowledge of the Group and its internal control environment;
> the extent of any changes in key management personnel including the transitioned Chief Executive and newly appointed Chief Financial Officer;
> the high degree of centralisation in the Group’s financial reporting controls and processes; and
> the low number of corrected and uncorrected misstatements identified in prior periods.
6.3. Error reporting threshold
We agreed with the Audit & Risk Committee that we would report to the Committee all audit differences in excess of £150k (2019: £115k), as well as
differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit & Risk Committee on disclosure
matters that we identified when assessing the overall presentation of the financial statements.
7. An overview of the scope of our audit
7.1. Identification and scoping of components
Our audit was scoped by obtaining an understanding of the Group and its environment, including Group-wide controls, and assessing the risks of material
misstatement at the Group level.
Components were selected to provide an appropriate basis for undertaking audit work to address the risks of material misstatement identified. Based on
that assessment, we identified 12 components of interest for the purposes of the Group audit (2019: 14). Of these components, nine were designated as
subject to full scope audit procedures (2019: nine), with the remaining three subject to specified procedures (2019: five). Excluding the Parent Company, our
component audits were performed using materiality between £1.0m and £1.4m (2019: £0.9m and £1.8m). These components represent the principal
business units and account for 76% of the Group’s Revenue (2019: 75%), 81% of the Group’s Net Assets (2019: 79%)and 83% of the Group’s PBT, excluding the
impact of exceptional items and the net IAS 41 valuation movement on biological assets (2019: 84%).
In the current year we performed a full scope audit in respect of PIC China (2019: specified procedures), reflecting a significant increase in the component’s
contribution to the Group. PIC Philippines was removed from our Group audit scope (2019: full scope), reflecting an overall decline in the component’s
contribution to the Group. Specified procedures were no longer required in respect of the Irish component following the unwind of the structure in the year.
At the Group level we also tested the consolidation process and carried out analytical procedures to confirm our conclusion that there were no significant
risks of material misstatement within the aggregated financial information of the remaining components not subject to full scope audit or specified
procedures.
Genus plc / Annual Report 2020 99
REVENUE
PROFIT BEFORE TAX1
NET ASSETS
3
2
1
2
3
2
3
1
1
1 Full scope audit
2 Specified procedures
3 Revenue at Group level
72%
4%
24%
1 Full scope audit
2 Specified procedures
3 Revenue at Group level
82%
1%
17%
1 Full scope audit
2 Specified procedures
3 Revenue at Group level
78%
3%
19%
1 Excluding the impact of exceptional items and the net IAS 41 valuation movement on biological assets.
7.2. Working with other auditors
The Group audit team engaged component audit teams to perform the audit procedures as set out in section 7.1. The Group audit team held regular
communication with the component auditors in planning for, and throughout, the year-end audit process. Oversight of the component auditors included
attending internal planning and status meetings, attending virtual inventory counts (where applicable), attending close meetings held with local
management, and reviewing relevant audit documentation.
In light of the travel restrictions and widespread lockdowns resulting from the COVID-19 pandemic we were not able to complete our normal programme of
planned visits. In response to these restrictions we enhanced our remote oversight through a number of measures, as appropriate to each component,
including more frequent dialogue and use of video conferencing and screen-sharing facilities. In the previous year, senior members of the Group audit team
visited component audit teams in the USA, Brazil, Chile, and in the UK.
8. Other information
The Directors are responsible for the other information. The other information comprises the information included in Strategic Report and the Corporate
Governance sections of the Annual Report; all information other than the financial statements and our auditor’s report thereon.
Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other
information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in
the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report that fact.
In this context, matters that we are specifically required to report to you as uncorrected material misstatements of the other information include where we
conclude that:
> Fair, balanced and understandable – the statement given by the Directors that they consider the Annual Report and financial statements taken as a
whole is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group’s position and performance,
business model and strategy, is materially inconsistent with our knowledge obtained in the audit; or
> Audit & Risk Committee reporting – the section describing the work of the Committee does not appropriately address matters communicated by us
to the Committee; or
> Directors’ statement of compliance with the UK Corporate Governance Code – the parts of the Directors’ statement required under the Listing
Rules relating to the Company’s compliance with the UK Corporate Governance Code containing provisions specified for review by the auditor in
accordance with Listing Rule 9.8.10R(2) do not properly disclose a departure from a relevant provision of the UK Corporate Governance Code.
We have nothing to report in respect of these matters.
9. Responsibilities of Directors
As explained more fully in the Directors’ responsibilities statement, the Directors are responsible for the preparation of the financial statements and for
being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the Parent Company’s ability to continue as a going
concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to
liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so.
FINANCIAL STATEMENTS
100
INDEPENDENT AUDITOR’S REPORT CONTINUED
To the Members of Genus plc
10. Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to
fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of these financial statements.
Details of the extent to which the audit was considered capable of detecting irregularities, including fraud and non-compliance with laws and regulations
are set out below.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
11. Extent to which the audit was considered capable of detecting irregularities, including fraud
We identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and then design and perform audit
procedures responsive to those risks, including obtaining audit evidence that is sufficient and appropriate to provide a basis for our opinion.
11.1. Identifying and assessing potential risks related to irregularities
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, we
considered the following:
> the nature of the industry and sector, control environment and business performance including the design of the group’s remuneration policies, key
drivers for Directors’ remuneration, bonus levels and performance targets;
> results of our enquiries of management, internal audit, and the Audit & Risk Committee about their own identification and assessment of the risks of
irregularities;
> any matters we identified having obtained and reviewed the Group’s documentation of their policies and procedures relating to:
identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of non-compliance;
–
– detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged fraud;
–
the internal controls established to mitigate risks of fraud or non-compliance with laws and regulations;
> the matters discussed among the audit engagement team including significant component audit teams and involving relevant internal specialists,
including tax, valuations, pensions, and IT specialists regarding how and where fraud might occur in the financial statements and any potential
indicators of fraud.
As a result of these procedures, we considered the opportunities and incentives that may exist within the organisation for fraud and identified the greatest
potential for fraud in those areas set out as key audit matters. In common with all audits under ISAs (UK), we are also required to perform specific
procedures to respond to the risk of management override.
We also obtained an understanding of the legal and regulatory frameworks that the Group operates in, focusing on provisions of those laws and regulations
that had a direct effect on the determination of material amounts and disclosures in the financial statements. The key laws and regulations we considered
in this context included the UK Companies Act, Listing Rules, pensions legislation, and global tax legislation.
In addition, we considered provisions of other laws and regulations that do not have a direct effect on the financial statements but compliance with which
may be fundamental to the Group’s ability to operate or to avoid a material penalty. These included the group’s compliance with health and safety
regulations and environmental regulations.
11.2. Audit response to risks identified
As a result of performing the above, we identified the valuation of biological assets under IAS 41 ‘Agriculture’ and the valuation of goodwill attributed to the
ABS cash-generating unit as key audit matters related to the potential risk of fraud. The key audit matters section of our report explains the matters in more
detail and also describes the specific procedures we performed in response to those key audit matters.
In addition to the above, our procedures to respond to risks identified included the following:
> reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with provisions of relevant laws and
regulations described as having a direct effect on the financial statements;
> enquiring of management, the Audit & Risk Committee, and in-house and external legal counsel concerning actual and potential litigation and claims;
> performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due to fraud;
> reading minutes of meetings of those charged with governance, and reviewing internal audit reports; and
> in addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries and other adjustments;
assessing whether the judgements made in making accounting estimates are indicative of a potential bias; and evaluating the business rationale of any
significant transactions that are unusual or outside the normal course of business.
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members including internal specialists
and significant component audit teams, and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.
Genus plc / Annual Report 2020 101
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
12. Opinions on other matters prescribed by the Companies Act 2006
In our opinion the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with
the Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
> the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are prepared
is consistent with the financial statements; and
> the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Group and the Parent Company and their environment obtained in the course of the audit,
we have not identified any material misstatements in the Strategic Report or the Directors’ Report.
13. Matters on which we are required to report by exception
13.1. Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if, in our opinion:
> we have not received all the information and explanations we require for our audit; or
> adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from branches not
visited by us; or
> the Parent Company financial statements are not in agreement with the accounting records and returns.
We have nothing to report in respect of these matters.
13.2. Directors’ Remuneration
Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of Directors’ Remuneration have not been made or the
part of the Directors’ Remuneration report to be audited is not in agreement with the accounting records and returns.
We have nothing to report in respect of these matters.
14. Other matters
14.1. Auditor tenure
Following the recommendation of the Audit & Risk Committee, we were appointed by the Board of Directors on 8 June 2006 to audit the financial
statements for the year ending 30 June 2006 and subsequent financial periods. The period of total uninterrupted engagement including previous renewals
and reappointments of the firm is 15 years, covering the years ended 30 June 2006 to 30 June 2020.
14.2. Consistency of the audit report with the additional report to the Audit & Risk Committee
Our audit opinion is consistent with the additional report to the Audit & Risk Committee we are required to provide in accordance with ISAs (UK).
15. Use of our report
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has
been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members
as a body, for our audit work, for this report, or for the opinions we have formed.
MARK TOLLEY FCA (SENIOR STATUTORY AUDITOR)
For and on behalf of Deloitte LLP
Statutory Auditor
Reading, United Kingdom
7 September 2020
FINANCIAL STATEMENTS
102
GROUP INCOME STATEMENT
For the year ended 30 June 2020
REVENUE
Adjusted Operating Profit
Adjusting items:
– Net IAS 41 valuation movement on biological assets
– Amortisation of acquired intangible assets
– Share-based payment expense
– Exceptional items:
– Litigation
– Acquisition and integration
– Other
– Pension related
Total exceptional items
Total adjusting items
OPERATING PROFIT
Share of post-tax profit of joint ventures and associates retained
Finance costs
Finance income
PROFIT BEFORE TAX
Taxation
PROFIT FOR THE YEAR
ATTRIBUTABLE TO:
Owners of the Company
Non-controlling interest
EARNINGS PER SHARE
Basic earnings per share
Diluted earnings per share
Alternative Performance Measures
Adjusted operating profit
Adjusted operating profit attributable to non-controlling interest
Pre-tax share of profits from joint ventures and associates excluding net IAS 41 valuation movement
Gene editing costs
Adjusted operating profit including joint ventures and associates, excluding gene
editing costs
Gene editing costs
Adjusted operating profit including joint ventures and associates
Net finance costs
Adjusted Profit Before Tax
Adjusted Earnings Per Share
Basic adjusted earnings per share
Diluted adjusted earnings per share
Note
5, 6
5
16
15
30
7
8
18
10
10
11
2020
£m
551.4
65.3
15.8
(8.5)
(5.8)
1.5
(16.4)
(2.1)
(0.7)
–
(19.2)
(17.7)
47.6
8.9
(5.3)
0.3
51.5
(10.6)
40.9
40.5
0.4
40.9
2019
£m
488.5
57.7
(14.7)
(9.5)
(3.0)
(27.2)
(5.0)
(0.7)
(0.9)
(15.2)
(21.8)
(49.0)
8.7
5.1
(4.7)
0.8
9.9
(3.2)
6.7
7.8
(1.1)
6.7
12
12
62.4p
61.9p
12.4p
11.9p
65.3
(0.6)
11.3
5.2
81.2
(5.2)
76.0
(5.0)
71.0
57.7
(0.4)
7.6
7.3
72.2
(7.3)
64.9
(3.9)
61.0
85.4p
84.7p
73.2p
70.7p
10
12
12
Adjusted results are the Alternative Performance Measures (‘APMs’) used by the Board to monitor underlying performance at a Group and operating
segment level, which are applied consistently throughout. These APMs should be considered in addition to statutory measures, and not as a substitute for
or as superior to them. For more information on APMs, see APM Glossary.
Genus plc / Annual Report 2020 GROUP STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 June 2020
PROFIT FOR THE YEAR
Items that may be reclassified subsequently to profit or loss
Foreign exchange translation differences
Fair value movement on net investment hedges
Fair value movement on cash flow hedges
Tax relating to components of other comprehensive income
Items that may not be reclassified subsequently to profit or loss
Actuarial loss on retirement benefit obligations
Movement on pension asset recognition restriction
Release of additional pension liability
Tax relating to components of other comprehensive expense/(income)
OTHER COMPREHENSIVE (EXPENSE)/INCOME FOR THE YEAR
TOTAL COMPREHENSIVE INCOME FOR THE YEAR
ATTRIBUTABLE TO:
Owners of the Company
Non-controlling interest
103
2019
£m
6.7
13.4
15.8
29.2
35.9
37.1
(1.2)
35.9
Note
11
29
29
29
11
2020
£m
(4.9)
(0.1)
(0.4)
(1.4)
(16.6)
10.4
4.7
0.8
2019
£m
19.7
(1.6)
(2.2)
(2.5)
(5.4)
(10.1)
34.5
(3.2)
2020
£m
40.9
(6.8)
(0.7)
(7.5)
33.4
33.1
0.3
33.4
FINANCIAL STATEMENTS
104
GROUP STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2020
BALANCE AT 30 JUNE 2018
(as previously reported)
Prior period restatement
BALANCE AT 30 JUNE 2018 (restated)
Foreign exchange translation differences, net of tax
Fair value movement on net investment hedges, net of tax
Fair value movement on cash flow hedges, net of tax
Actuarial gain on retirement benefit obligations, net of tax
Movement on pension asset recognition restriction, net of tax
Recognition of additional pension liability, net of tax
Other comprehensive income/(expense) for the year
Profit for the year
Total comprehensive income/(expense) for the year
Recognition of share-based payments, net of tax
Adjustment arising from change in non-controlling interest
and written put option
Dividends
Issue of ordinary shares
BALANCE AT 30 JUNE 2019 (restated)
Foreign exchange translation differences, net of tax
Fair value movement on net investment hedges, net of tax
Fair value movement on cash flow hedges, net of tax
Actuarial loss on retirement benefit obligations, net of tax
Movement on pension asset recognition restriction, net of tax
Release of additional pension liability, net of tax
Other comprehensive expense for the year
Profit for the year
Total comprehensive income/(expense) for the year
Recognition of share-based payments, net of tax
Dividends
Issue of ordinary shares
Note
2
13
13
Called up
share
capital
£m
Share
premium
account
£m
Own
shares
£m
Trans-
lation
reserve
£m
Hedging
reserve
£m
Retained
earnings
£m
6.2
–
6.2
–
–
–
–
–
–
–
–
–
–
–
–
0.3
6.5
–
–
–
–
–
–
–
–
–
–
–
–
112.8
–
112.8
–
–
–
–
–
–
–
–
–
–
–
–
66.2
179.0
–
–
–
–
–
–
–
–
–
–
–
0.1
(0.1)
–
(0.1)
–
–
–
–
–
–
–
–
–
–
–
–
–
(0.1)
–
–
–
–
–
–
–
–
–
–
–
–
20.5
–
20.5
16.6
(1.3)
–
–
–
–
15.3
–
15.3
–
–
–
–
35.8
(6.4)
0.1
–
–
–
–
(6.3)
–
(6.3)
–
–
–
2.0
–
2.0
–
–
(1.8)
–
–
–
(1.8)
–
(1.8)
–
–
–
–
0.2
–
–
(0.4)
–
–
–
(0.4)
–
(0.4)
–
–
–
275.2
(15.2)
260.0
–
–
–
(4.6)
(8.3)
28.7
15.8
7.8
23.6
0.2
–
(16.8)
–
267.0
–
–
–
(10.4)
6.8
2.9
(0.7)
40.5
39.8
5.5
(18.3)
–
Non-
controll-
ing
interest
£m
2.5
–
2.5
(0.1)
–
–
–
–
–
(0.1)
(1.1)
(1.2)
–
(2.6)
–
–
(1.3)
(0.1)
–
–
–
–
–
(0.1)
0.4
0.3
–
–
–
Total
£m
416.6
(15.2)
401.4
16.6
(1.3)
(1.8)
(4.6)
(8.3)
28.7
29.3
7.8
37.1
0.2
–
(16.8)
66.5
488.4
(6.4)
0.1
(0.4)
(10.4)
6.8
2.9
(7.4)
40.5
33.1
5.5
(18.3)
0.1
Total
equity
£m
419.1
(15.2)
403.9
16.5
(1.3)
(1.8)
(4.6)
(8.3)
28.7
29.2
6.7
35.9
0.2
(2.6)
(16.8)
66.5
487.1
(6.5)
0.1
(0.4)
(10.4)
6.8
2.9
(7.5)
40.9
33.4
5.5
(18.3)
0.1
BALANCE AT 30 JUNE 2020
6.5
179.1
(0.1)
29.5
(0.2)
294.0
508.8
(1.0)
507.8
Genus plc / Annual Report 2020 GROUP BALANCE SHEET
As at 30 June 2020
ASSETS
Goodwill
Other intangible assets
Biological assets
Property, plant and equipment
Interests in joint ventures and associates
Other investments
Derivative financial assets
Other receivables
Deferred tax assets
TOTAL NON-CURRENT ASSETS
Inventories
Biological assets
Trade and other receivables
Cash and cash equivalents
Income tax receivable
Derivative financial assets
Asset held for sale
TOTAL CURRENT ASSETS
TOTAL ASSETS
LIABILITIES
Trade and other payables
Interest-bearing loans and borrowings
Provisions
Deferred consideration
Obligations under leases
Tax liabilities
Derivative financial liabilities
TOTAL CURRENT LIABILITIES
Trade and other payables
Interest-bearing loans and borrowings
Retirement benefit obligations
Provisions
Deferred consideration
Income tax liability
Deferred tax liabilities
Derivative financial liabilities
Obligations under leases
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Called up share capital
Share premium account
Own shares
Translation reserve
Hedging reserve
Retained earnings
EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY
Non-controlling interest
Put option over non-controlling interest
TOTAL NON-CONTROLLING INTEREST
TOTAL EQUITY
1 See note 2 for details of the prior period restatement.
105
Note
2020
£m
(restated)¹
2019
£m
(restated)¹
2018
£m
14
15
16
17
18
19
26
21
11
20
16
21
22
26
23
27
25
38
28
26
23
27
29
25
38
11
26
28
31
31
31
31
39
39
105.6
76.2
310.1
117.9
22.7
6.9
–
1.8
3.7
644.9
37.4
39.8
100.8
41.3
3.1
1.2
0.2
223.8
868.7
(95.0)
(9.2)
(4.0)
(7.5)
(10.0)
(4.0)
(0.5)
(130.2)
(3.3)
(103.6)
(18.1)
(11.8)
(1.2)
–
(65.5)
(6.1)
(21.1)
(230.7)
(360.9)
507.8
6.5
179.1
(0.1)
29.5
(0.2)
294.0
508.8
4.6
(5.6)
(1.0)
507.8
106.3
80.1
287.1
86.0
23.6
7.4
0.4
–
3.5
594.4
36.0
40.1
98.0
30.5
3.3
1.1
0.2
209.2
803.6
(87.7)
(2.1)
(3.1)
(2.0)
(2.2)
(6.1)
(1.0)
(104.2)
–
(101.9)
(24.2)
(5.7)
(4.2)
–
(66.7)
(5.7)
(3.9)
(212.3)
(316.5)
487.1
6.5
179.0
(0.1)
35.8
0.2
267.0
488.4
4.2
(5.5)
(1.3)
487.1
102.0
78.7
285.3
76.9
19.9
5.9
0.3
–
4.3
573.3
34.2
37.0
91.0
29.1
1.4
2.5
0.2
195.4
768.7
(83.7)
(13.4)
(2.8)
(19.3)
(1.4)
(4.4)
(0.3)
(125.3)
–
(120.7)
(33.9)
(4.5)
(4.2)
(0.9)
(69.5)
(3.7)
(2.1)
(239.5)
(364.8)
403.9
6.2
112.8
(0.1)
20.5
2.0
260.0
401.4
5.7
(3.2)
2.5
403.9
The Financial Statements were approved and authorised for issue by the Board of Directors on 7 September 2020.
Signed on behalf of the Board of Directors
STEPHEN WILSON
Chief Executive
ALISON HENRIKSEN
Chief Financial Officer
FINANCIAL STATEMENTS
106
GROUP STATEMENT OF CASH FLOWS
For the year ended 30 June 2020
NET CASH FLOW FROM OPERATING ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES
Dividends received from joint ventures and associates
Joint venture loan repayment
Disposal of joint venture
Acquisition of joint venture
Acquisition of trade and assets
Disposal of subsidiary
Payment of deferred consideration
Purchase of property, plant and equipment
Purchase of intangible assets
Proceeds from sale of property, plant and equipment
NET CASH OUTFLOW FROM INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Drawdown of borrowings
Repayment of borrowings
Payment of lease liabilities
Equity dividends paid
Issue of ordinary shares
NET CASH (OUTFLOW)/INFLOW FROM FINANCING ACTIVITIES
NET INCREASE IN CASH AND CASH EQUIVALENTS
Cash and cash equivalents at start of the year
Net increase in cash and cash equivalents
Effect of exchange rate fluctuations on cash and cash equivalents
TOTAL CASH AND CASH EQUIVALENTS AT 30 JUNE
Note
32
18
18
18
18
38
22
2020
£m
65.8
2.5
1.2
3.8
(2.2)
–
–
(1.7)
(24.6)
(10.8)
1.1
(30.7)
80.0
(73.8)
(11.1)
(18.3)
0.1
(23.1)
12.0
30.5
12.0
(1.2)
41.3
2019
£m
33.4
2.7
0.7
–
–
(2.0)
0.4
(21.1)
(17.1)
(11.2)
1.5
(46.1)
104.8
(138.9)
(2.0)
(16.8)
66.5
13.6
0.9
29.1
0.9
0.5
30.5
Genus plc / Annual Report 2020 NOTES TO THE GROUP FINANCIAL STATEMENTS
For the year ended 30 June 2020
107
1. REPORTING ENTITY
Genus plc (the ‘Company’) is a public company limited by shares and incorporated in England, United Kingdom under the Companies Act 2006. Its company
number is 02972325 and its registered office is Matrix House, Basing View, Basingstoke, Hampshire RG21 4DZ. The Group Financial Statements for the year
ended 30 June 2020 comprise the Company and its subsidiaries (together referred to as the ‘Group’). We have used the equity method to account for the
Group’s interests in joint ventures and associates. Our business model on pages 10 and 11 explains the Group’s operations and principal activities.
2. BASIS OF PREPARATION
We have prepared the Group Financial Statements in accordance with International Financial Reporting Standards (‘IFRSs’) as adopted by the European
Union and therefore comply with Article 4 of the IAS Regulation.
Unless otherwise stated, we have consistently applied the significant accounting policies set out below to all periods presented in these Group Financial
Statements.
The going concern statement has been included in the Strategic Report on page 47 and forms part of these statements.
Restatement in the 2019 and 2018 Group Balance Sheet
During the period, it was discovered that an input used in the valuation of biological assets in preceding periods was not in line with observable data.
Accordingly, the prior period balance sheets at 30 June 2019 and 30 June 2018 have been restated in accordance with IAS 8, and, in accordance with IAS 1
(revised). A balance sheet at 30 June 2018 is also presented together with related notes. The restatements involved are a reduction in biological assets at
30 June 2019 and 30 June 2018 of £20.5m and a reduction in related deferred tax liabilities at 30 June 2019 and 30 June 2018 of £5.3m.
Impact on the Group’s Balance Sheet for year ended 30 June 2019
Non-current assets
Biological assets
Current liabilities
Deferred tax liabilities
Net assets
(as reported)
2019
£m
Impact of
restatement
£m
(restated)
2019
£m
307.6
(20.5)
287.1
(72.0)
502.3
5.3
(15.2)
(66.7)
487.1
For the year ended 30 June 2019, there has been no material effect on the Group Income Statement, Group Statement of Comprehensive Income and no
impact on the Group Statement of Cash Flows. Therefore, there has been no restatement of the Group Income Statement and there is no adjustment to
earnings per share.
Functional and presentational currency
We present the Group Financial Statements in Sterling, which is the Company’s functional and presentational currency. All financial information presented
in Sterling has been rounded to the nearest £0.1m.
Use of estimates
Preparing financial statements requires management to make judgements, estimates and assumptions that affect our application of accounting policies
and our reported assets, liabilities, income and expenses. Our actual results may differ from these estimates. We review our estimates and underlying
assumptions on an ongoing basis, and recognise revisions to accounting estimates in the period in which we revise the estimate and in any future periods
affected.
Note 4 provides information about significant areas of estimation uncertainty and the critical judgements we made in applying accounting policies that
have the most effect on the amounts recognised in the Financial Statements.
Alternative Performance Measures
In reporting financial information, the Group presents Alternative Performance Measures, (‘APMs’), which are not defined or specified under the
requirements of IFRS and which are not considered to be a substitute for, or superior to, IFRS measures.
The Group believes that these APMs provide stakeholders with additional helpful information on the performance of the business. The APMs are consistent
with how we plan our business performance and report on it in our internal management reporting to the Board and the executive leadership team. Some
of these measures are also used for the purpose of setting remuneration targets.
For a full list of all APMs please see the Alternative Performance Measures section of the Annual Report on pages 176 to 184.
FINANCIAL STATEMENTS
108
3. SIGNIFICANT ACCOUNTING POLICIES APPLIED IN THE CURRENT REPORTING PERIOD THAT RELATE TO THE FINANCIAL STATEMENTS
AS A WHOLE
This section sets out our significant accounting policies that relate to the Financial Statements as a whole. Where an accounting policy is generally
applicable to a specific note to the Financial Statements, the policy has been described in that note. We have also detailed below the new accounting
pronouncements that we will adopt in future years and our current view of the impact they will have on our financial reporting.
Accounting convention
We prepare the Group Financial Statements under the historical cost convention, except for our biological assets, share-based payment expense, pension
liabilities and derivative financial instruments. In accordance with IFRS, we measure: biological assets at fair value less point-of-sale costs, which represent
distribution costs and selling expenses, and share-based payment expense, pension liabilities, and certain financial instruments at fair value.
Basis of consolidation
Subsidiaries are entities the Group controls. We have control of an entity when we are exposed, or have the rights, to variable returns from the entity and
have the ability to affect the returns through power over the entity. In assessing control, we take into account potential voting rights that we can currently
exercise or convert. We fully consolidate the results of subsidiaries we acquire from the date that control transfers to the Group. We cease consolidating the
results of subsidiaries that we cease to control from the date that control passes.
In preparing the Group Financial Statements, we eliminate intra-Group balances and any unrealised income and expenses arising from intra-Group
transactions. Unrealised gains arising from transactions with equity accounted investees are eliminated against the investment, to the extent of our
interest in the investee. We eliminate unrealised losses in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.
Foreign currencies
We record foreign currency transactions in the relevant Group entity’s functional currency, at the exchange rate on the transaction date. At each balance
sheet date, we retranslate monetary assets and liabilities denominated in foreign currencies at the exchange rate on the balance sheet date. We recognise
the foreign exchange differences arising on retranslation in the Group Income Statement.
When non-monetary assets and liabilities are measured at historical cost in a foreign currency, we translate them at the exchange rate at the transaction
date. When non-monetary assets and liabilities are stated at fair value in a foreign currency, we translate them at the prevailing exchange rate on the date
we determined the fair value. We recognise the foreign exchange differences arising on retranslation in the Group Statement of Comprehensive Income.
The assets and liabilities of foreign operations, including goodwill arising on consolidation, are translated into Sterling at the prevailing exchange rates at
the balance sheet date. The resulting exchange differences are booked into foreign currency translation reserves and reported in the Group Statement of
Comprehensive Income. We translate these operations’ revenues and expenses using an average rate for the period.
When exchange differences arise from the fair value movement of related effective hedges, we take them to the foreign currency translation reserve. When
we dispose of a foreign operation, we release these differences to the income statement. Exchange movements on inter-Company loans considered to be
permanent equity are recognised in the Group Statement of Comprehensive Income, together with any related taxation.
The principal exchange rates were as follows:
US Dollar/£
Euro/£
Brazilian Real/£
Mexican Peso/£
Chinese Yuan/£
Russian Rouble/£
Average
Closing
2020
1.26
1.14
5.74
26.08
8.89
85.17
2019
1.29
1.13
4.99
25.04
8.83
84.93
2018
1.35
1.13
4.51
25.37
8.77
79.66
2020
1.24
1.10
6.77
28.52
8.75
88.19
2019
1.27
1.12
4.89
24.40
8.72
80.30
2018
1.32
1.13
5.12
26.3
8.75
82.94
Research and development
We undertake research with the aim of gaining new scientific or technical knowledge, and recognise this expenditure in the income statement as it is
incurred.
The Group constantly monitors its research activities. When research projects achieve technical feasibility and are commercially viable, our policy is to
capitalise further development costs within intangible assets, in accordance with IAS 38.
Our development activities include developing and maintaining our porcine genetic nucleus herd and our bovine pre-stud herds. We do not capitalise
development expenditure separately for these herds, as their fair value is included in the fair value of the Group’s biological assets, in accordance with
IAS 41.
We disclose the costs of research and development activities, as required by IAS 38 (see note 8).
Genus plc / Annual Report 2020NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUEDFor the year ended 30 June 2020 109
3. SIGNIFICANT ACCOUNTING POLICIES APPLIED IN THE CURRENT REPORTING PERIOD THAT RELATE TO THE FINANCIAL STATEMENTS
AS A WHOLE CONTINUED
Other income and deferred income
In the prior year, the company entered into a strategic collaboration with Beijing Capital Agribusiness (‘BCA’) under which BCA will establish and fund a
collaboration specific entity (‘BCA Future Bio-Tech’) which will use Genus’ intellectual property and know-how to pursue the PRRSv resistance regulatory
and development work in China. Genus will receive consideration after meeting certain milestones in the development programme.
Each milestone is considered to be either a separate performance obligation, or a set of groups of separate performance obligations, under this agreement
and are unbundled in the contractual arrangement as if they are distinct from one another.
We assess each separate performance obligation relating to the milestone payments, and upon completion of those performance obligations recognise
the fair value of amounts earned in other income. Some performance obligations, such as the transfer of know-how, are recognised at a point in time where
others, such as the provision of technical services, are recognised over time. We recognise any received but unearned consideration as deferred income.
We will apply the same accounting policy to any other comparable agreements.
Reversals of impairment
We reverse an impairment loss in respect of assets other than goodwill when the impairment loss may no longer exist and we have changed the estimates
we used to determine the recoverable amount.
We only reverse an impairment loss to the extent that the asset’s carrying amount does not exceed the carrying amount it would have had, net of
depreciation or amortisation, if we had not recognised the impairment loss.
New standards and interpretations
In the current period, the Group has applied a number of amendments to IFRSs issued by the International Accounting Standards Board that are
mandatorily effective for an accounting period that begins after 1 January 2019 and have been implemented with effect from 1 July 2019. These are:
> IFRIC 23 – ‘Uncertainty over Income Tax Treatments’;
> Annual Improvements to IFRS 2015–2017 Cycle;
> Amendments to IAS 28 – ‘Long-term Interests in Associates and Joint Ventures’;
> Amendments to IFRS 9 – ‘Prepayment Features with Negative Compensation’; and
> Amendments to IAS 19 – ‘Plan Amendment, Curtailment or Settlement’.
Their addition has not had any material impact on the disclosures, or amounts reported in the Group Financial Statements.
In addition to the above the Group adopted IFRS 16 ‘Leases’ from 1 July 2019.
IFRS 16 ‘Leases’
The Group has adopted IFRS 16 using the modified retrospective approach with the value of the right-of-use asset being equal to the lease liability at the
date of adoption.
The Group has elected not to recognise right-of-use assets and lease liabilities for leases of low-value assets (those with a purchase price of less than
£4,000), and lease payments associated with those assets will be recognised as an expense on a straight-line basis. The Group has made use of the practical
expedient available on transition to IFRS 16 not to reassess whether a contract is or contains a lease. Where the contracts have been modified on or after
1 July 2019 have been reassessed to determine if it contains a lease as defined by IFRS 16. The Group has not elected to apply IFRS 16 to contracts where the
right-of-use asset would be recognised as an intangible asset.
In addition, the Group has utilised the following practical expedients, permitted by IFRS 16:
> the right-of-use asset for each lease has been measured as the present value of the lease liability adjusted for any prepaid or accrued lease payments
prior to application;
> for leases where the remaining term was less than 12 months at 1 July 2019 the Group has elected to treat these as short term;
> for leases that were previously classified as an operating lease under IAS 17 ‘Leases’ the lease liability on 1 July 2019 was calculated as the present value
of the remaining lease payments using the incremental borrowing rate as at 1 July 2019;
> for existing leases that incurred initial direct costs, were excluded from the measurement of the right-of-use asset as at 1 July 2019;
> the use of hindsight for existing leases has been applied in determining options to extend or terminate the lease;
> the Group has not elected to separate lease components from non-lease components; and
> the Group has elected to apply a single discount rate to a portfolio of leases with similar characteristics.
Financial impact of IFRS 16
The impact of adopting IFRS 16 on the Group’s Income Statement, Balance Sheet and Statement of Cash Flows are presented in the following tables:
Impact on the Group’s Income Statement
In the year, the adoption of IFRS 16 has had the following impact of the Group’s Income Statement:
Operating profit
Share of post-tax profit of joint ventures and associates retained
Finance costs
Finance income
Profit before tax
Year ended
30 June 2020
(as reported)
£m
Differences
between
IFRS 16 and
IAS 17
£m
Year ended
30 June 2020
(under IAS 17)
£m
47.6
8.9
(5.3)
0.3
51.5
(0.7)
–
0.7
–
–
46.9
8.9
(4.6)
0.3
51.5
FINANCIAL STATEMENTS
110
3. SIGNIFICANT ACCOUNTING POLICIES APPLIED IN THE CURRENT REPORTING PERIOD THAT RELATE TO THE FINANCIAL STATEMENTS
AS A WHOLE CONTINUED
Impact on the Group’s Balance Sheet
Non-current assets
Property, plant, motor vehicles and equipment
Current liabilities
Obligations under leases
Non-current liabilities
Obligations under leases
1 July 2019
prior to
adoption
of IFRS 16
(as reported)
£m
Recognised
on adoption
of IFRS 16
£m
1 July 2019
post adoption
of IFRS 16
£m
86.0
(2.2)
(3.9)
26.6
(7.5)
112.6
(9.7)
(19.1)
(23.0)
The following table shows a reconciliation between the operating lease obligations reported at 30 June 2019 and the amount recognised on adoption of
IFRS 16 using the weighted average incremental borrowing rate of 2.6% at the date of adoption.
Operating lease commitments (as at 30 June 2019)
Leases classified as low value or short term
Software licences outside the scope of IFRS 16
Operating lease commitments to be capitalised under IFRS 16
Impact of discounting
Lease liability (1 July 2019)
Impact on the Group’s Statement of Cash Flows
Net cash from operating activities
Net cash outflow from investing activities
Net cash outflow from financing activities
Net increase in cash and cash equivalents
£m
32.7
(0.9)
(2.3)
29.5
(2.9)
26.6
Year ended
30 June 2020
(as reported)
£m
Reclassification
on adoption of
IFRS 16
£m
Year ended
30 June 2020
(under IAS 17)
£m
65.8
(30.7)
(23.1)
12.0
(7.6)
–
7.6
–
58.2
(30.7)
(15.5)
12.0
The reconciliation of the impact on net debt of adopting IFRS 16 can be found in the analysis of the net debt note 32.
Following adoption there was no material impact to adjusted earnings per share, earnings per share or taxation.
Leases accounting policy under IFRS 16
In accordance with IFRS 16, we recognise as an expense any payments made in respect of short-term leases (those with a term of less than 12 months) and
leases for low-value items on a straight-line basis over the life of the lease.
For all other leases we recognise a right-of-use asset and corresponding liability at the date at which the leased asset is made available for use. Lease
liabilities are measured at the present value of the future lease payments, excluding any payments relating to non-lease components. Future lease
payments include fixed payments, in-substance fixed payments, and variable lease payments that are based on an index or a rate, less any lease incentives
receivable. Lease liabilities also take into account amounts payable under residual value guarantees and payments to exercise options to the extent that it
is reasonably certain that such payments will be made. The payments are discounted at the rate implicit in the lease or, where that cannot be measured, at
an incremental borrowing rate.
Right-of-use assets are measured initially at cost based on the value of the associated lease liability, adjusted for any payments made before inception,
initial direct costs and an estimate of the dismantling, removal and restoration costs required in the terms of the lease. Subsequent to initial recognition,
we record an interest charge in respect of the lease liability. The related right-of-use asset is depreciated over the term of the lease or, if shorter, the useful
economic life of the leased asset. The lease term shall include the period of an extension option where it is reasonably certain that the option will be
exercised. Where the lease contains a purchase option the asset is written-off over the useful life of the asset when it is reasonably certain that the purchase
option will be exercised.
We remeasure the lease liability (and make a corresponding adjustment to the related right-of-use asset) whenever:
> The lease term has changed or there is a change in the assessment of exercise of a purchase option, in which case the lease liability is remeasured by
discounting the revised lease payments using a revised discount rate.
> The lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value, in which cases the
lease liability is remeasured by discounting the revised lease payments using the initial discount rate (unless the lease payments change is due to a
change in a floating interest rate, in which case a revised discount rate is used).
> A lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is remeasured by
discounting the revised lease payments using a revised discount rate.
The Group did not make any such adjustments during the periods presented.
Genus plc / Annual Report 2020NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUEDFor the year ended 30 June 2020 111
3. SIGNIFICANT ACCOUNTING POLICIES APPLIED IN THE CURRENT REPORTING PERIOD THAT RELATE TO THE FINANCIAL STATEMENTS
AS A WHOLE CONTINUED
New standards and interpretations not yet adopted
At the date of the Annual Report, the following standards and interpretations which have not been applied in the report were in issue but not yet effective
(and in some cases had not yet been adopted by the EU). The Group will continue to assess the impact of these amendments prior to their adoption.
These are:
> Amendments to IAS 1 and IAS 8 – ‘Definition of Material’;
> Amendments to IFRS 3 – ‘Definition of a Business’;
> Amendments to IFRS 9, IAS 39 and IFRS 7 – ‘Interest Rate Benchmark Reform’;
> Conceptual Framework for Financial Reporting; and
> IFRS 16 ‘COVID-19 Related Rent Concessions’.
4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
The preparation of Consolidated Financial Statements requires the Group to make estimates and judgements that affect the application of policies and
reported amounts.
Critical judgements represent key decisions made by management in the application of the Group’s accounting policies where a significant risk of
materially different outcomes exists due to management assumptions or sources of estimation uncertainty. Estimates and judgements are continually
evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the
circumstances. Actual results may differ from these estimates.
The estimates which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next 12 months are
discussed below.
Critical accounting judgements
Adjusting items
The Directors believe that the adjusted profit and earnings per share measures provide additional information to shareholders on the performance of the
business. These measures are consistent with how business performance is measured internally by the Board and the executive leadership team.
The profit before tax and adjusting items measures are not recognised profit measures under IFRS and may not be directly comparable with adjusted profit
measures used by other companies. The classification of adjusting items requires significant judgement after considering the nature and intentions of a
transaction. The Group’s definitions of adjusting items are outlined within the Group accounting policies and have been applied consistently year on year.
Key sources of estimation uncertainty
Determination of the fair value of biological assets (note 16)
Determining the fair values of our bovine and porcine biological assets requires the application of a number of estimates and assumptions.
Below is a list of these estimates and assumptions, showing whether we consider them to be observable or unobservable inputs to the fair value
determination. In addition, we identify those inputs that are ‘readily obtainable’ transactional data or ‘open market prices’.
Bovine
Porcine (non pure line herds)
Porcine (pure line herds)
1 Key sources of estimation uncertainty.
Estimates and assumptions
Observable/Unobservable
Source
Long-term dairy volume growth rate
Short-term dairy volume growth rate
Value at point of production1
Unit prices
Animals’ useful lifespan
Percentage of new dairy bulls to be produced internally each year1
Age profile of bulls1
Risk adjusted discount rate1
Animals’ useful lifespan
The proportion of animals that go to slaughter
The mix of boars and gilts
Risk adjusted discount rate
Number of future generations attributable to the current herds
Fair value prices achieved on sales
Animals’ expected useful lifespan and productivity
The proportion of animals that go to breeding sales1
Risk adjusted discount rate1
Unobservable
Unobservable
Unobservable
Observable
Observable
Unobservable
Unobservable
Unobservable
Observable
Observable
Observable
Unobservable
Observable
Observable
Observable
Observable
Unobservable
n/a
n/a
n/a
Readily obtainable
Readily obtainable
n/a
n/a
n/a
Readily obtainable
Readily obtainable
Readily obtainable
n/a
Readily obtainable
Open market prices
Readily obtainable
Readily obtainable
n/a
FINANCIAL STATEMENTS
112
5. SEGMENTAL INFORMATION
IFRS 8 ‘Operating Segments’ requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly
reviewed by the Chief Executive and the Board to allocate resources to the segments and to assess their performance. The Group’s operating and reporting
structure comprises three operating segments: Genus PIC, Genus ABS and Research and Development. These segments are the basis on which the Group
reports its segmental information. The principal activities of each segment are as follows:
> Genus PIC – our global porcine sales business;
> Genus ABS – our global bovine sales business; and
> Research and Development – our global spend on research and development.
A segmental analysis of revenue, operating profit, depreciation, amortisation, non-current asset additions, segment assets and liabilities and geographical
information is provided below. We do not include our adjusting items in the segments, as we believe these do not reflect the underlying performance of the
segments. The accounting policies of the reportable segments are the same as the Group’s accounting policies, as described in the Financial Statements.
Revenue
Genus PIC
Genus ABS
Research and Development
Porcine Product Development
Bovine Product Development
Gene Editing
Other Research and Development
2020
£m
298.8
237.6
11.7
3.3
–
–
15.0
551.4
2019
£m
253.7
222.6
9.4
2.8
–
–
12.2
488.5
Adjusted operating profit by segment is set out below and reconciled to the Group’s adjusted operating profit. A reconciliation of adjusted operating profit
to profit for the year is shown on face of the Group Income Statement.
Adjusted operating profit
Genus PIC
Genus ABS
Research and Development
Porcine Product Development
Bovine Product Development
Gene Editing
Other Research and Development
Adjusted segment operating profit
Central
Adjusted operating profit
2020
£m
113.3
32.5
(28.9)
(20.6)
(5.2)
(10.2)
(64.9)
80.9
(15.6)
65.3
2019
£m
93.1
29.9
(18.4)
(19.7)
(7.3)
(9.0)
(54.4)
68.6
(10.9)
57.7
Our business is not highly seasonal and our customer base is diversified, with no individual customer generating more than 2% of revenue.
Exceptional items of £19.2m expense (2019: £21.8m expense), relate to Genus ABS (£18.4m expense), Genus PIC (£0.5m expense) and our central segment
(£0.3m expense). Note 7 provides details of these exceptional items.
We consider share-based payment expenses on a Group-wide basis and do not allocate them to reportable segments.
Other segment information
Genus PIC
Genus ABS
Research and Development
Research
Porcine Product Development
Bovine Product Development
Segment total
Central
Total
Depreciation
Amortisation
Additions to non-current assets
2020
£m
4.5
11.4
0.5
2.4
1.5
4.4
20.3
3.7
24.0
2019
£m
0.7
2.3
0.5
2.3
3.4
6.2
9.2
3.4
12.6
2020
£m
7.6
3.2
0.9
–
0.2
1.1
11.9
1.5
13.4
2019
£m
7.2
2.4
1.2
–
2.9
4.1
13.7
–
13.7
2020
£m
2.7
24.7
1.5
1.4
4.2
7.1
34.5
10.0
44.5
2019
£m
1.3
6.8
0.8
3.0
11.5
15.3
23.4
9.4
32.8
Genus plc / Annual Report 2020NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUEDFor the year ended 30 June 2020 113
5. SEGMENTAL INFORMATION CONTINUED
Segment assets
Segment liabilities
Genus PIC
Genus ABS
Research and Development
Research
Porcine Product Development
Bovine Product Development
Segment total
Central
Total
1 See note 2 for details of the prior period restatement.
2020
£m
247.6
201.3
7.2
226.3
146.5
380.0
828.9
39.8
868.7
(restated)1
2019
£m
(restated)1
2018
£m
262.1
157.1
7.4
180.0
161.5
348.9
768.1
35.5
803.6
235.9
160.6
12.5
189.0
152.8
354.3
750.8
17.9
768.7
2020
£m
(72.6)
(52.9)
(3.5)
(56.3)
(33.6)
(93.4)
(218.9)
(142.0)
(360.9)
Geographical information
The Group’s revenue by geographical segment is analysed below. This analysis is stated on the basis of where the customer is located.
Revenue
North America
Latin America
UK
Rest of Europe, Middle East, Russia and Africa
Asia
(restated)1
2019
£m
(51.6)
(41.9)
(restated)1
2018
£m
(48.3)
(41.2)
(0.6)
(50.8)
(32.8)
(84.2)
(177.7)
(138.8)
(316.5)
2020
£m
226.4
81.8
94.4
78.0
70.8
551.4
(1.3)
(71.2)
(31.1)
(103.6)
(193.1)
(171.7)
(364.8)
2019
£m
211.8
81.1
83.7
67.7
44.2
488.5
Non-current assets (excluding deferred taxation and financial instruments)
The Group’s non-current assets by geographical segment are analysed below and are stated on the basis of where the assets are located.
2020
£m
454.4
37.3
78.8
41.5
29.2
641.2
(restated)1
2019
£m
(restated)1
2018
£m
400.2
45.7
70.6
59.3
14.7
590.5
429.7
37.4
41.0
42.2
18.4
568.7
North America
Latin America
UK
Rest of Europe, Middle East, Russia and Africa
Asia
1 See note 2 for details of the prior period restatement.
6. REVENUE
Accounting policy
The Group recognises revenue from the following sources:
> sale of bovine and porcine semen, porcine breeding animals, embryos and ancillary products;
> royalties;
> consulting;
> technical services and advice revenues;
> installation and maintenance of IntelliGen technology;
> licensing of IntelliGen technology;
> slaughter animal sales; and
> bovine partnership contracts.
Revenue is measured based on the consideration the Group expects to be entitled to under a contract with a customer and excludes amounts collected on
behalf of third parties. The Group recognises revenue when it transfers control of a product or service to a customer.
FINANCIAL STATEMENTS
114
6. REVENUE CONTINUED
The sale of bovine and porcine semen, porcine breeding animals, embryos and ancillary products
Revenue from the sale of bovine and porcine semen, porcine breeding animals, embryos and ancillary products is recognised when the control of the
goods has transferred to the customer or distributor. This is either when we ship to customers or on delivery, depending on the terms of sale. Payment of
the transaction price is due immediately, or within a short period of time, from the point the customer or distributor controls the goods.
Royalties
Royalties are recognised when the performance obligation is met. We receive royalty payments from certain porcine customers based on key performance
variables, such as the number of pigs born per litter, the number of litters born per sow and the average slaughter weight of the animals born. This amount
is confirmed directly to Genus by the customer. Payment of the transaction price is due immediately from the customer, or within a short period of time,
once the performance obligation is satisfied.
Consulting
Revenue from consulting represents the amounts we charged for services we provided during the year, including recoverable expenses. We recognise
consulting services provided but not yet billed as revenue, based on a fair value assessment of the work we have delivered and our contractual right to
receive payment. Where unbilled revenue is contingent on a future event, we do not recognise any revenue until the event occurs.
Technical services and advice revenues
Revenue from technical services and advice revenues represents the amounts we charged for services we provided during the year, including recoverable
expenses. We recognise technical services and advice revenues provided but not yet billed as revenue, based on a fair value assessment of the work we
have delivered and our contractual right to receive payment. Where unbilled revenue is contingent on a future event, we do not recognise any revenue until
the event occurs. Technical services and advice revenues are presented in ancillary services in the following table.
Installation and maintenance of IntelliGen technology
Revenue from the installation of IntelliGen technology is recognised by reference to the stage of completion of the installation and is based on milestones
being met. Maintenance is provided as a distinct service to customers and is recognised over the period of the service agreement. These revenues are
presented in ancillary services in the following table.
Licensing of IntelliGen technology
Revenue from the licensing of IntelliGen technology is recognised at a point in time when the licence is granted. In determining the transaction price any
minimum royalties due under the contracts are included in the value apportioned to the grant of the licence, excluding any royalties that arise on units
produced in excess of the guaranteed minimums. These additional royalties have been determined to be a usage-based royalty and are recognised as
revenue at the point in time that the units are produced. These revenues are presented in ancillary services in the following table.
Slaughter of animals
Revenue from the slaughter of animals is recognised when control of the goods has transferred to the slaughterhouse, which is generally on the delivery of
animals to the slaughterhouse. Payment of the transaction price is due immediately, or within a short period of time, from the point the slaughterhouse
controls the goods.
Bovine partnership contracts
Partnership contracts include the provision of multiple bovine products and services for a single price. The contract price is allocated to the individual
performance obligations base on their standalone selling prices. The revenue is recognised for the products and services once the individual performance
obligation has been satisfied. Revenues from partnership contracts are presented in sale of animals, semen, embryos, products and ancillary services.
Sale of animals, semen, embryos, products and ancillary services
Royalties
Consulting services
Revenue from contracts with customers
The Group’s revenue is analysed below and stated by the timing at which it is recognised.
Genus PIC
Genus ABS
Research and Development
Recognised at a point in time
Genus PIC
Genus ABS
Research and Development
Recognised over time
Total revenue
An analysis of contract assets and contract liabilities is provided in note 24.
2020
£m
408.1
136.2
7.1
551.4
2020
£m
295.5
217.7
14.9
528.1
3.3
19.9
0.1
23.3
2019
£m
358.9
122.0
7.6
488.5
2019
£m
251.3
200.3
12.2
463.8
2.4
22.3
–
24.7
551.4
488.5
Genus plc / Annual Report 2020NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUEDFor the year ended 30 June 2020 115
7. EXCEPTIONAL ITEMS
Accounting policy
We present exceptional items separately, as we believe it helps to improve the understanding of the Group’s underlying performance.
In determining whether an item should be presented as exceptional, we consider items which are material either because of their size or their nature, and
those which are non-recurring. For an item to be considered as exceptional, it must initially meet at least one of the following criteria:
> it is a one-off material item;
> it has been directly incurred as the result of either an acquisition, integration or other major restructuring programme;
> it has been previously classified as an exceptional item, and as such consistent accounting treatment is being applied; or
> it is unusual in nature, e.g. outside the normal course of business.
If an item meets at least one of the criteria, we then exercise judgement as to whether the item should be classified as exceptional.
For the tax and cash impact of exceptional items see note 11 and 32, respectively.
Operating expense
Litigation and damages
Acquisition and integration
Other
Pension related
2020
£m
(16.4)
(2.1)
(0.7)
–
(19.2)
2019
£m
(5.0)
(0.7)
(0.9)
(15.2)
(21.8)
Litigation and damages
Litigation includes legal fees of £5.6m (2019: £5.0m) related to the actions between ABS Global, Inc. and certain affiliates (‘ABS’) and Inguran, LLC and
certain affiliates (aka Sexing Technologies (‘ST’)) and £10.8m (2019: £nil) for damages and costs related to patent infringement.
In July 2014, ABS launched a legal action against ST in the US District Court for the Western District of Wisconsin and initiated anti-trust proceedings which
ultimately enabled the launch of ABS’s IntelliGen sexing technology in the US market (‘ABS I’). In June 2017, ST filed proceedings against ABS in the same
District Court, where ST alleged that ABS infringed seven patents and asserted trade secret and breach of contract claims (‘ABS II’). The ABS I and ABS II
proceedings in the periods before the year ended 30 June 2020 are more fully described in the Notes to the Financial Statements in previous Annual
Reports.
Material litigation activities during the year ended 30 June 2020
In relation to ABS II, a hearing proceeded in September 2019, and on 9 September a jury held that ABS’ IntelliGen technology infringed US patents 8,206,987
(the ‘’987 patent’), 7,311,476 (the ‘’476 patent’) and 7,611,309 (the ‘’309 patent’), and also found that ST was not in material breach of the 2012 Semen Sorting
Agreement. The infringement of the ’987 patent confirms ABS’ existing obligation from ABS I to pay a royalty of $1.25 for each straw of sexed semen
produced in the US and the jury later held that ABS should pay a royalty of $2.60 per straw for infringement of the ’476 and ’309 patents for 3,295,355 straws
sold by ABS up to 30 June 2019. This royalty is retrospective, as ABS had reengineered the IntelliGen technology by incorporating a non-infringing
microfluidic chip known as ‘SSC(B)’ prior to the hearing. ST confirmed in court that the SSC(B) chip did not infringe the ’476 or ’309 patents. ABS has sought
judgments as a matter of law (‘JMOL’) in relation to the invalidity of the ’987, ’476 and ’309 patents, JMOLs in relation to the non-infringement of the ’309 and
’476 patents, and a reduction in damages awarded by the jury. Once the court has decided on the JMOLs, the parties will consider their options for appeal.
On 29 January 2020, ST filed a new US complaint against ABS (‘ABS III’). ST allege infringement of the ’987 patent through: (i) the sale, lease or transfer of the
IntelliGen technology to third parties; (ii) the importation of sexed semen straws made outside the US using the IntelliGen technology; and (iii) the use of
the IntelliGen technology to produce IVF products. ABS has prepared and filed a response to the ABS III complaint, including a motion to dismiss, on the
basis that all these issues were fully resolved in either the ABS I or ABS II litigations. The parties await the court’s decision.
On March 10, 2020, the USPTO issued patent 10,583,439 (the ‘’439 patent’), and subsequently ST asked the court for permission to file a supplemental
complaint in ABS III asserting infringement of the ’439 patent. ABS believes that ST’s claim for infringement falls short and has filed an opposition to ST’s
request.
On April 15, 2020, ST filed a new complaint (‘ABS IV’), asserting the same claim of infringement of the ’439 patent alleged in its supplemental complaint and
then moved to consolidate the ABS IV and ABS III litigation. ABS has opposed this action and has filed a motion for summary dismissal.
On 23 June 2020, the USPTO issued patent 10,689,210 (the ‘210 patent’), and on 6 July 2020, ST sought a second supplement of ABS III by adding a claim of
’210 patent infringement. ABS has opposed this action. The parties await the court’s decision, and in the meantime, ABS is considering its options for
responding to ST’s assertion of the ’439 and ’210 patents.
A provision of £10.5m has been recognised in the year ended 30 June 2020 in respect of the royalty per straw for infringement of the ’476 and ’309 patents
claimed by ST through ABS II.
Indian Litigation: In September 2019, ST also filed parallel patent infringement proceedings against ABS in India alleging infringement of the Indian patent
240790 (‘’790 patent’). The ’790 patent is the equivalent of the US ’476 patent relating to microfluidic chips. ABS had already sought the revocation of the
’790 patent in April 2017 and filed a response and counterclaim seeking the revocation of the ’790 patent. This matter is next before the Indian Courts on
8 October 2020 to consider the timetable and the application for a preliminary injunction. All microfluidic chips used by ABS in India are the non-infringing
SSC(B) chips.
FINANCIAL STATEMENTS
116
7. EXCEPTIONAL ITEMS CONTINUED
Acquisitions and integration
During the year, £2.1m (2019: £0.7m) of expenses were incurred in relation to potential acquisitions that were not completed.
Other
Included within ‘Other’ are £0.8m (2019: £1.5m) of expenses which relate to the costs of entering into our strategic porcine collaboration in China. Included
within the 2019 balance is an insurance receipt of £0.6m from a legacy environmental claim.
Pension related
In the prior year, the High Court handed down judgment in the Lloyds Bank pensions case, requiring pension schemes to equalise Guaranteed Minimum
Pensions (‘GMPs’). Genus’s legacy pension schemes are affected by this ruling, resulting in an aggregate past service charge of £16.1m, partially offset by a
settlement gain of £0.9m (net of fees).
8. OPERATING PROFIT
Operating costs comprise:
Cost of sales excluding net IAS 41 valuation movement on biological assets and amortisation of multiplier contract
intangible assets
Net IAS 41 valuation movement on biological assets
Amortisation of multiplier contract intangible assets
Cost of goods sold
Cost of sales (excluding amortisation of acquired intangibles)
Amortisation of customer relationship intangible assets
Cost of sales
Research and Development expenditure
Amortisation and impairment of technology, software and licences and patents
Research and Development costs
Administrative expenses (excluding exceptional items)
Share-based payment expense
Amortisation of software, licences and patents
Exceptional items within administrative expenses
Total administrative expenses
Total operating costs
Profit for the year is stated after charging/(crediting):
Net foreign exchange losses
Depreciation of owned fixed assets
Depreciation of right-of-use assets
Loss on disposal of fixed assets and right-of-use assets
Loss/(profit) on disposal of intangible fixed assets
Rental expense for short-term leases
Employee costs (see note 9)
Impairment of inventory
Cost of inventories recognised as an expense
Auditor’s remuneration is as follows:
Fees payable to the Company’s auditor and its associates for the audit of the Company’s Annual Report and Financial Statements
Fees payable to the Company’s auditor and its associates for the audit of the Company’s subsidiaries
Total audit fees
Tax compliance services
Transaction support services
Total non-audit fees
Total fees to the Group’s auditor
Fees payable to other auditors of Group companies
2020
£m
2019
£m
(236.3)
15.8
(0.3)
(220.8)
(103.5)
(5.3)
(108.8)
(65.3)
(6.1)
(71.4)
(76.1)
(5.8)
(1.7)
(19.2)
(102.8)
(503.8)
2020
£m
0.9
13.1
10.9
3.7
1.2
1.2
175.5
1.2
87.3
(204.8)
(14.7)
(0.3)
(219.8)
(97.7)
(6.5)
(104.2)
(54.9)
(6.0)
(60.9)
(68.0)
(3.0)
(2.1)
(21.8)
(94.9)
(479.8)
2019
£m
0.4
10.6
2.0
–
(0.1)
–
154.1
–
88.8
2020
£m
2019
£m
0.4
0.5
0.9
0.1
0.2
0.3
1.2
–
0.3
0.5
0.8
0.1
–
0.1
0.9
–
Non-audit tax services principally comprise tax compliance support services and transaction support. These services fall within the non-audit services
policy approved by the Company’s Audit Committee.
Genus plc / Annual Report 2020NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUEDFor the year ended 30 June 2020 9. EMPLOYEE COSTS
This note shows the total employment costs and the average number of people employed by segment during the year.
Employee costs, including Directors’ remuneration, amounted to:
Wages and salaries (including bonuses and sales commission)
Social security costs
Contributions to defined contribution pension plans
Share-based payment expense (excluding National Insurance)
117
2020
£m
154.3
15.1
4.6
4.8
178.8
2019
£m
136.6
13.3
4.4
2.7
157.0
The employee costs above include £3.3m (2019: £2.9m) which has been capitalised into intangible assets as part of the development of GenusOne
(see note 15).
The average monthly number of employees and full-time equivalent employees, including Directors, was as follows:
Genus PIC
Genus ABS
Research and Development
Central
Included in the totals above:
UK
Number of employees
Full-time equivalent
2020
Number
537
2,078
346
142
3,103
(restated)1
2019
Number
535
1,973
329
127
2,964
2020
Number
518
1,991
325
135
2,969
(restated)1
2019
Number
505
1,884
298
122
2,809
843
818
759
753
The Directors’ Remuneration Report sets out details of the Directors’ remuneration, pensions and share options.
1
In the prior year, certain employees were incorrectly allocated as Genus PIC employees but should have been classified as Genus ABS employees. This has been corrected in the prior period numbers to
conform with the current year presentation. There is no change to the overall employee numbers reported.
10. NET FINANCE COSTS
Net finance costs mainly arise from interest due on bank loans, pension scheme liabilities, amortisation of debt issue costs, unwinding of discount on put
options and the results of hedging transactions used to manage foreign exchange and interest rate movements.
Accounting policy
We recognise interest income and interest expense in the income statement, as they accrue, based on the effective interest rate method.
Interest income includes income on cash and cash equivalents and income on other financial assets. Finance costs include interest costs in relation to
financial liabilities. This includes interest on lease liabilities which represents the unwind of the discount rate applied to lease liabilities.
Interest payable on bank loans and overdrafts
Amortisation of debt issue costs
Other interest payable
Unwinding of discount put options
Net interest cost in respect of pension scheme liabilities
Interest on lease liabilities
Total interest expense
Interest income on bank deposits
Net settlement income on derivative financial instruments
Total interest income
Net finance costs
2020
£m
(2.9)
(0.4)
(0.1)
(0.5)
(0.4)
(1.0)
(5.3)
0.3
–
0.3
(5.0)
2019
£m
(3.3)
(0.4)
–
–
(0.9)
(0.1)
(4.7)
0.2
0.6
0.8
(3.9)
FINANCIAL STATEMENTS
118
11. TAXATION AND DEFERRED TAXATION
This note explains how our Group tax charge arises. The deferred tax section of the note also provides information on our expected future tax charges
and sets out the tax assets and liabilities held across the Group, together with our view on whether or not we expect to be able to make use of them
in the future.
Accounting policies
Tax on the profit or loss for the year comprises current and deferred tax. We recognise tax in the income statement, unless:
> it relates to items we have recognised directly in equity, in which case we recognise it in equity; or
> it arises as a fair value adjustment in a business combination.
We provide for current tax, including UK corporation tax and foreign tax, at the amounts we expect to pay (or recover), using the tax rates and the laws
enacted or substantively enacted at the balance sheet date, together with any adjustments to tax payable in respect of previous years.
Deferred tax is tax we expect to pay or recover due to differences between the carrying amounts of our assets and liabilities in our Financial Statements and
the corresponding tax bases used in calculating our taxable profit. We account for deferred tax using the balance sheet liability method.
We generally recognise deferred tax liabilities for all taxable temporary differences, and deferred tax assets to the extent that we will probably have taxable
profits to utilise deductible temporary differences against. We do not recognise these assets and liabilities if the temporary difference arises from:
> our initial recognition of goodwill; or
> our initial recognition of other assets and liabilities in a transaction (other than a business combination) that affects neither our taxable profit nor our
accounting profit.
We recognise deferred tax liabilities for taxable temporary differences arising on our investments in subsidiaries, and interests in joint ventures and
associates, except where we can control the reversal of the temporary difference and it is probable that it will not reverse in the foreseeable future.
We calculate deferred tax at the tax rates we expect to apply in the period when we settle the liability or realise the asset. We charge or credit deferred tax in the
income statement, except when it relates to items we have charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.
Income tax expense
Current tax expense
Current period
Adjustment for prior periods
Total current tax expense in the Group Income Statement
Deferred tax expense
Origination and reversal of temporary differences
Adjustment for prior periods
Total deferred tax credit in the Group Income Statement
Total income tax expense excluding share of income tax of equity accounted investees
Share of income tax of equity accounted investees (see note 18)
Total income tax expense in the Group Income Statement
Reconciliation of effective tax rate
Profit before tax
Add back share of income tax of equity accounted investees
Profit before tax excluding share of income tax of equity accounted investees
Income tax at UK corporation tax of 19.0% (2019: 19.0%)
Effect of tax rates in foreign jurisdictions
Non-deductible expenses
Tax exempt income and incentives
Change in tax rate
Movements in recognition of tax losses
Change in unrecognised temporary differences
Tax overprovided in prior periods
Change in provisions
Tax on undistributed reserves
Total income tax expense in the Group Income Statement
2020
£m
13.8
(1.1)
12.7
(2.6)
0.5
(2.1)
10.6
2.3
12.9
2019
%
19.0
52.3
14.3
(43.3)
(3.5)
6.2
(1.8)
(14.9)
11.5
0.9
40.7
2019
£m
12.6
(0.9)
11.7
(7.7)
(0.8)
(8.5)
3.2
1.4
4.6
2019
£m
9.9
1.4
11.3
2.2
5.9
1.6
(4.9)
(0.4)
0.7
(0.2)
(1.7)
1.3
0.1
4.6
2020
%
19.0
6.1
3.2
(4.4)
(2.8)
0.9
(0.4)
(0.6)
1.5
1.5
24.0
2020
£m
51.5
2.3
53.8
10.2
3.3
1.7
(2.4)
(1.5)
0.5
(0.2)
(0.3)
0.8
0.8
12.9
Genus plc / Annual Report 2020NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUEDFor the year ended 30 June 2020 119
11. TAXATION AND DEFERRED TAXATION CONTINUED
The tax rate for the year depends on our mix of profits by country and our ability to recognise deferred tax assets in respect of losses in some of our smaller
territories. Tax is calculated using prevailing tax legislation, reliefs and existing interpretations and practice.
The Group’s future tax charge and effective tax rate could be affected by factors such as countries reforming their tax legislation to implement the OECD’s
BEPS recommendations and by European Commission initiatives including state aid investigations.
In October 2017, the European Commission announced that it would be conducting a State Aid investigation into the Group Financing Partial Exemption
(‘Finco exemption’) contained within the UK’s controlled foreign company (‘CFC’) legislation. Genus, in common with many other UK companies has taken
advantage of this financing structure to support intra-Group lending to the Group’s subsidiaries in the USA. The Commission concluded in April 2019 that
the exemption contravened EU law and constituted partial state aid to the extent that the specific people functions (‘SPFs’) most relevant to managing the
financing activities were based in the UK. The UK Government, as well as a number of affected UK tax payers including Genus, have appealed the EU
Commission’s conclusions and court hearings for these appeals/annulment requests are currently pending.
In the light of the European Commission judgment, we have undertaken a review of our historic Finco structures, to establish the extent to which the SPFs
in relation to the economic ownership of the assets and the Key Entrepreneurial Risk Taking functions (‘KERTs’) of the related foreign finance companies
were carried out in the UK. This review has identified some activities performed by UK personnel, including the involvement of the Group Tax & Treasury
function in the designing and setting up of the appropriate funding structures before presenting them to the foreign board of directors. On this basis, we are
of the opinion that the KERT functions relating to the Finco structures could be regarded as split between the foreign board of directors (on account of the
active decision making to lend made by them in board meetings of the CFC) and the UK Group functions (for diligence and groundwork in relation to the
design and construction of the arrangement, and the selection and approval of the funding structure).
We have benchmarked the value of the functions performed in the UK based on the reasonable third-party comparable returns of banks and portfolio
managers for the three key activities performed by the UK (diligence and groundwork in constructing the arrangement, selection of the investment and
ongoing management) to identify the returns attributable to the activities carried out in the UK and have arrived at a total arm’s length return in the range
of 14.8%–22.8% for the UK, with consequently, the remaining 77.2%–85.2% being attributable to the Fincos. The total value of tax relief claimed in previous
years under the Finco structure was £4.3m. Accordingly, based on our benchmarking study a contingent tax liability of between £0.6m and £1m exists
depending on the future results of the various appeals and challenges to the European Commission’s judgment. The Company made a provision of £1m for
this uncertain tax position in the prior year and we believe this provision remains adequate based on the additional work we have performed subsequently
on the SPF and KERT analysis.
The tax credit attributable to exceptional items is £4.5m (2019: credit of £3.9m).
Income tax recognised directly in the Statement of Comprehensive Income and Statement of Changes in Equity
Financial instruments
Foreign exchange differences on long-term intra-Group currency loans and balances
Actuarial movement on retirement benefit obligations
Foreign exchange differences on translation of biological assets, intangible assets and leases
Income tax recognised directly to the Statement of Changes in Equity
Share-based payment expense
2020
£m
0.1
–
0.8
(1.5)
(0.6)
1.1
1.1
2019
£m
0.4
(0.3)
(3.2)
(2.6)
(5.7)
–
–
Unrecognised deferred tax assets and liabilities
At the balance sheet date, the Group had unused tax losses which were available for offset against future profits, with a potential tax benefit of £13.6m
(2019: £14.4m). We have recognised a deferred tax asset in respect of £3.9m (2019: £2.9m) of these benefits, as we expect these losses to be offset against
future profits of the relevant jurisdictions in the near term. We have not recognised a deferred tax asset in respect of the remaining £9.7m (2019: £11.5m),
due to uncertainty about the availability of future taxable profits in the relevant jurisdictions.
At 30 June 2020, the expiry dates of deferred tax assets in respect of losses available for the carry forward were as follows:
Losses for which a deferred tax asset is recognised
Losses for which no deferred tax asset is recognised
Expiring within
1–10 years
£m
11–20 years
£m
Unlimited
£m
0.1
0.2
0.3
0.2
–
0.2
3.6
9.5
13.1
Total
£m
3.9
9.7
13.6
FINANCIAL STATEMENTS
120
11. TAXATION AND DEFERRED TAXATION CONTINUED
At 30 June 2019, the expiry dates of deferred tax assets in respect of losses available for the carry forward were as follows:
Losses for which a deferred tax asset is recognised
Losses for which no deferred tax asset is recognised
Expiring within
1–10 years
£m
11–20 years
£m
Unlimited
£m
–
0.2
0.2
0.2
0.1
0.3
2.7
11.2
13.9
Total
£m
2.9
11.5
14.4
The gross value of losses for which deferred tax assets are recognised is £17.9m (2019: £16.7m). The gross value of losses for which deferred tax assets are
not recognised is £33.3m (2019: £37.9m).
We have not recognised deferred tax liabilities totalling £2.1m (2019: £2.3m) for the withholding tax and other taxes that would be payable on the
unremitted earnings of certain overseas subsidiaries. This is because we can control the timing and reversal of these differences and it is probable that the
differences will not reverse in the foreseeable future.
Recognised deferred tax assets and liabilities
We have offset deferred tax assets and liabilities above, to the extent that they arise in the same tax jurisdiction.
The analysis of deferred tax balances is set out below:
Deferred tax assets
Deferred tax liabilities
1 See note 2 for details on prior period restatement.
2020
£m
(3.7)
65.5
61.8
(restated)¹
2019
£m
(3.5)
66.7
63.2
UK deferred tax assets and liabilities are stated at 19%, which is the UK headline rate of tax effective from 1 April 2017. The previously planned rate
reduction to 17% was cancelled in the Budget on 11 March 2020, with the continuation of the 19% rate being substantively enacted on 17 March 2020.
Movement in net deferred tax liabilities during the year
(restated)1
As at
1 July
2019
£m
Recognised
in income
statement
£m
Changes in
tax rate
recognised in
income
statement
£m
Prior year
adjustments
recognised in
income
statement
£m
4.5
10.7
66.6
(4.4)
(2.7)
(8.7)
(2.8)
63.2
(0.5)
(1.6)
4.2
1.4
0.2
(5.1)
0.3
(1.1)
(0.8)
(0.1)
(0.3)
0.2
(0.4)
0.2
(0.3)
(1.5)
1.9
(0.2)
2.6
–
(0.1)
(2.4)
(1.3)
0.5
(restated)1
As at
1 July
2018
£m
Recognised
in income
statement
£m
Changes in
tax rate
recognised in
income
statement
£m
Prior year
adjustments
recognised in
income
statement
£m
Recognised
in equity
£m
Transfers
£m
Foreign
exchange
difference
£m
–
0.1
1.3
(0.7)
(0.7)
–
–
–
–
–
–
–
–
0.6
0.2
0.8
0.1
(0.1)
–
–
–
(0.1)
–
(0.1)
Recognised
in equity
£m
Acquisitions
£m
Foreign
exchange
difference
£m
4.9
13.0
65.4
(6.0)
(3.4)
(6.5)
(2.2)
65.2
(0.5)
(1.5)
(3.2)
(1.4)
0.2
(0.6)
(0.6)
(7.6)
(0.1)
(0.2)
(0.1)
–
–
0.2
0.1
(0.1)
–
0.2
–
–
–
(0.9)
(0.1)
(0.8)
–
–
3.0
3.1
0.5
(0.8)
–
5.8
–
(1.1)
1.5
–
–
–
–
0.4
0.2
0.3
–
(0.1)
–
(0.1)
–
0.3
As at
30 June
2020
£m
5.2
8.8
74.4
(3.5)
(3.7)
(15.5)
(3.9)
61.8
(restated)1
As at
30 June
2019
£m
4.5
10.7
66.6
(4.4)
(2.7)
(8.7)
(2.8)
63.2
Property, plant and equipment
Intangible assets
Biological assets
Retirement benefit obligations
Share-based payment expense
Short-term timing differences
Tax loss carry-forwards
Property, plant and equipment
Intangible assets
Biological assets
Retirement benefit obligations
Share-based payment expense
Short-term timing differences
Tax loss carry-forwards
1 See note 2 for details on prior period restatement.
Genus plc / Annual Report 2020NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUEDFor the year ended 30 June 2020 121
12. EARNINGS PER SHARE
Basic earnings per share is the profit generated for the financial year attributable to equity shareholders divided by the weighted average number of shares
in issue during the year.
Basic earnings per share from continuing operations
Basic earnings per share
2020
(pence)
62.4
2019
(pence)
12.4
The calculation of basic earnings per share from continuing operations is based on the net profit attributable to owners of the Company from continuing
operations of £40.5m (2019: £7.8m) and a weighted average number of ordinary shares outstanding of 64,908,000 (2019: 63,141,000), which is calculated
as follows:
Weighted average number of ordinary shares (basic)
Issued ordinary shares at the start of the year
Effect of own shares held
Share placement
Shares issued on exercise of stock options
Shares issued in relation to Employee Benefit Trust
Weighted average number of ordinary shares in year
Diluted earnings per share from continuing operations
Diluted earnings per share
2020
000s
65,055
(168)
–
21
–
64,908
2020
(pence)
61.9
2019
000s
61,542
(405)
1,697
6
301
63,141
2019
(pence)
11.9
The calculation of diluted earnings per share from continuing operations is based on the net profit attributable to owners of the Company from continuing
operations of £40.5m (2019: £7.8m) and a weighted average number of ordinary shares outstanding, after adjusting for the effects of all potential dilutive
ordinary shares, of 65,427,000 (2019: 65,304,000), which is calculated as follows:
Weighted average number of ordinary shares (diluted)
Weighted average number of ordinary shares (basic)
Dilutive effect of share awards and options
Impact of share placement
Weighted average number of ordinary shares for the purposes of diluted earnings per share
Adjusted earnings per share from continuing operations
Adjusted earnings per share
Diluted adjusted earnings per share
2020
000s
64,908
519
–
65,427
2020
(pence)
85.4
84.7
2019
000s
63,141
763
1,400
65,304
2019
(pence)
73.2
70.7
Adjusted earnings per share is calculated on profit before the net IAS 41 valuation movement on biological assets, amortisation of acquired intangible
assets, share-based payment expense and exceptional items, after charging taxation associated with those profits, of £55.4m (2019: £46.2m), which
is calculated as follows:
Profit before tax from continuing operations
Add/(deduct):
Net IAS 41 valuation movement on biological assets
Amortisation of acquired intangible assets
Share-based payment expense
Exceptional items (see note 7)
Net IAS 41 valuation movement on biological assets in joint ventures
Tax on joint ventures and associates
Attributable to non-controlling interest
Adjusted profit before tax
Adjusted tax charge
Adjusted profit after tax
Effective tax rate on adjusted profit
2020
£m
51.5
(15.8)
8.5
5.8
19.2
0.1
2.3
(0.6)
71.0
(15.6)
55.4
2019
£m
9.9
14.7
9.5
3.0
21.8
1.1
1.4
(0.4)
61.0
(14.8)
46.2
22.0%
24.3%
FINANCIAL STATEMENTS
122
12. EARNINGS PER SHARE CONTINUED
Reconciliation of effective tax rate
Total income tax expense in the Group Income Statement
Net IAS 41 valuation movement on biological assets
Amortisation of acquired intangible assets
Share-based payment expense
Exceptional items (see note 7)
Net IAS 41 valuation movement on biological assets in joint ventures
Attributable to non-controlling interest
Adjusted profit before tax
Total income tax expense in the Group Income Statement
Net IAS 41 valuation movement on biological assets
Amortisation of acquired intangible assets
Share-based payment expense
Exceptional items (see note 7)
Net IAS 41 valuation movement on biological assets in joint ventures
Attributable to non-controlling interest
Adjusted profit before tax
2020
Profit
£m
53.8
(15.8)
8.5
5.8
19.2
0.1
(0.6)
71.0
2019
Profit
£m
11.3
14.7
9.5
3.0
21.8
1.1
(0.4)
61.0
13. DIVIDENDS
Dividends are one type of shareholder return, historically paid to our shareholders in late November/early December and late March.
Amounts recognised as distributions to equity holders in the year
Final dividend
Final dividend for the year ended 30 June 2019 of 18.8 pence per share
Final dividend for the year ended 30 June 2018 of 17.9 pence per share
Interim dividend
Interim dividend of 9.4 pence per share
Interim dividend for the year ended 30 June 2019 of 8.9 pence per share
2020
Tax
£m
12.9
(4.7)
1.8
1.1
4.5
–
–
15.6
2019
Tax
£m
4.6
3.3
2.1
0.5
3.9
0.4
–
14.8
2020
£m
12.2
–
6.1
–
18.3
2020
%
24.0
29.7
21.2
19.0
23.4
–
–
22.0
2019
%
40.7
22.4
22.1
16.7
17.9
36.4
–
24.3
2019
£m
–
11.0
–
5.8
16.8
The Directors have proposed a final dividend of 19.7 pence per share for 2020. This is subject to shareholders’ approval at the Annual General Meeting and
we have therefore not included it as a liability in these financial statements.
14. GOODWILL
Accounting policies
When we acquire a subsidiary, associate or joint venture, the goodwill arising is the excess of the acquisition cost, excluding transaction costs, over our
interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities. Identifiable assets include intangible assets which
could be sold separately, or which arise from legal rights, regardless of whether those rights are separable.
We state goodwill at cost less any accumulated impairment losses. We allocate goodwill to cash-generating units (‘CGUs’), which are the smallest
identifiable group of assets that generate cash inflows that are largely independent of the cash inflows from other assets or groups of assets. We do not
amortise goodwill but we do test it annually for impairment.
IAS 21 ‘The Effects of Changes in Foreign Exchange Rates’ requires us to treat the following as assets and liabilities of the acquired entity, rather than of the
acquiring entity:
> goodwill arising on acquisition of a foreign operation; and
> any fair value adjustments we make on acquisition to the carrying amounts of the acquiree’s assets and liabilities.
We therefore express them in the foreign operation’s functional currency and retranslate them at the balance sheet date.
Genus plc / Annual Report 2020NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUEDFor the year ended 30 June 2020 123
14. GOODWILL CONTINUED
Impairment
We review the carrying amounts of our tangible and intangible assets at each balance sheet date, to determine whether there is any indication of
impairment. If any indication exists, we estimate the asset’s recoverable amount.
For goodwill, and tangible and intangible assets that are not yet available for use, we estimate the recoverable amount at each balance sheet date.
The recoverable amount is the greater of their net selling price and value in use. In assessing value in use, we discount the estimated future cash flows to
their present value, using a pre-tax discount rate, which is derived from the Group’s weighted average cost of capital (‘WACC’). For some countries we add
a premium to this rate, to reflect the risk attributable to that country. If the asset does not generate largely independent cash inflows, we determine the
recoverable amount for the CGU that the asset belongs to.
We recognise an impairment loss in the income statement whenever the carrying amount of an asset or its CGU exceeds its recoverable amount.
When we recognise an impairment loss in respect of a CGU, we first allocate it to reduce the carrying amount of any goodwill allocated to the CGU,
and then apply any remaining loss to reduce the carrying amount of the unit’s other assets on a pro rata basis.
The aggregate carrying amounts of goodwill allocated to each operating segment are as follows:
Cost
Balance at 1 July 2018
Acquisitions
Effect of movements in exchange rates
Balance at 30 June 2019
Effect of movements in exchange rates
Balance at 30 June 2020
Amortisation and impairment losses
Balance at 1 July 2018, 30 June 2019 and 30 June 2020
Carrying amounts
At 30 June 2020
At 30 June 2019
Genus PIC
£m
Genus ABS
£m
Total
£m
70.8
–
2.2
73.0
1.1
74.1
–
74.1
73.0
31.2
1.1
1.0
33.3
(1.8)
31.5
–
31.5
33.3
102.0
1.1
3.2
106.3
(0.7)
105.6
–
105.6
106.3
To test impairment, we allocate goodwill to our CGUs which are in line with our operating segments. These are the lowest level within the Group at which
we monitor goodwill for internal management purposes.
We test goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired. We determine the recoverable
amount of our CGUs by using value in use calculations. The key assumptions for these calculations relate to discount rates, growth rates, expected changes
to selling prices, cost saving derived from the IntelliGen technologies, and changes in product mix
We have estimated the pre-tax discount rate using the Group’s WACC. We risk-adjusted the discount rate for risks specific to each market, adding between
nil and 24% to the WACC as appropriate. The pre-tax discount rate of 11% (2019: 13%) we applied to our cash flow projections equates to a post-tax rate of
9.3% (2019: 8.7%). Our estimates of changes in selling prices and direct costs are based on past experience and our expectations of future changes in the
market.
The annual impairment test is performed on 31 May. There have been no additional indicators of impairment identified after this date that would require
the impairment test to be reperformed. It is based on cash flows derived from our most recent financial and strategic plans approved by management,
over the next five years. A growth rate of 2.5% (2019: 2.5%) has been used to extrapolate cash flows beyond this period. Short-term profitability and growth
rates are based on past experience, current trading conditions and our expectations of future changes in the market.
FINANCIAL STATEMENTS
124
14. GOODWILL CONTINUED
The Genus PIC and Genus ABS CGUs are deemed to be significant. The individual country assumptions used to determine value in use for these CGUs are:
Genus PIC
Genus ABS
Genus PIC
Genus ABS
Risk premium used to adjust
discount rate
Short-term growth rates (CAGR)
Long-term growth rates
2020
2019
2020
nil–24%
nil–24%
nil–10%
nil–47%
nil–10% (7%)–44%
2019
6–29%
9–19%
2020
2.5%
2.5%
2019
2.5%
2.5%
Weighted average risk adjusted
discount rate
Weighted average short-term
growth rates (CAGR)
2020
9%
9%
2019
10%
10%
2020
13%
23%
2019
13%
14%
The rates towards the higher end of the range above represent those which are applied to our smaller entities and those in emerging markets and hence
appear high relative to others.
Sensitivity to changes in assumptions
Management has performed the following sensitivity analysis:
> changing of the key assumptions with other variables held constant;
> simultaneously changing the key assumptions; and
> incorporating the potential impact of the principal risks and uncertainties outlined on pages 44 to 46, in particular the impacts of biosecurity, market
down turns, continuity of supply, increased competition and the impact of the global COVID-19 pandemic taking into account the likely degree of
available mitigating actions.
Management has concluded that there are no reasonably possible changes in any one of the key assumptions that would cause the carrying amounts of
goodwill to exceed the value in use of PIC and ABS.
15. INTANGIBLE ASSETS
Our Group Balance Sheet contains significant intangible assets, including acquired technology, customer relationships and our IntelliGen development
project.
Accounting policies
Identifiable intangible assets are recognised when the Group controls the asset, it is probable that future economic benefits attributed to the asset will flow
to the Group and the cost of the asset can be reliably measured.
Intangible assets that we have acquired in a business combination since 1 April 2005 are identified and recognised separately from goodwill, where they
meet the definition of an intangible asset and we can reliably measure their fair values. Their cost is their fair value at the acquisition date.
After their initial recognition, we report these intangible assets at cost less accumulated amortisation and accumulated impairment losses. This is the same
basis as for intangible assets acquired separately.
The estimated useful lives for intangible assets are as follows:
> Porcine and bovine genetics technology
> Multiplier contracts
> Customer relationships
> IntelliGen
> Patents and licences
> Software
20 years
15 years
10 to 17 years
10 years
term of agreement (4 years)
2 to 10 years
Genus plc / Annual Report 2020NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUEDFor the year ended 30 June 2020
125
15. INTANGIBLE ASSETS CONTINUED
Intangible assets acquired separately
We carry intangible assets acquired other than through a business combination at cost less accumulated amortisation and any impairment loss. We charge
amortisation on a straight-line basis over their estimated useful lives and review the useful life and amortisation method at the end of each financial year,
accounting for the effect of any changes in estimate on a prospective basis.
Porcine
and bovine
genetics
Technology
£m
Brand,
multiplier
contracts and
customer
relationships
£m
Separately
identified
acquired
intangible
assets
£m
Software
£m
Assets under
construction
£m
IntelliGen
£m
Patents,
licences and
other
£m
51.7
–
–
–
–
1.3
53.0
–
–
–
(1.0)
52.0
27.7
–
–
2.7
0.4
30.8
–
–
2.9
(0.5)
33.2
18.8
22.2
24.0
80.5
–
1.8
–
–
2.8
85.1
–
–
–
0.8
132.2
–
1.8
–
–
4.1
138.1
–
–
–
(0.2)
85.9
137.9
53.7
–
–
6.8
1.3
61.8
–
–
5.6
0.8
81.4
–
–
9.5
1.7
92.6
–
–
8.5
0.3
68.2
101.4
17.7
23.3
26.8
36.5
45.5
50.8
12.0
1.4
–
1.2
(0.1)
0.2
14.7
0.1
(0.6)
13.6
0.1
27.9
9.3
1.2
(0.1)
1.0
0.2
11.6
0.2
–
1.6
0.1
13.5
14.4
3.1
2.7
3.4
8.8
–
(1.2)
–
–
11.0
8.9
–
(13.6)
–
6.3
–
–
–
–
–
–
–
–
–
–
–
6.3
11.0
3.4
22.2
1.0
–
–
–
0.8
24.0
1.8
(1.0)
–
0.6
25.4
2.5
–
–
2.1
0.4
5.0
–
(0.4)
2.3
–
6.9
18.5
19.0
19.7
3.9
0.5
–
–
(0.1)
0.1
4.4
–
–
–
–
4.4
1.8
–
–
1.1
–
2.9
–
–
1.0
–
3.9
0.5
1.5
2.1
Total
£m
173.7
11.7
1.8
–
(0.2)
5.2
192.2
10.8
(1.6)
–
0.5
201.9
95.0
1.2
(0.1)
13.7
2.3
112.1
0.2
(0.4)
13.4
0.4
125.7
76.2
80.1
78.7
Cost
Balance at 1 July 2018
Additions
Acquisitions
Transfers
Disposals
Effect of movements in exchange rates
Balance at 30 June 2019
Additions
Disposals
Transfers
Effect of movements in exchange rates
Balance at 30 June 2020
Amortisation and impairment losses
Balance at 1 July 2018
Impairment
Disposals
Amortisation for the year
Effect of movements in exchange rates
Balance at 30 June 2019
Impairment
Disposals
Amortisation for the year
Effect of movements in exchange rates
Balance at 30 June 2020
Carrying amounts
At 30 June 2020
At 30 June 2019
At 30 June 2018
Included within the Software class of assets is £11.5m and included in assets in the course of construction is £5.7m that relate to the ongoing development
costs of GenusOne, our single global enterprise system.
FINANCIAL STATEMENTS
126
16. BIOLOGICAL ASSETS
The Group applies quantitative genetics and biotechnology to animal breeding. We use these techniques to identify and select animals with the genes
responsible for superior milk and meat, high health and performance traits. We sell breeding animals and semen to customers, who use them to produce
offspring which yield greater production efficiency and milk and meat quality, for the global dairy and meat supply chain. We recognise that accounting for
biological assets is an area which includes key sources of estimation uncertainty. These are outlined in note 4 and sensitivities are provided below.
Accounting policies
Biological assets and inventories
In bovine, we use research and development to identify genetically superior bulls in a number of breeds, primarily the Holstein dairy breed. Each selected
bull has its performance measured against its peers, by using genomic evaluations and progeny testing of its daughters’ performance. We collect and
freeze semen from the best bulls, to satisfy our customers’ demand. Farmers use semen from dairy breeds to breed replacement milking stock. They use
the semen we sell from beef breeds in either specialist beef breeding herds, for multiplying breeding bulls for use in natural service, or on dairy cows to
produce animals to be reared for meat.
Our research and development also enables us to produce and select our own genetically superior females, from which we will breed future bulls.
We hold our bovine biological assets for long-term internal use and classify them as non-current assets. We transfer bull semen to inventory at its fair value
at the point of harvest, which becomes its deemed cost under IAS 2. We state our inventories at the lower of this deemed cost and net realisable value.
Sorting semen is a production process rather than a biological process. As a result, we transfer semen inventory into sexed semen production at its fair
value at the point of harvest, less the cost to sell, and it becomes a component of the production process. We carry sexed semen in finished goods at
production cost.
In porcine, we maintain and develop a central breeding stock (the ‘nucleus herd’), to provide genetically superior animals. These genetics help make
farmers and food processors more profitable, by increasing their output of consistently high-quality products, which yield higher value. So we can
capitalise on our intellectual property, we outsource the vast majority of our pig production to our global multiplier network. We also sell the offspring or
semen we obtain from animals in the nucleus herd to customers for use in commercial farming.
Pig sales generally occur in one of two ways: ‘upfront’ and ‘royalty’. Under upfront sales, we receive the full fair value of the animal at the point we transfer it
to the customer. Under royalty sales, the pig is regarded as comprising two separately identifiable components: its carcass and its genetic potential. We
receive the initial consideration, which is approximately the animal’s carcass value, at the point we transfer the pig to the customer. We retain our interest in
the pig’s genetic potential and receive royalties for the customer’s use of this genetic potential.
The breeding animal biological assets we own, and our retained interest in the biological assets we have sold under royalty contracts, are recognised and
measured at fair value at each balance sheet date. We recognise changes in fair value in the income statement, within operating profit for the period.
We classify the porcine biological assets we are using as breeding animals as non-current assets and carry them at fair value. The porcine biological assets
we are holding for resale, which are the offspring of the breeding herd, are carried at fair value and classified as current assets.
Determination of fair values – biological assets
IAS 41 ‘Agriculture’ requires us to show the carrying value of biological assets in the Group Balance Sheet. We determine this carrying value according to
IAS 41’s provisions and show the net valuation movement in the income statement. There are important differences in how we value our bovine and porcine
assets, as explained below.
Bovine – we base the fair value of all bulls, on the net cash flows we expect to receive from selling their semen, discounted at a current risk adjusted
market-determined rate. The significant assumptions determining the fair values are the expected future demand for semen, the estimated biological
value, and the marketable life of bulls. The biological value is the estimated value at the point of production. We adjust the fair value of the bovine herd and
semen inventory where a third-party earns a royalty from semen sales from a particular bull. Females are valued by reference to market prices and
published independent genetic evaluations. The net cashflows include any expected impact of the COVID-19 pandemic.
Porcine – the fair value of porcine biological assets includes the animals we own entirely and our retained interest in the genetics of animals we have sold
under royalty arrangements. The fair value of animals we own is calculated using the animals’ average live weights, plus a premium where we believe that
their genetics make them saleable. We base the live weight value and the genetic premium on recent transaction prices we have achieved. The significant
assumptions in determining fair values are the breeding animals’ expected life, the percentage of production animals that are saleable as breeding animals
and the expected sales prices. For our retained interest in the genetics of animals sold under royalty contracts, we base the initial fair value on the fair
values we achieved in recent direct sales of similar animals, less the amount we received upfront for the carcass element. We then remeasure the fair value
of our retained interest at each reporting date. The significant assumption in determining the fair value of the retained interest is the animals’ expected life.
The assumptions used include any expected impact of the COVID-19 pandemic.
We value the pigs in our pure line herds, which are the repository of our proprietary genetics, as a single unit of account. We do this using a discounted cash
flow model, applied to the herds’ future outputs at current prices. The significant assumptions we make are the number of future generations attributable
to the current herds, the fair value prices we achieve on sales, the animals’ expected useful lifespan and productivity, and the risk adjusted discount rate.
Non-recognition of porcine multiplier contracts where the Group does not retain a contractual interest
To manage commercial risk, a very large part of our porcine business model involves selling pigs to farmers (‘multipliers’) who produce piglets on farms we
neither manage nor control. We have the option, but not the obligation, to buy the offspring at slaughter market value plus a premium. Because the
offspring have superior genetics, we can then sell them to other farmers at a premium.
We do not recognise the right to purchase offspring on the Group Balance Sheet, as we enter into the contracts and continue to hold them for the purpose
of receiving non-financial items (the offspring), in accordance with our expected purchase requirements. This means the option is outside the scope of IFRS
9. We do not recognise the offspring as biological assets under IAS 41, as we do not own or control them.
Genus plc / Annual Report 2020NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUEDFor the year ended 30 June 2020 16. BIOLOGICAL ASSETS CONTINUED
Fair value of biological assets
Balance at 30 June 2018 (as previously reported)
Prior period adjustment (see note 2)
Balance at 30 June 2018 (restated1)
Non-current biological assets
Current biological assets
Balance at 30 June 2018 (restated1)
Increases due to purchases
Decreases attributable to sales
Decrease due to harvest
Changes in fair value less estimated sale costs
Effect of movements in exchange rates
Balance at 30 June 2019 (restated1)
Non-current biological assets
Current biological assets
Balance at 30 June 2019 (restated1)
Increases due to purchases
Decreases attributable to sales
Decrease due to harvest
Changes in fair value less estimated sale costs
Effect of movements in exchange rates
Balance at 30 June 2020
Non-current biological assets
Current biological assets
Balance at 30 June 2020
1 See note 2 for details of prior period restatement.
127
(restated)1
Total
£m
342.8
(20.5)
322.3
285.3
37.0
322.3
126.7
(191.5)
(47.5)
104.4
12.8
327.2
287.1
40.1
327.2
136.2
(217.3)
(47.2)
144.1
6.9
349.9
310.1
39.8
349.9
Bovine
£m
104.0
–
104.0
104.0
–
104.0
9.2
–
(25.3)
7.2
3.6
98.7
98.7
–
98.7
17.5
–
(24.5)
13.5
2.0
107.2
107.2
–
107.2
(restated)1
Porcine
£m
238.8
(20.5)
218.3
181.3
37.0
218.3
117.5
(191.5)
(22.2)
97.2
9.2
228.5
188.4
40.1
228.5
118.7
(217.3)
(22.7)
130.6
4.9
242.7
202.9
39.8
242.7
Bovine biological assets include £5.5m (2019: £3.9m) representing the fair value of bulls owned by third parties but managed by the Group, net of expected
future payments to such third parties, which are therefore treated as assets held under finance leases.
There were no movements in the carrying value of the bovine biological assets in respect of sales or other changes during the year.
A risk adjusted rate of 8.8% (2019: 8.8%) has been used to discount future net cash flows from the sale of bull semen.
Decreases due to harvest represent the semen extracted from the biological assets. Inventories of such semen are shown as biological asset harvest in
note 20.
In porcine, included in increases due to purchases is the aggregate increase arising during the year on initial recognition of biological assets in respect of
multiplier purchases, other than parent gilts, of £46.3m (2019: £36.3m).
Decreases attributable to sales during the year of £217.3m (2019: £191.5m) include £68.1m (2019: £71.4m) in respect of the reduction in fair value of the
retained interest in the genetics of animals, other than parent gilts, transferred under royalty contracts.
Also included is £101.6m (2019: £85.4m) relating to the fair value of the retained interest in the genetics in respect of animals, other than parent gilts, sold to
customers under royalty contracts in the year.
Total revenue in the year, including parent gilts, includes £205.8m (2019: £179.6m) in respect of these contracts, comprising £69.8m (2019: £57.6m) on initial
transfer of animals and semen to customers and £136.0m (2019: £122.0m) in respect of royalties received.
A risk adjusted rate of 9.3% (2019: 11.0%) has been used to discount future net cash flows from the expected output of the pure line porcine herds. The
number of future generations which have been taken into account is seven (2019: seven) and their estimated useful lifespan is 1.4 years (2019: 1.4 years).
FINANCIAL STATEMENTS
128
16. BIOLOGICAL ASSETS CONTINUED
Year ended 30 June 2020
Net IAS 41 valuation movement on biological assets1
Changes in fair value of biological assets
Inventory transferred to cost of sales at fair value
Biological assets transferred to cost of sales at fair value
Fair value movement in related financial derivative
Year ended 30 June 2019
Net IAS 41 valuation movement on biological assets1
Changes in fair value of biological assets
Inventory transferred to cost of sales at fair value
Biological assets transferred to cost of sales at fair value
Fair value movement in related financial derivative
Bovine
£m
Porcine
£m
Total
£m
13.5
(10.9)
–
2.6
–
2.6
130.6
(22.7)
(95.1)
12.8
0.4
13.2
Bovine
£m
Porcine
£m
7.2
(20.0)
–
(12.8)
–
(12.8)
97.2
(22.2)
(77.2)
(2.2)
0.3
(1.9)
144.1
(33.6)
(95.1)
15.4
0.4
15.8
Total
£m
104.4
(42.2)
(77.2)
(15.0)
0.3
(14.7)
1 This represents the difference between operating profit prepared under IAS 41 and operating profit prepared under historical cost accounting, which forms part of the reconciliation to adjusted
operating profit.
Fair value measurement
All of the biological assets inputs fall under Level 3 of the hierarchy defined in IFRS 13. Significant increases/(decreases) in any of these inputs in isolation
would result in a significantly lower or higher fair value measurement.
Unobservable inputs and key sources of estimation uncertainty
Bovine
Risk adjusted discount rate1
Value at point of production1
Percentage of new dairy
bulls to be produced
internally in future years1
Age profile of Holstein bulls
generating future sales1
Age profile of US beef on
dairy bulls generating
future sales1
Long-term dairy volume
growth rate
Short-term dairy volume
growth rate
Porcine
Risk adjusted discount rate
– upfront prices
Risk adjusted discount rate
– pure line herd1
2020
8.8%
36.2%
FY21 68%
FY22 78%
FY23 81%
FY24 and thereafter 83%
FY21 – avg age 3.9 yrs
FY22 – avg age 3.9 yrs
FY23 – avg age 3.9 yrs
FY24 and thereafter –
avg age 3.8 yrs
FY21 – avg age 5.0 yrs
FY22 – avg age 4.8 yrs
FY23 – avg age 4.8 yrs
FY24 and thereafter –
avg age 4.8 yrs
2.0%
4.8%
8.8%
9.25%
2019 Sensitivity
8.7% 1 percentage point increase in the discount rate would result in
approximately a £3.2m (2019: £2.9m) reduction in value.
37.5% 1 percentage point decrease in the rate would result in approximately
a £4.8m (2019: £4.2m) reduction in value.
If percentage remained at FY20 level of 36% (2019: 48%) there would
be a decrease in value of approximately £12.4m (2019:£4.4m).
If age profile remains at FY20 average age of 4.0 years (2019: 4.1 years),
there would be an increase in value of approximately £2.4m
(2019: £4.3m).
If age profile remains at FY20 average age of 5.2 years (2019: 4.2 years),
there would be a decrease in value of approximately £1.4m
(2019: £1.9m).
FY20 49%
FY21 61%
FY22 72%
FY23 and thereafter 79%
FY20 – avg age 4.0 yrs
FY21 – avg age 3.9 yrs
FY22 – avg age 3.9 yrs
FY23 and thereafter –
avg age 3.8 yrs
FY20 – avg age 5.1 yrs
FY21 – avg age 5.6 yrs
FY22 – avg age 5.2 yrs
FY23 and thereafter –
avg age 5.3 yrs
1.4% 1 percentage point decrease in the growth rate would result in
approximately a £0.2m (2019: £0.2m) reduction in value.
4.4% 1 percentage point decrease in the growth rate would result in
approximately a £1.7m (2019: £1.6m) reduction in value.
8.8% 1 percentage point increase in the discount rate would result in
approximately a £0.3m (2019: £0.3m) reduction in value.
11% 1 percentage point increase in the discount rate would result in
approximately a £3.1m (2019: £3.1m) reduction in value. Any additional
increase in the percentage would lead to a linear impact.
1 percent point increase in the go to breeding sales would result in
approximately £8.8m (2019: £8.1m) increase in value.
Proportion of animals that
go to breeding sales1
Gilts – 6.8%
Boars – 9.0%
Gilts – 4.5%
Boars – 12.0%
1 Key sources of estimation uncertainty.
Genus plc / Annual Report 2020NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUEDFor the year ended 30 June 2020
16. BIOLOGICAL ASSETS CONTINUED
Additional information
Bovine
Quantities at period end
Number of bulls in production
Number of bulls under development (including calves)
Total number of bulls
Number of doses of semen valued in inventory
Amounts during the year
Fair value of agricultural produce – semen harvested during the period
Porcine
Quantities at period end
Number of pigs (own farms)
Number of pigs, excluding parent gilts, despatched on a royalty basis and valued at fair value
Amounts during the year
Fair value of agricultural produce – semen harvested during the period
129
2020
2019
808
652
1,460
12.4m
644
982
1,626
10.9m
£24.5m
£25.3m
93,316
89,337
97,468
80,992
£22.7m
£22.2m
17. PROPERTY, PLANT AND EQUIPMENT
We make significant investments in our property, plant and equipment. All assets are depreciated over their useful economic lives.
Accounting policies
We state property, plant and equipment at cost, together with any directly attributable acquisition expenses, or at their latest valuation, less depreciation
and any impairment losses. Where parts of an item of property, plant and equipment have different useful lives, we account for them separately.
We charge depreciation to the income statement on a straight-line basis, over the estimated useful lives of each part of an asset. The estimated useful lives
are as follows:
> Freehold buildings
> Leasehold buildings
> Plant and equipment
> Motor vehicles
10 to 40 years
over the term of the lease
3 to 20 years
3 to 5 years
We do not depreciate land or assets under construction.
Right-of-use assets
Right-of-use assets are measured initially at cost based on the value of the associated lease liability, adjusted for any payments made before inception,
initial direct costs and an estimate of the dismantling, removal and restoration costs required in the terms of the lease. Subsequent to initial recognition,
we record an interest charge in respect of the lease liability. The related right-of-use asset is depreciated over the term of the lease or, if shorter, the useful
economic life of the leased asset. The lease term shall include the period of an extension option where it is reasonably certain that the option will be
exercised. Where the lease contains a purchase option the asset is written off over the useful life of the asset when it is reasonably certain that the purchase
option will be exercised.
FINANCIAL STATEMENTS
130
17. PROPERTY, PLANT AND EQUIPMENT CONTINUED
Land and
buildings
£m
Plant, motor
vehicles and
equipment
£m
Assets under
construction
£m
Cost or deemed cost
Balance at 1 July 2018
Additions
Transfers
Disposals
Effect of movements in exchange rates
Balance at 30 June 2019
Recognised on the adoption of IFRS 16
Transfers on adoption of IFRS 16
Additions
Transfers
Disposals
Effect of movements in exchange rates
Balance at 30 June 2020
Depreciation and impairment losses
Balance at 1 July 2018
Depreciation for the year
Disposals
Effect of movements in exchange rates
Balance at 30 June 2019
Transfers on the adoption of IFRS 16
Depreciation for the year
Disposals
Effect of movements in exchange rates
56.5
1.0
3.5
(1.6)
2.7
62.1
–
–
0.4
6.6
(1.6)
0.4
67.9
18.1
3.0
(1.5)
1.2
20.8
–
3.8
(0.7)
0.4
78.1
10.1
6.0
(6.0)
3.1
91.3
–
(12.2)
9.4
4.7
(5.4)
–
87.8
43.6
9.6
(4.7)
2.8
51.3
(4.8)
9.3
(2.7)
–
Balance at 30 June 2020
24.3
53.1
4.0
10.0
(9.5)
(0.1)
0.3
4.7
–
–
14.8
(11.3)
–
–
8.2
–
–
–
–
–
–
–
–
–
–
Carrying amounts
At 30 June 2020
At 30 June 2019
43.6
41.3
34.7
40.0
8.2
4.7
Total
owned
assets
£m
138.6
21.1
–
(7.7)
6.1
158.1
–
(12.2)
24.6
–
(7.0)
0.4
163.9
61.7
12.6
(6.2)
4.0
72.1
(4.8)
13.1
(3.4)
0.4
77.4
86.5
86.0
Land and
buildings
£m
Plant, motor
vehicles and
equipment
£m
Total
right-of-use
assets
£m
–
–
–
–
–
–
19.7
–
1.9
–
–
0.3
21.9
–
–
–
–
–
–
4.4
–
–
4.4
17.5
–
–
–
–
–
–
–
6.9
12.2
7.2
–
(2.7)
0.4
24.0
–
–
–
–
–
4.8
6.5
(1.5)
0.3
10.1
13.9
–
–
–
–
–
–
–
26.6
12.2
9.1
–
(2.7)
0.7
45.9
–
–
–
–
–
4.8
10.9
(1.5)
0.3
14.5
31.4
–
Total
£m
138.6
21.1
–
(7.7)
6.1
158.1
26.6
–
33.7
–
(9.7)
1.1
209.8
61.7
12.6
(6.2)
4.0
72.1
–
24.0
(4.9)
0.7
91.9
117.9
86.0
18. EQUITY ACCOUNTED INVESTEES
We hold interests in several joint ventures and associates where we have significant influence.
Accounting policies
Joint ventures are entities over whose activities we have joint control, under a contractual agreement. The Group Financial Statements include the Group’s
share of profit or loss arising from joint ventures.
Associates are entities in which the Group has significant influence, but not control, over the financial and operating policies. The Group Financial
Statements include the Group’s share of the total recognised income and expense of associates on an equity accounted basis, from the date that significant
influence commences until the date it ceases. When our share of losses exceeds our interest in an associate, we reduce the carrying amount to nil and stop
recognising further losses, except to the extent that the Group has incurred legal or constructive obligations or made payments on an associate’s behalf.
Under the equity method, investments in joint ventures or associates are initially recognised in the Group Balance Sheet at cost and adjusted thereafter to
recognise the Group’s share of the profit or loss and other comprehensive income of the joint ventures and associates. Related party transactions with the
Group’s joint ventures and associates primarily comprise the sale of products and services. As each arrangement is a separate legal entity and control
rights are substantially equal with the other parties, no significant judgements are required.
The Group’s share of profit after tax in its equity accounted investees for the year was £8.9m (2019: £5.1m).
Genus plc / Annual Report 2020NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUEDFor the year ended 30 June 2020 18. EQUITY ACCOUNTED INVESTEES CONTINUED
The carrying value of the investments is reconciled as follows:
Balance at 1 July
Share of post-tax retained profits of joint ventures and associates
Additions
Disposal proceeds
Dividends received from Agroceres – PIC Genética de Suínos Ltda (Brazil)
Dividends received from HY-CO Hybridschweine-Cooperations GmbH (Germany)
Loan repayment
Effect of other movements including exchange rates
Balance at 30 June
131
2019
£m
19.9
5.1
–
–
(2.7)
–
(0.7)
2.0
23.6
2020
£m
23.6
8.9
2.2
(3.8)
(2.2)
(0.3)
(1.2)
(4.5)
22.7
During the year, we invested £2.2m in a new associate Inner Mongolia Haoxiang Pig Breeding Co. Ltd and disposed of its entire holding of Xianyang
Yongxiang Agriculture Technology Co., Ltd receiving a return of loan capital and equity totalling £5.0m.
During the prior year, under the subscription agreement with Avlscenter Møllevang A/S (‘Møllevang’), Genus purchased 49% of the Danish porcine genetics
company and obtained economic control of its elite genetics. Under this agreement, the majority shareholders have a call option to purchase the entire
shares held by Genus, after a three-year period, for a consideration which is capped at Genus’s share of total retained profits during the period of
ownership. Under the same agreement, Genus is also not liable for any losses made by Møllevang in the same three-year period and can sell its entire
shareholding for USD 1. Møllevang is treated as an associate but as a result of this call option, Genus will receive no economic benefit from the net assets of
the entity other than its expected share of retained interest, and therefore has restricted the net assets to £0.2m.
There are no significant restrictions on the ability of the joint ventures and associates to transfer funds to the parent, other than those imposed by the
Companies Act 2006 or equivalent government rules within the joint venture’s jurisdiction.
Related party transactions with joint ventures and associates
Sale of goods and services to joint ventures and associates
Purchase of goods and services from joint ventures and associates
Transaction value
Balance outstanding
2020
£m
(1.2)
3.1
2019
£m
–
2.0
2020
£m
–
(1.6)
2019
£m
–
(2.6)
All outstanding balances with joint ventures and associates are priced on an arm’s length basis and are to be settled in cash within six months of the
reporting date. None of the balances are secured.
Summary financial information for equity accounted investees, adjusted for the Group’s percentage ownership, is shown below:
Joint ventures and associates – year ended 30 June 2020
Net assets
Ownership
Cash and cash
equivalent
£m
Current
assets
£m
Non-current
assets
£m
Biological
assets
£m
Total
assets
£m
Current
liabilities
£m
Total
liabilities
£m
Net
assets
£m
Agroceres – PIC Genética de
Suínos Ltda (Brazil)
HY-CO Hybridschweine-
Cooperations GmbH
(Germany)
Inner Mongolia Haoxiang Pig
Breeding Co. Ltd. (China)1
Chitale Genus ABS (India)
Private Limited (India)
Avlscenter Møllevang A/S1
49%
50%
49%
50%
49%
2.9
–
2.0
–
–
4.9
6.1
0.2
1.2
0.4
0.2
8.1
8.1
–
0.3
1.1
–
9.5
3.5
20.6
(2.4)
(2.4)
18.2
–
(0.1)
–
–
3.4
0.2
3.4
1.5
0.2
(0.1)
(0.3)
–
–
25.9
(2.8)
(0.1)
(0.3)
(0.4)
–
(3.2)
0.1
3.1
1.1
0.2
22.7
1 Classified as an associate, all other investments are classified as joint ventures.
FINANCIAL STATEMENTS
132
18. EQUITY ACCOUNTED INVESTEES CONTINUED
Joint ventures and associates have a December year end, except Chitale Genus ABS (India) Private Limited, which has a March year end.
Income statement
Agroceres – PIC Genética de Suínos Ltda (Brazil)
HY-CO Hybridschweine-Cooperations GmbH (Germany)
Xianyang Yongxiang Agriculture Technology Co., Ltd.
(China)1
Inner Mongolia Haoxiang Pig Breeding Co. Ltd. (China)1
Chitale Genus ABS (India) Private Limited (India)
Avlscenter Møllevang A/S1
Net IAS 41
valuation
movement on
biological
assets
£m
–
–
–
(0.1)
–
–
(0.1)
Ownership
Revenue
£m
49%
50%
49%
49%
50%
49%
28.1
0.9
1.4
2.6
0.3
0.2
33.5
Expenses
£m
Operating
profit
£m
(18.9)
(0.7)
(0.7)
(1.6)
(0.3)
–
9.2
0.2
0.7
0.9
–
0.2
Taxation
£m
(2.3)
–
–
–
–
–
(22.2)
11.2
(2.3)
Profit
after tax
£m
6.9
0.2
0.7
0.9
–
0.2
8.9
1 Classified as an associate, all other investments are classified as joint ventures.
Joint ventures and associates have a December year end, except Chitale Genus ABS (India) Private Limited, which has a March year end.
Joint ventures and associates – year ended 30 June 2019
Net assets
Ownership
Cash and cash
equivalent
£m
Current
assets
£m
Non-current
assets
£m
Biological
assets
£m
Total
assets
£m
Current
liabilities
£m
Total
liabilities
£m
Net
assets
£m
Agroceres – PIC Genética de
Suínos Ltda (Brazil)
HY-CO Hybridschweine-
Cooperations GmbH
(Germany)
Xianyang Yongxiang
Agriculture Technology Co.,
Ltd. (China)1
Chitale Genus ABS (India)
Private Limited (India)
Avlscenter Møllevang A/S1
49%
50%
49%
50%
49%
2.2
–
0.2
–
–
2.4
6.9
0.2
1.9
0.3
–
9.3
8.1
0.1
3.7
0.8
–
12.7
Income statement
Ownership
Revenue
£m
3.6
–
(0.1)
–
–
3.5
Net IAS 41
valuation
movement on
biological
assets
£m
20.8
(2.8)
(2.8)
18.0
0.3
(0.1)
(0.1)
5.7
1.1
–
27.9
(1.4)
(1.4)
–
–
–
–
(4.3)
(4.3)
23.6
0.2
4.3
1.1
–
Expenses
£m
Operating
profit
£m
Taxation
£m
Profit
after tax
£m
Agroceres – PIC Genética de Suínos Ltda (Brazil)
HY-CO Hybridschweine-Cooperations GmbH (Germany)
Xianyang Yongxiang Agriculture Technology Co., Ltd.
(China)1
Chitale Genus ABS (India) Private Limited (India)
Avlscenter Møllevang A/S1
49%
50%
49%
50%
49%
25.1
1.3
3.1
0.3
–
29.8
(1.2)
–
0.1
–
–
(1.1)
(18.1)
(1.3)
(2.5)
(0.3)
–
(22.2)
5.8
–
0.7
–
–
6.5
(1.5)
–
0.1
–
–
(1.4)
4.3
–
0.8
–
–
5.1
1 Classified as an associate, all other investments are classified as joint ventures.
Joint ventures and associates have a December year end, except Chitale Genus ABS (India) Private Limited, which has a March year end.
Genus plc / Annual Report 2020NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUEDFor the year ended 30 June 2020 133
19. OTHER INVESTMENTS
We hold a number of unlisted and listed investments, mainly comprising our strategic investment in Caribou Biosciences, Inc. and shares in listed entity
National Milk Records plc (‘NMR’).
Accounting policies
Financial assets at fair value through other comprehensive income (‘FVOCI’) comprise equity securities which are not held for trading, and which the Group
has irrevocably elected at initial recognition to recognise as FVOCI. The Group considers this classification relevant as these are strategic investments.
Financial assets at FVOCI are adjusted to the fair value of the asset at the balance sheet date with any gain or loss being recognised in other comprehensive
income and held as part of other reserves. On disposal any gain or loss is recognised in other comprehensive income and the cumulative gains or losses are
transferred from other reserves to retained earnings.
At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through income statement,
transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through
income statement are expensed in the income statement.
Other investments may include equity investments (where the Group does not have control, joint control or significant influence in the investee), short-term
deposits with banks and other investments with original maturities of more than three months. Any dividends received are recognised in the income
statement.
Investments carried at fair value
Unlisted equity shares – Caribou Biosciences, Inc.
Unlisted equity shares – Other
Listed equity shares – NMR
2020
£m
3.7
1.4
1.8
6.9
2019
£m
3.7
1.1
2.6
7.4
We hold a strategic non-controlling interest of 5% in Caribou Biosciences, Inc. which is measured at fair value and the valuation basis is Level 3
classification. The fair value has been calculated using the subject company transaction method with equity adjustment, and the key input into the
valuation is the equity adjustment of 10%. The equity adjustment has been determined with reference to the performance of comparable public
companies. A 1% movement in the equity adjustment would result in a change in the Group’s investment of £0.3m.
NMR ordinary shares were acquired as part of the NMR pension agreement, and are measured at fair value. The valuation basis is Level 1 classification
where fair value techniques are quoted (unadjusted) prices in active markets for identical assets and liabilities.
Other unlisted equity investments primarily consist of strategic non-controlling interest in a herd management software company, which is measured at fair
value and the valuation basis is Level 3 classification, where fair value techniques use inputs which have a significant effect on the recorded fair value and
are not based on observable market data.
20. INVENTORIES
Our inventory primarily consists of bovine semen, raw materials and ancillary products.
Accounting policies
Inventory (excluding biological assets’ harvest) is stated at the lower of cost and net realisable value. Cost is determined on the basis of weighted average
costs and comprises direct materials and, where appropriate, direct labour costs and those overheads that have been incurred in bringing the inventories
to their present location and condition.
For our biological assets accounting policies, see note 16.
Biological assets’ harvest classed as inventories
Raw materials and consumables
Goods held for resale
2020
£m
20.3
0.7
16.4
37.4
2019
£m
19.0
0.8
16.2
36.0
FINANCIAL STATEMENTS
134
21. TRADE AND OTHER RECEIVABLES
Our trade and other receivables mainly consist of amounts owed to us by customers and amounts we pay to our suppliers in advance.
Accounting policies
We state trade and other receivables at their amortised cost less any impairment losses.
Trade receivables
Less expected credit loss allowance
Trade receivables net of impairment
Other debtors
Prepayments
Accrued income (note 24)
Other taxes and social security
Current trade and other receivables
Non-current other receivables
2020
£m
83.7
(3.4)
80.3
6.3
6.6
5.1
2.5
100.8
1.8
102.6
2019
£m
85.4
(2.6)
82.8
5.1
5.3
2.9
1.9
98.0
–
98.0
Trade receivables
The average credit period our customers take on the sales of goods is 53 days (2019: 62 days). We do not charge interest on receivables for the first 30 days
from the date of the invoice.
The Group always measures the loss allowance for trade receivables at an amount equal to lifetime expected credit losses (‘ECL’). The expected credit
losses on trade receivables are estimated using a provision matrix by reference to past default experience of the debtor and an analysis of the debtor’s
current financial position, adjusted for factors that are specific to the general economic conditions of the industry and country in which the debtor operates
and an assessment of both the current and as the forecast direction of conditions at the reporting date. The Group writes off a trade receivable when there
is information indicating that the debtor is in severe financial difficulty and there is no realistic prospect of recovery, such as when the debtor has been
placed under liquidation or has entered into bankruptcy proceedings.
The Group recognises ECLs with reference to the following matrix, in accordance with the simplified approach permitted in IFRS 9. There has been no
change in the estimation techniques during the current reporting period. A component of the calculation is the risk premium of the countries in which our
customers operate. The risk premiums are updated on each reporting date to reflect changes in the global economy. The changes in the global economy
incorporate the uncertainty caused by the COVID-19 pandemic.
2020
2019
North America
Latin America
1.6%
1.5%
6.3%
5.0%
EMEA
2.6%
2.3%
Asia
12.2%
5.0%
The following table shows the movement in lifetime ECL that has been recognised for trade receivables in accordance with the simplified approach set out
in IFRS 9.
Balance at the start of the year
Change in loss allowance due to new trade and other receivables originated net of those derecognised due to settlement
Amounts written off as uncollectable
Impairment losses reversed
Effect of movements in exchange rates
Balance at the end of the year
The aging of trade receivables is presented below:
2020
£m
2.6
2.5
(0.3)
(1.3)
(0.1)
3.4
2019
£m
4.4
1.7
(2.2)
(1.4)
0.1
2.6
Days past due
Not yet due
0–30 days
31–90 days
91–180 days
Over 180 days
Trade receivables
Trade receivables net of
impairment
2020
£m
65.4
8.7
5.9
1.5
2.2
83.7
2019
£m
61.6
11.4
6.7
2.8
2.9
85.4
2020
£m
62.9
8.3
5.5
1.5
2.1
80.3
2019
£m
61.6
11.4
6.3
2.3
1.2
82.8
No customer represents more than 5% of the total balance of trade receivables (2019: nil).
The Directors consider that the carrying amount of trade and other receivables approximates their fair value.
Receivables denominated in currencies other than Sterling comprise £34.7m denominated in US Dollars (2019: £31.4m), £13.2m denominated in Euros
(2019: £12.3m) and £32.1m denominated in other currencies (2019: £34.3m).
Genus plc / Annual Report 2020NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUEDFor the year ended 30 June 2020 135
22. CASH AND CASH EQUIVALENTS
We hold cash and bank deposits which have a maturity of three months or less, to enable us to meet our short-term liquidity requirements.
Accounting policies
Cash and cash equivalents comprise cash balances. Bank overdrafts that are repayable on demand form an integral part of our cash management and are
included in interest-bearing loans and borrowings less than one year.
Cash at bank and in hand
2020
£m
41.3
2019
£m
30.5
The carrying amount of these assets approximates to their fair value. Included within bank balances above is £nil (2019: £nil) which was subject to certain
local restrictions, principally in China.
The credit quality of cash and cash equivalents can be assessed by reference to external credit ratings of the counterparty where the account or deposit is
placed.
Counterparties with external credit ratings
A to AA-
BBB- to BBB
B- to BB+
2020
£m
31.0
5.1
5.2
41.3
2019
£m
24.0
3.6
2.9
30.5
23. TRADE AND OTHER PAYABLES
Our trade and other payables mainly consist of amounts we owe to our suppliers that have been invoiced or are accrued. They also include taxes and social
security amounts due in relation to our role as an employer.
Accounting policies
Trade payables are not interest bearing and are stated at their nominal value.
Trade payables
Other payables
Accrued expenses
Deferred income (note 24)
Other taxes and social security
Current trade and other payables
Deferred income (note 24)
Non-current trade and other payables
2020
£m
18.5
4.9
57.2
8.2
6.2
95.0
3.3
3.3
2019
£m
24.5
3.9
45.4
6.9
7.0
87.7
–
–
The average credit period taken for trade purchases is 21 days (2019: 31 days).
Payables denominated in currencies other than Sterling comprise £39.1m denominated in US Dollars (2019: £32.8m), £11.1m denominated in Euros
(2019: £11.3m) and £27.6m denominated in other currencies (2019: £22.4m).
The carrying values of these liabilities are a reasonable approximation of their fair values.
24. CONTRACT BALANCES
Accounting policy
A contract asset is recognised when the Group’s right to consideration is conditional on something other than the passage of time, for example the
completion of future performance obligations under the terms of the contract with the customer. In some instances, the Group receives payments from
customers based on a billing schedule, as established in the contract, which may not match with the pattern of performance under the contract.
Where payment is received ahead of performance a contract liability will be created and where performance obligations are satisfied ahead of billing then a
contract asset will be recognised.
Contract assets – accrued income (note 21)
Current contract liabilities
Non-current contract liabilities
Contract liabilities – deferred income (note 23)
2020
£m
5.1
(8.2)
(3.3)
(11.5)
2019
£m
2.9
(6.9)
–
(6.9)
FINANCIAL STATEMENTS
136
24. CONTRACT BALANCES CONTINUED
Balance at 1 July 2018
Increases as a result of performance in advance of billing
Transfers to receivables during the year
Increases as a result of billing ahead of performance
Decreases as a result of revenue recognised in the year
Effect of movements in exchange rates
Balance at 30 June 2019
Increases as a result of performance in advance of billing
Transfers to receivables during the year
Increases as a result of billing ahead of performance
Decreases as a result of revenue recognised in the year
Effect of movements in exchange rates
Balance at 30 June 2020
Contract
assets
£m
Contract
liabilities
£m
5.0
22.0
(24.1)
–
–
–
2.9
27.3
(25.1)
–
–
–
5.1
(6.3)
–
–
(33.3)
32.7
–
(6.9)
–
–
(82.0)
77.1
0.3
(11.5)
In some cases, the Group receives payments from customers based on a billing schedule, as established in our contracts. The contract assets relate to
revenue recognised for performance in advance of scheduled billing and have increased as the Group has provided more services ahead of the agreed
payment schedules for certain contracts. The contract liability relates to payments received in advance of performance under contract and varies based on
performance under these contracts.
The transaction price allocated to partially unsatisfied performance obligations at 30 June 2020 is £6.8m (2019: £8.4m). It is expected that the Group will
recognise this revenue over the next five years.
25. PROVISIONS
A provision is a liability recorded in the Group Balance Sheet, where there is uncertainty over the timing or amount that will be paid, and is therefore
estimated. The main provisions we hold relate to litigation damages, legal provisions, customer claims and share forfeiture.
Accounting policies
We recognise a provision in the balance sheet when an event results in the Group having a current legal or constructive obligation, and it is probable that
we will have to settle the obligation through an outflow of economic benefits. If the effect is material, we discount provisions to their present value.
ST
litigation
£m
Contingent
deferred
consideration
£m
Share
forfeiture
£m
Other
provisions
£m
Balance at 1 July 2018
Additional provision in the year
Utilisation of provision
Release of provision
Balance at 30 June 2019
Additional provision in the year
Utilisation of provision
Release of provision
Reclassified to deferred consideration1
Effect of movement in exchange rates
Balance at 30 June 2020
–
–
–
–
–
10.2
–
–
–
0.3
10.5
4.0
0.9
(0.4)
–
4.5
–
–
–
(4.5)
–
–
2.2
–
(0.2)
–
2.0
0.3
–
–
–
–
2.3
1 Contingent deferred consideration has been reclassified to be disclosed within deferred consideration, as the balances are recorded at fair value and not estimated.
Current
Non-current
1.1
1.7
(0.3)
(0.2)
2.3
2.5
(1.6)
(0.2)
–
–
3.0
2020
£m
4.0
11.8
15.8
Total
£m
7.3
2.6
(0.9)
(0.2)
8.8
13.0
(1.6)
(0.2)
(4.5)
0.3
15.8
2019
£m
3.1
5.7
8.8
ST litigation relates specifically to our litigation only with Sexing Technologies, as described in note 7.
The share forfeiture provision of £2.3m relates to potential claims that could be made by untraced members over the next two years, relating to the resale
proceeds of shares that were identified during the prior year as being forfeited.
Other provisions mainly relate to legal provisions (excluding ST litigation) and customers’ claims. The timing and cash flows associated with the majority of
legal claims are expected to be less than one year. However, for some legal claims the timing of cash flows may be long term in nature and are disclosed
as such.
Genus plc / Annual Report 2020NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUEDFor the year ended 30 June 2020 137
26. FINANCIAL INSTRUMENTS
This note details our treasury management and financial risk management objectives and policies, as well as the Group’s exposure and sensitivity to credit,
liquidity, interest and foreign exchange rate risk, and the policies in place to monitor and manage these risks.
Financial risk management objectives
The Group’s Corporate Treasury function provides services to the business, coordinates our access to domestic and international financial markets, and
monitors and manages the financial risks relating to the Group’s operations, through internal risk reports that analyse exposures by degree and magnitude
of risks. These risks include market risk (including currency risk, fair value interest rate risk and price risk), credit risk, liquidity risk and cash flow interest
rate risk.
We seek to minimise the effects of these risks by hedging them using derivative financial instruments. Our use of financial derivatives is governed by
policies approved by the Board of Directors, which provide written principles on foreign exchange risk, interest rate risk, credit risk, the use of financial
derivatives and non-derivative financial instruments, and the investment of excess liquidity. The Board of Directors regularly reviews our compliance with
policies and exposure limits. The Group does not enter into or trade financial instruments, including derivative financial instruments, for speculative
purposes.
Key financial risks and exposures are monitored through a monthly report to the Board of Directors, together with an annual Board review of corporate
treasury matters.
Financial risk
The principal financial risks our activities expose us to are the risks of changes in foreign currency exchange rates, interest rates and commodity prices.
We use derivative financial instruments to manage our exposure to interest rate, foreign currency and commodity price risks, including:
> forward foreign exchange contracts, to hedge the exchange rate risk arising on the sale of goods and purchase of supplies in foreign currencies;
> interest rate swaps, to mitigate the risk of rising interest rates; and
> forward commodity contracts, to hedge commodity price risk.
Accounting policies
Financial instruments
Financial assets and liabilities, in respect of financial instruments are recognised on the Group’s balance sheet when the Group becomes a party to the
instrument’s contractual provisions.
Financial liabilities and equity instruments
Financial liabilities and equity instruments issued by the Group are classified according to the substance of the contractual arrangements entered into and
the definitions of a financial liability and an equity instrument. An equity instrument is any contract that provides a residual interest in the Group’s assets
after deducting all of its liabilities and includes no obligation to deliver cash or other financial assets. The accounting policies adopted for specific financial
liabilities and equity instruments are set out below.
Put option arrangements over non-controlling interest
The potential cash payments related to put options issued by the Group over the equity of subsidiary companies are accounted for as financial liabilities.
The amount that may become payable under the option on exercise is initially recognised at present value within financial liabilities, with a corresponding
charge directly to equity. The charge to equity is recognised separately as written put options over non-controlling interest, adjacent to non-controlling
interest in the net assets of consolidated subsidiaries.
Such options are subsequently measured at amortised cost, using the effective interest rate method, in order to accrete the liability up to the amount
payable under the option at the date at which it first becomes exercisable. The charge arising is recorded as a financing cost. If the option expires
unexercised, the liability is derecognised, with a corresponding adjustment to equity.
Derivative financial instruments
Derivatives are recognised initially at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at each
reporting date. The resulting gain or loss is recognised in the income statement immediately unless the derivative is designated and effective as a hedging
instrument, in which event the timing of the recognition in the income statement depends on the nature of the hedge relationship.
A derivative with a positive fair value is recognised as a financial asset whereas a derivative with a negative fair value is recognised as a financial liability.
Derivatives are not offset in the financial statements unless the Group has both a legally enforceable right and intention to offset. A derivative is presented
as a non-current asset or a non-current liability if the remaining maturity of the instrument is more than 12 months and it is not due to be realised or settled
within 12 months. Other derivatives are presented as current assets or current liabilities.
The fair value of interest rate swaps is the estimated amount that we would receive or pay to terminate the swap at the balance sheet date, taking into
account current interest rates and the creditworthiness of the swap counterparties.
The fair values of forward exchange contracts and forward commodity contracts are their quoted market price at the balance sheet date, which is the
present value of the quoted forward price.
FINANCIAL STATEMENTS
138
26. FINANCIAL INSTRUMENTS CONTINUED
Hedging activities
The Group designates certain derivatives as hedging instruments in respect of foreign exchange risk, interest rate risk and commodity risk in fair value
hedges, cash flow hedges, or hedges of net investments in foreign operations.
At the inception of the hedge relationship, the Group documents the relationship between the hedging instrument and the hedged item, along with its risk
management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis,
the Group documents whether the hedging instrument is effective in offsetting changes in fair values or cash flows of the hedged item attributable to the
hedged risk, which is when the hedging relationship meets all of the following hedge effectiveness requirements:
> there is an economic relationship between the hedged item and the hedging instrument;
> the effect of credit risk does not dominate the value changes that result from that economic relationship; and
> the hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the Group actually hedges and the
quantity of the hedging instrument that the Group actually uses to hedge that quantity of hedged item.
If a hedging relationship ceases to meet the hedge effectiveness requirement relating to the hedge ratio but the risk management objective for that
designated hedging relationship remains the same, the Group adjusts the hedge ratio of the hedging relationship (i.e. rebalances the hedge) so that it
meets the qualifying criteria again.
The Group designates the full change in the fair value of a forward contract (i.e. including the forward elements) as the hedging instrument for all of its
hedging relationships involving forward contracts.
The Group designates only the intrinsic value of option contracts as a hedged item, i.e. excluding the time value of the option. The changes in the fair value
of the aligned time value of the option are recognised in Other Comprehensive Income and accumulated in the cost of hedging reserve. If the hedged item
is transaction-related, the time value is reclassified to the Income Statement when the hedged item affects the Income Statement. If the hedged item is
time-period related, then the amount accumulated in the cost of hedging reserve is reclassified to the income statement on a rational basis – the Group
applies straight-line amortisation. Those reclassified amounts are recognised in the income statement in the same line as the hedged item. If the hedged
item is a non-financial item, then the amount accumulated in the cost of hedging reserve is removed directly from equity and included in the initial carrying
amount of the recognised non-financial item. Furthermore, if the Group expects that some or all of the loss accumulated in cost of hedging reserve will not
be recovered in the future, that amount is immediately reclassified to the Income Statement.
Cash flow hedges
The effective portion of changes in the fair value of derivatives and other qualifying hedging instruments that are designated and qualify as cash flow
hedges is recognised in Other Comprehensive Income and accumulated under the heading of cash flow hedging reserve, limited to the cumulative change
in fair value of the hedged item from inception of the hedge. The gain or loss relating to the ineffective portion is recognised immediately in the Income
Statement, and is included in the ‘other gains and losses’ line item.
Amounts previously recognised in other comprehensive income and accumulated in equity are reclassified to the Income Statement in the periods when
the hedged item affects the income statement, in the same line as the recognised hedged item. However, when the hedged forecast transaction results in
the recognition of a non-financial asset or a non-financial liability, the gains and losses previously recognised in other comprehensive income and
accumulated in equity are removed from equity and included in the initial measurement of the cost of the non-financial asset or non-financial liability. This
transfer does not affect other comprehensive income. Furthermore, if the Group expects that some or all of the loss accumulated in the cash flow hedging
reserve will not be recovered in the future, that amount is immediately reclassified to the Income Statement.
The Group discontinues hedge accounting only when the hedging relationship (or a part thereof) ceases to meet the qualifying criteria (after rebalancing,
if applicable). This includes instances when the hedging instrument expires or is sold, terminated or exercised. The discontinuation is accounted for
prospectively. Any gain or loss recognised in other comprehensive income and accumulated in cash flow hedge reserve at that time remains in equity and
is reclassified to the income statement when the forecast transaction occurs. When a forecast transaction is no longer expected to occur, the gain or loss
accumulated in the cash flow hedge reserve is reclassified immediately to the Income Statement.
Under interest rate swap contracts, the Group agrees to exchange the difference between fixed and floating rate interest amounts calculated on agreed
notional principal amounts. Such contracts enable the Group to mitigate the risk of changing interest rates on the fair value of issued fixed rate debt held
and the cash flow exposures on the issued variable rate debt held. The fair value of interest rate swaps at the reporting date is determined by discounting
the future cash flows using the curves at the reporting date and the credit risk inherent in the contract. The average interest rate is based on the
outstanding balances at the end of the financial year.
As the critical terms of the interest rate swap contracts and their corresponding hedged items are the same, the Group performs a qualitative assessment
of effectiveness and it is expected that the value of the interest rate swap contracts and the value of the corresponding hedged items will systematically
change in opposite direction in response to movements in the underlying interest rates. The main source of hedge ineffectiveness in these hedge
relationships is the effect of the counterparty and the Group’s own credit risk on the fair value of the interest rate swap contracts, which is not reflected in
the fair value of the hedged item attributable to the change in interest rates. No other sources of ineffectiveness emerged from these hedging relationships.
Net investment hedges
Hedges of net investments in foreign operations are accounted for similarly to cash flow hedges. Any gain or loss on the foreign currency forward contracts
relating to the effective portion of the hedge is recognised in Other Comprehensive Income and accumulated in the foreign currency translation reserve.
The gain or loss relating to the ineffective portion is recognised immediately in the Income Statement, and is included in the ‘other gains and losses’ line
item.
Gains and losses on the hedging instrument accumulated in the foreign currency translation reserve are reclassified to the Income Statement on the
disposal or partial disposal of the foreign operation.
We only apply net investment hedge accounting in the Group Financial Statements.
Genus plc / Annual Report 2020NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUEDFor the year ended 30 June 2020 139
26. FINANCIAL INSTRUMENTS CONTINUED
Capital risk management
The Group manages its capital to ensure that Group entities can continue as going concerns, while maximising the return to shareholders by optimising
our debt and equity balance. The Group’s capital structure consists of debt, which includes the borrowings disclosed in note 27, cash and cash equivalents,
and equity attributable to equity holders of the Parent, comprising issued capital, reserves and retained earnings, as disclosed in note 31.
Gearing ratio
The Group keeps its capital structure under review and monitors it monthly to ensure the gearing ratio remains below 60%. The Group is not subject to
externally imposed capital requirements. The gearing ratio at the year end was as follows:
Debt (see note 27)
Cash and cash equivalents (see note 22)
Net debt (see note 32)
Equity1
Net debt to equity ratio
1 See note 2 for details of prior period restatement.
2020
£m
143.9
(41.3)
102.6
507.8
20%
2019
£m
110.1
(30.5)
79.6
487.1
16%
Debt is defined as long and short-term borrowings, including lease obligations as detailed in note 27.
Equity includes all capital and reserves of the Group attributable to equity holders of the Parent.
Categories of financial instruments
We have categorised financial instruments held at valuation into a three-level fair value hierarchy, based on the priority of the inputs to the valuation
technique in accordance with IFRS 13. The hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1)
and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure fair value fall within different levels of the hierarchy, we base the
category level on the lowest priority level input that is significant to the fair value measurement of the instrument in its entirety. We have estimated the fair
values of the Group’s outstanding interest rate swaps by calculating the present value of future cash flows, using appropriate market discount rates,
representing Level 2 fair value measurements as defined by IFRS 13.
Financial assets
Other investments
Trade receivables and other debtors,
excluding prepayments and accrued
income (see note 21)
Cash and cash equivalents
Derivative instruments in non-designated
hedge accounting relationships
Derivative instruments in designated hedge
accounting relationships
Financial liabilities
Trade and other payables, excluding other
taxes and social security (see note 23)
Loans and overdrafts (see note 27)
Leasing obligations (see note 28)
Derivative instruments in non-designated
hedge accounting relationships
Derivative instruments in designated hedge
accounting relationships
Put option over non-controlling interest
Deferred consideration (see note 38)
2020 Carrying value
2019 Carrying value
Level 1
£m
Level 2
£m
Level 3
£m
Total
£m
Level 1
£m
Level 2
£m
Level 3
£m
Total
£m
1.8
–
5.1
6.9
2.6
–
4.8
7.4
–
–
–
–
89.0
41.3
1.2
–
–
–
–
–
89.0
41.3
1.2
–
–
–
–
–
89.8
30.5
0.9
0.6
–
–
–
–
89.8
30.5
0.9
0.6
1.8
131.5
5.1
138.4
2.6
121.8
4.8
129.1
–
–
–
–
–
–
–
–
(92.2)
(112.8)
(31.1)
(0.3)
(0.2)
(6.1)
(5.1)
(247.8)
–
–
–
–
–
–
(3.6)
(3.6)
(92.2)
(112.8)
(31.1)
(0.3)
(0.2)
(6.1)
(8.7)
(251.4)
–
–
–
–
–
–
–
–
(80.7)
(104.0)
(6.1)
(0.6)
(0.6)
(5.5)
(6.2)
(203.7)
–
–
–
–
–
–
–
–
(80.7)
(104.0)
(6.1)
(0.6)
(0.6)
(5.5)
(6.2)
(203.7)
There have been no transfers between levels during the year.
FINANCIAL STATEMENTS
140
26. FINANCIAL INSTRUMENTS CONTINUED
Foreign currency risk management
We undertake transactions denominated in foreign currencies.
The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities at the reporting date were as follows:
US Dollar (including leases)
Euro
Chinese Yuan Renminbi
Liabilities
Assets
2020
£m
(76.2)
(5.5)
–
2019
£m
(83.3)
(11.5)
–
2020
£m
1.2
–
0.2
2019
£m
11.6
0.5
1.2
Foreign currency income statement sensitivity analysis
The Group is mainly exposed to movements in the US Dollar, Euro, Brazilian Real, Mexican Peso and Chinese Yuan Renminbi exchange rates.
The following table details the Group’s sensitivity to a 10% and 20% increase and decrease in Sterling against these currencies. 10% is the sensitivity rate
used when reporting foreign currency risk internally to key management and represents our assessment of a significant change in foreign exchange rates.
The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 10%
or 20% change in foreign currency rates. It includes external loans, as well as loans to foreign operations within the Group where the loan is denominated in
a currency other than the lender or borrower’s currency. A positive number below indicates an increase in profit when Sterling weakens against the relevant
currency. A strengthening of Sterling against the relevant currency would produce an equal but opposite reduction in profit, and the balances below would
be negative.
Euro
US Dollar
Brazilian Real
Mexican Peso
Chinese Yuan Renminbi
Russian Rouble
20% currency movement
10% currency movement
2020
£m
2.2
1.5
2.2
2.8
4.3
1.0
2019
£m
2.2
3.8
1.6
2.6
0.4
0.6
2020
£m
1.1
0.8
1.1
1.4
2.2
0.5
2019
£m
1.1
1.9
0.8
1.3
0.2
0.3
Genus plc / Annual Report 2020NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUEDFor the year ended 30 June 2020 141
26. FINANCIAL INSTRUMENTS CONTINUED
Forward foreign exchange contracts
The Group’s policy is to enter into forward foreign exchange contracts, to cover specific foreign currency payments and receipts. The following table details
the forward foreign currency contracts outstanding as at the year end:
Average exchange rate
Contract value
Fair value
2020
2019
Foreign
currency
2020
£m
2019
£m
2020
£m
2019
£m
Outstanding contracts
Buy DKK
Sell CAD
Sell CNY
Buy AUD
Buy RON
Sell CLP
Sell BRL
Buy BRL
Sell PHP
Sell RUB
Buy EUR
Sell PLN
Buy MXN
Sell USD
Buy EUR/Sell CHF
Buy EUR/Sell CAD
Buy EUR/Sell BRL
Buy USD/Sell COP
Buy USD/Sell BRL
Buy USD/Sell CLP
Buy CLP/Sell USD
Buy ARS/Sell USD
Buy USD/Sell CNY
Buy PHP/Sell USD
Buy USD/Sell CAD
Buy MXN/Sell USD
Buy USD/Sell MXN
Buy USD/Sell EUR
Buy USD/Sell RUB
Buy USD/Sell INR
Buy USD/Sell ZAR
8.34
–
8.95
1.83
–
–
6.36
–
62.85
86.97
0.98
4.96
28.21
1.23
1.06
–
5.88
–
5.22
798.13
–
–
7.09
49.96
1.36
–
22.74
1.12
69.92
76.33
17.25
–
1.71
8.8
1.87
5.48
879.4
–
4.9
65.35
81.65
1.13
4.79
24.86
1.27
1.13
1.51
–
3,253
3.88
–
686.2
45.83
6.91
52.67
1.33
19.25
–
1.14
64.99
69.65
14.90
DKK
CAD
CNY
AUD
RON
CLP
BRL
BRL
PHP
RUB
EUR
PLN
MXN
USD
CHF
CAD
BRL
COP
BRL
CLP
CLP
ARS
CNY
PHP
CAD
MXN
MXN
EUR
RUB
INR
ZAR
4.3
–
2.0
1.1
–
–
0.1
–
–
0.1
5.7
0.8
0.1
2.0
0.3
–
0.2
–
3.3
0.3
–
–
1.8
3.9
3.1
–
0.1
0.3
0.9
4.0
0.3
–
0.2
1.3
1.2
0.3
–
–
0.2
–
0.6
3.9
0.7
0.4
1.6
0.3
0.2
–
0.6
1.7
–
0.2
0.3
0.8
3.4
0.8
0.2
–
0.9
0.2
2.4
0.2
0.1
–
–
–
–
–
–
–
–
–
–
–
0.1
–
–
–
–
–
0.1
–
–
–
–
–
–
–
–
–
–
–
–
0.3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.1
–
–
–
–
–
–
–
0.1
Interest rate risk management
The Group is exposed to interest rate risk, as Group entities borrow funds at both fixed and floating interest rates. We manage this risk centrally, by
maintaining an appropriate mix between fixed and floating rate borrowings, using interest rate swaps. We regularly review our hedging activities, to align
with our interest rate views and defined risk appetite, thereby ensuring we apply optimal hedging strategies to minimise the adverse impact of fluctuations
in interest expense through different interest rate cycles.
The Group’s exposures to interest rates on financial assets and financial liabilities are detailed in the liquidity risk management section of this note.
Interest rate sensitivity analysis
We have determined the sensitivity analyses below, based on the Group’s exposure to interest rates for both derivatives and non-derivative instruments,
at the balance sheet date. For floating rate liabilities, we prepared the analysis assuming the liability outstanding at the balance sheet date was outstanding
for the whole year. A 1.0 percentage point increase or decrease is used when reporting interest rate risk internally to key management and is our
assessment of a significant change in interest rates.
If interest rates had been 1.0 percentage point higher or lower and all other variables were held constant, the Group’s profit would have decreased or
increased by £0.7m (2019: decrease/increase by £0.1m). This impact is smaller than would otherwise be the case, due to our fixed rate hedging.
Interest rate swap contracts
Under interest rate swap contracts, the Group agrees to exchange the difference between fixed and floating rate interest amounts, calculated on agreed
notional principal amounts. These contracts enable us to mitigate the risk of changing interest rates on the cash flow exposures on the variable rate debt
we hold. We determine the fair value of interest rate swaps at the reporting date by discounting the future cash flows, using the yield curves at the reporting
date and the credit risk inherent in the contract. This fair value is disclosed on the following page. The average interest rate is based on the outstanding
balances at the end of the financial year.
FINANCIAL STATEMENTS
142
26. FINANCIAL INSTRUMENTS CONTINUED
Cash flow hedges
The following table details the notional principal amounts and remaining terms of interest rate swap contracts outstanding, as at the reporting date:
Outstanding receive floating pay fixed contracts
USD interest rate swaps
Less than one year
One to five years
GBP interest rate swaps
One to five years
Average contract
fixed interest rate
2020
%
1.22
–
2019
%
1.10
1.22
1.61
1.07
Notional principal amount
Fair value
2020
£m
36.3
–
36.3
25.0
2019
£m
35.4
35.5
70.9
25.0
2020
£m
–
–
–
2019
£m
0.1
0.4
0.5
(0.2)
(0.2)
The interest rate swaps settle on a quarterly basis. The corresponding floating rate on the interest rate swaps is three-month LIBOR. We settle the difference
between the fixed and floating interest rate on a net basis.
Interest rate swap contracts that exchange floating rate interest amounts for fixed rate interest amounts are designated as cash flow hedges, to reduce
our cash flow exposure resulting from variable interest rates on borrowings. The interest rate swaps and the interest payments on the loan occur
simultaneously and we recognise the amount deferred in equity in the income statement, over the period that the floating rate interest payments
on debt affect the income statement.
It is anticipated that LIBOR will cease to exist after December 2021 and the Group will transition to a similar but more robust alternative. All of the existing
interest rate swaps expire before 31 December 2021 and as such there is no assumed impact from LIBOR reform in assessing whether these swaps continue
to meet the documented hedging criteria.
Commodity hedges
The Group hedges both feed and slaughter exposures using Chicago Mercantile Exchange lean hog, corn and soybean meal commodity futures contracts.
Commodity hedge
Open commodity contracts as at June 2019
Lean hog
Corn
Soybean meal
Average price
Notional principal amount
Fair value
2020
US$
0.58
3.82
300
2019
US$
0.74
4.06
314
2020
£m
4.7
(2.0)
(2.1)
0.6
2019
£m
6.0
(4.0)
(2.8)
(0.8)
2020
£m
0.9
(0.1)
–
0.8
2019
£m
–
0.3
0.1
0.4
Net investment hedges
The Group policy is to hedge no more than 70% of its wholly owned subsidiaries The Group has designated EUR 7.5m of Pig Improvement Company España,
S.A. as a hedged item using EUR 7.5m of the revolving credit facility as a net investment hedge.
The table below shows a reconciliation of the gains or loss deferred in equity:
Loss at the start of the year
Effective losses recognised in equity in period
Balance carried forward in equity as effective losses
2020
£m
(0.4)
(0.1)
(0.5)
2019
£m
(0.3)
(0.1)
(0.4)
Credit risk management
Credit risk is the risk that a counterparty will default on its contractual obligations, resulting in financial loss to the Group. We have a policy of only dealing
with creditworthy counterparties. We regularly monitor our exposure and the credit ratings of our counterparties, and the aggregate value of transactions
concluded is spread amongst approved counterparties. Credit exposure on financial instruments is controlled by counterparty limits that the Board
reviews and approves annually.
Trade receivables consist of a large number of customers, spread across diverse industries and geographical areas. We carry out ongoing credit evaluation
of the financial condition of accounts receivable.
Liquidity risk management
The Board of Directors has ultimate responsibility for managing liquidity risk. We manage this risk by maintaining adequate reserves and banking facilities,
by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities.
Genus plc / Annual Report 2020NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUEDFor the year ended 30 June 2020 143
26. FINANCIAL INSTRUMENTS CONTINUED
Liquidity and interest risk tables
For non-derivative financial liabilities, see notes 27, 28 and 38.
The following table details the Group’s remaining contractual maturity for its non-derivative financial liabilities, excluding trade payables and other
creditors which are short term and as disclosed in note 23 have an average credit period of 21 days (2019: 31 days). We have drawn up the table based on
the undiscounted cash flows of financial liabilities, using the earliest date on which we can be required to pay. The table includes both interest and principal
cash flows.
2020
Loans and borrowings
Lease liabilities
Deferred consideration
Variable interest rate instruments
2019
Loans and borrowings
Lease liabilities
Deferred consideration
Variable interest rate instruments
Weighted
average
effective
interest rate
%
0.92
3.00
–
1.53
2.75
4.01
–
2.96
Less than
1 month
£m
1–3 months
£m
3 months–
1 year
£m
1–5 years
£m
5+ years
£m
9.8
–
–
9.8
0.2
–
–
0.2
0.2
2.8
4.6
7.6
3.1
0.6
1.2
4.9
0.2
8.4
2.9
11.5
5.0
1.6
0.8
6.6
106.5
19.7
1.2
127.4
113.9
3.9
4.2
122.8
–
3.9
–
3.9
–
–
–
–
Total
£m
116.7
34.8
8.7
160.2
122.2
6.1
6.2
134.5
The following table details the Group’s expected maturity for other non-derivative financial assets, excluding trade receivables and other debtors. We have
drawn up this table based on the undiscounted contractual maturities of the assets, including interest we will earn on them, except where we expect the
cash flow to occur in a different period.
2020
Variable interest rate instruments
2019
Variable interest rate instruments
Weighted
average
effective
interest rate
%
Less than
1 month
£m
1–3 months
£m
3 months–
1 year
£m
1–5 years
£m
5+ years
£m
1.10
1.04
41.3
30.5
–
–
–
–
–
–
–
–
Total
£m
41.3
30.5
The Group has financing facilities with a total unused amount of £125.4m (2019: £125.6m) at the balance sheet date. We expect to meet our other
obligations from operating cash flows and the proceeds of maturing financial assets. We expect to reduce the debt to equity ratio, as borrowings decrease
through repayment from operating cash flows.
The following table details the Group’s liquidity analysis for its derivative financial instruments. We have drawn up the table based on the undiscounted net
cash outflows on derivative instruments that settle on a net basis and the undiscounted gross outflows on derivatives that require gross settlement. When
the amount payable or receivable is not fixed, we have determined the amount disclosed by reference to the projected interest and foreign currency rates,
as illustrated by the yield curves at the reporting date.
2020
Foreign exchange contracts
Commodity swaps
Interest rate swaps
2019
Foreign exchange contracts
Commodity swaps
Interest rate swaps
Less than
1 month
£m
1–3 months
£m
3 months to
1 year
£m
1–5 years
£m
5+ years
£m
Total
£m
0.2
0.3
–
0.1
0.4
(0.1)
–
0.5
0.1
–
0.1
(0.2)
–
–
0.1
–
(0.1)
(0.4)
–
–
–
–
–
–
–
–
–
–
–
–
0.2
0.8
0.2
0.1
0.4
(0.7)
Commodity swaps and interest rate swaps are always settled on a net basis. Foreign exchange contracts can be settled on a net or gross basis; the net cash
flows presented in the table above reflect an inflow of £70.3m and outflow of £70.1m (2019: inflow of £44.0m and outflow of £43.9m).
FINANCIAL STATEMENTS
144
27. LOANS AND BORROWINGS
The Group’s borrowing for funding and liquidity purposes comes from a range of committed bank facilities.
Interest-bearing loans and borrowings
We initially recognise interest-bearing loans and borrowings at their fair value, less attributable transaction costs. After this initial recognition, we state
them at amortised cost and recognise any difference between the cost and redemption value in the income statement over the borrowings’ expected life,
on an effective interest rate basis. The carrying values of these liabilities are a reasonable approximation of their fair values.
Non-current liabilities
Unsecured bank loans
Obligations under leases (see note 28)
Current liabilities
Unsecured bank loans and overdrafts
Obligations under leases (see note 28)
Total interest-bearing liabilities
Terms and debt repayment schedule
Terms and conditions of outstanding loans and overdrafts were as follows:
Revolving credit facility and overdraft
Revolving credit facility, term loan and overdraft
Revolving credit facility and overdraft
Obligations under leases
Other unsecured bank borrowings
Total interest-bearing liabilities
Currency
GBP
USD
EUR
USD
Other
2020
Interest rate
1.1%
1.4%
0.9%
3.0%
0.7%
2020
£m
2019
£m
103.6
21.1
124.7
9.2
10.0
19.2
143.9
2020
£m
28.6
68.5
6.8
31.1
8.9
101.9
3.9
105.8
2.1
2.2
4.3
110.1
2019
£m
25.0
77.2
–
6.1
1.8
143.9
110.1
The above revolving credit facilities are unsecured. Information about the Group’s exposure to interest rate and foreign currency risks is shown in note 26.
Loans and borrowings (excluding leases) comprise amounts falling due:
In one year or less or on demand
In more than one year but not more than two years
In more than two years but not more than five years
Less: unamortised issue costs
Current liabilities
Non-current liabilities
2020
£m
9.5
103.6
–
113.1
(0.3)
112.8
(9.2)
103.6
2019
£m
2.5
–
102.2
104.7
(0.7)
104.0
(2.1)
101.9
At the balance sheet date, the Group’s credit facilities comprised a £95m multi-currency revolving credit facility (‘RCF’) and a USD165m RCF. £47m of the
Group’s credit facilities expire in February 2021, with the remaining facilities expiring in February 2022.
A new credit facility agreement with a syndicate of eight banks was signed post year end on 24 August 2020. The new facility consists of a £150m multi-
currency RCF, a USD125m RCF and a USD20m bond and guarantee facility. The term of the new facility is for three years with an option to extend the
maturity date before the first and second anniversaries of the signing date for a further year. The facility also includes an uncommitted £100m accordion
option which can be requested on a maximum of three occasions over the lifetime of the facility to fund the Group’s business development plans.
As part of its interest rate strategy, the Group has entered into interest rate swaps to hedge floating LIBOR rates. As a result, bank loan and overdrafts
include borrowings of US$45m (£36.3m) fixed at 1.22% and GBP £20m fixed at 1.08%, excluding applicable bank margin.
28. OBLIGATIONS UNDER LEASES
A lease is a commitment to make a payment in the future, primarily in relation to property, plant and machinery and motor vehicles.
Accounting policies
In accordance with IFRS 16, we recognise as an expense any payments made in respect of short-term leases (those with a term of less than 12 months)
and leases for low-value items on a straight-line basis over the life of the lease.
For all other leases we recognise a liability at the date at which the leased asset is made available for use, and a corresponding right-of-use asset is
recognised and depreciated over the term of the lease (see note 17).
Genus plc / Annual Report 2020NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUEDFor the year ended 30 June 2020 145
28. OBLIGATIONS UNDER LEASES CONTINUED
Lease liabilities are measured at the present value of the future lease payments, excluding any payments relating to non-lease components. Future lease
payments include fixed payments, in substance fixed payments, and variable lease payments that are based on an index or a rate, less any lease incentives
receivable. Lease liabilities also take into account amounts payable under residual value guarantees and payments to exercise options to the extent that it
is reasonably certain that such payments will be made. The payments are discounted at the rate implicit in the lease or, where that cannot be measured,
at an incremental borrowing rate.
We remeasure the lease liability (and make a corresponding adjustment to the related right-of-use asset) whenever:
> The lease term has changed or there is a change in the assessment of exercise of a purchase option, in which case the lease liability is remeasured by
discounting the revised lease payments using a revised discount rate.
> The lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value, in which cases
the lease liability is remeasured by discounting the revised lease payments using the initial discount rate (unless the lease payments change is due to
a change in a floating interest rate, in which case a revised discount rate is used).
> A lease contract is modified, and the lease modification is not accounted for as a separate lease, in which case the lease liability is remeasured by
discounting the revised lease payments using a revised discount rate.
The Group did not make any such adjustments during the periods presented.
The change in the lease liabilities are as follows:
Balance at the start of the year
Recognised on the adoption of IFRS 16
Leases entered into during the year
Payments made
Interest
Effect of movements in exchange rates
Balance at the end of the year
At 30 June 2020, the Group is committed to £0.1m for short-term leases.
The maturity of the obligations under leases are as follows
FY20
FY21
FY22
FY23
FY24
FY25
FY26
FY27
After FY27
Presented as
Current
Non-current
2020
£m
6.1
26.6
9.1
(12.1)
1.0
0.4
31.1
2019
£m
3.5
–
3.9
(2.0)
0.5
0.2
6.1
2020
£m
2019
£m
–
10.0
7.8
5.2
3.2
1.6
1.2
1.2
0.9
31.1
10.0
21.1
31.1
2.2
1.9
1.4
0.6
–
–
–
–
–
6.1
2.2
3.9
6.1
Lease obligations denominated in currencies other than Sterling comprise £18.0m denominated in US Dollars (2019: £6.1m), £3.3m denominated in Euros
(2019: £nil) and £2.6m denominated in other currencies (2019: £nil).
FINANCIAL STATEMENTS
146
29. RETIREMENT BENEFIT OBLIGATIONS
The Group operates a number of defined contribution and defined benefit pension schemes covering many of its employees. The principal funds are the
Milk Pension Fund (‘MPF’) and the Dalgety Pension Fund (‘DPF’) in the UK, which are defined benefit schemes. The assets of these funds are held separately
from the Group’s assets, are administered by trustees and managed professionally.
Accounting policies
Defined contribution pension schemes
A number of our employees are members of defined contribution pension schemes. We charge contributions to the income statement as they become
payable under the scheme rules. We show differences between the contributions payable and the amount we have paid as either accruals or prepayments
in the balance sheet. The schemes’ assets are held separately from the Group’s assets.
Defined benefit pension schemes
The Group operates defined benefit pension schemes for some of its employees. These schemes are closed to new members and to further accrual. We
calculate our net obligation separately for each scheme, by estimating the amount of future benefit that employees have earned, in return for their service
to date. We discount that benefit to determine its present value and deduct the fair value of the plan’s assets (at bid price). The liability discount rate we use
is the market yield at the balance sheet date on high-quality corporate bonds, with terms to maturity approximating our pension liabilities. Qualified
actuaries perform the calculations, using the projected unit method.
We recognise actuarial gains and losses in equity in the period in which they occur, through the Group Statement of Comprehensive Income. Actuarial gains
and losses include the difference between the expected and actual return on scheme assets and experience gains and losses on scheme liabilities.
Genus and the other participating employers are jointly and severally liable for the MPF’s obligations. We account for our section of the scheme and our
share of any orphan assets and liabilities, and provide for any amounts we believe we will have to pay under our joint and several liability. The joint and
several liability also means we have a contingent liability for the scheme’s obligations that we have not accounted for.
Under the joint and several liability, we initially recognise any changes in our share of orphan assets and liabilities in the income statement. After this initial
recognition, any actuarial gains and losses on the orphan assets and liabilities are recognised directly in equity through the Group Statement of Changes in
Equity, in the period in which they occur.
During the year, the DPF defined benefit pension scheme purchased annuities in order to hedge longevity risk for pensioners within the scheme. As
permitted by IAS 19, the Group has opted to recognise the difference between the fair value of the plan assets and the cost of the policy as an actuarial loss
in other comprehensive income.
We measure the fair value our qualifying insurance policy assets to be the deemed present value of the related obligation.
Retirement benefit obligations
The financial positions of the defined benefit schemes, as recorded in accordance with IAS 19 and IFRIC 14, are aggregated for disclosure purposes. The
liability split by principal scheme is set out below.
The Milk Pension Fund – Genus’s share
The Dalgety Pension Fund
National Pig Development Pension Fund
Post-retirement healthcare
Other unfunded schemes
Overall net pension liability
2020
£m
7.5
–
0.7
0.6
9.3
18.1
2019
£m
14.1
–
0.8
0.6
8.7
24.2
Overall, we expect to pay £8.0m (2020: £8.4m) in contributions to defined benefit plans in the 2021 financial year.
The defined benefit plans are administered by trustee boards that are legally separated from the Group. The trustee board of each pension fund consists of
representatives who are employees, former employees or are independent from the Company. The boards of the pension funds are required by law to act
in the best interest of the plan participants and are responsible for setting certain policies, such as investment and contribution policies, and for the
governance of the fund.
The defined benefit pension schemes expose the Group to actuarial risks such as greater than expected longevity of members, lower than expected return
on investments and higher than expected inflation, which may increase the plans’ liabilities or reduce the value of their assets.
UK pensions are regulated by The Pensions Regulator, a non-departmental public body established under the Pensions Act 2004 and sponsored by the
Department for Work and Pensions, operating within a legal regulatory framework set by the UK Parliament. The Pensions Regulator has statutory
objectives set out in legislation, which include promoting and improving understanding of the good administration of work-based pensions, protecting
member benefits and regulating occupational defined benefit and contribution schemes. The Pensions Regulator’s statutory objectives and regulatory
powers are described on its website at thepensionsregulator.gov.uk.
All defined benefit schemes are registered as an occupational pension plan with HM Revenue & Customs and are subject to UK legislation and oversight
from The Pensions Regulator. UK legislation requires that pension schemes are funded prudently and valued at least every three years. Separate valuations
are required for each scheme. Within 15 months of each valuation date, the plan trustees and the Group must agree any contributions required to ensure
that the plan is fully funded over time, on a suitably prudent measure.
Funding plans are individually agreed with the respective trustees for each of the Group’s defined benefit pension schemes, taking into account local
regulatory requirements.
Genus plc / Annual Report 2020NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUEDFor the year ended 30 June 2020 147
29. RETIREMENT BENEFIT OBLIGATIONS CONTINUED
In the prior year, the High Court issued a judgment in a claim involving Lloyds Banking Group’s defined benefit pension schemes. This judgement concluded
the schemes should be amended in order to equalise pension benefits for men and women in relation to guaranteed minimum pension benefits. The
issues determined by the judgment have reduced the value of the assets in the Group’s defined benefit pension schemes by £16.1m. This increase was
reflected in the results as a past service cost in the prior year.
The Milk Pension Fund (‘MPF’)
The MPF was previously operated by the Milk Marketing Board and was also open to staff working for Milk Marque Ltd (the principal employer, now known
as Community Foods Group Limited), National Milk Records plc, First Milk Ltd, hauliers associated to First Milk Ltd, Dairy Farmers of Britain Ltd (which went
into receivership in June 2009) and Milk Link Ltd.
We have accounted for our section of the scheme and our share of any orphan assets and liabilities, which together represent approximately 86% of the
MPF (2019: 86%). Although the MPF is managed on a sectionalised basis, it is a ‘last man standing scheme’, which means that all participating employers are
jointly and severally liable for all of the fund’s liabilities. With effect from 30 June 2013, Genus’s remaining active members ceased accruing benefits in the
fund and became deferred pensioners.
The most recent actuarial triennial valuation of the MPF was at 31 March 2018 and was carried out by qualified actuaries. The valuation has been agreed by
the trustees.
The principal actuarial assumptions adopted in the 2018 valuation were that:
> investment returns on existing assets would exceed fixed interest gilt yields by 1.6% per annum until 31 March 2030, then by 0.5% per annum thereafter;
> Consumer Price Index (‘CPI’) price inflation is expected to be 0.9% per annum lower than Retail Price Index (‘RPI’) price inflation; and
> pensions in payment and pensions in deferment would increase in future in line with CPI price inflation, subject to various minimum and maximum
increases.
At 31 March 2018, the market value of the fund’s assets was £454m. This represented approximately 95% of the value of the uninsured liabilities, which were
£480m at that date.
The deficit in the fund as a whole, by reference to the 31 March 2018 valuation, was £26m (of which Genus’s notional share was £22m). This shortfall is being
addressed by additional contributions from the participating employers. Under the trustee prepared schedule of contributions, Genus is required to make
deficit repair contributions of £6.0m per annum commencing 1 April 2018, and rising thereafter by 3.4% per annum until 30 September 2021, in addition to
funding the scheme’s operating expenses.
The disclosures required under IAS 19 have been calculated by an independent actuary, based on accurate calculations carried out as at 31 March 2018 and
updated to 30 June 2020.
Genus has assessed its additional pension liability under IFRIC 14 by reference to this schedule of contributions, resulting in an amount of £22.6m (2019:
£26.7m) being recognised in the Group Statement of Comprehensive Income.
Dalgety Pension Fund (‘DPF’)
The most recent actuarial valuation of the DPF was at 31 March 2018 and was carried out by qualified actuaries.
The principal actuarial assumptions adopted in the 2018 valuation were that:
> investment returns on existing assets would exceed fixed interest gilt yields by 1.6% per annum until 31 March 2018, then equal the gilt yield per annum
thereafter;
> CPI price inflation is expected to be 0.7% per annum lower than RPI price inflation; and
> pensions in payment and pensions in deferment would increase in future in line with CPI price inflation, subject to various minimum and maximum
increases.
The market value of the available assets at 31 March 2018 was £32.9m. The value of those assets represented approximately 109% of the value of the
uninsured liabilities, which were £30.2m at 31 March 2018. Under the funding agreement, the Company will not have to make deficit repair contributions.
The disclosures required under IAS 19 have been calculated by an independent actuary, based on accurate calculations carried out as at 31 March 2018 and
updated to 30 June 2020.
As at 30 June 2020 the DPF, which includes a £22.5m separate reserve held against future unknown liabilities materialising, was in an overall net pension
asset position of £8.7m. However, the Company does not have the unilateral right to this surplus and therefore in line with IFRIC 14 the recognition of this
asset is restricted.
In August 2019, the Trustees purchased an additional bulk buy-in annuity policy with Legal and General in respect of the remaining deferred and pensioner
members, at a cost of £38m. This reflected a £15m premium over an estimated IAS 19 liability of £23m, reducing the restriction on the recognition of assets.
The primary bulk annuity policy was secured with an insurance company in July 1999, which matched the benefit entitlement of almost all of the fund’s
current and deferred pension liabilities at that time. The value of the policy and related liabilities at 30 June 2020 was £691m (2019: £727m). We do not have
any legal rights to any surplus relating to these bulk annuity policies.
FINANCIAL STATEMENTS
148
29. RETIREMENT BENEFIT OBLIGATIONS CONTINUED
National Pig Development Company Pension Fund (‘NPD’)
The Group operates a closed defined benefit scheme for a small number of former employees of the National Pig Development Company Limited. The total
market value of scheme assets and liabilities at 30 June 2020, under the provisions of IAS 19, were £6.1m (2019: £5.7m) and £6.8m (2019: £6.5m), respectively.
The most recent actuarial triennial valuation of the MPF was at 30 June 2017 and was carried out by qualified actuaries. The valuation has been agreed by
the trustees.
The principal actuarial assumptions adopted in the 2017 valuation were that:
> investment returns on existing assets would exceed fixed interest gilt yields by 1.7% per annum;
> CPI price inflation is expected to be 1.0% per annum lower than RPI price inflation; and
> pensions in payment and pensions in deferment would increase in future in line with CPI price inflation, subject to various minimum and maximum
increases.
The market value of the available assets at 30 June 2017 was £5.2m. The value of those assets represented approximately 78% of the value of the uninsured
liabilities, which were £6.7m at 30 June 2017. Under the trustee prepared schedule of contributions, Genus is required to make deficit repair contributions of
£250k per annum commencing 1 July 2017.
The disclosures required under IAS 19 have been calculated by an independent actuary, based on accurate calculations carried out as at 30 June 2017 and
updated to 30 June 2020.
Other unfunded schemes
When the Group acquired Sygen International plc in 2005, it also acquired three unfunded defined benefit schemes and an unfunded retirement health
benefit plan, which it now operates for the benefit of the previous Group’s senior employees and executives.
Unfunded defined benefits schemes
The scheme liabilities for the three unfunded defined benefit schemes amounted to £8.4m (2019: £7.9m), based on IAS 19’s methods and assumptions. This
amount is included within pension liabilities in the Group Balance Sheet. It also operates several unfunded defined benefits which amounted to £0.9m
(2019: £0.8m). Interest on pension scheme liabilities amounted to £0.2m (2019: £0.2m). The disclosures required under IAS 19 have been calculated by an
independent actuary, using the principal assumptions used to calculate the scheme liabilities as for the defined benefit schemes.
Post-retirement healthcare
The scheme liabilities for the unfunded retirement health benefit plan amounted to £0.6m (2019: £0.6m), based on IAS 19’s methods and assumptions. This
amount is included within retirement benefit obligations in the Group Balance Sheet. Interest on plan liabilities amounted to £nil (2019: £nil).
The principal assumptions used to calculate the plan liabilities were that the discount rate would be 1.65% (2019: 2.35%) and that the long-term rate of
medical expense inflation would be 6.8% (2019: 7.2%).
The 2019 comparative figures have been restated to include in the aggregated disclosures the assets and related liabilities of the bulk annuity policies. The
deficit recognised in 2019 has not been impacted.
Aggregated position of defined benefit schemes
Present value of funded obligations (includes Genus’s 86% share of MPF (2019: 86%))
Present value of unfunded obligations
Total present value of obligations
Fair value of plan assets (includes Genus’s 86% share of MPF (2019: 86%))
Restricted recognition of asset (DPF)
Recognition of additional liability (MPF)
Recognised liability for defined benefit obligations
2020
£m
1,159.5
9.8
1,169.3
(1,182.5)
8.7
22.6
18.1
(Restated)
2019
£m
1,170.3
9.2
1,179.5
(1,201.1)
19.1
26.7
24.2
Each of the defined benefit schemes manages risks through a variety of methods and strategies, including equity protection, to limit the downside risk of
falls in equity markets, as well as inflation and interest rate hedging. By funding its defined benefits schemes, the Group is exposed to the risk that the cost
of meeting its obligations is higher than anticipated. This could occur for several reasons, for example:
> Investment returns on the schemes’ assets may be lower than anticipated, especially if falls in asset values are not matched by similar falls in the value
of the schemes’ liabilities.
> The level of price inflation may be higher than that assumed, resulting in higher payments from the schemes.
> Scheme members may live longer than assumed, for example due to advances in healthcare. Members may also exercise (or not exercise) options in a
way that leads to increases in the schemes’ liabilities, for example through early retirement or commutation of pension for cash.
> Legislative changes could also lead to an increase in the schemes’ liabilities.
Genus plc / Annual Report 2020NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUEDFor the year ended 30 June 2020 29. RETIREMENT BENEFIT OBLIGATIONS CONTINUED
Aggregated position of defined benefit schemes
The fair value of the total plan assets at the end of the reporting period for each category is as follows:
Equities
Diversified growth funds
Liability driven investments
Gilts and corporate bonds
Cash
Property
Direct lending
Bulk annuity policy
Other
Level 1
£m
Level 2
£m
Level 3
£m
2020
£m
Level 1
£m
Level 2
£m
Level 3
£m
–
0.2
–
–
1.6
3.3
–
–
1.2
6.3
50.6
91.5
145.4
115.5
7.4
–
2.8
–
–
413.2
–
–
–
–
–
33.6
14.8
714.6
–
763.0
50.6
91.7
145.4
115.5
9.0
36.9
17.6
714.6
1.2
1,182.5
–
11.4
–
–
0.6
2.3
–
–
–
14.3
60.7
111.1
139.1
105.8
4.8
–
–
–
–
421.5
–
–
–
–
–
38.5
–
726.8
–
765.3
149
(restated)
2019
£m
60.7
122.5
139.1
105.8
5.4
40.8
–
726.8
–
1,201.1
Note:
Level 1: valued using unadjusted quoted prices in active markets for identical financial instruments.
Level 2: valued using techniques based on information that can be obtained from observable market data.
Level 3: valued using techniques incorporating information other than observable market data.
For the property assets only given in the table above amounting to £33.6m. Due to the unprecedented market situation related to COVID-19, valuation of
the property is requiring significant judgement and is subject to significant uncertainty at the Balance Sheet date. Consequently, a higher degree of caution
should be attached to the valuation of those assets than would normally be the case.
Movement in the liability for defined benefit obligations
Liability for defined benefit obligations at the start of the year (including the bulk annuity policy (DPF))
Benefits paid by the plans
Current service costs and interest
Actuarial gains recognised on fund liabilities arising from changes in demographic assumptions
Actuarial losses recognised on fund liabilities arising from changes in financial assumptions
Actuarial (gains)/losses recognised on fund liabilities arising from experience (other)
Gains on curtailments and settlements)
Past service cost
Exchange rate adjustment
Liability for defined benefit obligations at the end of year
Movement in plan assets
Fair value of plan assets at the start of the year (including the bulk annuity policy (DPF))
Administration expenses
Gains on curtailments and settlements
Contributions paid into the plans
Benefits paid by the plans
Interest income on plan assets
Actuarial gains recognised in equity
Fair value of plan assets at the end of the year
2020
£m
1,179.5
(58.1)
27.1
(23.0)
85.4
(41.5)
–
–
(0.1)
1,169.3
2020
£m
1,201.1
(0.5)
–
8.4
(58.1)
27.3
4.3
1,182.5
(restated)
2019
£m
1,094.7
(65.0)
30.8
(21.4)
96.9
33.3
(6.0)
16.1
0.1
1,179.5
(restated)
2019
£m
1,129.3
(0.9)
(4.9)
7.6
(65.0)
31.9
103.1
1,201.1
FINANCIAL STATEMENTS
150
29. RETIREMENT BENEFIT OBLIGATIONS CONTINUED
Aggregated position of defined benefit schemes
Summary of movements in Group deficit during the year
Deficit in schemes at the start of the year
Administration expenses
Exceptional cost of GMP equalisation
Exceptional gain on settlement
Contributions paid into the plans
Net pension finance cost
Actuarial losses recognised during the year
Movement in restriction of assets
Release of additional liability
Exchange rate adjustment
Deficit in schemes at the end of the year
Amounts recognised in the Group Income Statement
Administrative expenses
Interest obligation
Interest income on plan assets
Interest on additional liability
Exceptional cost of GMP equalisation
Exceptional gains on settlement and past service
The expense is recognised in the following line items in the Group Income Statement
Administrative expenses
Exceptional cost of GMP equalisation
Exceptional gains on settlement and past service
Net finance charge
Actuarial losses/(gains) recognised in the Group Statement of Comprehensive Income
Cumulative loss at the start of the year
Actuarial losses recognised during the year
Movement in restriction of assets
Release of additional liability
Exchange rate adjustment
Cumulative loss at the end of the year
Actuarial assumptions and sensitivity analysis
Principal actuarial assumptions (expressed as weighted averages) are:
Discount rate
Consumer Price Index
Retail Price Index
2020
£m
(24.2)
(0.5)
–
–
8.4
(0.4)
(16.6)
10.4
4.7
0.1
(18.1)
2020
£m
0.5
27.1
(27.3)
0.6
–
–
0.9
2020
£m
0.5
–
–
0.4
0.9
2020
£m
61.9
16.6
(10.4)
(4.7)
(0.1)
63.3
2019
£m
(33.9)
(0.9)
(16.1)
1.1
7.6
(0.9)
(5.4)
(10.1)
34.5
(0.1)
(24.2)
(Restated)
2019
£m
0.9
30.8
(31.6)
1.7
16.1
(1.1)
16.8
2019
£m
0.9
16.1
(1.1)
0.9
16.8
2019
£m
80.8
5.4
10.1
(34.5)
0.1
61.9
2020
2019
1.65%
2.10%
2.80%
2.35%
2.15%
3.15%
The mortality assumptions used are consistent with those recommended by the schemes’ actuaries and reflect the latest available tables, adjusted for the
experience of the scheme where appropriate. For 2020, the mortality tables used are 97% of the S2NA tables, with birth year and 2019 CMI projections with
a smoothing parameter of Sk = 7.0, subject to a long-term rate of improvement of 1.25% for males and females and 2019, the mortality tables used are 97%
of the S2NA tables, with birth year and 2017 CMI projections with a smoothing parameter of Sk = 7.5, subject to a long-term rate of improvement of 1.25% for
males and females.
Genus plc / Annual Report 2020NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUEDFor the year ended 30 June 2020 151
29. RETIREMENT BENEFIT OBLIGATIONS CONTINUED
Aggregated position of defined benefit schemes
The following table shows the assumptions used for all schemes and illustrates the life expectancy of an average member retiring at age 65 at the balance
sheet date and a member reaching age 65 in 20 years’ time.
Retiring at balance sheet date at age 65
Retiring at age 65 in 20 years’ time
Duration of benefit obligations
Weighted average duration of the defined benefit obligations
Weighted average duration of the defined benefit obligations,
excluding defined benefit obligations backed by purchased annuities
Male
Female
Male
Female
2020
Years
22.0
24.3
23.3
25.8
2020
Years
13.9
17.1
2019
Years
22.4
24.7
23.8
26.2
2019
Years
13.7
17.4
Sensitivity analysis
Measurement of the Group’s defined benefit obligation is sensitive to changes in certain key assumptions. The sensitivity analysis below shows how a
reasonably possible increase or decrease in a particular assumption would, in isolation, result in an increase or decrease in the present value of the defined
benefit obligation as at 30 June 2020. We have included additional sensitivity analysis, which excludes the value of our defined benefit obligations backed
by purchased annuities, as the asset value is the deemed present value of obligations, with no movement to the overall scheme deficits. Given recent
market volatility due to the impact of COVID-19, we have increased the sensitivity analysis from 0.25% to 0.50%.
Increase/(decrease) in present value of defined obligation
Excluding purchased annuity obligations
Increase/(decrease) in present value of defined obligation
Discount rate
Rate of inflation
Life expectancy
Decrease
by 0.5%
£m
Increase
by 0.5%
£m
Decrease
by 0.5%
£m
Increase
by 0.5%
£m
93.2
36.2
(89.9)
(63.6)
(34.9)
(24.7)
71.8
27.9
Decrease
by 1 year
£m
(47.7)
(18.5)
Increase
by 1 year
£m
47.7
18.5
The sensitivity analysis may not be representative of an actual change in the defined benefit obligation, as it is unlikely that changes in assumptions would
occur in isolation from one another.
The sensitivities assume the funds’ assets remain unchanged. However, in practice changes in interest rates and inflation will also affect the value of the
funds’ assets. The funds’ investment strategy is to hold matching assets with values that move in line with the liabilities of the fund; to protect against
changes in interest rates and inflation
This sensitivity analysis has been prepared using the same method adopted when adjusting results of the latest funding valuation to the Balance Sheet
date. This is the same approach adopted in previous periods.
The history of experience adjustment is as follows:
Present value of the defined benefit obligation
Fair value of plan assets
Restrict recognition of asset and recognition of additional liability
Deficit in the plans
Experience adjustments arising on plan liabilities (%)
Experience adjustments arising on plan assets (%)
2020
£m
1,169.3
(1,182.5)
31.3
18.1
1.8
1.6
(restated)
2019
£m
1,179.5
(1,201.1)
45.8
24.2
4.8
2.5
(restated)
2018
£m
1,094.7
(1,129.3)
68.5
33.9
2.7
1.0
(restated)
2017
£m
1,141.2
(1,126.4)
26.1
40.9
2.7
2.8
(restated)
2016
£m
1,059.8
(1,037.0)
21.7
44.5
1.8
0.5
FINANCIAL STATEMENTS
152
30. SHARE-BASED PAYMENTS
We have a number of share plans used to award shares to Directors and senior management as part of their remuneration. To record the cost of these, a
charge is recognised over the vesting period in the Group Income Statement, based on the fair value of the award on the date of grant.
Accounting policies
We recognise the fair value of share awards and options granted as an employee expense, with a corresponding increase in equity. We measure the fair
value at the grant date and spread it over the vesting period of each option. We use a binomial valuation model to measure the fair value of options and a
Black-Scholes valuation model to measure the fair value of share awards. We adjust the amount we recognise as an expense, to reflect the estimated
performance against non-market related conditions and the number of share awards and options that actually vest at the end of the vesting period.
The Group recognised a total share-based payment expense of £5.8m (2019: £3.0m), including National Insurance contributions of £1.0m (2019: £0.3m).
Share awards
There were 770,690 conditional share awards outstanding at 30 June 2020. These conditional shares were awarded to Executive Directors and senior
management under the 2014 Performance Share Plan on 20 November 2014, 14 September 2015, 14 September 2016, 13 September 2017, 9 October 2018,
11 September 2019 and 7 April 2020. In accordance with the plan’s terms, participants have received a conditional annual award of shares or nil cost option
awards which will normally vest after three years, with the proportion of the award vesting depending on growth in the Group’s adjusted earnings per share.
Further details of the plan’s performance conditions are given in the Directors’ Remuneration Report.
During the year ended 30 June 2020:
> 228,247 awards were granted on 11 September 2019, with an aggregate fair value of £6,380,000. The fair value of services received in return for share
awards granted is based on the fair value of share awards granted, measured using a Black-Scholes valuation model. At the date of grant, the fair value
of a share awarded was £27.91, based on an expected dividend yield of 1.16%.
> 22,435 awards were granted on 7 April 2020, with an aggregate fair value of £686,000. The fair value of services received in return for share awards
granted is based on the fair value of share awards granted, measured using a Black-Scholes valuation model. At the date of grant, the fair value of a
share awarded was £30.58, based on an expected dividend yield of 0.9%.
Outstanding at the start of year
Exercised during the year
Forfeited during the year
Granted during the year
Outstanding at 30 June
Exercisable at 30 June
Number of
awards
2020
933,772
(203,438)
(210,326)
250,682
770,690
14,694
Number of
awards
2019
980,421
(190,812)
(181,651)
325,814
933,772
36,359
Bonus and restricted stock share awards
In addition to the outstanding share awards above, there were 84,061 bonus and restricted stock share awards outstanding at 30 June 2020. The bonus
shares were awarded to Executive Directors and senior management as part of the compulsory deferred bonus, and restricted stock share awards were
granted to senior management in connection with recruitment. In accordance with the awards’ terms, participants have received a conditional annual
bonus award of shares or nil cost option awards, which will normally vest between one and three years, after award, providing the participant is employed
by the Group at that time.
In the year ended 30 June 2020, 20,738 bonus share awards were granted on 11 September 2019, with an aggregate fair value of £587,000.
Outstanding at the start of year
Exercised during the year
Forfeited during the year
Granted during the year
Outstanding at 30 June
Exercisable at 30 June
Number of
awards
2020
138,633
(33,269)
(42,041)
20,738
84,061
–
Number of
awards
2019
128,843
(50,909)
(6,239)
66,938
138,633
1,833
Share options
On 12 August 2004, the Group established a share option programme that entitles key management and other senior employees to purchase shares in the
Company. Further grants on similar terms were offered to these employee groups as set out below. The terms and conditions of the grants are as set out
below. All options are to be settled by physical delivery of shares and meet the criteria for being treated as equity settled.
Employees entitled
Grant date
Number of instruments
Vesting conditions
Option exercise price
Contractual life of options
2004 Company share plan
2004 Company share plan
2004 Company share plan
2004 Company share plan
Total share options
10 September 2010
9 September 2011
7 September 2012
26 September 2013
Exercisable
Exercisable
Exercisable
Exercisable
7,760
21,581
17,655
20,135
67,131
729.83p
977.83p
1,334.00p
1,413.00p
10 years
10 years
10 years
10 years
Genus plc / Annual Report 2020NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUEDFor the year ended 30 June 2020 153
30. SHARE-BASED PAYMENTS CONTINUED
Share options
The number and weighted average exercise prices of share options are as follows:
Outstanding at the start of year
Share appreciation rights effected during the year
Exercised during the year
Outstanding at 30 June
Exercisable at 30 June
Weighted
average
exercise price
2020
1,137p
1,184p
1,021p
1,173p
1,173p
Number of
options
2020
120,688
(16,491)
(37,066)
67,131
67,131
Weighted
average
exercise price
2019
1,121p
1,128p
987p
1,137p
1,137p
Number of
options
2019
145,828
(10,248)
(14,892)
120,688
120,688
The options at 30 June 2020 had a weighted average remaining contractual life of 2.0 years (2019: 2.6 years). No share options were granted during the year
(2019: nil). The weighted average share price at the date of exercise during the year was £31.34p (2019: £25.21p).
31. CAPITAL AND RESERVES
Called up share capital is the number of shares in issue at their par value. A number of shares were issued in the year, in relation the employee share
schemes.
Accounting policies
Equity instruments issued by the Group are recorded at the amounts of the proceeds received, net of direct issuance costs.
Own shares
We include the transactions, assets and liabilities of the Group-sponsored Qualifying Employee Share Ownership Trust (‘QUEST’) in the Group Financial
Statements. In particular, the trust’s purchases of the Company’s shares are deducted from shareholders’ funds until they vest unconditionally with
employees.
Share capital
Issued and fully paid
Ordinary shares of 10 pence
There is no authorised share capital limit.
The holders of ordinary shares are entitled to receive dividends, as declared from time to time.
The movement in share capital for the period was as follows:
Issued under the Executive Share Option Plan
Issued to Employee Benefit Trust
Issued at share placement
Shares issued under the Executive Share Option Plan were issued at option prices as follows:
Executive Share Option Plan
2020
Number
2019
Number
65,091,625
65,054,559
2020
£m
6.5
2019
£m
6.5
2019
£m
–
–
0.3
0.3
2019
Price
2020
Number
37,066
–
–
37,066
2020
Number
–
6,097
9,213
7,175
6,209
8,372
37,066
2019
Number
2020
£m
14,892
400,000
3,097,200
3,512,092
–
–
–
–
2020
Price
2019
Number
776.00p
654.50p
729.83p
977.83p
1334.00p
1413.00p
776.00p
654.50p
729.83p
977.83p
1334.00p
1413.00p
3,932
2,106
1,915
1,463
3,685
1,791
14,892
FINANCIAL STATEMENTS
154
31. CAPITAL AND RESERVES CONTINUED
Reserve for own shares
The Company’s shares are held by a QUEST, which is an employee benefit trust established to facilitate the operation of our long-term incentive scheme for
senior management. The reserve amount represents the deduction in arriving at shareholders’ funds for the consideration the trust paid for the Company’s
shares, which had not vested unconditionally at the Balance Sheet date. The number and market value of the ordinary shares held by the Employee Benefit
Trust and the QUEST were:
Shares allocated but not vested
Unallocated shares
The shares have a nominal value of £16,752 (2019: £40,546).
2020
Number
75,184
92,334
167,518
2019
Number
313,125
92,334
405,459
2020
£m
2.6
3.3
5.9
2019
£m
8.3
2.4
10.7
Translation reserve
The translation reserve comprises all foreign currency differences arising from translating the financial statements of our foreign operations.
The Group uses foreign currency denominated borrowings of £6.8m (2019: £6.7m) as a hedge against the translation exposure on the Group’s net
investment in overseas companies. Where the hedge is fully effective at hedging the variability in the net assets of such companies caused by changes in
exchange rates, the changes in value of the borrowings are recognised in the Consolidated Statement of Comprehensive Income and accumulated in the
hedging and translation reserves. The ineffective part of any change in value caused by changes in exchange rates is recognised in the Consolidated Income
Statement.
Hedging reserve
The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments, net of taxation.
Hedging and translation reserves
Balance at 30 June 2018
Exchange differences on translation of overseas operations
Gain recognised on net investment hedges
Gain recognised on cash flow hedges – interest swaps
Income tax related to net gains/(losses) recognised in other comprehensive income
Balance at 30 June 2019
Exchange differences on translation of overseas operations
Gain recognised on net investment hedges
Gain recognised on cash flow hedges – interest swaps
Income tax related to net gains/(losses) recognised in other comprehensive income
Balance at 30 June 2020
Hedging
reserve
£m
Translation
reserve
£m
2.0
–
–
(2.2)
0.4
0.2
–
–
(0.4)
–
(0.2)
20.5
19.8
(1.6)
–
(2.9)
35.8
(4.8)
(0.1)
–
(1.4)
29.5
Genus plc / Annual Report 2020NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUEDFor the year ended 30 June 2020 32. NOTES TO THE CASH FLOW STATEMENT
Profit for the year
Adjustment for:
Net IAS 41 valuation movement on biological assets
Amortisation of acquired intangible assets
Share-based payment expense
Share of profit of joint ventures and associates
Finance costs (net)
Income tax expense
Exceptional items
Adjusted operating profit from continuing operations
Depreciation of property, plant and equipment
Loss on disposal of plant and equipment
Loss/(profit) on disposal of intangible assets
Amortisation and impairment of intangible assets
Adjusted earnings before interest, tax, depreciation and amortisation
Cash impact of exceptional items
Other movements in biological assets and harvested produce
(Decrease)/increase in provisions and release in deferred consideration
Additional pension contributions in excess of pension charge
Other
Operating cash flows before movement in working capital
Decrease/(increase) in inventories
Increase in receivables
Increase in payables
Cash generated by operations
Interest received
Interest and other finance costs paid
Interest on leased assets
Cash flow from derivative financial instruments
Income taxes paid
Net cash from operating activities
Analysis of net debt
Total changes in liabilities due to financing activities are as follows:
155
2019
£m
6.7
14.7
9.5
3.0
(5.1)
3.9
3.2
21.8
57.7
12.6
–
(0.1)
5.4
75.6
(7.3)
(5.5)
1.5
(6.7)
(4.1)
53.5
(3.2)
(6.6)
4.7
48.4
0.2
(3.2)
(0.1)
0.6
(12.5)
33.4
2020
£m
40.9
(15.8)
8.5
5.8
(8.9)
5.0
10.6
19.2
65.3
24.0
3.7
1.2
5.1
99.3
(5.8)
(2.9)
(2.2)
(7.9)
(0.9)
79.6
0.1
(8.8)
12.0
82.9
0.3
(3.4)
(1.0)
0.5
(13.5)
65.8
Cash and cash equivalents (see note 22)
Interest-bearing loans – current (see note 27)
Lease liabilities – current (see note 28)
Interest-bearing loans – non-current (see note 27)
Lease liabilities – non-current (see note 28)
Total debt financing
Net debt
At 1 July
2019
£m
30.5
(2.1)
(2.2)
(4.3)
(101.9)
(3.9)
(105.8)
(110.1)
(79.6)
Adoption of
IFRS 16
leases
£m
At 1 July
2019
£m
Net
cash flows
£m
Foreign
exchange
£m
Other
non-cash
movements
£m
At 30 June
2020
£m
–
–
(7.5)
(7.5)
–
(19.1)
(19.1)
(26.6)
(26.6)
30.5
(2.1)
(9.7)
(11.8)
(101.9)
(23.0)
(124.9)
(136.7)
(106.2)
12.0
(6.6)
11.1
4.5
0.4
–
0.4
4.9
16.9
(1.2)
(0.1)
(0.1)
(0.2)
(2.1)
(0.3)
(2.4)
(2.6)
(3.8)
–
(0.4)
(11.3)
(11.7)
–
2.2
2.2
(9.5)
(9.5)
41.3
(9.2)
(10.0)
(19.2)
(103.6)
(21.1)
(124.7)
(143.9)
(102.6)
Included within non-cash movements is £9.5m in relation to new leases and unwinding of debt issue costs.
FINANCIAL STATEMENTS
156
33. OPERATING LEASES
Accounting policies
For short-term leases (those with a term of less than 12 months) and low-value items we charge the rentals payable to the income statement on a
straight-line basis over the lease term.
The Company has elected not to apply IFRS 16 to contracts where the right-of-use asset would be recognised as an intangible asset (e.g. software licences).
Total of future minimum lease payments under non-cancellable operating leases which expire:
In less than one year
Between one and five years
In more than five years
2020
£m
0.8
0.8
–
1.6
2019
£m
9.2
18.2
5.3
32.7
The reduction in future minimum lease payments relates to the adoption of IFRS 16 (see note 3).
34. CAPITAL AND OTHER COMMITMENTS
At 30 June 2020, outstanding contracted capital expenditure amounted to £13.2m and related to the purchase of property, plant and equipment
(2019: £2.2m).
35. CONTINGENCIES AND BANK GUARANTEES
Contingent liabilities are potential future cash outflows, where the likelihood of payments is considered more than remote but is not considered probable
or cannot be measured reliably. Assessing the amount of liabilities that are not probable is highly judgemental.
The retirement benefit obligations referred to in note 29 include obligations relating to the MPF defined benefit scheme. Genus, together with other
participating employers, is joint and severally liable for the scheme’s obligations. Genus has accounted for its section and its share of any orphan assets
and liabilities, collectively representing approximately 86% (2019: 86%) of the MPF. As a result of the joint and several liability, Genus has a contingent
liability for the scheme’s obligations that it has not accounted for. The total deficit of the MPF from the most recent triennial valuation can be found
in note 29.
The Group has widespread global operations and is consequently a defendant in many legal, tax and customs proceedings incidental to those operations.
In addition, there are contingent liabilities arising in the normal course of business in respect of indemnities, warranties and guarantees. These contingent
liabilities are not considered to be unusual in the context of the normal operating activities of the Group. Provisions have been recognised in accordance
with the Group accounting policies where required. None of these claims are expected to result in a material gain or loss to the Group.
As described in note 7, the Group is involved in ongoing litigation proceedings and investigations with ST that are at various legal stages. The Group makes
a provision for amounts to the extent where an outflow of economic benefit is probable and can be reliably estimated. However, there are specific claims
identified in the litigation which the Group considers the outcome of the claim is not probable and will not result in the outflow of economic benefit.
The Group’s future tax charge and effective tax rate could be affected by factors such as countries reforming their tax legislation to implement the OECD’s
BEPS recommendations and by European Commission initiatives including state aid investigations. Further information can be found in note 11.
At 30 June 2020, we had entered into bank guarantees totalling £5.9m (2019: £4.0m).
36. DIRECTORS AND KEY MANAGEMENT COMPENSATION
In accordance with IAS 24 ‘Related Party Disclosures’, key management personnel are those having authority and responsibility for planning, directing and
controlling the activities of the Group, directly or indirectly. Key management personnel comprise the Directors and the other members of the Executive
Management Committee.
Salaries and short-term employee benefits
Post-employment benefits
Share-based payment expense
Directors
Further details of Directors’ compensation are included in the Directors’ Remuneration Report.
Other transactions with key management personnel
Other than remuneration, there were no transactions with key management personnel.
2020
£m
7.2
0.3
2.0
9.5
2019
£m
5.4
0.3
1.3
7.0
Genus plc / Annual Report 2020NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUEDFor the year ended 30 June 2020 157
37. GROUP ENTITIES
In accordance with section 409 of the Companies Act 2006, a list of subsidiaries and joint ventures and associates as at 30 June 2020 is set out below.
All subsidiary undertakings are subsidiary undertakings of their immediate parent undertaking(s), unless otherwise indicated.
NATURE OF BUSINESS
Bovine
Name of undertaking
Registered address
Country of
incorporation
Direct/indirect
Group interest
Share class
ABS Argentina S.A.
ABS Chile Limitada
A. Castellanos 1169, (3080) Esperanza, Sante Fe, Argentina
Argentina
Direct
ARS1 Ordinary
Avenida del Parque #4161 office #601, Huechuraba,
Santiago, Chile
Chile
Direct
CLP1 Common
Stock
% of share
capital/voting
rights held by
Group
companies
100%
100%
ABS Genetics South Africa (Pty) Ltd Prestige Park Block B, Unit No 5B, Pastorale Street,
South Africa
Indirect
ZAR1 Ordinary
100%
Durbanville Industrial Park, Durbanville, 7550, South Africa
ABS Global (Canada) Inc.
1525 Floradale Road, Elmira ON N3B 2Z1, Canada
Canada
Indirect
CAD1 Ordinary
ABS Global, Inc.
1525 River Road, De Forest WI 53532, United States
United States
Indirect
ABS Italia S.r.l.
Via Bastida nr. 6, loc. Cavatigozzi, 26020, Cremona, Italy
Italy
Indirect
ABS México, S.A. de C.V.
Kansas No. 2028, Quintas Campestre, 31214, Chihuahua,
Chih., Mexico
Mexico
Direct
ABS Polska Sp. z o.o.
Szafirowa 22A, 82-300 Gronowo Górne, Poland
Poland
Indirect
USD0.01
Common
€1 Quota
MXN10 Class 1
MXN10 Class 2
PLN1,000
Ordinary
100%
100%
100%
100%
100%
ABS Progen Ireland Limited
Suite 6, Rineanna House, Shannon Free Zone, Co. Clare,
Ireland
Ireland
Indirect
€1.25 Ordinary
100%
Bovec SASU
69 Chemin des Molieres, 69210, Lentilly, France
France
Indirect
€10 Ordinary
Chitale Genus ABS (India) Private
Limited
Amar Neptune, Office No.406, off Baner Road, S. No.6/1/1,
Village Baner, Tal. Haveli, Pune, Pune, Maharashtra, India
India
Indirect
INR100 Ordinary
De Novo Genetics LLC
1286 Oriole Drive, New Albin IA 52160, Untied States
United States
Indirect No Par Value LLC
Units
Genus ABS Colombia SAS
Avenida Carrera 70, No. 105 – 51, Bogota, Colombia
Colombia
Indirect
Genus Australia Pty Ltd
15 Scholar drive, Bundoora VIC 3063, Australia
Australia
Indirect
Genus (Beijing) International
Trade Co., Ltd.
B1608, Lucky Tower, East5 3rd Ring Road, Chaoyang District,
Beijing, 100027, China
China
Indirect
COP10,000
Ordinary
No Par Value
Ordinary
No Par Value
Common Stock
100%
50%1
51%
100%
100%
100%
Genus Breeding India Private
Limited
Amar Neptune, Office No.406, off Baner Road, S. No.6/1/1,
Village Baner, Tal. Haveli, Pune, Pune, Maharashtra, India
Genus Breeding Limited
(01192037)²
Matrix House, Basing View, Basingstoke, Hampshire,
RG21 4DZ, United Kingdom
‘Genus Ukraine’ LLC
Pidlisna str., 1, KYIV 03164, Ukraine
Inimex Genetics Limited
(01315335)²
Matrix House, Basing View, Basingstoke, Hampshire,
RG21 4DZ, United Kingdom
India
Indirect
INR1 Ordinary
100%
United Kingdom
Direct
£1 Ordinary
100%
Ukraine
Indirect
No Par Value
Common Stock
100%
United Kingdom
Indirect
£1 Ordinary
100%
In Vitro Brasil México, S.A. de C.V.
LLC Genus ABS Rus
Plaza Comercial Punto Colorines, Boulevard Independencia
#746, Interior 6, CP. 27140, Cidade Torreon – Estado, Coahuila,
Mexico
Zheleznodorozhnaya Street, House 51, Letter Zh, Premises 2,
300062, Tula, Russian Federation
Mexico
Indirect
MXN1 Ordinary
99%
Russia
Indirect
RUB1 Ordinary
100%
Pecplan ABS Imp. e Exp. Ltda.
Rod. BR 050 Km 196 + 150metros, Zona Rural, Delta,
MG – 38108-000, Brazil
Brazil
Indirect
BRL1 Ordinary
100%
St Jacobs Animal Breeding Corp.
1525 River Road, De Forest WI 53532, United States
United States
Indirect
Zitery S.A
Maximo Tajes 7189, Uruguay
Uruguay
Indirect
100%
100%
No Par Value
Common
UYU0.54
Provisional
Certified
Registered
UYU1.00
Registered
FINANCIAL STATEMENTS
158
37. GROUP ENTITIES CONTINUED
Nature of business
Porcine
Name of undertaking
Registered address
Agroceres PIC Genética de Suínos
Ltda
Rua 1 JN, n˚ 1411, Sala 16 – Jardim Novo, Rio Claro/SP – CEP,
13.502-741, Brazil
Country of
incorporation
Direct/indirect
Group interest
Share class
Brazil
Indirect
BRL1 Ordinary
Agroceres PIC Suínos Ltda
Rua 1 JN, n˚ 1411, Sala 17 – Jardim Novo, Rio Claro/SP – CEP,
13.502-741, Brazil
Brazil
Indirect
BRL1 Ordinary
Avlscenter Mollevang A/S
Mollevej 3, 6670 Holsted, Denmark
Denmark
Indirect
DKK 1 Ordinary
Genus Biotechnology (Shanghai)
co. LTD
Office 1106, Ramada Plaza, 509 Caobao Road, Xuhui District,
Shanghai, 200233, China
China
Indirect
HY-CO Hybridschweine-
Cooperations GmbH
Tegelberg 19 – 21, 24576 Bad Bramstedt, Germany
Germany
Indirect
No Par Value
Common Stock
No Par Value
Common Stock
Inner Mongolia Haoxiang Pig
Breeding Co. Ltd
Jintang Village, Jinding Town, Zhidan County, Yan An
Municipality, Shaanxi Province, China
China
Indirect
CNY1 Ordinary
% of share
capital/voting
rights held by
Group
companies
49%1
49%1
49%1
100%
50%1
49%1
PIC (Zhangjiagang) Pig
Improvement Co., Ltd.
Office 1210, International Finance Tower, 20 Jingang Road,
Zhangjiagang Bonded Zone, Zhangjiagang City, Jiangsu
Province, China
China
Indirect
USD1 Ordinary
100%
PIC Andina SpA
PIC Canada Ltd.
Avenida del Parque #4161 office #601, Huechuraba, Santiago,
Chile
Chile
Indirect
USD65.449
Ordinary
100%
Borden Ladner Gervais LLP, 1900-520, 3rd Avenue, S.W.,
Calgary, Alberta T2P OR3, Canada
Canada
Indirect
CAD1 Ordinary
100%
PIC France SA
69 Chemin des Molieres, 69210, Lentilly, France
PIC Genetics Designated Activity
Company
Riverside One, Sir John Rogerson’s Quay, Dublin 2, Ireland
PIC Genetics LLC
79 Narodnyy Boulevard, 308000, Belgorod, Russian
Federation
France
Ireland
Indirect
€17 Ordinary
Indirect
€1.27 Ordinary
€1.27
Redeemable
preference
shares
100%
100%
Russia
Indirect
RUB1 Ordinary
100%
PIG Datendienst GmbH
Ratsteich 31, 24837 Schleswig, Germany
Germany
Indirect
Pig Improvement Company de
México, S. de R.L. de C.V.
Wenceslao de la Barquera No.7, Col. Villas del Sur,
76040 Queretaro, Queretaro, Mexico
Mexico
Indirect
PIG Improvement Company
Deutschland GmbH
Jathostraße 11a, D-30163 Hannover, Germany
Germany
Indirect
No Par Value
Common Stock
No Par Value
Common Stock
No Par Value
Common Stock
50%1
100%
100%
Pig Improvement Company
España, S.A.
C/Pau Vila, 22 2ᵒ puerta 6, 08174 Sant Cugat del Valles,
Barcelona, Spain
Pig Improvement Company UK
Limited (00716304)²
Matrix House, Basing View, Basingstoke, Hampshire,
RG21 4DZ, United Kingdom
Spain
Indirect
€25 Ordinary
100%
UK
Indirect
£0.10 Ordinary
100%
PIC Italia S.r.l.
Strada dei Loggi 22, 06135, Ponte San Giovanni, Perugia, Italy
Italy
Indirect
€1 Ordinary
PIC Philippines, Inc.
PIC USA, Inc.
Unit 2101/2102, 21st Floor Jollibee Plaza, F. Ortigas, Jr. Rd.,
Ortigas Center, Pasig City, 1605, Philippines
Philippines
Indirect
PHP100
Ordinary
100 BlueGrass Commons Blvd, Suite 2200, Hendersonville,
TN 37075 United States
United States
Indirect
USD1 Ordinary
100%
RenOVAte Biosciences, Inc.
3500 South Dupont Highway, Dover, Delaware 19901,
United States
United States
Direct USD0.001 Series
Seed Preferred
Reprodutores PIC, Lda
Av. Eng. Duarte Pacheo, Amoreiras, Torre 2 – 14ºA,
1070-102 Lisboa, Portugal
Shaanxi PIC Pig Improvement Co.,
Ltd.
12105, 21st floor, Yun tian Building, 12 Feng Cheng Second
Street, Xian Economic Development District, Xian City,
Shaanxi Province, China
Portugal
Indirect
China
Indirect
No Par Value
Common Stock
No Par Value
Common Stock
Xianyang Yongxiang Agriculture
Technology Co., Ltd.
Qiaojiaguan Village, Jianjun Town Yongshou County,
Xianyang Shaanxi Province, China
China
Indirect
No Par Value
Common Stock
20%1
100%
100%
49%1
85%
100%
Genus plc / Annual Report 2020NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUEDFor the year ended 30 June 2020 37. GROUP ENTITIES CONTINUED
Nature of business
Other
Name of undertaking
Registered Address
Country of
incorporation
Direct/indirect
Group interest
Share class
159
% of share
capital/voting
rights held by
Group
companies
Accounting & Managerial Services
S. de R.L. de C.V.
Kansas No. 2028, Quintas Campestre, 31214, Chihuahua,
Chih., Mexico
Mexico
Indirect
MXN1 Class 1
96%
ABS International, Inc.
1525 River Road, De Forest WI 53532, United States
United States
Indirect
USD1 Ordinary
ABS Pecplan Ltda.
Agence Spillers N.V.
Rod. BR 050 Km 196 + 150metros, Zona Rural, Delta,
MG – 38108-000, Brazil
Brazil
Direct
BRL1 Ordinary
Place Saint-Lambert 14, 1200 Woluwe-Saint-Lambert,
Belgium
Belgium
Indirect
No Par Value
Common Stock
100%
100%
100%
Brazilian Holdings Limited
(00479048)²
Matrix House, Basing View, Basingstoke, Hampshire,
RG21 4DZ, United Kingdom
Brazilian Properties Limited
Matrix House, Basing View, Basingstoke, Hampshire,
RG21 4DZ, United Kingdom
Busby Participações Ltda.
Cannavarro Participações Ltda.
Dalco Exportadora Ltda.
Dalgety Pension Trust Limited
Av. Leopoldino de Oliveira, 4.113, Sala 303, Centro,
CEP: 38010-000, UBERABA-MG
Av. Leopoldino de Oliveira, 4.113, Sala 303, Centro,
CEP: 38010-000, UBERABA-MG
Av. Leopoldino de Oliveira, 4113 – Sala 303, Uberaba,
Minas Gerais, CEP 38010-000, Brazil
Matrix House, Basing View, Basingstoke, Hampshire,
RG21 4DZ, United Kingdom
UK
UK
Indirect
£1 Ordinary
100%
Direct
£1 Ordinary
100%
Brazil
Indirect
BRL1 Ordinary
100%
Brazil
Indirect
BRL1 Ordinary
100%
Brazil
Indirect
BRL1 Ordinary
100%
UK
Indirect
£1 Ordinary
100%
Elmira ABC Ltd.
1525 Floradale Road, Elmira ON N3B 2Z1, Canada
Canada
Indirect
100%
NPV Class “A”
special shares
NPV Class “B”
special shares
NPV Common
shares
Fyfield (SM) Limited (01026475)²
Fyfield Dormant
Fyfield Holland B.V.
Matrix House, Basing View, Basingstoke, Hampshire,
RG21 4DZ, United Kingdom
Matrix House, Basing View, Basingstoke, Hampshire,
RG21 4DZ, United Kingdom
Matrix House, Basing View, Basingstoke, Hampshire,
RG21 4DZ, United Kingdom
UK
UK
Indirect
£1 Ordinary
100%
Indirect
£1 Ordinary
100%
Netherlands
Indirect
Fyfield Ireland Limited
One Spencer Dock, North Wall Quay, Dublin 1, Ireland
Ireland
Indirect
100%
100%
NLG100
Ordinary
€1.25 ‘A’
Ordinary
€1.25 ‘B’
Ordinary
UK
UK
UK
Direct
£1 Ordinary
100%
Direct
£1 Ordinary
100%
Direct
£1 Ordinary
100%
Genus Investments Limited
(02028517)²
Matrix House, Basing View, Basingstoke, Hampshire,
RG21 4DZ, United Kingdom
Genus Quest Trustees Limited
Genus Trustees Limited
GIL Finance S.à.r.l.
PIC (UK) Limited
Matrix House, Basing View, Basingstoke, Hampshire,
RG21 4DZ, United Kingdom
Matrix House, Basing View, Basingstoke, Hampshire,
RG21 4DZ, United Kingdom
121 Avenue de la Faiencerie, L – 1511, Luxembourg
Luxembourg
Indirect
USD1 Ordinary
Matrix House, Basing View, Basingstoke, Hampshire,
RG21 4DZ, United Kingdom
UK
Indirect
£1 Ordinary
100%
100%
100%
PIC Do Brasil Empreendimentos e
Participações Ltda.
Rua 1 JN, no. 1411, Sala 13, Jardim Novo, Rio Claro,
Estado De Sao Paulo, CEP 13.502.741, Brazil
Brazil
Indirect
BRL0.01
Ordinary
PIC Fyfield Limited (00019739)²
Matrix House, Basing View, Basingstoke, Hampshire,
RG21 4DZ, United Kingdom
UK
Indirect
£1 Ordinary
100%
PIC Servicios Agropecuarios, S.A.
de C.V.
Wenceslao de la Barquera No.7, Col. Villas del Sur,
76040 Queretaro, Queretaro, Mexico
Mexico
Indirect
MXN1,000
Ordinary
100%
Pig Improvement Company
Overseas Limited (00716304)²
Matrix House, Basing View, Basingstoke, Hampshire,
RG21 4DZ, United Kingdom
Pigtales Limited (01809650)²
Matrix House, Basing View, Basingstoke, Hampshire,
RG21 4DZ, United Kingdom
UK
UK
Indirect
£1 Ordinary
100%
Indirect
£1 Ordinary
100%
FINANCIAL STATEMENTS
160
37. GROUP ENTITIES CONTINUED
NATURE OF BUSINESS
Other
Name of undertaking
Registered Address
Premium Genetics (UK) Limited
(08461779)²
Alpha Building, London Road, Nantwich, Stapeley,
Cheshire, CW5 7JW, United Kingdom
Premium Genetics Limited
Suite 6, Rineanna House, Shannon Free Zone, Co. Clare,
Ireland
Promar International Limited
(03004562)²
Matrix House, Basing View, Basingstoke, Hampshire,
RG21 4DZ, United Kingdom
Skogluno Participações Ltda.
Spillers Limited (00024021)²
Spillers Overseas Limited
Av. Leopoldino de Oliveira, 4.113, Sala 303, Centro,
CEP: 38010-000, UBERABA-MG
Matrix House, Basing View, Basingstoke, Hampshire,
RG21 4DZ, United Kingdom
Matrix House, Basing View, Basingstoke, Hampshire,
RG21 4DZ, United Kingdom
Country of
incorporation
Direct/indirect
Group interest
Share class
% of share
capital/voting
rights held by
Group
companies
UK
Indirect
£0.10 Ordinary
100%
Ireland
Indirect
€1.27 Ordinary
100%
UK
Direct
£1 Ordinary
100%
Brazil
Indirect
BRL1 Ordinary
100%
UK
UK
Indirect
£0.25 Ordinary
£1 Preference
100%
Indirect
£0.25 Ordinary
100%
Sygen, Inc.
100 BlueGrass Commons Blvd, Suite 2200, Hendersonville,
TN 37075 United States
United States
Indirect
USD1 Common
100%
Sygen International Limited
(03215874)²
Matrix House, Basing View, Basingstoke, Hampshire,
RG21 4DZ, United Kingdom
United Kingdom
Direct
£0.10 Ordinary
100%
Sygen Investimentos Ltda.
Usicafé SA
Av. Leopoldino de Oliveira, 4113 – Sala 303, Uberaba,
Minas Gerais, CEP 38010-000, Brazil
c/o Cabinet Mayor, avocats, Rue Jean-Gabriel Eynard 6,
1205 Genève
Brazil
Indirect
Switzerland
Indirect
BRL0.63
Ordinary
CHF1,000
Ordinary
100%
100%
1 Associated undertakings including joint venture interests.
2 UK subsidiaries taking advantage of the audit exemption within section 479A of the Companies Act 2006.
38. DEFERRED CONSIDERATION
Accounting policies
We recognise deferred consideration on the balance sheet when a business combination contains a contractual clause that defers a portion of the
purchase price. When the consideration transferred by the Group in a business combination includes a contingent consideration arrangement, the
contingent consideration is measured at its acquisition-date fair value and included as part of the consideration transferred in a business combination.
Changes in fair value of the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with corresponding
adjustments against goodwill. Measurement period adjustments are adjustments that arise from additional information obtained during the
‘measurement period’ (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date.
Subsequent contingent consideration fair value remeasurements that do not qualify as measurement period adjustments are recognised in the
income statement.
Contingent deferred consideration is measured at fair value and the valuation basis is Level 3 classification, where fair value techniques use inputs which
have a significant effect on the recorded fair value that are not based on observable market data.
Balance at 1 July 2018
Additional provision in the year
Payment of consideration
Balance at 30 June 2019
Reclassified from provisions (see note 25)
Payment of consideration
Release of unutilised contingent consideration
Effect of movement in exchange rates
Balance at 30 June 2020
Current
Non-current
Balance at 30 June 2020
Current
Non-current
Balance at 30 June 2019
Contingent
deferred
consideration
£m
Deferred
consideration
£m
–
–
–
–
4.5
(0.6)
(0.4)
0.1
3.6
2.8
0.8
3.6
–
–
–
19.3
6.2
(19.3)
6.2
–
(1.1)
–
–
5.1
4.7
0.4
5.1
2.0
4.2
6.2
Total
£m
19.3
6.2
(19.3)
6.2
4.5
(1.7)
(0.4)
0.1
8.7
7.5
1.2
8.7
2.0
4.2
6.2
Genus plc / Annual Report 2020NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUEDFor the year ended 30 June 2020 38. DEFERRED CONSIDERATION CONTINUED
The balance at 30 June 2020 relates to the following transactions:
De Novo Genetics LLC
Hermitage Genetics DAC
Avlscenter Møllevang A/S
Dairy LLC (n/a Bovisync)
Progenex S.L.
Balance at 30 June 2020
Contingent
deferred
consideration
£m
Deferred
consideration
£m
Fiscal year of
transaction
2017
2017
2018
2019
2019
–
2.8
–
0.4
0.4
3.6
0.8
–
4.3
–
–
5.1
Hermitage Genetics DAC
The contingent deferred consideration is based on fees paid to the seller and the earning of PIC – Hermitage LP during the period 1 July 2018 and
30 June 2020.
39. NON-CONTROLLING INTEREST
Non-controlling interest
Put option over non-controlling interest at inception
Total non-controlling interest
2020
£m
4.6
(5.6)
(1.0)
Summarised financial information in respect of each of the Group’s subsidiaries that has a material non-controlling interest is set out below before
intra-Group eliminations.
Revenue
Expenses
Total comprehensive income for the year
Total comprehensive income attributable to owners of the Company
Total comprehensive income attributable to the non-controlling interest
Biological assets
Current assets
Other non-current assets
Current liabilities
Net assets
Equity attributable to owners of the Company
Non-controlling interest
No dividends were paid to non-controlling interests (2019: £nil).
Revenue
Expenses
Total comprehensive income/(loss) for the year
Total comprehensive (loss)/income attributable to owners of the Company
Total comprehensive (loss)/income attributable to the non-controlling interest
Biological assets
Current assets
Other non-current assets
Current liabilities
Net assets
Equity attributable to owners of the Company
Non-controlling interest
De Novo
Genetics LLC
£m
PIC Italia S.r.l
£m
3.7
(3.1)
0.6
0.3
0.3
14.9
1.3
0.8
(8.8)
8.2
(3.8)
4.4
4.1
(3.2)
0.9
0.8
0.1
–
1.2
0.9
(0.6)
1.5
(1.3)
0.2
De Novo
Genetics LLC
£m
PIC Italia S.r.l
£m
2.1
(4.6)
(2.5)
(1.3)
(1.2)
11.6
1.2
0.8
(6.1)
7.5
(3.5)
4.0
2.9
(2.1)
0.8
0.7
0.1
–
0.8
1.4
(0.7)
1.5
(1.3)
0.2
161
Total
£m
0.8
2.8
4.3
0.4
0.4
8.7
2019
£m
4.2
(5.5)
(1.3)
2020
£m
7.8
(6.3)
1.5
1.1
0.4
14.9
2.5
1.7
(9.4)
9.7
(5.1)
4.6
2019
£m
5.0
(6.7)
1.7
0.6
(1.1)
11.6
2.0
2.2
(6.8)
9.0
(4.8)
4.2
FINANCIAL STATEMENTS
162
40. RELATED PARTY TRANSACTIONS
Bomaz, Inc. and Bogz Dairy, LLC, are well-recognised breeders in the industry, and are related parties to the Group as these entities are under the control
of relatives of Nate Zwald, our ABS Dairy COO.
We transact with Bomaz, Inc. and Bogz Dairy, LLC as part of our bull product development effort, under a variety of contracts and agreements. Payments
in 2020 amounted to £1.5m (2019: £1.3m). As at 30 June 2020, the balance owing to these entities was £nil, all amounts were settled in cash.
These related party transactions were made on terms equivalent to those that prevail in arm’s length transactions.
41. POST BALANCE SHEET EVENTS
A new credit facility agreement with a syndicate of eight banks was signed post year end on 24 August 2020. The new facility consists of a £150m multi-
currency RCF, a USD125m RCF and a USD20m bond and guarantee facility. The US Dollar bond is being used to provide security in relation to damages
claimed under the ABS II litigation relating to the ‘987 patent royalties (up to 5 June 2020), the ‘476 and ‘309 patent royalties (up to 8 June 2020) and
includes accrued interest and is subject to the outcome of any appeal.
The term of the new credit facility is for three years with an option to extend the maturity date before the first and second anniversaries of the signing date
for a further year. The facility also includes an uncommitted £100m accordion option which can be requested on a maximum of three occasions over the
lifetime of the facility to fund the Group’s business development plans.
Genus plc / Annual Report 2020NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUEDFor the year ended 30 June 2020
PARENT COMPANY BALANCE SHEET
As at 30 June 2020
Non-current assets
Intangible assets
Property, plant and equipment
Investments in subsidiaries
Other investments
Derivative financial asset
Deferred tax asset
Current assets
Other receivables
Cash and cash equivalents
Current liabilities
Current payables
Provisions
Net current assets
Total assets less current liabilities
Non-current liabilities
Non-current payables
Provisions
Net assets
Equity
Called up share capital
Share premium account
Own shares
Retained earnings
Hedging reserve
Total equity
The Company recognised profit for the year of £17.1m (2019: £16.8m profit).
The Financial Statements were approved and authorised for issue by the Board of Directors on 7 September 2020.
Signed on behalf of the Board of Directors.
STEPHEN WILSON
Chief Executive
ALISON HENRIKSEN
Chief Financial Officer
Company number: 02972325
163
2020
£m
2019
£m
18.3
1.3
116.2
1.8
–
1.4
139.0
444.7
1.0
445.7
(224.1)
(2.0)
(226.1)
219.6
358.6
(105.8)
(0.4)
(106.2)
252.4
6.5
179.1
(0.1)
67.1
(0.2)
252.4
11.3
0.5
109.3
2.6
0.4
–
124.1
443.7
2.0
445.7
(216.7)
–
(216.7)
229.0
353.1
(102.1)
(2.0)
(104.1)
249.0
6.5
179.0
(0.1)
63.4
0.2
249.0
Note
C3
C4
C5
C6
C15
C8
C7
C9
C11
C10
C11
C16
FINANCIAL STATEMENTS
164
PARENT COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2020
Balance at 1 July 2018
Actuarial loss on retirement benefits obligations
Movement on pension asset recognition restriction
Other comprehensive income for the year
Total profit for the financial year
Total comprehensive income for the financial year
Shares issued
Dividends
Share-based payment expense, net of tax
Fair value of movement on cash flow hedges, net of tax
Balance at 30 June 2019
Actuarial gain on retirement benefits obligations
Movement on pension asset recognition restriction
Other comprehensive income for the year
Total profit for the financial year
Total comprehensive income for the financial year
Shares issued
Dividends paid
Share-based payment expense, net of tax
Fair value of movement on cash flow hedges, net of tax
Called up
share capital
£m
Share
premium
account
£m
6.2
–
–
–
–
–
0.3
–
–
–
6.5
–
–
–
–
–
–
–
–
–
112.8
–
–
–
–
–
66.2
–
–
–
179.0
–
–
–
–
–
0.1
–
–
–
Own
shares
£m
(0.1)
–
–
–
–
–
–
–
–
–
(0.1)
–
–
–
–
–
–
–
–
–
Balance at 30 June 2020
6.5
179.1
(0.1)
For information on dividends see note 13, cash flow hedges see note 26 and share-based payment expense see note 30.
Retained
earnings
£m
Hedging
reserve
£m
62.7
(2.2)
2.6
0.4
16.8
17.2
–
(16.8)
0.3
–
63.4
0.5
(0.4)
0.1
17.1
17.2
–
(18.3)
4.8
–
67.1
2.0
–
–
–
–
–
–
–
–
(1.8)
0.2
–
–
–
–
–
–
–
–
(0.4)
(0.2)
Total
equity
£m
183.6
(2.2)
2.6
0.4
16.8
17.2
66.5
(16.8)
0.3
(1.8)
249.0
0.5
(0.4)
0.1
17.1
17.2
0.1
(18.3)
4.8
(0.4)
252.4
Genus plc / Annual Report 2020 NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
For the year ended 30 June 2020
165
C1. ACCOUNTING INFORMATION AND POLICIES
Basis of preparation
The Parent Company Financial Statements have been prepared in accordance with Financial Reporting Standard 101 ‘Reduced Disclosure Framework’
(‘FRS 101’) and the Companies Act 2006 (the ‘Act’). FRS 101 sets out a reduced disclosure framework for a ‘qualifying entity’ as defined in the standard, which
addresses the financial reporting requirements and disclosure exemptions in the individual financial statements of qualifying entities that otherwise apply
the recognition, measurement and disclosure requirements of EU-adopted IFRSs.
The Company Financial Statements have been prepared using the historical cost convention, as modified by the revaluation of certain financial assets
and financial liabilities and in accordance with the Act. The Financial Statements have been prepared on a going concern basis, as set out in note 1 of the
Consolidated Financial Statements of Genus plc. The accounting policies set out below and stated in the relevant notes have been applied consistently to
all periods presented in these Financial Statements.
The Company has taken advantage of the disclosure exemptions available under FRS 101 in relation to share-based payments, business combinations,
financial instruments, presentation of comparative information in respect of certain assets, presentation of a cash flow statement, standards issued not yet
effective, impairment of assets and related party transactions. Where required, equivalent disclosures are given in the Consolidated Financial Statements
of Genus plc.
As permitted by section 408 of the Act, the Company has not presented its own income statement in this Annual Report.
The functional currency of the Company is Sterling.
Critical accounting judgements and key sources of estimation uncertainty
Preparing Company Financial Statements in conformity with FRS 101 requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the Company Financial Statements and the reported
amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The estimates and underlying assumptions
are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised, if the revision affects only
that period, or in the period of the revision and future periods, if the revision affects both current and future periods.
Management have not identified ant critical accounting judgements or key sources of estimation uncertainty.
Adoption of IFRS 16 ‘Leases’
The Company has adopted IFRS 16 using the modified retrospective approach with the value of the right-of-use asset being equal to the lease liability at the
date of adoption.
The Company has elected not to recognise right-of-use assets and lease liabilities for leases of low-value assets (those with a purchase price of less than
GBP 4,000), and lease payments associated with those assets will be recognised as an expense on a straight-line basis. The Company has made use of the
practical expedient available on transition to IFRS 16 not to reassess whether a contract is or contains a lease. When the contracts are modified on or after
1 July 2019, they are reassessed to determine if it contains a lease as defined by IFRS 16. The Company has not elected to apply IFRS 16 to contracts where
the right-of-use asset would be recognised as an intangible asset.
In addition, the Company will utilise the following practical expedients, permitted by IFRS 16:
> the right-of-use asset for each lease has been measured as the present value of the lease liability adjusted for any prepaid or accrued lease payments
prior to application;
> for leases where the remaining term was less than 12 months at 1 July 2019 the Company has elected to treat these as short term;
> for leases that were previously classified as an operating lease under IAS 17 ‘Leases’ the lease liability on 1 July 2019 was calculated as the present value
of the remaining lease payments using the incremental borrowing rate as at 1 July 2019;
> for existing leases that incurred initial direct costs, these were excluded from the measurement of the right-of-use asset as at 1 July 2019;
> the use of hindsight for existing leases has been applied in determining options to extend or terminate the lease;
> has not elected to separate lease components from non-lease components; and
> has elected to apply a single discount rate to a portfolio of leases with similar characteristics.
Impact on the Company’s Balance Sheet
Non-current assets
Property, plant and equipment
Current liabilities
Obligations under Leases
Non-current liabilities
Obligations under Leases
1 July 2019
prior to
adoption of
IFRS 16
(as reported)
£m
Recognised on
adoption of
IFRS 16
£m
1 July 2019
post adoption
of IFRS 16
£m
1.1
–
–
1.0
(0.1)
(0.9)
2.1
(0.1)
(0.9)
FINANCIAL STATEMENTS
166
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS CONTINUED
For the year ended 30 June 2020
C1. ACCOUNTING INFORMATION AND POLICIES CONTINUED
The following table shows a reconciliation between the operating lease obligations reported at 30 June 2019 and the amount recognised on adoption of
IFRS 16 using the weighted average incremental borrowing rate of 1.65% at the date of adoption.
Operating lease commitments (as at 30 June 2019)
Leases classified as low value or short term
Software licences outside the scope of IFRS 16
Operating lease commitments to be capitalised under IFRS 16
Impact of discounting
Obligations under Leases (1 July 2019)
£m
3.4
–
(2.3)
1.1
(0.1)
1.0
Significant accounting policies applied in the current reporting period that relate to the Financial Statements as a whole
This section sets out our significant accounting policies that relate to the Financial Statements as a whole. Where an accounting policy is generally
applicable to a specific note to the Financial Statements, the policy has been described in that note.
Other income and deferred income
In the prior year, the Company entered into a strategic collaboration with Beijing Capital Agribusiness (‘BCA’) under which BCA will establish and fund a
collaboration specific entity (‘BCA Future Bio-Tech’) which will use Genus’ intellectual property and know-how to pursue the PRRSv resistance regulatory
and development work in China. Genus will receive consideration after meeting certain milestones in the development programme.
Each milestone is considered to be either a separate performance obligation, or a set of groups of separate performance obligations, under this agreement
and are unbundled in the contractual arrangement as if they are distinct from one another.
We assess each separate performance obligation relating to the milestone payments, and upon completion of those performance obligations recognise
the fair value of amounts earned in other income. Some performance obligations, such as the transfer of know-how, are recognised at a point in time where
others, such as the provision of technical services, are recognised over time. We recognise any received but unearned consideration as deferred income.
We will apply the same accounting policy to any other comparable agreements.
Pensions
A number of our employees are members of defined contribution pension schemes. We charge contributions to profit and loss as they become payable
under the schemes’ rules. We show differences between the contributions payable and the amounts actually paid as either accruals or prepayments in the
balance sheet. The schemes’ assets are held separately from those of the Company.
Certain former employees of the Company are members of one of the Group's defined benefit pension schemes, details of which are given in note 28 to the
Group Financial Statements. The schemes are all multi-employer defined benefit schemes, whose assets and liabilities are held independently from the
Group but within their sponsored Group company.
Taxation
We provide for current tax, including UK corporation tax and foreign tax, at the amounts we expect to pay or recover, using the tax rates and the laws
enacted or substantively enacted at the balance sheet date.
Foreign currencies
We record transactions in foreign currencies at the rate ruling at the transaction date. We retranslate monetary assets and liabilities denominated in foreign
currencies at the prevailing rate of exchange at the balance sheet. All differences are taken to the income statement.
Own shares
The Company has adopted FRS 101, which requires us to recognise the assets and liabilities associated with the Company’s investment in its own shares in
the Company’s Financial Statements, where there is de facto control of the assets and liabilities.
The Company’s own shares held by a Qualifying Employee Share Ownership Trust remain deducted from shareholders’ funds until they vest unconditionally
with employees.
Employee share schemes
The Company’s Executive Directors and Chief Operating Officers receive part of their remuneration in the form of share awards, which vest upon meeting
performance criteria over a three-year period.
We measure the cost of these awards by reference to the shares’ fair value at the award date. At the end of each financial reporting period, we estimate the
extent to which the performance criteria will be met at the end of three years and record an appropriate charge in the profit and loss account, together with
a corresponding credit to profit and loss reserves. Changes in estimates of the number of shares vesting may result in charges or credits to the profit and
loss account in subsequent periods.
Share-based payments
We have implemented the generally accepted accounting principle for accounting for share-based payments with subsidiary undertakings under FRS 101,
whereby the Company has granted rights to its shares to employees of its subsidiary undertakings under an equity-settled arrangement, and the
subsidiaries have not reimbursed the Company for these rights. Under this arrangement, the Company treats the share-based payment recognised in
the subsidiary’s Financial Statements as a cost of investment in the subsidiary and credits equity with an equal amount.
Genus plc / Annual Report 2020 167
C1. ACCOUNTING INFORMATION AND POLICIES CONTINUED
Derivative financial instruments and hedging
Our activities expose us primarily to the financial risks of changes in foreign currency exchange rates and interest rates.
We use interest rate swaps to hedge interest rate risk. We also use forward foreign currency contracts, implemented through a medium-term US Dollar
cross currency borrowing and related interest rate swap, to hedge exposure to translation risk associated with US Dollar net assets of subsidiaries. Forward
foreign currency contracts do not qualify for hedge accounting in the Parent Company Financial Statements, as the hedged item is not in its balance sheet.
Our use of financial derivative instruments is governed by the Group’s policies, which are approved by the Board of Directors. The notes to the Group
Financial Statements include information about the Group’s financial risks and their management, and its use of financial instruments and their impact
on the Group’s risk profile, performance and financial condition.
The fair value of the US Dollar and interest rate swaps is the estimated amount that we would receive or pay to terminate the swap at the balance sheet
date, taking into account current interest rates and the creditworthiness of the swap counterparties.
The fair value of forward exchange contracts is their quoted market price at the balance sheet date, which is the present value of the quoted forward price.
Cash flow hedges
The effective portion of changes in the fair value of derivatives and other qualifying hedging instruments that are designated and qualify as cash flow
hedges is recognised in other comprehensive income and accumulated under the heading of cash flow hedging reserve, limited to the cumulative change
in fair value of the hedged item from inception of the hedge. The gain or loss relating to the ineffective portion is recognised immediately in the Income
Statement, and is included in the ‘other gains and losses’ line item.
Amounts previously recognised in other comprehensive income and accumulated in equity are reclassified to the income statement in the periods when
the hedged item affects the income statement, in the same line as the recognised hedged item. However, when the hedged forecast transaction results
in the recognition of a non-financial asset or a non-financial liability, the gains and losses previously recognised in other comprehensive income and
accumulated in equity are removed from equity and included in the initial measurement of the cost of the non-financial asset or non-financial liability.
This transfer does not affect other comprehensive income. Furthermore, if the Company expects that some or all of the loss accumulated in the cash
flow hedging reserve will not be recovered in the future, that amount is immediately reclassified to the Income Statement.
The Company discontinues hedge accounting only when the hedging relationship (or a part thereof) ceases to meet the qualifying criteria (after
rebalancing, if applicable). This includes instances when the hedging instrument expires or is sold, terminated or exercised. The discontinuation is
accounted for prospectively. Any gain or loss recognised in other comprehensive income and accumulated in cash flow hedge reserve at that time remains
in equity and is reclassified to the income statement when the forecast transaction occurs. When a forecast transaction is no longer expected to occur,
the gain or loss accumulated in the cash flow hedge reserve is reclassified immediately to the Income Statement.
Under interest rate swap contracts, the Company agrees to exchange the difference between fixed and floating rate interest amounts calculated on
agreed notional principal amounts. Such contracts enable the Company to mitigate the risk of changing interest rates on the fair value of issued fixed rate
debt held and the cash flow exposures on the issued variable rate debt held. The fair value of interest rate swaps at the reporting date is determined by
discounting the future cash flows using the curves at the reporting date and the credit risk inherent in the contract. The average interest rate is based
on the outstanding balances at the end of the financial year.
As the critical terms of the interest rate swap contracts and their corresponding hedged items are the same, the Company performs a qualitative
assessment of effectiveness and it is expected that the value of the interest rate swap contracts and the value of the corresponding hedged items will
systematically change in opposite direction in response to movements in the underlying interest rates. The main source of hedge ineffectiveness in these
hedge relationships is the effect of the counterparty and the Company’s own credit risk on the fair value of the interest rate swap contracts, which is
not reflected in the fair value of the hedged item attributable to the change in interest rates. No other sources of ineffectiveness emerged from these
hedging relationships.
C2. EMPLOYEES
Staff costs including Directors’ remuneration during the year amounted to:
Wages and salaries
Social security costs
Pension costs
Share-based payment expense
2020
£m
7.5
1.1
0.2
1.8
10.6
2019
£m
5.6
0.7
0.1
0.6
7.0
The employee costs above are inclusive of £0.3m (2019: £0.2m) which has been capitalised into intangible assets as part of the development of GenusOne
(see note C3).
The Directors’ Remuneration Report sets out details of the Directors’ remuneration, pensions and share options.
The average monthly number of employees including Directors during the year was as follows:
Administration
2020
Number
40
2019
Number
34
FINANCIAL STATEMENTS
168
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS CONTINUED
For the year ended 30 June 2020
C3. INTANGIBLE ASSETS
Accounting policies
Patents, licences and software are stated at acquisition cost less accumulated amortisation. The amortisation period is determined by reference to
expected useful life, which is reviewed at least annually. Amortisation is charged to the income statement on a straight-line basis over the estimated useful
life. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by
changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates.
See note 15 for useful economic life. We do not amortise assets under construction.
Cost
Balance at 1 July 2019
Additions
Transfers
Balance at 30 June 2020
Amortisation
Balance at 1 July 2019
Amortisation for the year
Balance at 30 June 2020
Carrying amounts
At 30 June 2020
At 30 June 2019
Software
£m
Patents and
licences
£m
Asset under
construction
£m
1.7
–
12.7
14.4
1.3
0.8
2.1
12.3
0.4
3.7
–
–
3.7
2.9
0.8
3.7
–
0.8
10.1
8.6
(12.7)
6.0
–
–
–
6.0
10.1
Total
£m
15.5
8.6
–
24.1
4.2
1.6
5.8
18.3
11.3
Assets under construction primarily relate to the ongoing development of GenusOne, a unified enterprise-wide business system.
C4. PROPERTY, PLANT & EQUIPMENT
Accounting policies
We state property, plant and equipment at cost, together with any incidental acquisition expenses, or at their latest valuation, less depreciation and any
provision for impairment. We calculate depreciation on a straight-line basis, to write the assets down to their estimated residual values over their estimated
useful lives. The rates of annual depreciation on tangible fixed assets are as follows:
> Leasehold improvements
> Leased buildings
> Equipment
period of lease
period of lease
3 to 20 years
We review the carrying value of fixed assets for impairment, if events or changes in circumstances indicate that the carrying value may not be recoverable.
Right-of-use assets
Right-of-use assets are measured initially at cost based on the value of the associated lease liability, adjusted for any payments made before inception,
initial direct costs and an estimate of the dismantling, removal and restoration costs required in the terms of the lease. Subsequent to initial recognition,
we record an interest charge in respect of the lease liability. The related right-of-use asset is depreciated over the term of the lease or, if shorter, the useful
economic life (‘UEL’) of the leased asset. The lease term shall include the period of an extension option where it is reasonably certain that the option will be
exercised. Where the lease contains a purchase option the asset is written-off over the useful life of the asset when it is reasonably certain that the purchase
option will be exercised.
Cost
Balance at 1 July 2019
Recognised on adoption of IFRS 16
Balance at 30 June 2020
Depreciation
Balance at 1 July 2019
Depreciation for the year
Balance at 30 June 2020
Carrying amounts
At 30 June 2020
At 30 June 2019
Leasehold
improvements
£m
Equipment
£m
Owned
assets
£m
Leased
buildings
£m
0.5
–
0.5
0.2
–
0.2
0.3
0.3
0.6
–
0.6
0.4
0.1
0.5
0.1
0.2
1.1
–
1.1
0.6
0.1
0.7
0.4
0.5
–
1.0
1.0
–
0.1
0.1
0.9
–
Total
£m
1.1
1.0
2.1
0.6
0.2
0.8
1.3
0.5
Genus plc / Annual Report 2020
169
C5. INVESTMENTS IN SUBSIDIARIES
Accounting policies
Shares in subsidiary undertakings are stated at cost less any provision for impairment.
The Company assesses investments for impairment whenever events or changes in circumstances indicate that the carrying value of an investment may
not be recoverable. If any such indication of impairment exists, then we estimate the recoverable amount. If the recoverable amount of the cash-generating
unit is less than the value of the investment, it is considered to be impaired and we write it down to its recoverable amount. An impairment loss is
recognised immediately in the profit and loss account.
Cost
Balance at 1 July 2019
Additions
Balance at 30 June 2020
Provision for impairment
Balance at 1 July 2019
Provided during the year
Balance at 30 June 2020
Carrying amounts
At 30 June 2020
At 30 June 2019
Shares in
subsidiary
undertakings
£m
302.5
6.9
309.4
193.2
–
193.2
116.2
109.3
Additions relate to increasing our investment in ABS Argentina S.A., ABS Pecplan Ltda. and Genus Investments Limited.
The Company considers the relationship between its market capitalisation and the carrying value of its investments, among other factors, when reviewing
for indicators of impairment. As at 30 June 2020, the net investment in four of the companies subsidiary undertakings exceeded the companies share of the
net assets. Each of these subsidiaries are denominated in Latin American currencies all of which have seen significant weakening against Sterling during the
year end 30 June 2020. For each of these undertakings the recoverable value has been estimated using the Board approved Strategic Plan. There were no
indicators of impairment for the companies other subsidiary undertakings.
The key assumptions for the value in use calculation are those regarding the discount rate, growth rates and expected trading performance.
Management estimates discount rates that reflect current market assessments of the time value of money and the risks specific to the Group. The pre-tax
discount rates are derived from the Group’s post-tax weighted average cost of capital (‘WACC’), which has been calculated using the capital asset pricing
model, the inputs of which include a country risk-free rate, equity risk premium, Group size premium and a risk adjustment (beta). Cash flows beyond the
five-year period are extrapolated using a long-term growth rate of 2.5%.
As a result of this analysis, the Company has not recognised any additional impairment charge during the year.
Principal subsidiary undertakings
The Company’s principal subsidiaries and their main activities are given in note 36 to the Group Financial Statements.
C6. OTHER INVESTMENTS
Accounting policies
Listed equity investments are stated at fair value.
Listed investment
C7. OTHER RECEIVABLES
Accounting policies
We state other receivables at their amortised cost less any impairment losses.
Amounts due within one year
Amounts owed by Group undertakings
Corporation tax recoverable
Other taxes and social security
Prepayments
Deferred taxation
Derivative financial asset
2020
£m
1.8
2019
£m
2.6
Note
2020
£m
2019
£m
440.7
–
–
2.2
0.6
1.2
444.7
438.3
0.9
0.3
1.6
1.5
1.1
443.7
C8
C15
At the Balance Sheet date, the amounts owed by Group undertakings were £440.7m (2019: £438.3m). The carrying amount of these assets approximates
their fair value. There are impaired receivable balances of £nil (2019: £nil) as the Company does not expect any credit losses on amounts owed by Group
undertakings due to the centralised management of these balances. Of the amounts owed by Group undertakings, £324.5m (2019: £320.9m) is interest-
bearing and any interest charged is at current market rates.
FINANCIAL STATEMENTS
170
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS CONTINUED
For the year ended 30 June 2020
C8. DEFERRED TAXATION
Accounting policies
We recognise deferred taxation in respect of all timing differences that have originated but not reversed at the Balance Sheet date, where transactions or
events that result in an obligation to pay more tax in future or a right to pay less tax in future have occurred at the Balance Sheet date.
We only recognise deferred taxation assets if we consider it more likely than not that we will have suitable profits from which we can deduct the future
reversal of the underlying timing differences. Timing differences are differences arising between the Company’s taxable profits and its results as stated in
the Financial Statements, and which are capable of reversing in one or more subsequent periods.
We only recognise deferred taxation in respect of the future remittance of retained earnings of overseas subsidiaries to the extent that, at the balance sheet
date, dividends have been accrued as receivable.
We measure deferred taxation on a non-discounted basis, at the tax rates we expect to apply in the periods in which we expect the timing differences to
reverse, based on tax rates and laws enacted or substantively enacted at the Balance Sheet date.
Deferred tax asset due within one year
Deferred tax asset due after more than one year
The movements in deferred taxation are as follows:
At the start of the year
Recognised in the income statement
Recognised in equity
At the end of the year
The amounts provided are as follows:
Share-based payment expense
Other timing differences
Losses
2020
£m
0.6
1.4
2.0
2020
£m
1.5
0.1
0.4
2.0
2020
£m
1.2
0.7
0.1
2.0
2019
£m
1.5
–
1.5
2019
£m
1.5
–
–
1.5
2019
£m
0.9
0.3
0.3
1.5
At the balance sheet date, the Company had unused tax losses available for offset against future profits, with a potential tax benefit of £0.1m (2019: £0.3m).
We have recognised a deferred tax asset in respect of this benefit, as we expect these losses to be offset against future profits of the UK tax group in the
near term.
C9. CURRENT PAYABLES
Accounting policies
Trade payables are not interest bearing and are stated at their nominal value.
Bank loans and overdrafts
Corporation tax payable
Trade payables
Other payables
Amounts owed to Group undertakings
Accruals
Deferred income
Obligations under leases
Derivative financial liabilities
Note
C12
C13
C15
2020
£m
9.2
0.3
0.7
0.2
209.7
3.2
0.3
0.1
0.4
224.1
2019
£m
2.1
–
2.0
0.3
208.2
3.1
–
–
1.0
216.7
Included within amounts owed to Group undertakings are amounts of £185.8m (2019: £192.4m) which are unsecured, repayable on demand and any
interest charged is at current market rates.
There are no outstanding contributions due to defined contribution pension schemes for the benefit of the employees (2019: £nil).
Genus plc / Annual Report 2020 C10. NON-CURRENT PAYABLES
Bank loans and overdrafts
Obligations under leases
Derivative financial liabilities
Deferred income
C11. PROVISIONS
Provisions due within one year
Provisions after more than one year
171
2019
£m
101.9
–
0.2
–
102.1
2019
£m
–
2.0
2.0
Note
C12
C13
C15
2020
£m
103.8
0.8
0.1
1.1
105.8
2020
£m
2.0
0.4
2.4
The provisions primarily consist of a share forfeiture provision of £2.3m which relates to potential claims that could be made by untraced members over the
next years, relating to the resale proceeds of shares that were identified during the prior years as being forfeited (see note 25).
C12. LOANS AND BORROWINGS
Accounting policies
We initially state debt at the amount of the net proceeds, after deducting issue costs. The carrying amount is increased by the finance cost in respect of the
accounting period and reduced by payments made in the period.
We charge the finance costs of debt to the profit and loss account over the debt term, at a constant rate on the carrying value of the debt to which they relate.
Loans and borrowings comprise amounts falling due:
In one year or less or on demand
In more than one year but not more than two years
In more than two years but not more than five years
Less: unamortised issue costs
Amounts falling due within one year
Amounts falling due after more than one year
2020
£m
9.5
103.8
–
113.3
(0.3)
113.0
(9.2)
103.8
2019
£m
2.5
–
102.2
104.7
(0.7)
104.0
(2.1)
101.9
At the balance sheet date, the Company’s credit facilities comprised a £95m multi-currency revolving credit facility (‘RCF’) and a USD165m RCF. £45m of the
Company’s credit facilities expire in February 2021, with the remaining facilities expiring in February 2022.
A new credit facility agreement with a syndicate of eight banks was signed post year end on 24 August 2020. The new facility consists of a £150m multi-
currency RCF, a USD125m RCF and a USD20m bond and guarantee facility. The term of the new facility is for three years with an option to extend the
maturity date before the first and second anniversaries of the signing date for a further year. The facility also includes an uncommitted £100m accordion
option which can be requested on a maximum of three occasions over the lifetime of the facility to fund the Group’s business development plans.
As part of its interest rate strategy, the Company has entered into interest rate swaps to hedge floating LIBOR rates. As a result, bank loan and overdrafts
include borrowings of US$45m (£36.3m) fixed at 1.22% and £20m fixed at 1.08%, excluding applicable bank margin.
Terms and debt repayment schedule
The terms and conditions of outstanding loans and overdrafts were as follows:
RCF and overdraft
RCF, term loan and overdraft
RCF and overdraft
Other unsecured bank borrowings
Total interest-bearing liabilities
The above RCFs are unsecured.
Currency
Interest rate
GBP
USD
EUR
Other
1.1%
1.4%
0.9%
0.7%
2020
£m
28.7
68.6
6.8
8.9
2019
£m
25.0
77.2
–
1.8
113.0
104.0
FINANCIAL STATEMENTS
172
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS CONTINUED
For the year ended 30 June 2020
C13. OBLIGATIONS UNDER LEASES
A lease is a commitment to make a payment in the future, primarily in relation to property, plant and machinery and motor vehicles.
Accounting policies
In accordance with IFRS 16, we recognise as an expense any payments made in respect of short-term leases (those with a term of less than 12 months) and
for low-value items on a straight-line basis over the life of the lease.
For all other leases we recognise a liability at the date at which the leased asset is made available for use, a corresponding right-of-use asset is recognised
and depreciated over the term of the lease (see note C4).
Lease liabilities are measured at the present value of the future lease payments, excluding any payments relating to non-lease components. Future lease
payments include fixed payments, in substance fixed payments, and variable lease payments that are based on an index or a rate, less any lease incentives
receivable. Lease liabilities also take into account amounts payable under residual value guarantees and payments to exercise options to the extent that it
is reasonably certain that such payments will be made. The payments are discounted at the rate implicit in the lease or, where that cannot be measured,
at an incremental borrowing rate.
We remeasure the lease liability (and make a corresponding adjustment to the related right-of-use asset) whenever:
> The lease term has changed or there is a change in the assessment of exercise of a purchase option, in which case the lease liability is remeasured by
discounting the revised lease payments using a revised discount rate.
> The lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value, in which cases the
lease liability is remeasured by discounting the revised lease payments using the initial discount rate (unless the lease payments change is due to a
change in a floating interest rate, in which case a revised discount rate is used).
> A lease contract is modified, and the lease modification is not accounted for as a separate lease, in which case the lease liability is remeasured by
discounting the revised lease payments using a revised discount rate.
The company did not make any such adjustments during the periods presented.
The change in the lease liabilities are as follows:
Balance at the start of the year
Recognised on the adoption of IFRS 16
Payments made
Balance at the end of the year
2020
£m
–
1.0
(0.1)
0.9
In accordance with the reduced disclosure exemptions included in FRS 101 a maturity analysis has not been presented. The maturity analysis of the Group’s
lease obligations is included in note 27 to the Group Financial Statements.
C14. OPERATING LEASES
Accounting policies
For short-term leases (those with a term of less than 12 months) and low-value items we charge the rentals payable to the income statement on a straight-
line basis over the lease term.
The Company has elected not to apply IFRS 16 to contracts where the right-of-use asset would be recognised as an intangible assets (e.g. software
licences).
Total of future minimum lease payments under non-cancellable operating leases which expire:
In less than one year
Between one and five years
In more than five years
The reduction in future minimum lease payments relates to the adoption of IFRS 16 (see note C1).
Operating lease rentals charged in the year:
Other
C15. DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS
Additional disclosures on financial instruments can be found in note 26.
2020
£m
0.8
0.8
–
1.6
2020
£m
0.7
2019
£m
0.9
2.1
0.4
3.4
2019
£m
0.9
Genus plc / Annual Report 2020 C16. CAPITAL AND RESERVES
Share capital
Issued and fully paid
Ordinary shares of 10 pence
There is no authorised share capital limit.
The holders of ordinary shares are entitled to receive dividends, as declared from time to time.
The movement in share capital for the period was as follows:
Issued under the Executive Share Option Plan
Issued to Employee Benefit Trust
Issued at share placement
Shares issued under the Executive Share Option Plan were issued at option prices as follows:
Executive Share Option Plan
173
2019
£m
6.5
2019
£m
–
–
0.3
0.3
2020
Number
2019
Number
65,091,625
65,054,559
2020
Number
37,066
–
–
37,066
2019
Number
14,892
400,000
3,097,200
3,512,092
2020
£m
6.5
2020
£m
–
–
–
–
2020
2019
Number
Price
Number
Price
776.00p
654.50p
729.83p
977.83p
1334.00p
1413.00p
–
6,097
9,213
7,175
6,209
8,372
37,066
776.00p
654.50p
729.83p
977.83p
1334.00p
1413.00p
3,932
2,106
1,915
1,463
3,685
1,791
14,892
Reserve for own shares
The Company’s shares are held by a QUEST, which is an employee benefit trust established to facilitate the operation of our long-term incentive scheme for
senior management. The reserve amount represents the deduction in arriving at shareholders’ funds for the consideration the trust paid for the Company’s
shares, which had not vested unconditionally at the balance sheet date. The number and market value of the ordinary shares held by the Employee Benefit
Trust and the QUEST were:
Shares allocated but not vested
Unallocated shares
The shares have a nominal value of £16,752 (2019: £40,546).
2020
Number
75,184
92,334
167,518
2019
Number
313,125
92,334
405,459
2020
£m
2.6
3.3
5.9
2019
£m
8.3
2.4
10.7
Hedging reserve
The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments net of taxation – see
note 26.
C17. RELATED PARTY TRANSACTIONS
The Company is exempt under FRS 101 from disclosing transactions with other members of the Group.
C18. CAPITAL AND OTHER COMMITMENTS
At 30 June 2020, outstanding contracted capital expenditure amounted to £nil (2019: £nil).
FINANCIAL STATEMENTS
174
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS CONTINUED
For the year ended 30 June 2020
C19. PENSIONS, GUARANTEES AND CONTINGENCIES
The NMR pension assigned to Genus plc under the Flexible Apportionment Agreement, recorded an actuarial gain of £0.5m which has increased the asset
restriction made in the previous years. As the Company does not have unilateral right to this surplus, as required in accordance with IFRIC 14 it is restricted
to £nil. For additional information on the MPF pension scheme, of which NMR was one of the participating employers, please see note 29.
The retirement benefit obligations referred to in note 29 to the Group Financial Statements include obligations relating to the MPF defined benefit scheme.
Genus, together with other participating employers, is joint and severally liable for the scheme’s obligations. Genus has accounted for its section and its
share of any orphan assets and liabilities, collectively representing approximately 86% (2019: 86%) of the MPF. As a result of the joint and several liability,
Genus has a contingent liability for the scheme’s obligations that it has not accounted for. The total deficit of the MPF scheme from the most recent triennial
valuation can be found in note 29.
Certain UK subsidiaries, which are detailed in note 37 to the Group Financial Statements, will take advantage of the audit exemption set out within section
479A of the Companies Act 2006 for the year ended 30 June 2020. The Company has assessed the probability of loss under the guarantee as remote.
At 30 June 2020, the Company had entered into bank guarantees totalling £nil (2019: £nil).
C20. POST BALANCE SHEET EVENTS
A new credit facility agreement with a syndicate of eight banks was signed post year end on 24 August 2020. The new facility consists of a £150m multi-
currency RCF, a USD125m RCF and a USD20m bond and guarantee facility. The term of the new facility is for three years with an option to extend the
maturity date before the first and second anniversaries of the signing date for a further year. The facility also includes an uncommitted £100m accordion
option which can be requested on a maximum of three occasions over the lifetime of the facility to fund the Group’s business development plans.
Genus plc / Annual Report 2020
FIVE-YEAR RECORD – CONSOLIDATED RESULTS
175
The information included in the five-year record below is in accordance with IFRS as adopted for use in the European Union.
Financial results
Revenue from continuing operations
Adjusted operating profit from continuing operations1
Adjusted operating profit including joint ventures and associates1
Adjusted profit before tax1
Basic adjusted earnings per share1
Diluted adjusted earnings per share1
Operating profit from continuing operations
Profit before tax from continuing operations
Profit after tax from continuing operations
Basic earnings per share
Diluted earnings per share
Net assets
Net debt
2020
£m
551.4
65.3
76.0
71.0
85.4p
84.7p
47.6
51.5
40.9
62.4p
61.9p
507.8
102.6
20192
£m
20182
£m
20173
£m
20163
£m
488.5
470.3
459.1
388.3
57.7
64.9
61.0
73.2p
70.7p
8.7
9.9
6.7
12.4p
11.9p
487.1
79.6
57.7
63.1
58.5
75.9p
74.9p
8.2
7.8
41.6
69.7p
68.7p
403.9
108.5
55.1
60.1
56.4
69.4p
68.4p
38.2
40.7
34.3
53.8p
53.0p
402.1
111.6
49.3
54.3
49.7
60.7p
60.1p
58.6
60.9
50.3
81.1p
80.3p
368.1
89.7
1 Adjusted operating profit, adjusted profit before tax and adjusted basic and diluted earnings per share are before net IAS 41 valuation movement on biological assets, amortisation of acquired
intangible assets, share-based payment expense, exceptional items and other gains and losses.
2 Restated see note 2.
3 As previously reported. The results of FY16 and FY17 have not been restated for the prior period adjustment outlined in note 2 as it would be impracticable to do so. Consequently, the net assets of
these periods are not directly comparable to those in the subsequent years.
ADDITIONAL INFORMATION
176
ALTERNATIVE PERFORMANCE MEASURES (‘APMS’) GLOSSARY
The Group tracks a number of APMs in managing its business, which are not
defined or specified under the requirements of IFRS because they exclude
amounts that are included in, or include amounts that are excluded from,
the most directly comparable measure calculated and presented in
accordance with IFRS, or are calculated using financial measures that are
not calculated in accordance with IFRS.
The Group believes that these APMs, which are not considered to be a
substitute for or superior to IFRS measures, provide stakeholders with
additional helpful information on the performance of the business. These
APMs are consistent with how the business performance is planned and
reported within the internal management reporting to the Board and
executive leadership team. Some of these APMs are also used for the
purpose of setting remuneration targets.
These APMs should be viewed as supplemental to, but not as a substitute
for, measures presented in the consolidated financial information relating
to the Group, which are prepared in accordance with IFRS. The Group
believes that these APMs are useful indicators of its performance. However,
they may not be comparable to similarly-titled measures reported by other
companies due to differences in the way they are calculated. The key
APMs that the Group uses include:
Alternative Performance
Measures
Calculation methodology and closest equivalent IFRS measure (where applicable)
Reasons why we believe the
APMs are useful
Income statement measures
Adjusted operating profit
exc JVs
Adjusted operating profit is operating profit with the net IAS 41 valuation
movement on biological assets, amortisation of acquired intangible assets,
share-based payment expense and exceptional items added back and
excludes JV and associate results.
Closest equivalent IFRS measure: Operating profit1
See reconciliation on page 180.
Adjusted operating profit
inc JVs
Including adjusted operating profit from JV and associate results.
See reconciliation on page 180.
Adjusted operating profit
inc JVs exc gene editing
costs
Adjusted operating profit
inc JVs exc impact of IFRS
16 adoption
Adjusted operating profit
inc JVs after tax
Adjusted operating profit
inc JVs exc impact of
IFRS 16 adoption after tax
Adjusted profit inc JVs
before tax
Including adjusted operating profit from JV and associate results but excluding
gene editing costs.
See reconciliation on page 180.
Excludes the impact of IFRS 16 on adoption.
See reconciliation on page 180.
Adjusted operating profit including JV less adjusted effective tax.
See reconciliation on page 180.
Adjusted operating profit before tax, excluding the impact of IFRS 16 on
adoption less adjusted effective tax.
See reconciliation on page 180.
Adjusted operating profit including JVs less net finance costs.
See reconciliation on page 180.
Adjusted profit inc JVs
after tax
Adjusted profit including JVs before tax less adjusted effective tax.
See reconciliation on page 180.
Allows the comparability of underlying
financial performance by excluding the
impacts of exceptional items and is a
performance indicator against which
short-term and long-term incentive
outcomes for our senior executives are
measured:
> net IAS 41 valuation movements on
biological assets – these movements
can be materially volatile and do not
directly correlate to the underlying
trading performance in the period.
Furthermore, the movement is
non-cash related and many
assumptions used in the valuation
model are based on projections
rather than current trading;
> amortisation of acquired intangible
assets – excluding this improves the
comparability between acquired and
organically grown operations, as the
latter cannot recognise internally
generated intangible assets.
Adjusting for amortisation provides a
more consistent basis for comparison
between the two;
> share based payments – this expense
is considered to be relatively volatile
and not fully reflective of the current
period trading, as the performance
criteria are based on EPS
performance over a three-year period
and include estimates of future
performance; and
> exceptional items – these are items
which due to either their size or their
nature are excluded to improve the
understanding of the Group’s
underlying performance.
Genus plc / Annual Report 2020
177
Alternative Performance
Measures
Adjusted effective tax rate
Calculation methodology and closest equivalent IFRS measure (where applicable)
Total income tax charge for the Group excluding the tax impact of adjusting
items divided by the adjusted operating profit.
Closest equivalent IFRS measure: Effective tax rate
See reconciliation on page 181.
Adjusted basic earnings
per share
Adjusted profit after tax profit divided by the
weighted basic average number of shares.
Closest equivalent IFRS measure: Earnings per share
See calculation on page 181.
Reasons why we believe the
APMs are useful
Provides an underlying tax rate to allow
comparability of underlying financial
performance by excluding the impacts of
net IAS 41 valuation movement on
biological assets, amortisation of
acquired intangible assets, share-based
payment expense and exceptional items.
On a per share basis, this allows the
comparability of underlying financial
performance by excluding the impacts of
adjusting items.
Adjusted diluted earnings
per share
Underlying attributable profit divided by the diluted weighted basic average
number of shares.
Closest equivalent IFRS measure: Diluted earnings per share
See calculation on page 181.
Adjusted earnings cover
Adjusted earnings per share divided by the expected dividend for the year.
See calculation on page 181.
The Board dividend policy targets the
adjusted earning cover to be between 2.5
– 3 times.
Adjusted EBITDA –
calculated in accordance
with the definitions used in
our financing facilities
This is adjusted operating profit, adding back cash received from our joint
ventures, depreciation of property, plant and equipment, depreciation of the
historical cost of biological assets, operational amortisation (i.e. excluding
amortisation on acquired intangibles) and deducting the amount attributable
to minority interest.
This APM is presented because it is used
in calculating our ratio of net debt to
EBITDA and our interest cover which we
report to our banks to ensure compliance
with our bank covenants.
Closest equivalent IFRS measure: Operating profit1
See reconciliation on page 181.
Adjusted operating margin
Adjusted operating profit (including JV) divided by revenue.
Adjusted operating margin
(exc JV)
Adjusted operating profit.
Constant currency basis
The Group reports certain financial measures, on both a reported and
constant currency basis and retranslates the current year’s results at the
average actual exchange rates used in the previous financial year.
Allows for the comparability of
underlying financial performance by
excluding the impacts of exceptional
items.
The Group’s business operates in
multiple worldwide countries and its
trading results are translated back into
the Group’s functional currency of
Sterling. This measure eliminates the
effects of exchange rate fluctuations
when comparing year-on-year reported
results.
ADDITIONAL INFORMATION
178
ALTERNATIVE PERFORMANCE MEASURES GLOSSARY CONTINUED
Alternative Performance
Measures
Balance sheet measures
Net debt
Net debt exc the impact of
IFRS 16
Net debt - calculated in
accordance with the
definitions used in our
financing facilities
Cash flow measures
Cash conversion
Calculation methodology and closest equivalent IFRS measure (where applicable)
Reasons why we believe the
APMs are useful
Net debt is gross debt, made up of unsecured bank loans and overdrafts and
obligations under finance leases, with a deduction for cash and cash
equivalents.
This allows the Group to monitor its
levels of debt.
See reconciliation on page 182.
Net debt less the impact of adopting IFRS 16 leases over IAS 17.
This allows a comparative to prior year.
See reconciliation on page 182.
Net debt excluding the impact of adopting IFRS 16 and adding back
guarantees and deferred purchase arrangements.
This is a key metric that we report to our
banks to ensure compliance with our
bank covenants.
See reconciliation on page 182.
Cash generated by operations as a percentage of adjusted operating profit
excluding JVs.
See calculation on page 182.
This is used to measure how much
operating cash flow we are generating
and how efficient we are at converting
our operating profit into cash.
Cash conversion exc the
impact of adopting IFRS 16
Cash generated by operations as a percentage of adjusted operating profit
excluding joint ventures excluding the impact of adopting IFRS 16.
This allows a comparative to the
prior year.
See calculation on page 182.
Free cash flow
Cash generated by the Group before debt repayments, acquisitions and
investments, dividends and proceeds from share issues.
Shows the cash retained by the Group in
the year.
Closest IFRS measure: Net cash flow from operating activities
See reconciliation on page 182.
Other measures
Interest cover
The ratio of adjusted net finance costs, calculated in accordance with the
definitions used in our financing facilities, is net finance costs with a deduction
for pension interest, interest from adopting IFRS 16, unwinding of discount on
put options and amortisation of refinancing fees, to Adjusted EBITDA.
This APM is used to understand our
ability to meet our interest payments
and is also a key metric that we report to
our banks to ensure compliance with our
bank covenants.
Closest equivalent IFRSs components for the ratio: The equivalent IFRS
components are finance costs, finance income and operating profit
See calculation and reconciliation on page 183.
Ratio of net debt to
adjusted EBITDA
The ratio of net debt, calculated in accordance with the definitions used in our
financing facilities, is gross debt, made up of unsecured bank loans and
overdrafts and obligations under finance leases, with a deduction for cash and
cash equivalents and adding back amounts related to guarantees and deferred
purchase arrangements, to EBITDA.
This APM is used as a measurement of
our leverage and is also a key metric that
we report to our banks to ensure
compliance with our bank covenants.
Closest equivalent IFRSs components for the ratio: The equivalent IFRS
components are gross debt, cash and cash equivalents and operating profit.
See calculation on page 183.
Return on adjusted
invested capital
The Group’s return on adjusted invested capital is measured on the basis of
adjusted operating profit including JV’s after tax, which is operating profit with
the pre-tax share of profits from JV’s and associates, net IAS 41 valuation
movement on biological assets, amortisation of acquired intangible assets,
share-based payment expense and exceptional items added back, net of
amounts attributable to non-controlling interest and tax.
This APM is used to measure our ability to
efficiently invest our capital and gives us
a sense of how well we are using our
resources to generate returns.
Genus plc / Annual Report 2020
179
Alternative Performance
Measures
Return on adjusted capital
invested (continued)
Calculation methodology and closest equivalent IFRS measure (where applicable)
The adjusted operating profit including joint ventures after tax is divided by
adjusted invested capital, which is the equity attributable to owners of the
Company adding back net debt, pension liability net of related deferred tax and
deducting biological assets (less historical cost) and goodwill, net of related
deferred tax.
Reasons why we believe the
APMs are useful
Closest equivalent IFRSs components for the ratio:
Return on invested capital
See calculation and reconciliation on page 183 and 184.
Excludes the impact of IFRS 16 on adoption.
See reconciliation on page 183.
Return on adjusted
invested capital exc the
impact of IFRS 16 adoption
This allows a comparative to the
prior year.
1 Operating profit is not defined per IFRS. It is presented in the Group Income Statement and is shown as profit before tax, finance income/costs and share of post-tax profit of joint ventures and
associates retained.
ADDITIONAL INFORMATION
180
ALTERNATIVE PERFORMANCE MEASURES GLOSSARY CONTINUED
THE TABLES BELOW RECONCILE THE CLOSEST EQUIVALENT IFRS MEASURE TO THE APM OR OUTLINE THE CALCULATION OF THE APM
INCOME STATEMENT MEASURES
ADJUSTED OPERATING PROFIT EXC JVS
ADJUSTED OPERATING PROFIT INC JVS
ADJUSTED OPERATING PROFIT INC JVS AND EXC GENE EDITING COSTS
Operating profit
Add back:
Net IAS 41 valuation movement on biological assets
Amortisation of acquired intangible assets
Share-based payment expense
Exceptional items
Adjusted operating profit exc JVs
Less: amounts attributable to non-controlling interest
Operating profit from joint ventures and associates
Tax on joint ventures and associates
Net IAS 41 valuation movement
Adjusted operating profit from JV’s
Adjusted operating profit inc JVs
Gene editing costs
Adjusted operating profit inc JVs and exc gene editing costs
2020
£m
(15.8)
8.5
5.8
19.2
8.9
2.3
0.1
£m
47.6
65.3
(0.6)
11.3
76.0
5.2
81.2
2019
£m
£m Reference
14.7
9.5
3.0
21.8
5.1
1.4
1.1
8.7 Group Income Statement
Group Income Statement
Group Income Statement
Group Income Statement
Group Income Statement
57.7 Group Income Statement
Group Income Statement
Note 11 – Income tax expense
Note 18 – Equity accounted
investees
(0.4)
7.6
64.9
7.3 Note 5 – Segmental information
72.2
ADJUSTED OPERATING PROFIT INC JVS EXC IMPACT OF IFRS 16 ADOPTION
2020
2019
ADJUSTED OPERATING PROFIT INC JVS EXC IMPACT OF IFRS 16 ADOPTION AFTER TAX
2020
2019
Adjusted operating profit inc JVs
Deduct:
Finance costs on impact of IFRS 16 adoption
Adjusted profit inc JVs exc impact of IFRS 16 adoption
ADJUSTED OPERATING PROFIT INC JVS AFTER TAX
Adjusted operating profit inc JV
Adjusted tax
Adjusted operating profit inc JV after tax
Adjusted operating profit inc JV exc impact of IFRS 16
adoption
Adjusted tax
Adjusted operating profit inc JV exc impact of IFRS 16
adoption after tax
ADJUSTED PROFIT INC JVS BEFORE TAX
ADJUSTED PROFIT INC JVS AFTER TAX
Adjusted operating profit inc JVs
Less net finance costs
Adjusted profit inc JVs before tax
Adjusted tax
Adjusted profit inc JVs after tax
£m
76.0
(0.7)
75.3
£m Reference
64.9 See APM
– Note 1 – Reporting entity
64.9
2020
2019
£m
76.0
(16.7)
59.3
£m
75.3
(16.6)
58.7
£m Reference
64.9 See APM
(15.8) At effective tax rate – see note 12
49.1
£m Reference
64.9 See APM
(15.8) At effective tax rate – see note 12
49.1
2020
2019
£m
76.0
(5.0)
71.0
(15.6)
55.4
£m Reference
64.9 See APM
(3.9) Note 10 – Net finance costs
61.0
(14.8) Note 12 – Earnings per share
46.2
Genus plc / Annual Report 2020
181
ADJUSTED EFFECTIVE TAX £M/RATE
Adjusted effective tax £m/rate
Exceptional items
Share-based payment expense
Amortisation of acquired intangible assets
Net IAS 41 valuation movement on biological assets
Net IAS 41 valuation movement on biological assets in JVs
2020
2019
£m
15.6
(4.5)
(1.1)
(1.8)
4.7
–
%
22.0
(23.4)
(19.0)
(21.2)
29.7
–
£m
14.8
(3.9)
(0.5)
(2.1)
(3.3)
(0.4)
% Reference
24.3 Note 12 – Earnings per share
(17.9)
(16.7)
(22.1)
(22.4)
(36.4)
Effective tax £m/rate
12.9
24.0
4.6
40.7
Note 11 – Taxation and deferred
taxation
ADJUSTED BASIC EARNINGS PER SHARE
Adjusted profit after tax (£m)
Weighted average number of ordinary shares (m)
Adjusted Earnings per share (pence)
ADJUSTED DILUTED EARNINGS PER SHARE
Adjusted profit inc JVs after tax (£m)
Weighted average number of diluted ordinary shares (m)
Adjusted earnings per share (pence)
ADJUSTED EARNINGS COVER
Adjusted earnings per share
Dividend for the year
Adjusted earnings cover
ADJUSTED EBITDA – AS CALCULATED UNDER OUR FINANCING FACILITIES
Operating profit
Add back:
Net IAS 41 valuation movement on biological assets
Amortisation of acquired intangible assets
Share-based payment expense
Exceptional items
Adjusted operating profit exc JVs
Adjust for:
Cash received from JVs (dividend and loan repayment)
Depreciation: property, plant and equipment owned assets
Depreciation: historical cost of biological assets
Amortisation and impairment (excluding separately identifiable
acquired intangible assets)
Less amounts attributable to non-controlling interest
2020
£m
(15.8)
8.5
5.8
19.2
65.3
3.7
13.1
11.0
5.1
(0.6)
pence
85.4
29.1
2020
55.4
64.908
85.4
2020
55.4
65.427
84.7
2019 Reference
46.2 See APM
63.141 Note 6 – Earnings per share
73.2
2019 Reference
46.2 See APM
65.304 Note 6 – Earnings per share
70.7
2020
2019
times
2.9
£m
47.6
pence
73.2
27.7
times Reference
See APM
Note 13 – Dividends
2.6
2019
£m
£m Reference
8.7 Group Income Statement
Group Income Statement
Group Income Statement
Group Income Statement
Group Income Statement
Group Income Statement
Group Statement of Cash Flows
Note 17 – Property, plant and
equipment
See Financial Review
Note 15 – Intangible assets
Group Income Statement
14.7
9.5
3.0
21.8
57.7
3.4
12.6
9.4
5.4
(0.4)
Adjusted EBITDA – as calculated under our financing facilities
97.6
88.1
ADDITIONAL INFORMATION
182
ALTERNATIVE PERFORMANCE MEASURES GLOSSARY CONTINUED
BALANCE SHEET MEASURES
NET DEBT
NET DEBT EXC IMPACT OF IFRS 16 ADOPTION
NET DEBT AS CALCULATED UNDER OUR FINANCING FACILITIES
2020
2019
Unsecured bank loans and overdrafts
Obligations under finance leases
Total debt financing
Deduct:
Cash and cash equivalents
Net debt
Deduct:-
Impact of IFRS 16 adoption
Net debt exc impact of IFRS 16 adoption
Add back:- Guarantees
Deferred purchase arrangements
Net debt – as calculated under our financing facilities
CASH FLOW MEASURES
CASH CONVERSION
Cash generated by operations
Operating profit
Add back:
Net IAS 41 valuation movement on biological assets
Amortisation of acquired intangible assets
Share-based payment expense
Exceptional items
Adjusted operating profit exc JVs
Cash conversion (%)
CASH CONVERSION EXC IMPACT OF IFRS 16 ADOPTION
Cash generated by operations
Deduct Impact of IFRS 16 adoption
Cash generated by operations exc impact of IFRS 16
adoption
Adjusted operating profit exc JVs
Cash Conversion exc impact of IFRS 16 adoption (%)
FREE CASH FLOW
£m
112.8
31.1
143.9
(41.3)
102.6
(24.7)
77.9
5.9
0.2
84.0
£m
104.0
6.1
110.1
(30.5)
79.6
–
79.6
4.0
1.3
84.9
Reference
Group Balance Sheet
Group Balance Sheet
Note 32 – Notes to the cash flow
statement
Group Balance Sheet
No direct reference
Note 35 – Contingencies and bank
guarantees
No direct reference
2020
£m
£m
82.9
47.6
(15.8)
8.5
5.8
19.2
2019
£m
£m Reference
48.4 Note 32 – Notes to the cash flow
statement
Group Income Statement
Group Income Statement
Group Income Statement
Group Income Statement
Group Income Statement
8.7
14.7
9.5
3.0
21.8
65.3
127%
57.7 Group Income Statement
84%
2020
2019
£m
82.9
(7.6)
75.3
65.3
115%
£m
£m
48.4
–
48.4
57.7
84%
£m Reference
Note 32 – Notes to the cash flow
statement
Note 1 – Reporting entity
Group Income Statement
2020
£m
£m
2019
£m
£m Reference
Cash generated by operations
Interest and tax paid
Capital expenditure
Cash received from JV (dividends and loan repayment)
Other
Free cash flow
82.9
(17.1)
(35.4)
3.7
1.1
35.2
48.4
(15.0)
(28.3)
3.4
1.5
10.0
Note 32 – Notes to cash flow
statement
Note 32 – Notes to cash flow
statement
Group Statement of Cash flows
Group Statement of Cash flows
Group Statement of Cash flows
Genus plc / Annual Report 2020
183
OTHER MEASURES
INTEREST COVER
Finance costs
Finance income
Net finance costs
Deduct:
Pension interest
Additional interest from adopting IFRS 16
Unwinding discount on put options
Amortisation of refinancing fees
Adjusted net finance costs
Adjusted EBITDA – as calculated under our financing
facilities
Interest cover
RATIO OF NET DEBT TO ADJUSTED EBITDA
Net debt – as calculated under our financing facilities
Adjusted EBITDA – as calculated under our financing
facilities
Ratio of net debt to EBITDA
RETURN ON ADJUSTED INVESTED CAPITAL
Adjusted operating profit inc JVs after tax
Equity attributable to owners of the Company
Add back:
Net debt
Pension liability
Related deferred tax
Deduct:
Biological assets – carrying value
Biological assets – historic cost
Goodwill
Related deferred tax
Adjusted invested capital
Return on adjusted invested capital
2020
2019
£m
5.3
(0.3)
5.0
(0.4)
(0.7)
(0.5)
(0.4)
3.0
97.6
Times
Times Reference
Group Income Statement
Group Income Statement
Note 10 – Net finance costs
Note 10 – Net finance costs
Note 10 – Net finance costs
Note 10 – Net finance costs
Note 10 – Net finance costs
£m
4.7
(0.8)
3.9
(0.9)
–
–
(0.4)
2.6
88.1
See APM
32
34
2020
2019
£m
84.0
97.6
2020
£m
59.3
508.8
102.6
18.1
(3.5)
(370.2)
57.5
(105.6)
74.4
282.1
Times
0.9
%
£m
84.9
88.1
Times Reference
See APM
See APM
1
2019
£m
% Reference
49.1
488.4
79.6
24.2
(4.4)
(346.2)
58.2
(106.3)
66.6
260.1
See APM
Group Balance Sheet
Note 32 – Notes to the cash flow
statement
Group Balance Sheet
Note 11 – Taxation and deferred
Taxation
See Financial Review
See Financial Review
Group Balance Sheet
Note 11 – Taxation and deferred
Taxation
21.0%
18.9%
RETURN ON ADJUSTED INVESTED CAPITAL EXC IMPACT OF IFRS 16 ADOPTION
2020
£m
%
2019
£m
% Reference
Adjusted operating profit inc JVs exc impact of IFRS 16
adoption after tax
Equity attributable to owners of the Company
Add back:
Net debt (excluding IFRS 16 leases)
Pension liability
Related deferred tax
Deduct:
Biological assets – carrying value
Biological assets – historic cost
Goodwill
Related deferred tax
Adjusted invested capital
Return on adjusted invested capital exc impact of IFRS 16
adoption
58.7
508.8
77.9
18.1
(3.5)
(370.2)
57.5
(105.6)
74.4
257.4
49.1
488.4
79.6
24.2
(4.4)
(346.2)
58.2
(106.3)
66.6
260.1
Group Balance Sheet
Group Balance Sheet
Note 11 – Taxation and deferred
taxation
See financial review
See financial review
Group Balance Sheet
Note 11 – Taxation and deferred
taxation
22.8%
18.9%
ADDITIONAL INFORMATION
184
ALTERNATIVE PERFORMANCE MEASURES GLOSSARY CONTINUED
RETURN ON ADJUSTED INVESTED CAPITAL
Return on adjusted invested capital
Adjusted operating profit inc JVs after tax
Tax rate
Adjusted operating profit including JV’s
Adjusted operating profit attributable to non-controlling interest
Pre-tax share of profits from JV’s exc net IAS 41 valuation
movement
Adjusted operating profit exc JVs
Fair value movement on biological assets
Amortisation of acquired intangibles
Share-based payment expense
Exceptional items
Share of post-tax profit of JV’s
Finance costs
Profit before tax
Tax
Profit
Equity attributable to owners of the Company
Return on invested capital
%
21.0%
22.0%
2020
£m
59.3
16.7
76.0
0.6
(11.3)
65.3
15.8
(8.5)
(5.8)
(19.2)
8.9
(5.0)
51.5
(10.6)
40.9
508.8
2019
£m
% Reference
18.9% see APM
49.1
15.8
64.9
0.4
(7.6)
57.7
(14.7)
(9.5)
(3.0)
(21.8)
5.1
(3.9)
9.9
(3.2)
6.7
488.4
– No direct reference in the
Financial Statements
24.3% Note 12 – Earnings per share
Group Income Statement
Group Income Statement
Group Income Statement
Group Income Statement
Group Income Statement
Group Income Statement
Group Income Statement
Group Income Statement
Group Income Statement
Group Income Statement
Group Income Statement
Group Income Statement
Group Income Statement
Group Balance Sheet
8.0%
1.4%
Genus plc / Annual Report 2020 GLOSSARY
185
AGM – Annual General Meeting.
Artificial insemination (‘AI’) – Using semen collected from
a bull or boar to impregnate a cow or sow when in estrus. Artificial
insemination allows a genetically superior male to be used to mate
with many more females than would be possible with natural mating.
ASF – African Swine Fever.
Biosecurity – The precautions taken to reduce the chance of transmitting
disease agents from one livestock operation to another.
Boar – A male pig.
BRD – Bovine Respiratory Disease, a complex, bacterial and viral infection
that causes lung disease in cattle (particularly calves) and is often fatal.
CPI – Consumer Price Index.
CRISPR-Cas 9 – Technology which accurately targets and cuts DNA to
produce precise and controllable changes to the genome.
CSR – Corporate Social Responsibility.
GMS – ABS’s Genetic Management System, which creates a genetic solution
tailored to each individual dairy producer to obtain improved herd
genetics.
Grandparent – The relationship of a breeding pig to the generation
of terminal market pigs. A grandparent produces parents, who in turn
produce the commercial generation of terminal pigs.
Group – Genus plc and its subsidiary companies.
In vitro fertilisation (‘IVF’) – The fertilisation of an oocyte with semen
(outside an animal) in a laboratory for transfer into a surrogate.
Index/Indices – A formula incorporating economically important traits for
ranking the genetic potential of animals as parents of the next generation.
Integrated pork producer – Producers of pork typically involved in raising
animals to slaughter weight all the way through to packaged and/or
branded pork products.
IntelliGen – The technology platform used to process sexed bovine semen
for ABS and third-party customers and commercialised by ABS globally as
Sexcel.
DSBP – Deferred Share Bonus Plan.
IP – Intellectual property.
EPS – Earnings per share.
IPR – Inter Partes Review before the US Patent and Trademarks Office.
Farrow – When a sow gives birth to piglets.
GELT – Genus Executive Leadership Team.
IVB – In Vitro Brasil S.A.
JV – Joint venture.
Gender skew – The ability to influence the proportion of offspring being
of a particular sex.
Genetic gain – The change of the genetic make up of a particular animal
population in response to having selected parents that excelled genetically
for important traits.
Genetic lag – The amount of time required to disseminate genetic gain
from a nucleus herd to the commercial customer.
Genetic nucleus – A specialised pig herd, where Genus PIC keeps its pure
lines. Pigs are genetically tested at the nucleus to select the best animals to
produce the next generation.
Genomic bull – A bull which has been assessed through genomic testing.
This typically refers to bulls which have not been progeny-tested.
Genomically tested – An animal that has been DNA profiled.
Genomics – The study of the genome, which is the DNA sequence of an
animal’s chromosomes.
Gilt – A young female pig, which has not yet given birth.
Line – Multiple animals that have been mated together in a closed breeding
population. Pure lines can have their origins in one founding breed or in
several breeds.
Market pig equivalents (‘MPE’) – Refers to a standardised measure of our
customers’ production of slaughter animals that contain our genetics with
genes from each of the sow and boar counting for half of the animal.
Multiplier – A producer whose farm contains grandparent sows. The farm
crosses together two lines of grandparents, multiplying the number of
genetically improved parents that are available for sale.
NuEra – The ABS beef breeding programme and index designed to drive
the customer’s genetic improvement and deliver total system profitability
for the beef supply chain.
PQA – Pork Quality Assurance.
Progeny tested – Elite animals whose genetic value as a parent has been
tested and validated through the performance of their offspring.
ADDITIONAL INFORMATION
186
GLOSSARY CONTINUED
PRRSv – Porcine Reproductive and Respiratory Syndrome Virus.
PSP – Performance Share Plan.
PTAB – Patent Trail and Appeal Board before the US Patent and
Trademarks Office.
R&D – Research and development.
RMS – ABS’s Reproductive Management System, which is a systematic
approach to maximising pregnancy production and its contribution to herd
profitability.
RPI – Retail Price Index.
RWD – ABS’s Real World Data System of observed performance data from
many dairy herds.
Sexcel – The ABS brand of sexed bovine genetics produced using
IntelliGen.
Sire – The male parent of an animal.
Sire line – The male line selected for traits desirable for the market.
Sow – A female pig which has given birth at least once.
Straw – A narrow tube used to package frozen bull semen.
Stud – Locations where bulls or boars are housed and their semen
collected, evaluated, diluted into multiple doses/straws and packaged,
ready for shipping to farms.
Terminal boars – The male pig that is used to mate with a parent female to
produce a terminal pig.
Trait – A measurable characteristic that may be a target for genetic
selection.
TransitionRight – Genus ABS’s patent-pending genetic selection tool to
help prevent multiple post calving metabolic disorders that occur during
transition.
Unit – A straw of frozen bull semen or tube/bag of fresh boar semen sold to
a customer.
Genus plc / Annual Report 2020 187
SOLICITORS
HERBERT SMITH FREEHILLS LLP
Exchange House
Primrose Street
London EC2A 2EG
BANKERS
BARCLAYS BANK PLC
2nd Floor
90–92 High Street
Crawley
West Sussex RH10 1BP
REGISTRARS
EQUINITI LIMITED
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA
ADVISERS
SECRETARY AND
REGISTERED OFFICE
DAN HARTLEY
Matrix House
Basing View
Basingstoke
Hampshire RG21 4DZ
Registered Number 02972325
FINANCIAL ADVISER
HSBC BANK PLC
8 Canada Square
London E14 5HQ
STOCKBROKERS
PEEL HUNT
Moor House
120 London Wall
London EC2Y 5ET
LIBERUM CAPITAL LIMITED
Ropemaker Place
Level 12
25 Ropemaker Street
London EC2Y 9LY
STATUTORY AUDITOR
DELOITTE LLP
Abbots House
Abbey Street
Reading RG1 3BD
ADDITIONAL INFORMATION
188
NOTES
Genus plc / Annual Report 2020 SOLICITORS
HERBERT SMITH FREEHILLS LLP
Exchange House
Primrose Street
London EC2A 2EG
BANKERS
BARCLAYS BANK PLC
2nd Floor
90–92 High Street
Crawley
West Sussex RH10 1BP
REGISTRARS
EQUINITI LIMITED
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA
ADVISERS
SECRETARY AND
REGISTERED OFFICE
DAN HARTLEY
Matrix House
Basing View
Basingstoke
Hampshire RG21 4DZ
Registered Number 02972325
FINANCIAL ADVISER
HSBC BANK PLC
8 Canada Square
London E14 5HQ
STOCKBROKERS
PEEL HUNT
Moor House
120 London Wall
London EC2Y 5ET
LIBERUM CAPITAL LIMITED
Ropemaker Place
Level 12 25 Ropemaker Street
London EC2Y 9LY
STATUTORY AUDITOR
DELOITTE LLP
Abbots House
Abbey Street
Reading RG1 3BD
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Genus plc
Matrix House, Basing View, Basingstoke, Hampshire RG21 4DZ
T: +44 (0)1256 347100 F: +44 (0)1256 477385
www.genusplc.com