Genus Regulatory News (GNS)

For immediate release 24 February 2015

Genus plc

('Genus', the 'Company' or the 'Group')

Interim Results for the six months ended 31 December 2014

Strong First Half Performance

Genus, a leading animal genetics company, announces its interim results for the six months ended 31 December 2014.

* Adjusted results are before net IAS 41 valuation movement on biological assets, amortisation of acquired intangible assets, share-based payment expense and exceptional items. These are the measures used by the Board to monitor underlying performance.

** Constant currency percentage movements are calculated by restating FY 2014 results at the average exchange rates applied in FY 2014.

BUSINESS HIGHLIGHTS

· Revenue increased by 9% (up 13% in constant currency):

o strong growth in Genus PIC, particularly in North America

o growth in all Genus ABS geographies

· Adjusted operating profit including joint ventures increase of 15% (up 20% in constant currency):

o Genus PIC profits up 14% (17% in constant currency) with strong contributions from North America, Mexico and Brazil

o Genus ABS profits 3% lower (up 2% in constant currency) with volume and revenue growth offset by higher product costs

o Genus Asia profits 21% lower (down 18% in constant currency) primarily impacted by less activity in Russia, while China showed improvement

· Adjusted earnings per share up 21% (26% in constant currency)

· Strong net cash flow from operating activities of £19.6m (2013: £11.2m), and net debt of £73.2m (2013: £79.9m)

· Interim dividend increased 11% to 6.1 pence per share payable on 27 March 2014

· Continued good progress in implementation of strategy:

o Agreement announced on 16 February 2015 to acquire 51% of In Vitro Brasil S.A. ('IVB'), the world leader in bovine in vitro fertilisation ('IVF'), for £4.6m adds important new capabilities to Genus ABS

o Acquisition of Birchwood Genetics, Inc. in September 2014 secures long-term distribution of PIC proprietary boar genetics to mid-sized customers in North America

o Génétiporc acquisition now fully integrated following the exit from Quebec operations and consolidation of nucleus herds during the first half, a year ahead of original schedule, resulting in an acceleration of the delivery of synergy benefits from the transaction

o Genus Sexed Semen development project made good progress against plan and capital expenditure increased

· Performance overall ahead of expectations for 2015

Karim Bitar, Chief Executive, commented:

"Our strong performance in the first half demonstrated the success of our strategy and strength of our diverse geographic presence. Performance was particularly robust in PIC, where we were able to accelerate the delivery of synergies from the Génétiporc acquisition.

"We announced last week, the acquisition of 51% of In Vitro Brasil, taking ABS into the rapidly developing area of bovine IVF, which enables customers to accelerate the genetic improvement of their herds. We are also pleased to have successfully completed the acquisition of Birchwood Genetics during the period, helping to build and sustain the success of the mid- and small-sized customers it serves.

"We are on course to perform above our original expectations for 2015,albeit we expect the pace of our growth to reduce in the second half of the year. Ourconfidence in the strategy for the business and in the future prospects for the Company is reflected in the 11% increase in our interim dividend."

An analyst meeting will be held at 9.00am today at Buchanan's offices (107 Cheapside, London EC2V 6DN). A live audio feed will be available to those unable to attend this meeting in person. To connect to the web cast facility, please go to the following link:

http://vm.buchanan.uk.com/2015/genus240215/registration.htm approximately 10 minutes (8.50am) before the start of the meeting.

For further information please contact:

This announcement is available on the Genus website www.genusplc.com

About Genus

Genus creates advances to animal breeding and genetic improvement by applying biotechnology and sells added value products for livestock farming and food producers. Its technology is applicable across all livestock species and is currently commercialised by Genus in the dairy, beef and pork food production sectors.

Genus's worldwide sales are made in seventy-five countries under the trademarks 'ABS' (dairy and beef cattle) and 'PIC' (pigs) and comprise semen and breeding animals with superior genetics to those animals currently in production. Genus's customers' animals produce offspring with greater production efficiency, and quality, and use these to supply the global dairy and meat supply chain.

The Group's competitive edge has been created from the ownership and control of proprietary lines of breeding animals, the biotechnology used to improve them and its global supply chain, technical service and sales and distribution network.

With headquarters in Basingstoke, United Kingdom, Genus companies operate in over twenty-five countries on six continents, with research laboratories located in Madison, Wisconsin, USA.

GROUP PERFORMANCE

Genus's results for the six months to 31 December 2014 showed double-digit growth in constant currency across all key measures. In actual currency, adjusted profit before tax grew by 20% and adjusted earnings per share were also up 21% at 29.7 pence per share (2013: 24.6 pence), demonstrating Genus's progress in implementing its growth strategy.

Results

Revenue of £198.5m for the six months to 31 December 2014 grew by 9% (2013: £181.7m). This reflects underlying constant currency growth of 13% offset by the impact of sterling appreciation compared with the prior year. Adjusted operating profit including joint ventures of £27.0m, grew 15% (up 20% in constant currency).

Porcine volumes were up 6%, with growth in North America, Latin America and Europe offsetting weakness in Asia. Bovine volumes were up 7% with growth in North America, Latin America and Europe, while Asia was held at a similar level.

Genus PIC performed strongly with a profit increase of 14% (17% in constant currency) helped by earlier achievement of Génétiporc synergies and by favourable market conditions in the Americas. Genus ABS's 3% decline in profit (up 2% at constant currency) was impacted by increased product costs offsetting strong revenue growth across the geographic sales regions. Genus Asia's profit decline of 21% (down 18% at constant currency) was attributable to lower porcine sales in Russia due to the economic situation and border closure, partially offset by improving performance in China as well as continued good growth in the Philippines.

Finance costs were £2.3m (2013: £2.8m), helped by lower pension interest cost. Adjusted profit before tax was £24.7m (2013: £20.6m), an increase of 20% (26% at constant currency). The tax rate on adjusted profits was 27.1% (2013: 27.7%), and adjusted earnings per share rose 21% (26% in constant currency) to 29.7 pence (2013: 24.6 pence).

The Group monitors performance principally through these adjusted measures which exclude certain non-cash items including the fair value movement on biological assets. The statutory results, including these items, show a 30% gain in profit before tax to £28.6m (2013: £22.0m) and a 16% increase in earnings per share to 33.0 pence (2013: 28.4 pence). Statutory earnings per share are higher than the adjusted results due to an increase in the fair value of biological assets in the period.

Cash Flow and Net Debt

The Group continued to have a strong net cash flow from operating activities of £19.6m in the period (2013: £11.2m) due to higher EBITDA and improved working capital management. Some of this inflow was utilised on higher capital expenditure of £7.8m (2013: £3.3m), with the increase primarily related to the Genus Sexed Semen project. In addition, Birchwood Genetics was acquired for £5.8m. Net debt as at 31 December 2014 was £73.2m (31 December 2013: £79.9m) after these investments, and the balance sheet remains strong with net debt to EBITDA of 1.3 times (31 December 2013: 1.5 times).

Dividend

Based on its confidence in the Company's strategy and growth prospects, the Board has approved an interim dividend of 6.1 pence per share, an increase of 11% on last year's interim dividend of 5.5 pence. The interim dividend is payable on 27 March 2015 to those shareholders on the register at 6 March 2015.

Progress on Strategy

Genus continued to make good strategic progress in the half year achieving continued strong results from our product development teams and focused execution of our strategic priorities in targeting key markets, tailoring our business model and further strengthening core competencies.

During the period, Genus continued to strengthen its porcine business with the acquisition in September 2014 of Birchwood Genetics Inc., a privately-owned boar stud operation and long-term PIC partner. Birchwood provides PIC boar semen to mid- and small-sized customers in the US and the transaction secures our route to market for PIC male genetics in this important market.

The integration of Génétiporc into PIC and Agroceres PIC, Genus's 49% joint venture in Brazil, continued to progress well. During the half year, we completed the exit from the Quebec nucleus farm operations, consolidating all the nucleus herd breeding activity into our existing two strategic nucleus farms in South Dakota and Saskatchewan. We are now operating at the full run rate of the expected cost synergies, approximately a year ahead of schedule.

On 16 February 2015, we announced the signing of an agreement for the acquisition of 51% of the share capital of IVB. IVB is the world's leading commercial provider of beef and dairy IVF technology, with a leading presence in Brazil, the world's largest bovine IVF market, and a growing presence in other Latin American countries and the US. In 2014, IVB delivered revenue in excess of £4m.

The transaction will strengthen Genus's global leadership in the delivery of genetic improvement in the bovine sector. Delivering genetics via IVF enables producers to accelerate the genetic improvement of their herds by optimising both male and female genetics simultaneously.

Genus will acquire a 51% interest in IVB for total consideration of BRL 20 million (£4.6m) in cash. Genus expects to acquire the remaining 49% of IVB's share capital in the first half of 2018 through a call/put option. The consideration for the remaining 49% is conditional on certain performance conditions and is capped at BRL 49 million (£11.2m).

In India, we continued to build the foundations of our business in the large Indian dairy market. Having secured land for our enlarged production bull stud with our joint venture partner, B G Chitale, we completed the investment in the joint venture and plans to increase production of high-quality semen are progressing well.

The Genus Sexed Semen development project continued to make good progress against its plan and we increased our capital investment in it during the period. The legal proceedings commenced by ABS, against Inguran LLC (aka Sexing Technologies ('ST')) in Wisconsin continue and a trial date has been set for 25 January 2016. The separate proceedings initiated by ST against ABS in the Southern District of Texas have been dismissed and on 7 November 2014, ST filed an Answer and Counterclaim in the Wisconsin proceedings. ABS remains committed to pursue vigorously this litigation.

As previously reported, ABS filed an inter-partes review ('IPR') application in July 2014 challenging the validity of one of ST's US patents. On 13 January 2015, the US Patent Trial Appeal Board ('PTAB') decided that ABS had demonstrated a reasonable likelihood of prevailing in its assertions against this patent and ordered that the IPR hearing be held on 25 September 2015. ABS filed further IPR applications during September and October 2014 challenging the validity of two additional ST patents. PTAB decisions on whether to institute review of these patents are anticipated shortly.

Outlook

During the first half Genus made good progress towards its strategic goals, and market conditions for Genus's customers were generally favourable. We expect continued progress in the second half, though at a lesser pace, against a backdrop of falling dairy and pork prices and continuing headwinds from the market conditions in Russia and China. Currencies are expected to be unfavourable for the full year with the strengthening of the US dollar offset by weakening in the Euro and emerging market currencies. For the full year, overall financial performance is expected to be above our original expectations.

REVIEW OF OPERATIONS

Genus PIC

Genus PIC comprises the Group's porcine business in North America, Latin America and Europe. It also includes the technical services and supply chain functions supporting the porcine business globally.

Market

Market conditions for Genus's porcine customers were favourable in the Americas but challenging in Europe. In the North American market, tight pork supplies following the outbreak and spread of porcine epidemic diarrhoea virus ('PEDv') led to record pig prices which, combined with low input costs, meant producer margins were exceptionally strong. New US PEDv cases reported during the last six months were stable, averaging just over 80 cases per week compared with the peak of over 300 weekly cases for most of February 2014. As productivity recovered and farmers increased the size of the breeding herd, pig prices have fallen back to more normal levels.

In Brazil, pig prices reached a record high in October 2014 helped by strong exports, particularly to Russia, following the ban on imports to Russia from the EU. By the end of the year, prices had drifted down slightly due to short-term over-supply. However, with strong domestic consumption expected in 2015 and a continuing export demand helped by the deflating Brazilian Real, the outlook remains positive for the Brazilian pork sector.

In Europe, the porcine industry suffered from lower pork consumption and export bans, primarily to Russia. This led to oversupply and pork prices declining 18% over the last year, significantly impacting producer profitability. The outlook for producers remains challenging in the short-term.

Performance

During the period, Genus PIC performed strongly with operating profits including joint ventures up 14% to £29.8m on revenue growth of 18% to £86.1m. Volumes grew by 9%, with all regions contributing. Overall, operating margins decreased to 31.7% (2013: 34.4%) due to increased shipments of animals and the dilutive effect of a full six months of Génétiporc in the results compared with three months in the prior year. The Birchwood acquisition also contributed to revenue and operating profit growth as planned.

In North America, profits were up 11% in constant currency on volume growth of 7%. Performance benefited from strong animal shipments, as customers started to refresh and expand their herds, and a full six months of Génétiporc trading and synergies. Birchwood also contributed positively. These items more than offset the drag from royalties lost due to PEDv, which were higher than in the prior year period.

Latin American profits improved 47% in constant currency on 10% volume increases, helped by an exceptionally strong operating profit performance in Brazil (up 138%) from the PIC Agroceres joint venture, which benefited from a strong Génétiporc contribution, the strategic improvements being driven through the business, and the buoyant market conditions. We also saw strong performances in Mexico (up 21%) and Chile (up 17%), while Latin America costs were also well controlled.

In Europe, volumes increased 12% and operating profit increased 2% in constant currency. Genus made continued progress in demonstrating the strength of its product offering through validation trials with a number of large integrated pork producers. Royalty-based revenues increased by 18%, and the percentage of volumes under royalty contracts increased to 55% in the period. However, the poor market conditions, caused in part by the border closure to Russia negatively affected the up-front sales business and margins, particularly in Central and Eastern Europe.

Overall, the PIC business showed substantial positive momentum in the period and continued to execute its strategy effectively.

Genus ABS

Genus ABS comprises the Group's dairy and beef businesses in North America, Latin America and Europe. It also includes the technical services, marketing, production and supply chain functions supporting the dairy and beef businesses globally.

Market

Following a period of buoyant prices in the early part of 2014, dairy prices declined steadily since the summer in Europe and Latin America as a result of an imbalance between supply and demand. While the US market prices held up through the autumn they fell sharply towards the end of the year. The outlook for the next twelve months is for milk prices to remain relatively deflated and although lower input costs have helped farmers, many dairy producers are currently working at break-even or below.

Beef prices have continued on their upward trajectory in Brazil and the US, in the latter continuing to break record highs as demand continues to outstrip supply. Farmers have sent fewer cows to slaughter as they start to rebuild the size of the herd from its current low point. The US price is expected to dip slightly in 2015, but will remain at historically strong levels. The Brazilian beef market should also remain strong with the Brazil export industry continuing to expand with countries such as China looking overseas to meet its demand.

Performance

Genus ABS revenues were up 6% for the half year at £82.3m (up 9% in constant currency) and profits declined by 3% to £12.0m (up 2% at constant currency). Volumes were up 9% on last year with growth in all regions. Volume growth was particularly strong in sorted semen with over 30% growth and the mix of dairy genomic sales also increased. Product costs across ABS were impacted by the increased mix of sorted semen and within the ABS Supply Chain by higher royalty payments on certain genomic bulls under lease arrangements.

North America profits increased 12% in constant currency on a 2% volumes uplift, primarily driven by an increase in sorted semen volumes, strong genomic dairy sales as well as continued progress on ancillary product sales such as udder care.

In Latin America, profits increased 12% in constant currency and volumes by 6% driven largely by Mexico and Brazil. Mexico achieved 16% volumes growth. Brazil also continued to grow both volumes and operating profit aided by continued strength in beef volumes and an increased sales blend towards higher priced semen.

Europe's volumes were 20% ahead of last year with growth in all key markets. Operating profit also increased by 7% at constant currency. Volume performance was aided by strong growth of over 50% in the European distributor business serving a wide range of markets, though deals can be variable in size and in margin in this business. Nearly all key countries across Europe grew operating profit and volumes with France and Germany growing both metrics double-digit, while in the UK market, volumes and operating profit grew in mid single digits.

Genus ABS maintained a strong genetic line up in proven and genomic bulls and has started to see good results from its internal breeding programme. In parallel, it has continued to develop its Real World Data™ ('RWD') platform and will introduce new indices in the second half which it will use to pioneer new selling approaches in key geographies based on customer segmentation.

The acquisition of 51% of IVB, which was recently announced, gives ABS access to important technology and skills in a growing segment of the bovine market. IVF enables customers to accelerate genetic improvement in their herds by selecting genetics on both the male and female side. Large commercial and enterprise customers are increasingly seeing the benefit of this approach.

Genus Asia

Genus Asia includes the porcine, dairy and beef businesses across the region. In addition to our businesses in China, the Philippines, India and Australia, the region also includes the Group's operations in Russia.

Market

Market conditions were challenging across much of the region in the period. In the China porcine industry, producer profitability remains at or below break-even as pork prices remain weak, albeit above the levels of earlier in 2014. The sow herd continued to decline every month in 2014 and producers' appetite to invest has not yet returned.

In Russia, a ban on pig imports from Europe and North America pushed up pork prices for much of the period. However, weakness in the general economy and the Rouble, has had a significant impact on the willingness of producers to expand despite the business being profitable and the country needing further growth in agriculture to become self-sufficient.

Dairy prices across Asia have been impacted by the fall in global dairy prices, caused at least in part by a reduction in Chinese dairy imports. The exception to this has been in Russia where trade restrictions have helped maintain high prices. India dairy prices have reduced of late with high seasonal supply together with lower demand following reports of contaminated milk. Recent drought concerns in some areas of the country are also affecting confidence in the industry. However on a positive note, in December 2014, Russia lifted a long-standing ban on imports from India connected to foot and mouth disease which may increase opportunity in 2015 for the Indian dairy industry.

Performance

Genus Asia's profits, including joint ventures, decreased in the period by 21% to £3.1m (down 18% in constant currency) on a revenue decline of 14%, with growth in China and the Philippines not sufficient to cover a significant decline in Russia.

Overall, volumes declined in Asia porcine by 7% on last year with operating profit down 19% due to the decline in Russia. In China porcine, volumes declined by 21%, primarily due to order delays as the industry sought to recover from the losses experienced in 2014. However, reduced Besun JV start-up costs helped overall performance to improve compared with the prior period. We saw further strong growth in volumes, revenues and profits in the Philippines as our strategy of moving to royalty-based contracts impacted beneficially.

Trading performance in Russia was significantly impacted by the economic conditions and border closure, with porcine volumes down 16% and operating profit down 48% in constant currency, compared with a strong performance in the prior year. Headwinds are likely to remain in the short-term but the longer-term growth opportunity in Russia remains promising.

In bovine, the region's profits were down 5% in constant currency on volumes that were flat on last year. Following a weak period a year ago in China as we transitioned our distribution model, profits grew there by over 50%. In Australia, which has experienced recent organisational restructuring and challenging market conditions, volume and profit performance was lower in the period. India volume growth was 7% and our business there continued to improve profitability. Land has been secured with our joint venture partner B G Chitale to build the expanded bull stud, in line with our plan to increase capacity to serve the Indian market with high quality genetics.

We continued to strengthen both the bovine and porcine teams in the Asia region, with an emphasis on key account management and technical service support. Our new large-scale customers in China, such as New Hope, are experiencing strong operational performance with the first stockings made into their farms in the last fiscal year, giving us increased confidence in our ability to demonstrate value and move towards royalty-based contracts. The first phase of the Riverstone, stocking announced with our full year results in September 2014, was successfully completed in February 2015.

Research and Product Development

Total research and development spend for the half year decreased by 6% to £13.4m (down 5% in constant currency), helped by lower feed costs, strong by-product slaughter prices and the exit from the Quebec nucleus that helped reduce porcine product development spend. Genus increased its underlying investment in genomic evaluations in porcine, beef and dairy as well as applied research and related intellectual property ('IP') costs.

Genus continues to be at the forefront of research in the industry in developing proprietary biotechnology to differentiate further both porcine and bovine product offerings and we continue to progress the development of genotyping by sequencing to drive genetic improvement even faster. Research expenditure increased in the period partly due to the phasing of projects and partly due to increased spending on IP creation and protection. We also continued to invest in Genus Sexed Semen and increased capital expenditure in the period on this technology.

Within porcine product development, the implementation of single-step genomic evaluation on all pure line populations, retail products and all traits of economic importance, is exceeding our predicted impact of 35% increase in the rate of genetic gain. The incorporation of the germplasm from the Génétiporc acquisition continues on schedule, creating further acceleration opportunities as we combine the best of each, with field trials of several new products underway. Spending was favourably impacted by the exit from the Génétiporc Quebec nucleus and the receipt of a back payment under a Canadian government agricultural support programme in the period. Commodity prices were also favourable.

Within bovine product development, significant progress was made in the building of a beef nucleus herd to develop unique customer products to enable value capture in the beef supply chain through genetic improvement and differentiation. For example, the custom genetic programme for ABP Food Group is on track to deliver proprietary indices for supply chain profitability by the end of the financial year. In dairy, we expect our first bull to be sampled in May 2015 from our elite heifer programme and we continue to grow our genomic database and expertise in our RWD programme. Costs were 5% higher in constant currency as we invested in increased resources for genomic prediction in bovine.

Genus Products

Genus manages its global operations through the three businesses, Genus PIC, Genus ABS and Genus Asia, but also monitors product performance globally, after allocating product development costs specific to each species.

Porcine revenue grew 14% overall in constant currency on volume growth of 6% for the Group. Profits grew strongly by 25% benefiting from the operational performance in the Americas, accelerated synergies from Génétiporc and lower product development costs. Market conditions were favourable in North and South America but were weak in Europe and China and challenging in Russia.

In bovine, volumes rose 7% overall with particularly strong growth in Europe and Latin America, but were flat in Asia. Revenue grew 9% in constant currency, but profits were 5% lower due to higher product costs associated with the increased mix of sorted semen and genomic bulls and increased bovine product development expenditure.

PRINCIPAL RISKS AND UNCERTAINTIES

Our approach to risk management is to identify, evaluate and prioritise risks and uncertainties and actively manage actions to mitigate them. The Genus plc Annual Report 2014 (a copy of which is available on the Genus plc website at www.genusplc.com) sets out on pages 20-21 a number of risks and uncertainties that might impact upon the performance of the Group. There has been no material change to the principal risks that might affect the performance of the Group in the current financial year other than increased risk associated with the continuing political and economic situation in Russia.

GENUS PLC

CONDENSED CONSOLIDATED INCOME STATEMENT

For the six months ended 31 December 2014

GENUS PLC

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 31 December 2014

GENUS PLC

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 31 December 2014

GENUS PLC

CONDENSED CONSOLIDATED BALANCE SHEET

As at 31 December 2014

GENUS PLC

GROUP STATEMENT OF CASH FLOWS

For the six months ended 31 December 2014

GENUS PLC

ANALYSIS OF NET DEBT

For the six months ended 31 December 2014