Investors reading the statutory numbers from animal genetics specialist Genus (GNS) have every right to be worried – slowing revenue growth and a sharp decline in pre-tax profits hardly sounds like good news. But ignore negative currency movements and one-off charges associated with the revaluation of Genus’s bovine assets, and the 6 per cent share price fall on results day seems unjustified. On an underlying basis, revenue and pre-tax profits actually rose 6 per cent and 9 per cent, respectively.
Driving that growth is the group’s new semen sexing technology, which increases the chances of producing female dairy cows. Early sales figures beat expectations and helped boost pre-tax profit in the bovine business by 29 per cent at constant currencies.
Growth was more underwhelming in the larger pig division, as some of the group’s boar stud were infected with the pig disease PRRSv in the US. Disease is also threatening herds in China, which could impact prices in the short term. Broker Peel Hunt has trimmed 2019 pre-tax profit forecasts by £2.5m to £62m (from £59.5m in 2018) accordingly, although breeding genetically resistant pigs – a process Genus is already involved in - could offer a longer-term opportunity.
GENUS (GNS) | ||||
ORD PRICE: | 2,590p | MARKET VALUE: | £1.59bn | |
TOUCH: | 2,588-2,594p | 12-MONTH HIGH: | 2,998p | LOW: 1,864p |
DIVIDEND YIELD: | 1% | PE RATIO: | 37 | |
NET ASSET VALUE: | 677p* | NET DEBT: | 26% |
Year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
2014 | 372 | 33.4 | 38.8 | 16.1 |
2015 | 399 | 57.8 | 65.7 | 19.5 |
2016 | 388 | 60.9 | 81.1 | 21.4 |
2017 | 459 | 40.7 | 53.8 | 23.6 |
2018 | 470 | 7.8 | 69.7 | 26.0 |
% change | +2 | -81 | +30 | +10 |
Ex-div: | 15 Nov | |||
Payment: | 30 Nov | |||
*Includes intangible assets of £181m, or 294p a share |