Genus: management purchase shows confidence

African Swine Fever swept across China in 2019, devastating the country’s pig population. To put that destruction into perspective, China is the world’s largest pork producer; the epidemic meant that around a quarter of the global pig herd was eliminated.

The good news for animal health company Genus (GEN) is that large pork producers in China have been restocking their herds in the wake of the crisis. Genus specialises in genetic improvement technology, enhancing the quality of food-producing animals by sending its customers breeding animals, semen and embryos with desirable traits. Its porcine business posted revenue growth of 8 per cent at constant currencies to £153m for the six months ending 31 December, underpinned by volume growth of 11 per cent amid high breeding stock sales in China.

The group’s other business area, bovine genetics, enjoyed an even stronger performance with sales up 17 per cent. Overall revenues climbed 6 per cent to £286m and Genus’s pre-tax profits rose almost a third to £48.4m. Free cash flows more than doubled to £26.6m, helping to underpin a half-year dividend increase of 32 per cent to 57.3p a share.

Bosses expect the company to “remain resilient” as the coronavirus pandemic continues to rage and believe that full-year trading will be in line with their expectations – although, admittedly, second-half growth is expected to be lower than that reported for the first half. The group also pointed to “increased currency headwinds”.

Genus’s shares slid more than 5 per cent in response. Still, they are up almost a half over the past 12 months. And adding to the sense of management confidence in the group’s prospects, Catherine Ferguson, wife of chairman Iain Ferguson, bought 1,500 shares in the company at £48.51 apiece on results day, totalling £72,762. For now, hold at 4,964p.

Last IC view: Hold, 3,712p, 8 Sep 2020