Genus plc

Welcome everybody to the Genus FY26 results. It's bright and early. Thank you very much for joining us in person and also to those of you that are connecting via the conference call. It's a pleasure to see you this morning. My name is Jurgen Koke and I am the Genus CEO. This has been an excellent first half for the group and I want to start by thanking all of my colleagues for their hard work and dedication in making this possible. We've delivered strong profits alongside substantial strategic progress. We're executing well against our priorities in both PIC and in APS while taking important steps to strengthen our long-term growth platform. I now want to point you to the customary disclaimer. before I'll start summarizing the key highlights from H1 and before our chief financial officer Andy Russell takes you through the numbers in more detail. Starting then with the highlights, the first half was strong across the group. We delivered record first half profit driven by PIC growth and further benefits from the value acceleration program or VAP program. in ABS making sure we turn our profits into cash is of course critical and I'm delighted that free cash flow generation remained very solid compared to last year's record inflow we achieved further regulatory progress on PRP the purse resistant pig including a major step towards North American commercialization with the Canadian approval in January And last but not least, we formed the Porcine Joint Venture in China, positioning the business for long time growth in the largest porcine market in the world. We'll of course touch on all these points in more detail as we go through the presentation. Before we dive further into the detail, this slide is a brief reminder of what Genus does. Our vision is pioneering animal genetic improvement to sustainably nourish the world. We have performed well against our three strategic priorities. The first is growing porcine, including accelerating PIC's growth in China. The second is successfully commercializing PRP and generating attractive returns from our R&D activities. And the third priority is driving greater value from bovine. Progress against each of these priorities contributed meaningfully to our financial and strategic progress in H1. We'll discuss the impact in more detail. Before I hand over to Andy, I did want to pause and reflect on the significant transaction that we completed in January. As many of you will know, the formation of our porcine joint venture is a significant strategic step. It creates the right platform to capture the substantial growth opportunity in the largest porcine market in the world. I'd like to remind you that half of the world's pigs are in China. Our partner, Beijing Capital Agribusiness, or BCA, is partially owned by a very large state-owned agribusiness with commercial interest across the wider food and beverage sectors. We've worked very well with BCA for over five years now and we believe the partnership of the two companies will create significant value for our shareholders. We're very excited to partner with BCA as we execute against the tremendous opportunity in China for the PIC business. Let me now turn the presentation over to Andy, who will take you through the financials.

Thanks, Jorgen, and good morning, everyone. My name is Andy Russell, and I'm Genius' CFO. Before we dive into the numbers, I wanted to flag that we've slightly changed the presentation to reduce complexity and really hone in on the key drivers of performance. Rest assured that the key data that was previously reported can be found in the appendix and in the interim announcement. Having completed almost seven months with the company now, I'd like to share a few observations. When I stood up here in September, I said I was excited by genus is strong IP and significant growth opportunities. As I've seen more of the company, my conviction in these initial observations is only grown. I continue to be impressed by my colleagues passion for the business and dedication to our customers. We have a tremendous platform for growth, and I'm extremely excited to help drive the execution of these opportunities. Let me now take you through our strong financial performance in the first half. On this slide we're showing our headline group financials. We've delivered strong first half profit on unchanged revenue with PBT up 57% to 55.7 million and EPS up 53% to 60.8 pence per share. I should flag that these figures include the benefit of a 5.6 million milestone receipt from our Chinese partner BCA. Excluding this milestone, we still would have delivered record profits with PBT at 42% and EPS up 37%. Moving to our balance sheet and returns metrics, leverage reduced to 1.4 times from 1.5 times at the end of June 2025. We have a strong balance sheet already and in fiscal Q4 we also expect to receive approximately £100 million of joint venture formation proceeds from BCA. Our 12-month rolling return on capital improved significantly from 14.7% at the end of June 2025 to 15.8% and this is a key focus area for us. lastly on free cash flow generation we generated an 8.2 million inflow in the first half which is a strong performance compared to last year's record level I'd remind you that first half free cash flow tends to be seasonally lower than the second half conversion of 60 looks a bit lower than you might expect however this was predominantly driven by the timing of the receipt of the bca milestone and dividends from agro series our jv partner in brazil the cash for both has now been received and i'm confident we'll beat our 70 conversion target at the full year Our first half performance was underpinned by strong operational delivery across both PIC and ABS. In PIC royalty revenue growth is a good indicator of performance. We delivered 6% actual currency growth to 93 million in the first half, comprising very strong performance in Asia, driven by over 50% royalty revenue growth in China. Notably, every region grew royalty revenue in constant currency. On the back of the solid royalty growth and including the BCA milestone payment of 5.6 million, PIC adjusted operating profit increased 30% to 72 million at a margin of 34.5%. Excluding the milestone payment, operating profit grew 19% with a margin of 33%. In ABS, VAP initiatives were the key drivers of profit growth. Sex volumes grew 1% in the period with conventional volumes declining 2%. VAP initiatives drove a profit increase of 27% and 180 basis point improvement in margin to 7.1%. Moving then to group operating profit, you can see that we generated excellent first half profits with strong growth in the core and PIC China. on the right hand side you can see the building blocks of the year-on-year increase with significant contributions across the board it's a record first-half performance even excluding the milestone payment from BCA group operating profit margin also increased to nineteen point two percent or seventeen point five percent excluding the milestone diving into PIC this slide shows a more detailed breakdown of performance as mentioned every pic trading region achieved royalty revenue growth in the half with the region within the regions brazil and china were the biggest contributors to a 10 million increase in profits the bcaa milestone receipt was of course a big year-on-year driver as well as a reminder we recognize this milestone upon regulatory approval for the formation of our joint venture This is the final milestone payment that we expect to receive from BCA. As planned, PRP costs continue to increase as we ramp up our market acceptance activity. For the full year, we expect an increase in underlying PRP related expenditure of about £3 million. Excluding the BCA milestone, PIC margins expanded to 33%. Moving then to ABS, VAT benefits were again the primary driver of profit growth. We realised 4.7 million of benefits in the first half, comprising 2 million of annualised Phase 2 benefits and 2.7 million of in-year Phase 3 benefit. Regional trading remained solid, included an expected decrease in Asia profitability, following china's decision to close its borders to u.s bovine genetics as expected abs's first half result was impacted by an increase in bovine product development costs of 2.1 million this increase in product development costs is due to higher depreciation on prior period investments and the impact of acquiring the minority interest in de novo For the full year, we expect bovine product development costs to increase by approximately 4 million. As we think about other factors for the full year, we now expect an in-year benefit from VAP phase 3 initiatives of approximately 7 million, as we've been able to progress slightly faster. We still expect the annualised benefit to be approximately 9 million pounds. ABS's margin increased 180 basis points to 7.1% and we continue to target a double digit margin in the medium term. R&D is core to our business and excluding the BCA milestone we spent almost 35 million pounds in the first half. Approximately 80% was spent on product development and 20% on research projects. Our spend was marginally lower as a percentage of revenue in the first half, but we expect a slightly higher level of spend in the second half. We'll continue to invest in product development to drive genetic progress and research that can drive game-changing innovation. Moving to our statutory income statement. As a reminder we consistently measure and report adjusted results as we think these give a better view of the group's underlying performance. Our statutory results are affected by non-cash items, in particular IAS 41, which can give a misleading picture of the group's underlying performance. Looking at the key line items, the movement in the IAS 41 valuation for the half was a 6.4 million decrease compared with the prior year valuation, primarily driven by porcine. Exceptional expenses were slightly higher year on year at 6.7 million and comprised two main elements, 4.6 million in relation to VAP, and 1.9 million in relation to the pic china jv formation based on what we can see today we expect lower exceptional costs in the second half in summary statutory operating profit and pbt were significantly ahead of the prior year Moving to free cash flow. We generated 8.2 million in the first half which compared to a very strong 10.3 million last year. The milestone of 5.6 million had a distorting impact because it was recognised in first half EBITDA but we received the cash post period end. We had higher bonus payment outflows in the first half compared to a low level last year. These bonus payments are driven by prior full year outcomes and FY25 was of course a lot stronger than FY24. The significant working capital negative movement on the chart is worth reflecting on. I'd remind you that this is the year-on-year change. Last year we had a significant working capital improvement due to a decrease in bovine inventories and receivables. We're pleased to have held onto those gains but the year-on-year impact is of course a negative. There's also a positive impact of lower cash exceptionals in the half. Overall, we're pleased with the first half cash generation and I'd remind you that second half cash generation is typically seasonally stronger. With what we can see today, we're expecting a step up in H2 free cash generation such that we expect FY26 free cash flow to be above FY25's record level. Following on from free cash flow, our balance sheet continues to strengthen with leverage reducing from 1.5 times to 1.4 times. Gross debt increased marginally to $233 million at 31 December 25 with higher EBITDA driving the leverage reduction. Following formation of our porcine JV in China, we expect to receive approximately 100 million in fiscal Q4 of FY26. 12-month rolling ROIC improved materially to 15.8% in the first half, albeit this includes the BCA milestone. As a result of our strong financial progress, the board is proposing an interim dividend of 11.2 pence per share compared to last year's 10.3 pence per share. Back in September, I outlined our high level capital allocation framework. We believe we're moving into a new cash flow paradigm. FY25 was a record year for free cash flow and we believe FY26 will be even stronger. We're also of course expecting receipt of over 100 million in fiscal Q4. I therefore wanted to provide some additional granularity on how we assess and prioritize capital deployment. Before we deploy any capital, we must secure our balance sheet. A strong balance sheet de-risks the group and gives us strategic optionality. I know Genus has previously targeted a range, a leverage range of one to two times net debt to EBITDA. And I think this remains the right through the cycle range for us to operate within. That being said, I want to be clear that we won't be rigidly bound by this range. In the short term on receipt of the BCA proceeds we will delever our balance sheet below the bottom end of the range as we appraise opportunities. After maintaining the strength of our balance sheet our first capital allocation priority is investing in organic growth. To give you a near term example, PRP is a transformative opportunity that we will absolutely continue to ramp up our investment in. After funding the best organic growth opportunities, we clearly want to continue rewarding our shareholders through our progressive dividend policy. We've also simplified the mechanics of our dividend policy to make it easier to model. Going forward, we intend to pay a full year dividend of between 30 to 40% of our adjusted earnings per share. We will continue to split the full year dividend into an interim and final and the interim of 11.2 pence per share is 35% of the previous full year dividend in line with our updated policy. Continuing down the capital allocation waterfall, we get to inorganic growth opportunities. You can expect us to continue applying strict financial and strategic criteria to any potential M&A transactions. We'll be very focused on returns, earnings accretion, cash flow generation and strategic fit. Genus is a good track record of value enhancing bolt-on deals and we are amenable to doing more. Moving then to the bottom of the slide, we will assess surplus capital returns to shareholders. We've given this significant thought and recognise it's an important element to shareholder value creation. We've established a defined process for evaluating surplus capital return options and we will be judicious in deploying capital in line with this approach. I hope that gives you some additional colour on how we think about capital deployment, and I expect we will return to this topic in the future. Before I turn the presentation back over to Jorgen, I wanted to share analysis we put together to help you with your modelling. Going forward, PIC China will be deconsolidated from our group accounts. Whilst PIC China continues to grow, this is a significant change to our reporting. We've also received one-off milestones from our Chinese partner BCA, which also makes comparison a little difficult. On this slide, we've shown you a pro forma P&L for FY25 H1 and FY26 H1. We've also included the same pro forma analysis for the whole of FY25 in the appendix. We think looking at the group this way probably gives the best like-for-like comparator for our future performance. The box on the right also flags a couple of the key elements that aren't in this analysis that are likely to impact the second half. Within PIC, we're expecting higher PRP market acceptance and product development costs. PIC China also had a particularly strong first half and we just want to be cautious about this level of growth continuing in the second half. Turning to ABS, we're expecting further VAP3 benefits to be partially offset by an increase in costs half over half. And lastly at the group level we expect lower net finance costs due to lower average net debt over the period. I'd finally also remind you that in our appendix we have a technical guidance slide which outlines expected impacts in our FY26 accounts for various line items that again should help you with your modelling. With that, let me now turn the presentation back over to Jorgen to take you through our strategic progress and outlook for the rest of the year.

Thank you, Andy. Let me now take you through the excellent strategic progress we've made in H1. As a reminder, our three strategic priorities remain clear and unchanged. let's discuss first PIC's royalty revenue PIC royalty revenue is a critical driver of our financial performance the royalty revenues are very high margin recurring in nature and extremely sticky the royalty model aligns our success with our customers success decouples our earnings from the underlying pork price volatility and supports the fostering of long-term genetic partnerships. You can see on the left-hand side of the page that PIC continued to grow royalty revenue in every region of the world in H1. As Andy mentioned, total PIC royalty revenue grew by 6%. Our four-year compound annual growth rate was also very healthy. Looking at the four regions, Asia is of course the standout at 34% over the four year period. Our commercial pivot two years ago to sell predominantly under the royalty model in China is a major driver of our growth. We generated around 93 million pounds of royalty revenue in H1 and continuing to drive royalty growth is a significant area of focus for us as we move forward. Moving to PIC China, which of course is part of PIC Asia, we achieved a very strong improvement in operating profit in H1. The chart on the left demonstrates that this was predominantly driven by a more than 50% increase in royalty revenue in China. Again, this is in line with the change we made in China to our commercial approach, which is now focused on selling under the royalty model. I'm also really pleased that the strong financial performance was achieved despite a weak market backdrop, as pork prices in China have been low. This highlights the value our genetics can bring to our customers in China, just as they do elsewhere in the world. The right-hand side of the chart is a reminder that post-period end, we formed our strategic porcine JV in China with base PCA. We are very excited by the platform this create as we seek to execute against the tremendous opportunity for growth in China. Moving then to our second priority, we continue to make steady progress on PRP regulatory approvals globally. January marked another major milestone towards North American commercialization, with Canada approving the use of the PRP gene edit. As a reminder, to commercialize in North America, we still believe we also need the Mexican and Japanese approvals. We're encouraged about the engagement with both of the regulatory bodies in those countries. Before turning to our outlook, let me touch on the Value Acceleration Program, or VAP, in ABS. As a reminder, we initiated VAP in FY24. to accelerate abs's growth and structurally improve margins return on invested capital and cash generation in fy26 we're executing phase 3 initiatives which have been focused on reshaping our go-to-market strategy and embedding commercial excellence across our global teams we've also launched a broad operational excellence initiative led by our new head of supply chain for ABS. Achievement in the first half was good, with £2.7 million of annualised operating profit benefit delivered from phase 3. We now expect to achieve an in-year benefit of approximately £7 million, which is ahead of our previous expectations of about £6 million. We still expect the total annualized benefit from phase three to be approximately nine million pounds as we continue our journey towards achieving a double digit margin in the medium term. Let me now turn to our outlook for the second half of the year. As we discussed earlier, our royalty model significantly insulates our financial performance. from underlying market conditions, specifically in PIC of course. As such, our momentum from H1 continues into H2, despite challenges in some of the markets. Looking at the market environment for our customers, we'd probably characterize the first half as being mixed, with the Americas stronger than the rest of the world. As we look to the second half of the year, The global porcine outlook appears relatively stable, albeit there are continuing disease challenges in some regions, such as the outbreak of ASF in Spain. Pork prices in China also remain relatively weak. In bovine, we're seeing global milk prices weaken, and the China border is still closed to US bovine genetics. Overall, therefore, we see a generally stable market environment in the second half of the year. This comes with the usual caveats that these markets are dynamic and the situation could change quickly. Turning then to our outlook for the second half of the year. I start by saying that we're delighted with our first half performance, record profits solid free cash flow generation and significant strategic progress. We're very pleased to have formed our porcine JV in China. As mentioned, we expect to receive the proceeds of approximately 100 million pounds in fiscal Q4, and we have outlined our capital allocation framework for assessing capital deployment. As we look to the second half, we continue to see good momentum across the business. As such, we're confident that we can deliver significant growth in FY26 adjusted PBT, in line with market expectations that were raised in January. With that, let me thank you for your attention and we're now happy to take your questions. Charles, please.