Genus shares slide on record profit as investors lock in gains

(Sharecast News) - Genus reported record first-half adjusted operating profit and substantial strategic progress on Thursday, with strong growth in its porcine genetics division and improved profitability in bovine genetics, as the group reiterated full-year expectations following the formation of a Chinese joint venture, although shares fell sharply as investors locked in gains after a strong recent run. For the six months ended 31 December, revenue was broadly flat at £335.6m.

Adjusted operating profit rose 38% to £55.8m, or 37% at constant currency, while adjusted profit before tax increased 57% to £55.7m.

Excluding a £5.6m milestone payment from Chinese partner Beijing Capital Agribusiness, adjusted PBT was up 42% in actual currency and 39% in constant currency.

Statutory operating profit increased to £35.8m from £12.5m, while statutory profit before tax rose to £39.5m from £3.3m, with the year-on-year movement largely reflecting a £6.4m decrease in the non-cash fair value IAS41 valuation of biological assets.

Adjusted basic earnings per share climbed 53% to 60.8p, and the interim dividend was raised 9% to 11.2p per share.

Cash generated by operations was £38.5m, compared with £46.1m in a strong prior-year period, with free cash flow of £8.2m.

Net debt-to-adjusted EBITDA reduced to 1.4x from 1.5x as at 30 June.

In PIC, adjusted operating profit including joint ventures increased 30% at constant currency, driven by strong trading in China and Latin America, lower input costs and the BCA milestone payment.

Royalty revenue rose 6% to £93m, with total volumes up 15%.

In ABS, adjusted operating profit including joint ventures improved to £10.9m from £8.6m, supported by £4.7m of benefits from the value acceleration programme, partly offset by lower profit in ABS China and higher product development costs.

Volumes were stable overall, with sexed volumes up 1% and conventional dairy and beef volumes down 2%.

Post period-end, the FTSE 250 company formed its Chinese porcine joint venture on 31 January, and Canada approved the use of its PRRS-resistant pig gene edit on 23 January, marking a key milestone for North American commercialisation.

"Genus achieved a strong first half with broad-based growth across PIC and continued improvement in ABS profitability," said chief executive Jorgen Kokke.

"Our focus on cash generation also continued to deliver strong results."

He added that the formation of the Chinese joint venture "creates the best platform to accelerate PIC China's long-term growth opportunity", while Canada's approval of the PRP gene edit "adds to our portfolio of regulatory approvals".

Looking ahead, the group said that, incorporating the deconsolidation of PIC China following the joint venture, it expected to receive approximately £100m in the fourth quarter and that full-year adjusted PBT was in line with current market expectations.

It added that currency impacts were expected to be broadly neutral in the second half if current exchange rates persist.

Despite the record profits, the shares fell as much as 8.5% in early trade, pulling back from their highest level in more than three years after rallying over 20% since a 16 January update in which management said trading was ahead of expectations.

Analysts said Thursday's figures were largely in line with those pre-released numbers, according to Bloomberg.

Stifel, which has a 'hold' rating and a 2,550p price target, said the results were in line with the January update, when a better-than-expected first half pushed up estimates for 2026.

However, analyst Christian Glennie said the recent share price strength increasingly priced in opportunities from PRP and China royalties, leaving the valuation "well ahead" of three-year historic multiples.

He also highlighted that the £100m payment for successfully forming the China PIC joint venture was due in the fourth quarter and said he was awaiting further detail on capital allocation plans and potential shareholder returns.

Peel Hunt, which rates the shares 'buy' with a 3,500p price target, described the results as strong as expected and lifted underlying forecasts by around 2%, citing a particularly robust performance from PIC and further benefits in ABS from the value acceleration programme.

The broker said the £100m of proceeds due in the fourth quarter would materially reduce net debt and leverage and expected Genus to retain the proceeds, with possible shareholder returns next year in the absence of other opportunities.

Panmure Liberum, also 'buy' rated with a 3,700p target, said there were no surprises in the results but that they highlighted how strong trading was in the first half.

The broker made a small 2% upgrade to 2026 pretax profit estimates while assuming no growth in 2027, adding that the investment case should be supported by upgrades in the short term and PRP in the longer term.

At 0944 GMT, shares in Genus were down 8.2% at 2,910p.

Reporting by Josh White for Sharecast.com.