### GENUS PLC / ANNUAL REPORT 2023 ## ACCELERATING ## CUSTOMER ## SUCCESS ### CONTENTS ## 12 36 OUR PURPOSE IN ACTION SUSTAINABILITY REPORT | STRATEGIC REPORT | | FINANCIAL STATEMENTS | | --- | --- | --- | | 01 2023 Highlights | | 117 Independent Auditor’s Report | | 02 Business Model | 16 | 124 Group Income Statement | | 12 Genus at a Glance | CHIEF EXECUTIVE Q&A | 125 Group Statement of | Comprehensive Income 14 Chairman’s Statement 126 Group Statement of Changes 18 Market Overview in Equity 20 Strategic Framework and Key 127 Group Balance Sheet Performance Indicators 128 Group Statement of Cash Flows 24 Operating Reviews 129 Notes to the Group 30 Financial Review Financial Statements 34 People and Culture 187 Parent Company Balance Sheet 36 Sustainability Report 188 Parent Company Statement of 46 TCFD Statement Changes in Equity 58 Stakeholder Engagement 189 Notes to the Parent Company 60 Non-Financial Information Statement Financial Statements and Section 172 Statement 61 Principal Risks and Uncertainties ## 65 Going Concern and I’m excited about Viability Statement ## the prospects ## CORPORATE GOVERNANCE for Genus. I see ADDITIONAL INFORMATION 66 Chairman’s Letter 199 Five-Year Record – ## real potential in Consolidated Results 68 Board of Directors and Company Secretary 200 Alternative Performance ## maximising the Measures Glossary 70 Genus Executive Leadership Team ## benefit of all 208 Glossary 72 Corporate Governance Statement 209 Advisers ## 72 Board Leadership and Purpose the investment 73 The Board’s Year in Review ## made to date. 76 Division of Responsibilities 78 Composition, Succession JORGEN KOKKE and Evaluation Chief Executive 80 Nomination Committee Report 83 Audit & Risk Committee Report 89 Directors’ Remuneration Report 114 Directors’ Report 116 Directors’ Responsibilities — genusplc.com ### 01 GENUS PLC / ANNUAL REPORT 2023 ### 2023 HIGHLIGHTS | SOLID GROUP PERFORMANCE | | SOLID ABS PERFORMANCE, PROFIT GROWTH | GROUP REVENUE | | --- | --- | --- | --- | | | 2 | ACHIEVED IN ALL REGIONS, OTHER THAN | | | • Group revenue rose 10% | in constant | | | LATIN AMERICA, WHICH WAS STABLE currency (16% in actual currency) • Adjusted operating profit including joint 2 • Volumes up 3%, revenue up 12% ventures up 3% in constant currency supported by robust price increases ## £689.7m (10% in actual currency) • Adjusted operating profit up 5%, after 2 • R&D investment increased by 19% as a stronger second half. Expansion 2022: £593.4m 2 | planned, including a 66% | rise in gene | of long-term partnerships with | | --- | --- | --- | | editing expense, in preparation for the | | strategic accounts, underpinned | | anticipated commercialisation of pigs | | by Sexcel and NuEra beef genetics, | STATUTORY PROFIT BEFORE TAX | resistant to porcine reproductive and | | drove strong profit growth in North | | | | --- | --- | --- | --- | --- | | respiratory syndrome virus (‘PRRSv’) which | | America and good growth in Europe | | | | continues to make excellent progress | | • Latin America profits stable, | | | | • Adjusted profit before tax (‘PBT’) flat in | | despite challenging market | | | | actual currency (8% lower in constant | | conditions, particularly in Brazil | £39.4m | | | currency), with net finance costs | | where macroeconomic conditions | | | | | 2 | | 2022: £48.4m | | | up 124% | | continued to impact beef supply | | | | • Statutory PBT reduced by 19% to | | and demand dynamics | | | | £39.4m with a £16.9m reduction in the | | • Sexed genetics volumes up 18%; strong | | | | non-cash fair value IAS 41 valuation | | | | 1 | | | | growth in volumes of Sexcel and | ADJUSTED PROFIT BEFORE TAX | | | of the Group’s biological assets | | third-party IntelliGen production | | | | Read more on pages 30-33 | | Read more on pages 26-27 | | | ## £71.5m RECORD PIC PERFORMANCE, PROFIT GOOD CASH FLOW, DEBT LEVERAGE 2022: £71.5m | GROWTH ACHIEVED IN ALL REGIONS | REDUCED AND DIVIDEND MAINTAINED | | | --- | --- | --- | | • Strong demand for PIC’s differentiated | | 1 | | | • Free cash inflow | of £18.2m (2022: | | genetics drove a 5% increase in | £13.5m outflow), reflecting record high | | 1 | | 2 | | | 1 | | ADJUSTED BASIC EARNINGS PER SHARE | | --- | --- | --- | --- | --- | --- | --- | | volumes, revenue up 7% | , and | | adjusted EBITDA | , lower working capital | | | | strategically important royalty revenue | | | outflows and lower capital expenditure. | | | | | | | 2 | | | 1 | | | growth across all regions, up 10% | | | Strong cash conversion of 105% | | (2022: | | | • Adjusted operating profit including | | | 82%) above target level of 90% | | | | 2, | joint ventures increased by 11% | as the | • Net debt to EBITDA ratio improved | | | 84.8p | | | | --- | --- | --- | --- | --- | --- | --- | --- | | business continued to expand and | | | 1 ( | | | | | | | | to 1.6x | 2022: 1.7x) within the 1.0x-2.0x | | | | | | strengthen commercial relationships | | | | 1 | 2022: 82.7p | | STRATEGIC REPORT | | | | target range. Net debt | | of £195.8m | | | | | with producers around the world | | (2022: £185.0m) as expected | | | | | | | • The performance was driven by | | • Adjusted earnings per share rose | | | | | | | strong profit growth in North America, | | 3%, full year dividend maintained at | | | | 1 | | FREE CASH FLOW | Latin America and Asia. Good | | 1 | | --- | --- | --- | | | 32.0p per share, with 2.7x | adjusted | | growth in Europe, with improved | earnings cover comfortably within | | | performance in the second half | the 2.5x-3.0x target range. | | • Performance in China was affected by ## ongoing market volatility, particularly Read more on pages 30-33 £18.2m in the second half of the year. 2022: £(13.5)m Volumes were 1% lower in the year, | with revenue stable. Royalty revenue | | GOOD STRATEGIC PROGRESS AND | | | --- | --- | --- | --- | | | 2 | CONTINUED INVESTMENT FOR GROWTH | | | was up 26% | and adjusted operating | | | | profit growth was £9.4m (2022: £5.6m, | | | DIVIDEND PER SHARE | • Genus’s PRRSv-resistant pigs impacted by a £4m customer credit) programme continued to make excellent progress, with submissions to Read more on pages 24-25 the US Food and Drug Administration ## (‘FDA’) completed ahead of schedule 32.0p and approval expected in the first half of 2024. We are making regulatory 2022: 32.0p progress in Colombia, Brazil and also China, where we have obtained consent for import of PRRSv-resistant pigs for in-country assessment • PIC’s new world-class elite farms in Canada, Brazil and China well positioned 1 Adjusted results are the Alternative Performance Measures (‘APMs’) used by the Board to monitor to capture future growth opportunities underlying performance at a Group and operating GenusOne successfully deployed segment level, which are applied consistently throughout the majority of Europe in the throughout. These APMs should be considered in year; implementation underway in LATAM addition to statutory measures, and not as a substitute for or as superior to them. For more • Strong progress in reducing CO 2 information on APMs, see the APM Glossary emissions; primary intensity ratio 2 Constant currency percentage movements are reduced by 36% and Scope 1 calculated by representing the results for the year ended 30 June 2023 at the average exchange rates and 2 emissions reduced by 14% applied to adjusted operating profit for the year compared to our 2019 baseline ended 30 June 2022 3 The primary intensity ratio is a measure of the Read more on pages 30-33 Group’s Scope 1 and 2 emissions per tonne of animal weight ### 02 02 GENUS PLC / ANNUAL REPORT 2023 ### GENETIC IMPROVEMENT ## DRIVING ## GENETIC ## IMPROVEMENT Genus breeds and sells market-leading genetically superior animals, which enable OUR INDUSTRY-LEADING NUERA BEEF STRATEGIC REPORT STRATEGIC REPORT farmers to produce more animal protein GENETIC PROGRAMME IS DELIVERING ## Trial outcomes with fewer resources. Driving genetic progress lies at the heart of our business. NuEra, our proprietary beef ## validate that breeding programme, produces ® Genus is a global leader in genetic industry-leading genetics for | PIC800 | delivers | | | | --- | --- | --- | --- | | | | improvement. Our bovine business, | beef supply chains around the | | | | Genus ABS, has a strong dairy genetics | globe. These genetics have proven | ## superior survivability | | portfolio and has a leading beef | their superiority in head-to-head | | --- | --- | --- | | and more full value | breeding programme. In Genus PIC, | trials against competitors and | | | our porcine programme has benefited | also in internal validations using | | pigs in commercial | our customers by delivering over $3.00 | | thousands of customer records | | profit improvement per commercial | | from NuEra-sired progeny. In these | | --- | --- | --- | --- | | settings, leading | | 1 | | | | pig per year in the past three years | . | evaluations of thousands of animals, | | | We achieve these results by starting | | advantages for the beef supply | ## to a significant | | with our world-class, proprietary herds, | chain have ranged from $38 per | | --- | --- | --- | | economic advantage | and applying leading technology and | animal leaving the grower at four | | | capabilities to rapidly improve them. | months of age, up to more than | | for customers. | | $400 per animal, for animals at | Genus is uniquely positioned as a harvest when using NuEra. This has leading player of scale. Serving many of driven demand for our proprietary MATT CULBERTSON the Top 100 pig producers and dairies NuEra Genetics, which from full Chief Operating Officer globally through our strategic supply commercial launch in FY18 now Genus PIC chain and distribution networks in over represent more than a third of overall 80 countries. Our cash generation and ABS beef sales volumes in FY23. listed status enables us to invest more 2 in leading technologies , which we can leverage across species. We also attract top talent across our 3,500 employees, 1 which include more than 130 PhDs. | | | 190 | 45% | | --- | --- | --- | --- | | | Read more on pages 24-29 | 180 | 40% | | | | 170 | 35% | | GENUS NUERA GENETICS INDEX AND | | 160 | 30% | | NUERA SALES | | 150 | 25% | | | | 140 | 20% | | | | 130 | 15% | | 1 | | 120 | 10% | | | | 110 | 5% | | | | 100 | 0% | FY18 FY21FY20FY19 FY22 FY23 NuEra % of total ABS beef volumes NuEra Genetic Index 1 Based on three-year rolling average of our NuEra Genetic Index porcine genetic index. See Strategic Framework 1 NuEra genetic index for Genus proprietary on page 20 T14 line 2 See Technology section on page 4 NuEra % of total ABS beef volumes ### 03 03 GENUS PLC / ANNUAL REPORT 2023 GENUS PLC / ANNUAL REPORT 2023 Training in using sexed semen is vital, ### MEETING THE UNIQUE since each straw costs up to 50 times ### NEEDS OF THE INDIAN as much as conventional semen. In FY23, we trained around 4,000 vets and ### DAIRY MARKET THROUGH technicians, to help them understand ### SEXED SEMEN the importance of genetics and selecting the right animals, and how to Milk is a major protein source in India store, handle and use the straws. This and demand is growing. With imported helps to maximise farmers’ returns and milk being unaffordable, the country creates advocacy for using our genetics. needs more productive cows with better To further improve outcomes, we genetic potential. However, conventional imported seven Jersey bulls from the US. breeding results in unwanted bulls, Jersey milk has the right level of solids which cannot be slaughtered, are and the cows have longer productive a drain on limited resources and lives and greater sustainability than a safety risk on Indian roads. Holsteins in tropical conditions. The In response, the Federal Government new bulls have contributed to the has provided financial assistance to profitability index for the best Jersey establish sexed semen laboratories bull in India more than tripling. and supported the purchase of sexed Our R&D team in India is now working semen straws. Through the Government on targeted improvements to our sexed programme, we have served six Indian semen technology, to reflect demand states with over 400,000 Sexcel for sexed water buffalo semen. Water straws, with repeat orders from five buffalo are the most important farm states and over 50% market share. animals in Asia and account for around 58% of all milk production in India. Read more on pages 28-29 STRATEGIC REPORT STRATEGIC REPORT ### 04 GENUS PLC / ANNUAL REPORT 2023 To encourage customer acceptance, ### ENHANCING ANIMAL we are nearing completion of our life ### WELFARE AND CUSTOMER cycle analysis, to demonstrate their sustainability benefits, and ### PROFITABILITY THROUGH conducting research to show the ### GENE EDITING potential reduction in antibiotic use. We are also focused on consumer In the last year, we have made further acceptance of gene-edited pigs, good progress with our programme which is essential for ensuring an to produce gene-edited pigs that are end-market for our customers. resistant to the deadly PRRS virus. As we prepare to offer PRRS-resistant In particular, we have submitted pigs commercially, we have started our final filings to the US FDA, with to expand our pig population with acceptance expected in early 2024. the initiation of a second nucleus To support submissions in other key farm. This will give us greater scope countries, we have prepared an for detailed animal testing and international dossier and engaged selection, to accelerate annual genetic with authorities in Colombia, Brazil, improvement, as well as increasing Mexico, Canada and Japan. the availability of elite breeding stock, so we can begin sales worldwide. Read more on pages 28-29 STRATEGIC REPORT ### 05 GENUS PLC / ANNUAL REPORT 2023 ### TECHNOLOGY ## THROUGH ## LEADING-EDGE ## TECHNOLOGIES To drive genetic improvement in our Our biosystems engineering team ## Our world-class | | proprietary herds and deliver superior | uses technology to interrogate and | | --- | --- | --- | | teams of scientists | breeding animals to our customers, we | select cells, such as in our proprietary | | | leverage leading-edge technologies | semen sexing technology, IntelliGen, | | continue to break | that we develop in-house and access | one of only two commercially available | | | through strategic partnerships. | bovine sexing technologies globally. | | new ground, as | | Today IntelliGen operates in ten | | | Our genome science and bioinformatics | countries, with 15 labs globally. | ## we invest in our teams have a deep understanding of the link between DNA and animals’ In gene editing, we have built strong ## programmes to STRATEGIC REPORT observable characteristics, such as in-house technical and regulatory protein and fat content, aided by our capabilities. Our PRRSv resistance ## deliver rapid genetic extensive databases of real-world animal programme is developing more ## advances to benefit performance data. We employ this sustainable, disease-resistant breeding knowledge in our proprietary breeding pigs by making precise changes to ## our customers. programmes to select superior parents their genes. We are also exploring with desirable characteristics to breed whether gene editing can provide successive generations of animals. solutions to other porcine diseases. ELENA RICE Chief Scientific Officer We have active R&D workstreams and Head of R&D in multiple advanced reproductive technologies, including enhancing embryo quality, efficient determination of embryo viability and exploring how embryonic stem cells can enhance ## 10 genetic gain and accelerate traits. countries where Read more on pages 28-29 IntelliGen operates ### 06 GENUS PLC / ANNUAL REPORT 2023 ### SUPPLY CHAIN ## INVESTING ## IN OUR ## SUPPLY CHAIN STRATEGIC REPORT | Genus’s global supply chain efficiently | New farm builds, such as our owned | | | --- | --- | --- | | delivers porcine and bovine genetics | Atlas (Canada), Granja Genesis | GROWING OUR SEXING PLATFORM | | to customers while mitigating risk for | (Brazil), and Ankang (China) farms have | | | us, for example by using third-party | expanded our global supply of elite | We have continued to grow our | | multiplier farms and by spreading | porcine genetics. In China our porcine | sexing platform to support the | | facilities across the world. | supply chain is unparalleled amongst | growing demand for Sexcel, | | | international genetics companies, | our proprietary genetics sexed | | PIC pure-bred pig lines are housed | with over 180,000 great grandparent | by IntelliGen, and third-party | | in strategically located biosecure | and grandparent sows in owned, joint | demand for sexing services | | facilities in four continents. ‘Market’ pigs | venture and contracted farms locally, | provided directly by IntelliGen. | | for processing are then produced in | enabling us to support industry growth. | | ‘breeding pyramids’ over four generations. PIC supplies live animals and semen ABS breeds elite bulls in four continents. The best bulls go to one of ABS’s six 1 to customers’ pyramids, enabling | them to produce pigs with the latest, | owned and contracted stud facilities | | --- | --- | | best-performing genetics. Third-party | in the US, Europe, Brazil, India and | | herd multipliers and studs expand our | Australia, where over 1,000 bulls’ | | breeding pig populations and produce | semen is collected for distribution | | semen for commercial sale, with PIC | as frozen semen ‘straws’ or used to | | controlling the sale of its animals to | create embryos for sale. ABS operates | | protect our intellectual property. In | embryo labs in Brazil, Mexico and the | | total, PIC boars are housed in more | US, and sexing operations in the US, | | than 400 studs globally and there are | Europe, Latin America and Asia. | more than 500 multiplication farms. Animals at ABS’s and PIC’s facilities benefit from industry-leading welfare FY18 FY19 FY20 FY21 FY22 FY23 standards, and we have started to roll- Other sexed out solar panels, solar generation has Sexcel increased by more than 100% since FY22. IntelliGen (3rd Party) Read more on pages 24-27 1 Sexed units delivered or produced for customers in the year TOTAL SEXED SALES VOLUMES (000s) 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 ### 07 GENUS PLC / ANNUAL REPORT 2023 ## Pork producers need ## the right products at ## the right time to keep ## their operations running ## smoothly and profitably. ## PIC is dedicated to ## making sure customers ## can access the high- ## quality genetics they ## desire, and we work ## with a global network ## of partners to achieve ## this goal. NICK MCCULLEY Global Porcine Supply Chain Director STRATEGIC REPORT ### 08 GENUS PLC / ANNUAL REPORT 2023 “In Ancali, we are building an extremely ### SUPPORTING disruptive business model,” says Miguel ### SUSTAINABILITY AND Aparicio, General Manager of Agrícola Ancali. “We have built the largest ### PRODUCTIVITY WITH robotic farm worldwide, with the most ### GENEADVANCE modern production and environmental strategy, backed by a strong team. This Over the last three years, we have helps us to deliver our key sustainability, worked with Ancali dairy in Chile social and governance pillars. to implement our GENEadvance “We have a strong and successful programme. GENEadvance uses business relationship with ABS, using genomic testing to predict the genetic GENEadvance to deliver our ambitious merit of heifers at a very young age, production and sustainability objectives. so the customer can use our ranking to We are achieving excellent results, select the right animals to breed future and we are now starting a high-quality herd replacements and those to sell or embryo project for export purposes.” breed to beef. Our revenue is then based on the outcomes for the customer. Read more on pages 26-27 STRATEGIC REPORT ### 09 GENUS PLC / ANNUAL REPORT 2023 ### CUSTOMERS ## PARTNERING ## WITH OUR ## CUSTOMERS Genus serves over 50,000 customers which typically require customers to ## We build long-term in more than 80 countries, including commit to a three to five year contract ## relationships with many of the Top 100 pig producers and and purchase 100% of their product 2 Top 100 dairies globally. Our porcine requirements from ABS . Today, this 3 | our customers, | business is global leader and we are a | business represents 32% | of our direct | | --- | --- | --- | --- | | | strong second in bovine. We sell products | sales volumes in EMEA. To serve customers | | | share in the value | | better, we have introduced digital sales | | through different channels, either as multi-annual product and service bundles channels, which account for around one ## we deliver for them STRATEGIC REPORT STRATEGIC REPORT or transactionally, always looking to align third of beef semen sales volumes in Latin pricing with value delivered to customers. America, an early adopter. We have also ## and continually look Our technical teams support customers to introduced digital tools and services to ## for ways to serve get the best from our products, delivering support contracted customers in key a superior customer experience. markets. We price each straw of semen ## them better. according to a genetic index score used We build trust with porcine customers by by the industry to estimate the economic linking pricing to on-farm performance value of breeding animals for farmers. We ANDREW THOMPSON | | and by running validation trials. 85% of | | have also introduced beef weaned calf | | --- | --- | --- | --- | | Head of ABS EMEA | | 1 | | | | our volumes | are on multi-annual royalty | fees, which are similar to PIC’s model. | contracts, where PIC supplies animals and semen at cost, and customers Read more on pages 26-27 typically then pay for every parent selected for breeding, every piglet 1 Including our Brazilian joint venture weaned or every pig sent to market. 2 Programme offering, customer commitment, pricing and contract lengths vary In bovine, customers have traditionally 3 Contracted business for 1-5 years, including our key account partner programme, reproductive purchased semen straws or embryos on a management services, Breeder Tag programme, per-unit fee. In FY19, we introduced multi- and other contracted services where the customer annual product and service bundles, has committed 80-100% business with Genus ABS ### 10 GENUS PLC / ANNUAL REPORT 2023 ### STAKEHOLDERS ## NOURISHING ## THE WORLD ## SUSTAINABLY STRATEGIC REPORT Genus breeds more productive and ## Superior genetics resilient breeding animals, which enables PRODUCTIVITY INCREASES IN farmers to produce meat and milk 4 ## are increasingly PIC HERD more efficiently and sustainably. Our market-leading breeding animals have a ## important to ‘climate significant impact on whole protein value 18 2.40x ## smart’ production chains and benefit multiple stakeholders, with customers being our central focus. 16 2.20x ## of animal protein, In the past 40 years, genetic improvement ## as we work to help has contributed to doubling US dairy 14 2.00x farmers’ average milk per cow, from 5.4 | further reduce our | | 1 | | | | --- | --- | --- | --- | --- | | | to 10.8 tonnes per year | . Genetic progress | | | | | | | 12 | 1.80x | has also helped to deliver significant ## customers’ emissions. resource savings and environmental benefits in protein production. Today 10 1.60x 2010 2020 2030F JORGEN KOKKE it takes 1.6kg less feed to produce a Pigs weaned/litter | Chief Executive | kilogramme of pork in a professional | | | | --- | --- | --- | --- | | | | 2 | Feed | | | farm system than it did 50 years ago | . | | By improving productivity, cost and resource utilisation, genetic improvement Genetic improvement in PIC herds makes nutritious animal protein more has delivered benefits across accessible to consumers globally, multiple observable traits, including helping to nourish the world more pigs weaned per litter and feed sustainably, in line with our vision. conversion. These all contribute to improving the overall pork 3,500 employees help to deliver our produced per sow and reducing the vision and more than 12,000 shareholders resources required to produce it. 3 are invested in our opportunity . By sharing in the value that we deliver to meat and milk producers globally, we provide career opportunities to our employees and generate 1 USDA ERS data for the period 1980-2020 2 Genus PIC data for the period 1970-2020 financial returns for our investors. 3 Number of Genus shareholders as of 30 June 2023 4 Genus PIC data; PIC herd represents top performing Read more on pages 36-59 PIC customers Pigs weaned/litter Feed conversion (efficiency) ### 11 GENUS PLC / ANNUAL REPORT 2023 STRATEGIC REPORT ### 12 GENUS PLC / ANNUAL REPORT 2023 ### GENUS AT A GLANCE ## PIONEERING ## ANIMAL GENETIC ## IMPROVEMENT TO ## HELP NOURISH ## THE WORLD STRATEGIC REPORT ### WHAT WE DO INVESTMENT CASE We are a world-leading animal protein genetics company. Our market- leading breeding animals have desirable characteristics such as feed | efficiency, disease resistance, growth | Leading multi-species market positions | People and relationships | | --- | --- | --- | | rate, protein and fat content, and | We supply 50,000+ customers in 75+ | We attract some of the best talent in the | | fertility. These characteristics enable | countries, including some of the world’s | industry. Our 3,500 employees, including | | farmers to produce better quality | top pig and dairy farmers. Our | 130+ PhDs, enable us to deliver superior | | meat and milk more efficiently, and | international, multi-species model reduces | products and services to our customers | | to feed the world more sustainably. | our reliance on individual markets. In | globally. Close relationships with leading | | | contrast, many of our competitors are | research and strategic partners further | | | regional single-species cooperatives. | strengthen our capabilities. | ### HOW WE DO IT We analyse animals’ DNA and look for markers that we know are linked to Focused technology-driven Scale and financial strength desirable characteristics for farmers. We business model Genus is the only large, listed animal then select the animals with the strongest We focus on delivering high-quality genetics company operating in pork, genetic profile from our proprietary breeding animals to farmers by beef and dairy. We are cash generative and partner herds, and breed them discovering, developing and delivering with a strong financial position and to produce even better offspring, in a pioneering technologies spanning the access to strategic capital. We leverage continuous cycle. We distribute these genomics, gene editing, sexing and our R&D investment across species to superior genetics to customers in the reproductive technology fields, across further our genetic lead. form of live animals, semen or embryos. multiple species. We also own technology that enables us to sort semen for desirable traits, for example to produce more female calves for the dairy market. In addition, we make precise gene edits to animals’ Positive long-term market DNA, which we are employing in our fundamentals R&D programmes to produce animals Demand for animal protein is growing which are resistant to fatal disease. globally, while the need to operate sustainably is becoming even greater. We focus on serving progressive farmers, Genus’s genetic improvement who are best placed to realise and technologies enable farmers to produce measure the benefits of our superior more animal protein with fewer genetics and technologies. resources, helping to reduce their environmental impact. ### 13 GENUS PLC / ANNUAL REPORT 2023 ### OUR INNOVATION-DRIVEN BUSINESS MODEL Genus’s business model is based on creating and delivering genetically improved breeding animals across different species, by leveraging a common, innovation-driven technology platform across different species. Our innovative R&D function includes over 450+ highly skilled employees including scientists, technicians, engineers and bioinformaticians. Our world-leading teams manage our proprietary breeding programmes by leveraging our extensive real-world data, collected on farms and through DNA analysis. More information on the key aspects of our business model can be found on pages 2 to 11. GENETIC IMPROVEMENT SHARED PROPRIETARY TECHNOLOGY PLATFORM GENOMIC BIOSYSTEMS GENE REPRODUCTIVE SELECTION ENGINEERING EDITING BIOLOGY GENOME SCIENCE AND BIOINFORMATICS SCIENTIFIC COMPUTING ### OUR COMMERCIAL DIVISIONS Genus’s leading porcine and bovine divisions, PIC and ABS, deliver genetically elite breeding animals and services to thousands of STRATEGIC REPORT farmers globally. Given the different nature of PIC’s and ABS’s markets and business models, PIC and ABS have different financial profiles. CUSTOMER PROFILE Consolidated and vertically integrated Consolidating REGIONAL VARIATION Low High GENETIC VALUE BASIS PIC proprietary index Moving from public to proprietary indices GENETICS PURCHASING Multi-year, royalty-based contracts Priced per straw, shifting to multi-year MODEL genetic programmes NUMBER OF EMPLOYEES ## 650+ 2,400+ 1 ADJUSTED REVENUE ## £349.5m £318.8m ADJUSTED OPERATING 1 PROFIT ## £145.3m £43.6m ADJUSTED OPERATING 2 MARGIN ## 38.6% 13.7% PIC divisional review can be read ABS divisional review can be read on pages 24-25 on pages 26-27 1 Revenue and Adjusted Operating Profit Includes Joint Ventures 2 Excluding Joint Ventures 14 GENUS PLC / ANNUAL REPORT 2023 CHAIRMAN'S STATEMENT # SEIZING THE OPPORTUNITIES ![img-0.jpeg](img-0.jpeg) “ The Board carefully considers the balance between investing for the future and ensuring an attractive current return for shareholders. IAIN FERGUSON CBE Chairman Performance was robust in the Group, which enabled us to deliver solid overall results for FY23, despite challenging market conditions for our customers and continued weakness in the porcine market in China. We continued to make excellent progress with implementing our strategy, leaving us well positioned to seize the opportunities in front of us. PERFORMANCE AND DIVIDEND Genus PIC achieved strong operating profit growth in most regions. However, the weak Chinese porcine market from December 2022 onwards resulted in PIC China being only modestly profitable in the last six months of FY23. Genus ABS faced very challenging markets in Latin America in the first half but saw better trading in the second half of the year, with operating profit growth in all regions. Overall, the Group's adjusted profit before tax was £71.5m (2022: £71.5m) and adjusted operating profit excluding gene editing was £100.1m (2022: £85.6m). Statutory PBT was £38.4m (2022: £48.4m). STRATEGIC REPORT 15 GENUS PLC / ANNUAL REPORT 2023 The Board carefully considers the balance between investing for the future and ensuring an attractive current return for shareholders. Our target is for the annual dividend to be 2.5x-3.0x covered by adjusted earnings. The Board is recommending a final dividend of 21.7p per share, which will give a total dividend of 32.0p (2022: 32.0p), including the unchanged interim dividend of 10.3p per share paid in March 2023. This results in dividend cover of 2.7 times for the year, within our target range. The final dividend will be paid on 8 December 2023, to shareholders on the register at the close of business on 10 November 2023. #### CONTINUED STRATEGIC PROGRESS The nature of our business means that whatever happens in our markets in the near term, we must continue to press forward with our strategic investments. Working to improve the genetic potential of animals and then making that potential available to customers can only take place across multiple breeding cycles, which makes it important to invest consistently. Our differentiated genetics deliver long-term value to our customers and are key to achieving higher efficiency from their herds, resulting in greater output of animal protein from fewer resources. This is at the heart of our purpose – pioneering animal genetic improvement to help nourish the world – while at the same time reducing the associated environmental impact. Increasingly, we see our genetics as being ‘climate smart’, equipping our customers to continue as animal producers into the future by protecting their licence to operate. During the year, we made strong progress with our PRRS+ resistant pigs programme, which opens up significant new opportunities for us. We have also continued to strengthen our supply chains, invest in digitalisation and develop our long-term customer relationships. More information can be found in the Chief Executive Q&A on page 16. #### THE BOARD The most significant development on the Board this year was Stephen Wilson’s decision to retire after more than ten years with Genus, including four as our Chief Executive Officer. The Group has made great strides in his time on the Board and Stephen has made a major contribution to its success. He leaves the business in excellent shape. We are delighted to have attracted a high-calibre replacement in Jurgen Kokke, who joined the Board in May 2023 and succeeded Stephen as CEO on 1 July 2023. We have a well-ordered process, supporting an effective handover of responsibility in the lead up to Stephen’s retirement at the end of September. Lykele van der Broek will retire as a Non-Executive Director at the Annual General Meeting in November. He has made an important contribution to the Board over the last nine years and we have begun the process of recruiting a successor who will also offer Lykele’s highly valuable experience in science-based agricultural businesses. #### OUR PEOPLE Genus employs highly talented people at all levels of the business and around the world, and I thank them all on the Board’s behalf for their contribution this year. We continue to invest in learning and development, strengthen our approach to diversity and inclusion and enable our people to share in the Group’s success through a new employee share scheme. We also celebrate and reward our people in many other ways. The Chairman’s Awards highlight outstanding innovation from across the business, while the Genus CEO Scholarships support colleagues to accelerate their professional development. We received a record number of applications for the scholarships this year and will cover the fees for two colleagues to undertake MBAs. I want to thank Dr Bill Christianson, who has retired as Chief Operating Officer of Genus PIC after three decades with the Group. Our succession planning work identified Dr Matt Culbertson as the outstanding candidate to step up into Bill’s role and we are delighted to have filled this key position internally. #### LOOKING FORWARD High inflation, rising interest rates and geopolitical instability mean the near-term economic environment remains uncertain. However, the Board believes that our continued focus on investing in our growth drivers leaves Genus well placed for success. We therefore look forward to the future with confidence. Iain Ferguson CBE Chairman STRATEGIC REPORT ![img-1.jpeg](img-1.jpeg) ### 16 GENUS PLC / ANNUAL REPORT 2023 ### CHIEF EXECUTIVE OFFICERS’ Q&A ### Our new Chief Executive Jorgen Kokke ## (‘JK’) and his predecessor Stephen Genus is very well ## Wilson (‘SW’) discuss our performance positioned. We ### in the year, our strategic progress and ## have a very strong ### Jorgen’s priorities for the future. ## workforce around ## the world. JORGEN KOKKE Chief Executive STRATEGIC REPORT ### 17 GENUS PLC / ANNUAL REPORT 2023 | Genus has faced some tough market | | In the last 12 months, we’ve finished the | | JK: Helping our customers with their | | | --- | --- | --- | --- | --- | --- | | conditions this year. How has this | | | final animal studies for our PRRSv-resistant | | sustainability is a real opportunity for us. | | affected performance? | | | pigs programme and we’re now waiting | | We’ve recently received a grant of £3m | | SW: We delivered solid overall results, | | | for approval from the US FDA of the | | from Innovate UK to further our work on | | | despite challenging markets and | | submissions we completed since the year | | climate-smart genetics in beef, which is | | | macroeconomic conditions. Genus | | end. In China, the regulatory environment | | a validation of the work we have been | | | PIC had good results. The business | | for this technology is moving forward, | | doing to show that genetics can make | | | performed strongly in North America | | with the publication of regulations on | | an important difference. In addition, we | | | throughout the year and also did well in | | gene-edited animals. We also have active | | are working in collaboration with the | | | Latin America. European porcine markets | | research programmes on using gene | | Gates foundation and other partners to | | | were difficult in H1 but the business | | editing to produce animals resistant to | | improve dairy genetics in East Africa. | | | had a better second half. However, | | other diseases. In addition, we’ve seen | | | What’s the outlook for the Group? the first half Chinese market recovery encouraging progress in reproductive JK: From what I’ve already said, you’ll stalled in December 2022, reflecting the biology and we’ve further enhanced our understand that I’m excited about the high supply of slaughter pigs and soft IntelliGen capabilities and technology. prospects for this business. I see real | | consumer demand in China. Pig prices | Our porcine business is benefiting from | | potential in maximising the benefit of | | --- | --- | --- | --- | --- | | | fell to the point where producers were | | our Atlas facility in Canada which was | all the investment that’s been done | | | unprofitable, causing many to delay | | fully operational in the year, Granja | to date and continuing to move the | | | restocking their sow herds. That led to | | Genesis in Brazil was stocked and | science forward, to benefit customers | | | PIC China swinging from an adjusted | | we have started stocking Ankang in | and society. We have a clear focus | | | operating profit of £8.8m in the first | | China. We’ve continued to build out | on continuing to drive growth through | | | half to only a modest profit in H2. | | ABS’s facilities in Leeds, Wisconsin. | leveraging the significant investments | | Conversely, Genus ABS saw trading | | | We’ve also completed the rollout of | the Group has made in recent years. The | | | improve as the year progressed. The | | GenusOne in the majority of Europe, | PRRSv-resistant pig represents the most | | | North American business had a strong | | with Latin America and Asia next in the | substantial opportunity in the medium | | | year and Europe delivered good growth, | | plan. The system is giving us access to | term with FDA approval expected in | | | although market conditions remained | | data we didn’t have before, so we have | the first half of 2024, having completed | | | challenging in Brazil. Volumes in ABS | | much better visibility of performance | our submissions ahead of schedule. We | | | have continued to benefit from take-up | | in the countries where we’re using it. | will also continue to drive commercial | | | of sexed and NuEra beef genetics. | JK: Since I joined the business, I’ve really | | excellence to grow sales, increase | | | | | seen the benefit of the long-term | efficiency and improve margins. | JK: We’re confident that our investments investment Stephen has talked about. In the near term, conditions remain in PIC China give us a strong platform I think Genus is very well positioned. challenging for our customers in several to capture the growth opportunities We have a very strong workforce parts of the world, most notably for and build a strong predictable around the world and the passion, Chinese pig producers and Brazilian royalty-based business, including professionalism and dedication of the beef producers. However, the profit commercialising PRRSv-resistant pigs. team members is phenomenal. There growth achieved by both businesses What did these conditions mean for have been tremendous investments in in FY23 illustrates the strength of STRATEGIC REPORT Genus’s financial results? the animal barns, the R&D capability our strategy and competitiveness SW: We finished the year with good growth is even stronger than I would have of our offer to customers. in adjusted operating profit excluding envisaged and I’m impressed by the gene editing of 9% in constant currency We anticipate that the China porcine cutting-edge science we’re performing. (17% in actual currency). Increased market will continue to be volatile, Based on that, what are your immediate reflecting continued disease outbreaks, investment in gene editing as planned priorities Jorgen? a less consolidated industry structure and higher interest rates meant that JK: Having made the investments, we need and weak consumer demand. We our adjusted profit before tax was to work hard to monetise them, which remain confident PIC China will be unchanged from the prior year, at means developing programmes and a resilient growth business over the £71.5m (8% lower in constant currency). projects that will benefit customers and medium-term through offering the Genus PIC’s volumes and revenue in ultimately shareholders. Commercial best genetics, customer service constant currency were up 5% and 7% excellence and efficiency will be a key and increasing the penetration respectively, with strategically important part of driving those returns. In ABS, we’re of our royalty-based model. royalty revenue up 10%. Adjusted already focusing on improving sales, operating profit (including joint ventures) In FY24 we expect to continue to execution and operational performance. was 11% higher. Volumes in Genus ABS perform in line with our expectations From a technological standpoint the increased by 3%, revenue was up 12% and for adjusted operating profit excluding PRRSv-resistant pig is the number one adjusted operating profit grew by 5%. gene editing, in constant currency. opportunity before us. That will have However, the recent strengthening Stephen, you’re about to retire after a my full attention and it should make a of the Pound Sterling relative to decade on the Board. How has Genus significant contribution over three to several of our key trading currencies evolved in that time? five years. The question then is what’s is currently anticipated to lead to SW: We’ve seen many challenges through next? Resistance to other diseases a currency translation headwind of that time but the key thing was that may be part of that and the R&D team approximately £5-6m in the year. In we really stayed the course in building is working on other game-changing addition, we expect finance costs for the long term. The business is in a technologies with great potential. to increase by approximately £2m completely different place in terms of its How are your sustainability plans as a result of the higher interest rate technology and R&D capability. Some progressing? environment. We therefore expect of the Group’s major achievements over SW: We’ve made real progress and we’re modest growth in adjusted profit that time include launching IntelliGen continuing to work through our plan, before tax in actual currency for FY24. and NuEra beef genetics, the growth which delivered a 5% reduction in our The Board remains confident in the of our dairy breeding programme with Scope 1 and 2 emissions during the year. Group’s strategy and our medium-term De Novo, significantly strengthening Since 2019 we have reduced our Scope growth expectations remain unchanged. PIC across all geographies, a number 1 and 2 emissions by 14%, while also of very value-adding acquisitions and growing our business, resulting in a 36% a significant refresh of our facilities, improvement in our primary intensity to give us world-class animal housing ratio. At the same time, our genetics can for the next decade and more. I think support our customers with reducing the capability in the team is also much the emissions from their herds, which stronger across all areas of the business. will only become more important. ### 18 GENUS PLC / ANNUAL REPORT 2023 ### MARKET OVERVIEW ## FEEDING THE ## WORLD MORE ## SUSTAINABLY ### WHAT DRIVES DEMAND INCREASING DEMAND FOR NEED TO PRODUCE FOOD ANIMAL PROTEIN MORE SUSTAINABLY ### FOR ELITE GENETICS The global population is expanding Competition for resources, such as and urbanising, and seeking a more land and water, and the need to varied and nutritious diet. This is driving reduce greenhouse gas emissions to increases in consumption of pork, milk tackle climate change, puts pressure and beef, which are forecast to grow on farmers to become more efficient 1 by 1-2% p.a. in the next decade. through the use of technology and genetically superior animals, which are 2 demonstrated to be more sustainable. STRATEGIC REPORT | | CONSUMERS DEMANDING | | FARM CONSOLIDATION AND | | --- | --- | --- | --- | | | BETTER PRODUCTS | | TECHNOLOGY ADOPTION | | | Consumers are increasingly | | Progressive farmers, who are more | | | demanding healthier and more | | open to new technologies and | | | sustainable products, which are | | measure performance in more | | | produced with a focus on animal | | detail, are consolidating the sector. | | | welfare, traceability and reduced | | They understand the economic and | | | drug use. This increases farmers’ | | sustainability benefits of genetically | | 1 OECD FAO production forecasts for period | demand for genetically superior | | superior animals and optimised | | 2022–2031 | breeding animals, which are naturally | | breeding strategies, such as combining | | 2 As demonstrated through Genus real-world data | | 3 | | | | more resilient and sustainable. | | the use of sexed dairy and beef semen | and various trials in porcine, dairy and beef systems on dairy herds to maximise profit. 3 Genus animals are selected according to indices that include productivity and health traits ### OUR POSITION 1 1 Genus is a leading player in global porcine and bovine genetics markets, 2 serving many of the Top 100 pig producers 2 and dairies globally. Investment in our proprietary genetic programmes has 12 3 3 delivered world-leading products in all 4 our species, validated by indices and 5 4 | on-farm trials. Genus is also recognised | PORK4 | 6 | | BEEF & DAIRY5 | | | --- | --- | --- | --- | --- | --- | | | | 7 | 7 | | | | as a global leader in genomic, gene | | 8 | | | 5 | 9 editing and sexing technologies. 10 6 11 | | | | 16% | 1 Competitor 1 | | --- | --- | --- | --- | --- | | | | | 6% | 2 ABS | | | | | 5% | 3 Competitor 2 | | 1 PIC | | 11% | | | | | | | 2% | 4 Competitor 3 | | 2 Competitor 1 | | 9% | | | | | 4 Source: Government agencies, Eurostat, pork | | 2% | 5 Competitor 4 | | 3 Competitor 2 | | 8% | | | | | organisations, Genus estimates. Market shares | | 2% | 6 Competitor 5 | | 4 Competitor 3 | represent the estimated share of pig production in | 5% | | | | | | | 1% | 7 Other | | 5 Competitor 4 | top pig production markets | 4% | | | 1% 5 Source: Government agencies, USDA, OECD, | 6 Competitor 5 | | 3% | | | --- | --- | --- | --- | | | genetics and agriculture organisations, Genus | | 1% | | 7 Competitor 6 | | 60% | | | | estimates. Market shares represent the estimated | | 2% | | 8 Competitor 7 | share of combined dairy and beef volumes in ABS’s | | | 19% 9 Competitor 8 Top 32 target markets for dairy and Top 8 target 44% markets for beef 10 Competitor 9 11 Internal programmes 12 Other ### 19 GENUS PLC / ANNUAL REPORT 2023 1 ### TRENDS IN OUR MARKET 2 TOTAL PORK TOTAL BEEF TOTAL MILK ## 122mt 721mt 911mt TOP 3 MARKETS TOP 3 MARKETS TOP 3 MARKETS ## 45% 17% 22%18% 12% 17%10% 10% 11% ADVANCED GENETICS USE ADVANCED GENETICS USE ADVANCED GENETICS USE PRODUCTION PRODUCTION PRODUCTION Pig production is largely technified with Beef is produced in a variety of systems Milk production systems vary due to genetics, progressive producers employing similar globally and from many breeds, using both technification and the local environment, production systems globally. To stock a artificial insemination and ‘natural service’. resulting in the average US cow producing farm, producers typically acquire breeding Beef animals are often traded multiple over ten tonnes of milk annually compared pigs and semen from specialist genetic times between birth and processing. with two tonnes in India. Dairy production improvement companies or captive breeding is fragmented, but progressive farmers are In the US, beef is mainly produced from | programmes. Thereafter, they periodically | | consolidating. Average herd size in the US has | | | --- | --- | --- | --- | | | pure-bred beef animals, which are bred | | 3 | | acquire semen so they can benefit from | | grown by 77% over ten years | , and China’s | naturally from bulls on farm or sourced from the latest and best-performing genetics. dairy sector has significantly consolidated the open market. A modest but growing in recent years with the top three producers Disease poses a significant risk to pig portion of beef cattle is produced by controlling almost 20% of production. | producers, who rely on biosecurity protocols | breeding dairy cattle with beef semen | | | --- | --- | --- | | and health products to manage the | (Beef x Dairy). Beef x Dairy uses ‘surplus’ | Historically farmers selected breeding | | threats such as African Swine Fever and | dairy breedings to produce high-quality | animals based on their progeny’s | | PRRSv, which causes billions of dollars | beef animals that are more consistent | performance. However, in 2008, genomics | | of damage to the industry annually. | than those from pure-bred beef systems. | enabled the selection of animals at birth | from their DNA. Leading studs such as ABS China is by far the world’s largest pork In Brazil, beef is mainly produced from STRATEGIC REPORT responded by consolidating the ownership market and pigs there were historically pure-bred ‘tropical’ beef cattle suited to of elite genetics and transitioning from produced mainly in small ‘backyard’ farms. local conditions, although tropical cattle are purchasing bulls to proprietary breeding In 2018, an outbreak of African Swine Fever increasingly being cross-bred with semen programmes. Between 2008 and 2023, caused the national sow herd to decline from European breeds. The resulting cross- the number of breeders featured in the | by about one-third. The resulting shortfall | bred calves have better meat quality and | | 4 | | --- | --- | --- | --- | | | | top bull rankings fell from 107 to 30 | . | | in pork drove the expansion of large-scale | growth rates than tropical animals, and are | | | | technified pig production, further aided by | more heat tolerant than European breeds. | Sexing technology use has grown | | | the legislative drive to professionalise the | | rapidly, enabling farmers to produce | | | sector. Today, the top 50 producers control | | herd replacements from their best cows | | | around a quarter of the sow herd in China. | | with fewer breedings, given the ~90% | | chance of a female. Other animals in the herd are increasingly bred with beef semen to produce a high value cross- bred beef calf. The proportion of ABS’s sales to US dairies consisting of sexed and beef genetics has grown from 16% to 78% between FY16 and FY23. GENUS OPPORTUNITY GENUS OPPORTUNITY GENUS OPPORTUNITY • Maintain our genetic lead by • Demonstrate the superiority of our • Driving genetic improvement faster driving genetic improvement faster proprietary beef genetics across the than competitors than competitors and customers’ value chain through trials and partnerships • Drive the adoption of our sexed and internal programmes • Build on our product leadership in beef Beef x Dairy genetics amongst dairy • Ensure biosecure supply of breeding semen for dairy and tropical cross-breeding farmers, to maximise their profitability stock and semen for progressive • Develop naturally more resilient cattle, • Grow our presence with progressive producers in all key markets through genomic selection and gene industry consolidators globally • Drive market share gains via strategic editing technologies • Deploy our proprietary sexing technology partnerships with major producers • Progress pull-through demand with partner studs, delivering competition, • Make China a ‘home market’, with local partnerships to underpin demand value and sustainability to the industry nucleus herds, supply chain and superior for Beef x Dairy genetics customer service • Obtain approval for and launch our gene-edited PRRSv-resistant pigs, and explore technology solutions to other diseases 1 Sources: OECD FAO 2023 (forecast data), Rabobank, Boyar, Journal of Swine Health and Production, Genus Analysis 2 Represents 81% cow milk, 15% buffalo milk, 4% other (OECD FAO 2023 forecast data) 3 USDA data for the period 2011 to 2021 4 Represents the number of US Holstein breeders represented in the Top 200 NM$ rankings by birth year; 2023 data based on Top 200 Holsteins active using August 2023 data from the Council on Dairy Cattle Breeding ### 20 GENUS PLC / ANNUAL REPORT 2023 ### STRATEGIC FRAMEWORK ## DELIVERING ## AND SHARING ## IN THE VALUE ### We harness innovative STRATEGIC PRIORITIES ### technologies and know- ### how to breed genetically ## DELIVER A ### superior animals for ## DIFFERENTIATED ### progressive farmers ## globally, and link our pricing PROPRIETARY ## to the performance of our GENETIC OFFERING ### STRATEGIC REPORT products on-farm. ## FOCUS ON PROGRESSIVE ## PROTEIN PRODUCERS ## GLOBALLY ## SHARE IN THE ## VALUE DELIVERED STRATEGIC IMPLEMENTATION Our overarching strategy, success drivers (which feed into the focus areas of our business model), and associated KPIs are determined at Group level. The strategy is then implemented at business unit level. ## Our overarching business unit SUSTAINABILITY priorities and strategic progress ## in FY23 can be found on pages 24-29. AT THE HEART OF ## OUR BUSINESS Sustainability lies at the heart of our business. KPIs marked with the icon on the right are considered by the Board to be indicative of our progress in this area. For more information see pages 36-57. ### 21 GENUS PLC / ANNUAL REPORT 2023 LINK TO KPIS SUCCESS DRIVERS WHAT DOES SUCCESS LOOK LIKE? Read more on pages 22-23 GENETIC GAIN ### ELITE ANIMALS Creating superior breeding animals ## $3.74 ### TECHNOLOGY for farmers, measured against indices comprising traits that help to drive Porcine Genetic ### AND CAPABILITIES farmers’ productivity and sustainability. Improvement Index ### DATA ## 1,084 Genomic Bull Net Merit Index (NM$) VOLUME GROWTH ### GLOBAL POSITION STRATEGIC REPORT Growing volumes, particularly with ## 3% ### GLOBAL SUPPLY CHAIN progressive livestock farmers. Dairy & Beef Volume Growth ### CUSTOMER EXPERIENCE ## 5% Porcine Volume Growth PROFITABILITY ### VALUE-BASED PRICING Generating profit resulting from ## £0.64 ### PRODUCT VALIDATION the performance of our products in customers’ systems, and growing Adjusted Operating Profit margin as we leverage scale and per Market Pig Equivalent ### LEVERAGE SCALE R&D investment across species. ## £0.72 Adjusted Bovine Operating Profit per Dose Our strategy is underpinned by our approach to sustainable business and ## 6.04 the strength of our people. The Board measures the performance of these Primary Intensity Ratio key areas using the KPIs opposite. ### 1 ## 82% Engagement Survey Results 1 FY22 Result ### 22 GENUS PLC / ANNUAL REPORT 2023 ### KEY PERFORMANCE INDICATORS ## MEASURING ## OUR SUCCESS ### KEY PERFORMANCE INDICATORS 3.74 1,084 3.73 951 3.53 900 3.15 797 3.12 764 STRATEGIC REPORT LINK TO LINK TO STRATEGIC PRIORITIES: STRATEGIC PRIORITIES: Measures the genetic improvement we achieve in our porcine Measures the genetic quality of our bulls released to market, nucleus herds, which ultimately filters down to our customers’ farms. based on economically relevant traits for farmers. DEFINITION: The index measures the marginal improvement in DEFINITION: The average NM$ index score of generally available customers’ US$ profitability, per commercial pig per year, on a rolling Holstein commercial bulls launched in the year for genomically tested three-year average. sires. This definition has been revised this year to better reflect the breadth of high quality bulls released to market each year. PERFORMANCE: Genus continues to deliver increasing rates of genetic PERFORMANCE: Genus continues to improve the quality of its improvement through expanding and maintaining a large nucleus commercially available bulls to maintain a leading genetic position in population for high selection intensity, improving technical processes the dairy industry. Genus also has maintained a strong pipeline of for genomic evaluation, implementing precision data collection from young bulls tested but not yet in production. This is mainly driven by birth to consumer and continuing to add new traits and data streams. the large proportion of high-quality bulls sourced from our proprietary breeding programme, De Novo. | | 3 | | | | | | | 5% | | 6% excl China | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | 3 | | | | | 0 | | | 8% excl China | | | | | | | | | 15 | | | 5% excl China | | | | 11% including China | | | | | | 8 | | | | | 6% excl China | | | | 13% including China | | | | 6 | | | | 0 | 5% excl China | | | | | | | LINK TO | | | | | LINK TO | | | | | | | | | STRATEGIC PRIORITIES: | | | | | STRATEGIC PRIORITIES: | | | | | | | | | Tracks our global unit sales growth in dairy and beef. | | | | | Tracks the growth in the number of commercial pigs with PIC | | | | | | | | genetics globally. DEFINITION: The change in dairy, beef and sorted units of semen and DEFINITION: The change in volume of both direct and royalty animal embryos delivered or produced for customers in the year. sales, using a standardised MPEs measure of commercial slaughter animals that contain our genetics. PERFORMANCE: Bovine volumes improved 3% to 25.9 million units, PERFORMANCE: Porcine volumes grew by 5%, 6% excluding China, to PIC VOLUME GROWTH (%) DAIRY & BEEF VOLUME GROWTH (%) GENOMIC BULL NET MERIT INDEX (NM$) PORCINE GENETIC IMPROVEMENT INDEX (US$) with strong growth in Asia and North America. Sexed volumes were 197 million MPEs, with growth across North America, Europe and Asia. 2023 2023 2023 2023 up 18%, reflecting strong growth in both Sexcel and third-party Strategically important royalty volumes increased 7%. In China, IntelliGen production. volumes declined 1%, with strong royalty volume growth of 41%, offset 2022 2022 2022 2022 by lower breeding stock volumes. | 2021 2021 2021 2021 | | | --- | --- | | 2020 2020 2020 2020 | | | 2019 2019 2019 2019 | | | | 0.00 3.74 0 13 0 15 0 1084 | ### 23 GENUS PLC / ANNUAL REPORT 2023 KEY TO STRATEGIC PRIORITIES Deliver a differentiated Focus on progressive Share in the Sustainability at the proprietary genetic offering protein producers globally value delivered heart of our business | | | 0.64 | | | | | 0.72 | | --- | --- | --- | --- | --- | --- | --- | --- | | | 0.59 | | | | | | 0.71 | | | | 0.65 | | | | 0.69 | | | | | 0.61 | | | 0.55 | | | | | 0.60 | | | 0.50 | | | | | LINK TO | | | LINK TO | | | | | | STRATEGIC PRIORITIES: | | | STRATEGIC PRIORITIES: | | | | | | Monitors porcine profitability per unit. | | | Monitors bovine profitability per unit. | | | | | DEFINITION: Net porcine adjusted operating profit globally, DEFINITION: Bovine adjusted operating profit globally, expressed per expressed per MPE. Results include our share of Agroceres PIC, dose of semen or embryo delivered or produced for customers. our Brazilian joint venture. STRATEGIC REPORT PERFORMANCE: Operating profit per MPE was £0.64, £0.05 higher PERFORMANCE: Operating profit per dose was £0.72, up £0.01 (stable in constant currency). This was primarily due to continued (up £0.04 in constant currency). This was due to profit margin royalty revenue growth across all regions, up 10% in constant currency, expansion through continued sales growth of our premium Sexcel partially offset by growth in porcine product development due to the product, robust pricing strategies to mitigate cost inflation impacts start of operations at our Atlas facility in Canada. and effective cost management, including across our bovine product development investment. ### OTHER NON-FINANCIAL KEY PERFORMANCE INDICATORS | 6.04 | | | | | 82% | | --- | --- | --- | --- | --- | --- | | | 6.98 | | | 79% | | | | | 8.31 | 75% | | | 8.33 9.37 LINK TO LINK TO STRATEGIC PRIORITIES: STRATEGIC PRIORITIES: Measures the emissions intensity of the Group’s operations, Measures levels of employee engagement over time. which are largely driven by animal weight. DEFINITION: The primary intensity ratio is a measure of the Group’s DEFINITION: Employees’ response to the statement “I would Scope 1 and 2 emissions per tonne of animal weight. recommend a friend to work at Genus”. | | PERFORMANCE: The primary intensity ratio has reduced by 14.6% from | PERFORMANCE: Our employee engagement survey, Your Voice, is | | --- | --- | --- | | ENGAGEMENT SURVEY RESULTS PRIMARY INTENSITY RATIO BOVINE ADJUSTED OPERATING PROFIT PER DOSE (£) ADJUSTED OPERATING PROFIT PER MARKET PIG EQUIVALENT (£) | | | | | FY22. This is driven by improved efficiency of producing animals, improved | conducted every two years. No survey was carried out in FY23 | | 2022 2023 2023 2023 | manure management to reduce methane and nitrous oxide emissions, | although management remain focused on embedding the actions | | | and increased herd size. We have continued to invest in biogas capture, | which arose from the last survey in FY22. | | 2019 2022 2022 2022 | | | renewable energy generation and our elite genetics which have driven an The next survey will be conducted in FY24. 2017 2021 2021 2021 absolute reduction in our Scope 1 and 2 emissions in FY23. | 2020 2020 2020 | | | --- | --- | | 2019 2019 2019 | | | | 0.00 0.72 0.00 0.65 | ### 24 GENUS PLC / ANNUAL REPORT 2023 ### OPERATING REVIEW: PIC ## INCREASING ## OUR IMPACT ### BUSINESS PRIORITIESBUSINESS PRIORITIES SHORT TERM MEDIUM TERM LONG TERM Begin offering PRRSv- Expand availability of Continue to strengthen resistant pigs to customers PRRSv-resistant pigs and relationships with customers in target markets, once keep building our royalty by enhancing genetic gain, regulatory approval has business in China product performance and been received consistency of supply DR MATT CULBERTSON Chief Operating Officer Genus PIC STRATEGIC REPORT ### STRATEGIC PROGRESS IN 2022-2023 CREATE DIFFERENTIATED SERVE PROGRESSIVE PROTEIN SHARE IN THE PROPRIETARY GENETIC PRODUCERS EFFECTIVELY VALUE DELIVERED SOLUTIONS | • Continued to enhance | • Delivered growth across | • Grew royalty volumes | | --- | --- | --- | | genetic gain for target | all regions through strong | in China by 41%, while | | traits (including prolificacy, | product performance, | increasing the proportion | | throughput, carcass value | a robust supply chain and | of global business covered | 1 | and efficiency) | world-class support services | by royalty contracts to 85% | | --- | --- | --- | | • Expanded use of digital | • Increased our share of | • Increased the volume of | | phenotyping to four further | damline and sireline business | boars distributed through | | sites, helping us identify | with producers across North | our CBV Max programme, | | patterns in movement | America, contributing to a | in which our most elite genes | | and behaviour to aid | 9% rise in operating profit | command a higher price, | | improvement of robustness | • Continued to invest in our | by 80% | | and longevity | team, services and supply | • Commitment to improve the | | • Added three facilities | chain in China, enabling us | knowledge of our products | | to our nucleus network, | to increase operating profit | and to show the economic | | enhancing resilience of | by 32% despite challenging | benefits of using PIC’s | | supply and expanding | market conditions | genetics was shown through | | capacity in preparation | • Maintained momentum in | 61 product validation and | | for the marketing of | Latin America and Europe by | management trials in 10 | | PRRSv-resistant pigs | strengthening relationships | countries, involving over | | | with strategic accounts, | 98,000 pigs | enhancing operating profits 1 Genus Group (inc Brazil JV) by 12% and 6% respectively Actual currency Constant currency 2023 2022 Change change Year ended 30 June £m £m % % Revenue 349.5 306.6 14 7 Adjusted operating profit exc JV 135.0 112.3 20 11 Adjusted operating profit inc JV 145.3 121.2 20 11 Adjusted operating margin exc JV 38.6% 36.6% 2.0pts 1.6pts ### 25 GENUS PLC / ANNUAL REPORT 2023 Porcine markets around the world continued to face challenging ### NORTH AMERICA EUROPE conditions during the year. These | included economic uncertainty, | The US breeding herd declined slightly, with | The region experienced the greatest | | --- | --- | --- | | volatile pig prices and outbreaks of | slower production growth in the second | reduction in its breeding herd for 10 years | | disease, especially African Swine | half of the year as domestic demand was | and production contracted in major markets, | | Fever (ASF’) and PRRSv. China, the | lower in the face of rising inflation and | due to the ongoing economic, geopolitical | | world’s largest porcine market, | competition from other proteins. Pig prices | and regulatory challenges impacting the | | experienced greater volatility than | fell sharply as a result, reducing producer | agricultural sector. This led to tight supply, | | other markets. Pig prices in China | margins already under pressure from high | driving pig prices to record highs and | | averaged 18.8 RMB/kg through | input costs. However, exports continued to | significantly improving producer margins. | | the year and were much weaker | grow, aided by lower prices compared with | These factors, along with high feed costs, | | than expected in the second half, | some other markets and the weakening | disease challenges and declining pork | | averaging 14.7 RMB/kg since January. | US dollar. This was driven particularly by | exports, are likely to constrain industry | | | strong demand from China and Mexico. | recovery and sow herd growth in the future. | Price declines in many regions | caused significant pressure on | PERFORMANCE: The business performed | | PERFORMANCE: Despite challenging | | --- | --- | --- | --- | | producer margins. This, together | strongly throughout the year, with | | market conditions, breeding stock sales in | | with inflation increasing input costs, | market share gains across our customer | | relation to royalty contracts rose and led | | drove some producers to reduce | base through sales of both sireline | | to revenue growing by 20%. Rising royalty | | or delay replenishing their herds. | and damline products (volumes up 4% | | revenue, including double-digit growth | | | and 15% respectively). This was aided | | in Spain, PIC’s largest European market, | | Despite such challenging conditions | particularly by the continuing popularity | | and Russia, from previous expansion | | impacting porcine markets, PIC | | ® | | | | of the PIC800 | sire and Cambrough | projects, helped the business deliver | | increased adjusted operating profit | sow. The increases in market share and | | further growth in adjusted operating profit. | | by 11% as the business continued to | contributions from Olymel’s AlphaGene | | | | expand and strengthen commercial | programme drove strong royalty | | | | relationships with producers around | revenue growth and a double-digit | | | | the world. Volumes rose by 5%, aided | increase in adjusted operating profit. | | | by increased breeding stock sales in Europe and further growth in market share within North America. | | +9% | +4% | +8% | +9% | +8% | +20% | +9% | +6% | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Revenue growth across all regions | volumes | revenue | royalty | adjusted | volumes | revenue | royalty | adjusted | | resulted in overall revenue increasing | | | revenue | operating | | | revenue | operating | | | | | | profit | | | | profit | by 7% and strategically important royalty revenue rising by 10%. ### LATIN AMERICA ASIA All growth rates on this page are presented in constant In Mexico, pork prices were lower than the Volatility in the China porcine market currency, where relevant. | previous year but remained well above | continued through this fiscal year, with pig | | | --- | --- | --- | | the five-year average and rose again in | prices declining from a high of 28 RMB/kg | STRATEGIC REPORT | | the final quarter. Production increased | in October 2022 to 14 RMB/kg by the end of | | | slightly, as expected, but weaker domestic | June 2023. In addition, China experienced | | | demand meant many producers made | significant ASF outbreaks, which created | | | losses for much of the year, although they | high levels of pork inventory, and there | | | are now approaching or above breakeven. | was a slow recovery in domestic demand | | | In Brazil, declining feed prices fuelled an | following the relaxation of COVID-19 | | | increase in production and helped to meet | restrictions. All these factors resulted in | | | rising export demand, particularly from | many producers operating at a loss and | | | China. These exports, when combined with | remaining cautious. Elsewhere in the region, | | | seasonal domestic demand, helped pig | ASF outbreaks affected both Vietnam and | | | prices rise by over 10% in the final quarter, | the Philippines, although pork production | | | but strengthening producer margins. | is gradually growing in both markets. | | | PERFORMANCE: Lower breeding stock | PERFORMANCE: Rising sales in the | | | sales meant sales revenue declined. | Philippines and Asia franchise businesses, | | | However, strong royalty revenue from | including Vietnam and South Korea, led | | | Mexico, Chile, and Colombia, as well | to increased revenue. In China, market | | | as 14% growth in income from our joint | volatility caused a decline in breeding stock | | | venture with Agroceres, drove a double- | sales, but overall revenue remained stable, | | | digit increase in adjusted operating profit, | aided in particular by solid growth in royalty | | | with all the larger countries contributing. | revenue. The growth in royalty revenue, | | as well as the impact of a one-time £4m customer credit in the prior year, meant there was a double-digit rise in adjusted operating profit despite lower breeding stock margins and the impact of two disease outbreaks on joint venture farms in the second half of the year. Continued investment in China’s supply chain and biosecurity means Genus is well positioned to benefit as the market stabilises. | 0% | -6% | +12% | +12% | +0% | +3% | +20% | +32% | | --- | --- | --- | --- | --- | --- | --- | --- | | volumes | revenue | royalty | adjusted | volumes | revenue | royalty | adjusted | | | | revenue | operating | | | revenue | operating | | | | | profit | | | | profit | | | | | | (PIC China -1%) | (PIC China | (PIC China | (PIC China | | | | | | | stable) | +26%) | +62%) | ### 26 GENUS PLC / ANNUAL REPORT 2023 ### OPERATING REVIEW: ABS ## SHARING IN ## CUSTOMER ## SUCCESS ### BUSINESS PRIORITIES SHORT TERM MEDIUM TERM LONG TERM Implement actions arising Leverage our world-leading Drive innovative strategies to from our review of approach genetics, technology develop more sustainable to serving customers in and people to secure food systems through further core markets further partnerships with genetic progress STRATEGIC REPORT progressive producers DR NATE ZWALD Chief Operating Officer Genus ABS Dairy ### STRATEGIC PROGRESS IN 2022-2023 CREATE DIFFERENTIATED SERVE PROGRESSIVE PROTEIN SHARE IN THE PROPRIETARY GENETIC PRODUCERS EFFECTIVELY VALUE DELIVERED SOLUTIONS | • Expanded GENEadvance, | • Initiated an extensive review | • Grew UK beef pull-through | | --- | --- | --- | | the programme through | of our approach to serving | volumes, with over 700 farms | | which producers agree a | customers in core markets, | now committed to ABS supply | JERRY THOMPSON 100% partnership with ABS, to identifying key success chains, increased calf flow Chief Operating Officer more than 600 herds globally factors and sharing learning to the Schmucker network Genus ABS Beef | • Increased sales of Sexcel | between markets | in the US and established | | --- | --- | --- | | and Beef InFocus genetics, | • Expanded use of digital | new supply chains in Spain, | | so they now represent 75% | platforms, particularly in | France and the Netherlands | | of units for GENEadvance | Latin America, with nearly | • Continued to ensure | | customers | 30% of sales in Brazil now | GENEadvance contracts are | | • Expanded production | online (over 20% of Brazil’s | built around outcome-based | | of NuEra Genetics, our | digital sales this year were | pricing, which rewards us | | proprietary beef range, | to new customers) | for the progress we help | | and accelerated genetic | • Increased market share in | customers make towards | | improvement in our | key territories including Brazil, | their goals | | nucleus herds | US and China – despite | • Began five new product | | | challenging market | performance trials to | | | conditions in each – and | provide further evidence | | | achieved record results | of the superior value NuEra | | | in Australia | Genetics delivers across | the beef supply chain Actual currency Constant currency 2023 2022 Change change Year ended 30 June £m £m % % Revenue 318.8 272.0 17 12 Adjusted operating profit 43.6 40.5 8 5 Adjusted operating margin 13.7% 14.9% (1.2)pts (1.1)pts ### 27 GENUS PLC / ANNUAL REPORT 2023 Declining feed costs encouraged producers in Europe to maintain ### NORTH AMERICA EUROPE high levels of milk production, but | markets in Latin America were | Dairy demand remained stable, but milk | Lower input costs encouraged producers | | --- | --- | --- | | affected by high costs, drought | prices fell significantly in the second | to maintain milk production levels. | | and limited forage. Growth in China | half of the year. This reduced producer | Following highs in the previous year, | | was more modest than expected | margins, leading to higher herd culling | milk prices declined amid concerns over | | due to slow recovery following the | and feed ration changes, which is likely | weakening consumer demand in the face | | relaxation of COVID-19 restrictions. | to slow growth in milk production. The | of inflationary pressure. Beef production | | High inventory and weaker consumer | US beef herd contracted due to drought | across the region dipped and carcass | | demand led to reduced milk prices | conditions and production has declined | prices have begun to decline as more cows | | in Brazil and China, and prices | during 2023 to date, with tighter supply | are sent for slaughter in response to the | | in the US declined significantly | driving wholesale prices to approach | falling milk price, although it remains well | | in the second half of the year. | record highs. These have yet to impact | above the five-year average. Beef exports | | | retail demand, but the high prices | fell by more than 20% during the year, as | | Global beef production remained | and lower domestic production have | high carcass prices led customers in some | | steady, with dips in the US and | significantly reduced export volumes. | markets to source cheaper alternatives. | Europe offset by rises in Brazil and | Australia. Beef prices remained high | PERFORMANCE: Double-digit growth | PERFORMANCE: Increased sales in most | | --- | --- | --- | | in the US, but declined year-on-year | in revenue was driven by robust price | retail markets, particularly France and | | in Brazil due to high inventory and | increases, rising sales of sexed genetics | Russia, were partially offset by lower | | lower consumer spending power. | and ancillary products and services. | volumes in some distributor-led markets, | | Prices in Europe declined as more | This more than offset lower volumes | due to economic conditions and limited | | animals were sent to slaughter in | of conventional and beef genetics as | availability of certain types of bulls for | | response to the falling milk prices. | customers used sexed genetics to invest | those markets. However, both revenue | | | in more replacement heifers, rather | and adjusted operating profit rose | | Despite the challenging market | than beef by-product income. These | following targeted price increases and | | conditions, ABS continued to expand | activities, along with continued expansion | the expansion of GENEadvance long- | | and strengthen its partnerships | of our IntelliGen sexed processing for | term contracts with strategic accounts. | | with strategic accounts around | third-party customers, achieved a 17% | IntelliGen third-party business in the region | | the world. Through these exclusive | increase in adjusted operating profit. | continued to grow, with new customers | | relationships, ABS is developing and | | in Italy, the Netherlands and Israel. | delivering bespoke genetic plans and growing sales of Sexcel and NuEra beef genetics to accelerate | | +5% | +15% | +17% | +1% | +8% | +7% | | --- | --- | --- | --- | --- | --- | --- | | customer success. These relationships | volumes | revenue | adjusted | volumes | revenue | adjusted | | drove a 3% increase in volumes, | | | operating | | | operating | | | | | profit | | | profit | which more than offset lower sales of conventional beef and dairy genetics in some markets. More widely, the ### business continued to follow robust LATIN AMERICA ASIA STRATEGIC REPORT pricing strategies to mitigate the | impact of cost inflation and exercised | High costs, drought and limited forage | Milk production in China continued to | | --- | --- | --- | | effective cost management. Such | availability affected milk production | grow, albeit more slowly in the second half | | factors helped to deliver a 12% rise | in Argentina and Uruguay, reducing | of the year, but high domestic inventory | | in revenue, which translated into | producer margins. Milk production in Brazil | and weak consumer demand meant | | 5% growth in adjusted operating | remained subdued and previously rising | that milk prices declined. This led to | | profit, after taking account of the | prices are now declining due to lower | growing numbers of animals being sent | | impact of higher supply chain costs | consumer demand and the increase in | to slaughter, boosting beef production. | | following an IT incident in June 2022. | supply following imports. Strong beef | Slaughter volumes also increased | | | exports from Brazil were driven by growing | in Australia, but lower domestic milk | | All growth rates on this page are | demand from China in particular, but | production contributed to a double- | | presented in constant currency, | high inventory and lower consumer | digit reduction in exports. Growth in | | where relevant. | purchasing power impacted the domestic | India’s milk production slowed, despite | | | market. Demand for beef in Mexico | increasing consumer demand, due to the | | | remains steady and exports have recently | impact of disease outbreaks and rising | | | improved after a slow start to 2023. | costs, particularly for feed. Demand | for beef in Japan continued to fall. | PERFORMANCE: A transition from | PERFORMANCE: Overall volumes rose by | | --- | --- | | conventional to sexed genetics across | 8%, with double-digit growth in sales of | | the region, along with robust prices | sexed genetics in Australia, China and | | increases, led to a 12% rise in revenue on | India tempered by fewer deliveries through | | broadly stable volumes comparable to | our distributor network, particularly in | | the prior year. Growth and effective cost | Japan due to a market slowdown in | | management in Argentina supported | the second half of the year. Growth in | | an increase in adjusted operating | volumes in India was driven particularly | | profit there, although this was offset | by a contract with the Government | | by declines in other countries, primarily | of India and support for third-party | | Brazil, where there were challenging | customers through IntelliGen technology. | | market conditions that particularly | This increase in volumes, together with | | impacted the embryo business, along | significant strategic account growth in | | with high business cost inflation. | China, drove a 20% rise in revenue and 4% | increase in adjusted operating profit. | –1% | +12% | +0% | +8% | +20% | +4% | | --- | --- | --- | --- | --- | --- | | volumes | revenue | adjusted | volumes | revenue | adjusted | | | | operating | | | operating | | | | profit | | | profit | ### 28 GENUS PLC / ANNUAL REPORT 2023 ### OPERATING REVIEW: R&D ## ADVANCING ## INNOVATION ### BUSINESS PRIORITIES SHORT TERM MEDIUM TERM LONG TERM Gain regulatory approvals Achieve regulatory approval Continue using pioneering for PRRSv-resistant pigs for PRRSv-resistant pigs technology to enhance in the US, Colombia and in China and other target genetic gain, combat disease Brazil. Secure third-party markets and accelerate work and support a sustainable STRATEGIC REPORT customers for our dashboard on reproductive technology food system DR ELENA RICE integrating data from Chief Scientific Officer different instruments and Head of R&D ### STRATEGIC PROGRESS IN 2022-2023 GENE EDITING REPRODUCTIVE BIOLOGY • Completed data package submissions to • Introduced our new medium for embryo culture, seek approval for PRRSv-resistant pigs from which improves the quantity and quality of the Food and Drug Administration in the US, embryos produced, in commercial laboratories while also completing regulatory submissions • Expanded our work exploring how embryonic in Colombia and Brazil stem cells could enhance genetic gain, • Gained approval to import PRRSv-resistant pigs following encouraging results from initial to China, for in-country regulatory assessment research, and began a new collaboration • Continued to evaluate potential target edits with the University of Florida to combat Swine Influenza • Established several collaborations with academic partners to accelerate work on identifying target edits to combat African Swine Fever GENDER SKEW DATA STRATEGY • Continued to enhance the efficiency of • Completed implementation of our data our proprietary bovine sexing technology, analytics strategy, enabling us to link and increasing the number of straws produced query different data sets simultaneously from each bull and elicit faster and deeper insights to inform • Established a further three IntelliGen genetic improvement Technologies laboratories for third-party • Integrated data from different locations around customers and signed one technology transfer the world and developed dashboards to contract, licensing customers to use our monitor production performance, instrument process and instruments efficiency and quality control parameters: aiding our operations and establishing a new product offer for third-party customers ### 29 GENUS PLC / ANNUAL REPORT 2023 BOVINE PRODUCT DEVELOPMENT We continued to strengthen our proprietary range of NuEra beef genetics and to invest in further product trials, from which preliminary data shows positive performance against competitor genetics in areas such as feed efficiency and growth rates. We made further investments in our proprietary bovine sexing technology, enabling us to continue strengthening our capability to produce sexed genetics for ABS and for third-party customers through IntelliGen technology. GENE EDITING We made significant progress on our PRRSv-resistant pig programme, as we seek regulatory approval for our gene- edited animals in target markets around the world. This included completing data submissions to the FDA ahead of schedule and we expect approval in the first half of 2024. We are also making regulatory progress in Brazil and Colombia and we gained consent to import PRRSv- resistant pigs to China, for in-country regulatory assessment. In parallel, we continued to expand capacity across our nucleus network in preparation for the potential marketing of our gene-edited animals. We also continued to explore how responsible use of gene editing could combat other porcine diseases. This included evaluating potential target edits and establishing further collaborations with academic partners. Actual currency Constant STRATEGIC REPORT currency 2023 2022 Change change OTHER RESEARCH AND DEVELOPMENT Year ended 30 June £m £m % % Other research and development expenditure increased by 13%, compared Porcine product development 29.7 22.5 32 24 to the previous year. This enabled us to Bovine product development 24.9 22.7 10 1 make further progress with our pioneering Gene editing 14.3 7.9 81 66 work on reproductive biology, including Other research and development 17.4 14.0 24 13 collaborating with the University of Net expenditure in R&D 86.3 67.1 29 19 Florida to explore how embryonic stem cells could enhance genetic gain, and introducing a new medium for embryo culture, which improves the quantity and quality of embryos During the year, net research and PORCINE PRODUCT DEVELOPMENT produced in commercial laboratories. development expenditure rose by 19% Porcine product development made in constant currency as planned. This further progress on genomic selection and The increased investment also helped increase enabled further investment enhanced genetic gain for target traits, us develop our work on biosystems in a wide range of areas, including the including prolificacy, throughput, carcass engineering and data analytics, with research and development pipeline, value and efficiency. We also expanded progress in the latter area enabling new technologies, gene editing projects our use of digital phenotyping to four us to link and query different data and product development initiatives. further sites, helping us identify patterns sets simultaneously and elicit faster in movement and behaviour to aid and deeper insights to inform genetic improvement of robustness and longevity. improvement. We also continued to These advances, along with continued collaborate with external partners expansion of our global supply chain on a series of discovery projects. (including the addition of three facilities to our nucleus network) enabled us to enhance resilience of supply for customers ## +19% around the world. Product development costs increased by 24% during the year, net research and due principally to the start of operations development at our Atlas facility in Canada. Higher feed expenditure prices during the year also contributed to the increase in expenditure. ### 30 GENUS PLC / ANNUAL REPORT 2023 ### FINANCIAL REVIEW ## SOLID ## PERFORMANCE AND ## GOOD STRATEGIC ## PROGRESS STRATEGIC REPORT ## In the year, the ## Group achieved ## revenue growth ## of 16% in actual ## currency (10% in ## constant currency). ALISON HENRIKSEN Chief Financial Officer 31 GENUS PLC / ANNUAL REPORT 2023 | Year ended 30 June | Adjusted results | | | Statutory results | | | | --- | --- | --- | --- | --- | --- | --- | | | Actual currency | | | Actual currency | | | | | 2023 £m | 2022 £m | Change % | 2023 £m | 2022 £m | Change % | | Revenue | 689.7 | 593.4 | 16 | 68.7 | 593.4 | 16 | | Operating profit | 74.6 | 68.8 | 8 | 40.5 | 49.4 | (18) | | Operating profit inc JVs | 85.8 | 77.7 | 10 | n/a | n/a | n/a | | Operating profit inc JVs exc gene editing | 100.1 | 85.6 | 17 | n/a | n/a | n/a | | Profit before tax | 71.5 | 71.5 | - | 39.4 | 48.4 | (19) | | Free cash flow | 18.2 | (13.5) | n/a | 39.4 | 48.4 | (19) | | Basic earnings per share (pence) | 84.8 | 82.7 | 3 | 50.8 | 62.5 | (19) | | Dividend per share (pence) | - | - | - | 32.0 | 32.0 | - | 1. Adjusted results are the alternative Performance measures (APPs) used by the Board to monitor underlying performance at a Group and operating segment level, which are applied consistently throughout. These APPs should be considered in addition to, and not as a substitute for all as superior to statutory measures. For more information on APPs, see APPs Glossary. 2. Constant currency percentage movements are calculated by representing the results for the year ended 30 June 2023 at the average exchange rates applied to adjusted operating profit for the year ended 30 June 2022. In the year ended 30 June 2022, the Group achieved revenue growth of 8% in actual currency (10% in constant currency). Adjusted operating profit including joint ventures was up 10% (3% in constant currency), reflecting good profit growth across our businesses, and was 17% higher (9% in constant currency) before gene editing costs. R&D investment increased by 29% (19% in constant currency), as planned due to an increase in gene editing costs as we move slower to commercialisation of the PRRS-resistant pig and higher porcine product development costs, primarily due to the start of operations at our Atlas Facility in Canada. On a statutory basis, profit before tax was £394m (2022: £48.4m). The difference between the movement in statutory and adjusted profit before tax was mainly due to a reduction in the non-cash fair value of 165.41 porcine biological assets, and a higher share-based payment charge. Basic earnings per share on a statutory basis were 50.8 pence (2022: 62.5 pence). Adjusted profit before tax remained at £71.5m (down 8% in constant currency), with the improved trading performance being offset by higher interest expense, which increased from £6.2m to £14.3m (up 24% in constant currency). The effect of exchange rate movements on the translation of overseas profits was to increase the Group's adjusted profit before tax for the year by £5.4m, compared with 2022, primarily due to the strength of the Brazilian Real and Mexican Peso against Sterling during the year. All growth rates quoted are in constant currency unless otherwise stated. Constant currency percentage movements are calculated by representing the results for the year ended 30 June 2023 at the average exchange rates applied to adjusted operating profit for the year ended 30 June 2022. # REVENUE Revenue increased by 16% (10% in constant currency) to £689.7m (2022: £593.4m). PIC's revenue rose by 14% (7% in constant currency) with growth across all regions and a double-digit increase in strategically important royalty revenue. In ABS, revenue was up 17% (10% in constant currency), reflecting the continuing success of Genus's sexed genetics and NuEra beef genetics as well as the implementation of robust prices increases to offset the effects of cost inflation. # ADJUSTED OPERATING PROFIT INCLUDING JVs | Year ended 30 June Adjusted Profit Before Tax | Actual currency | | | Constant Currency Change % | | --- | --- | --- | --- | --- | | | 2023 £m | 2022 £m | Change % | | | Genus PIC | 145.3 | 121.2 | 20 | 11 | | Genus ABS | 43.6 | 40.5 | 8 | 5 | | R&D | (86.3) | (67.1) | (29) | (19) | | Central costs | (16.8) | (16.9) | 1 | 1 | | Adjusted operating profit inc JVs | 85.8 | 77.7 | 10 | 3 | | Net finance costs | (16.3) | (6.2) | (13) | (12.4) | | Adjusted profit before tax | 71.5 | 71.5 | 0 | (8) | 1. Includes share of adjusted pre-tax profits of joint ventures and services share of adjusted profits of non-controlling interests. Adjusted operating profit including joint ventures was £85.8m (2022: £77.7m), 3% higher in constant currency. The Group's share of adjusted joint venture operating profit, primarily from our Brazilian joint venture with Agroceres, was higher at £10.8m (2022: £9.2m). Gene editing investment, which is primarily focused on the PRRS-resistant pig programme, increased to £14.3m (2022: £7.9m) as planned. This enabled us to continue expanding our population of gene-edited animals and increase preparation for commercialisation. Adjusted operating profit including joint ventures and excluding gene editing investment was £100.3m (2022: £85.6m), 9% higher in constant currency. Over the last five years our compound annual growth rate in this profit measure remains at 10% in constant currency, in line with our medium-term objective. PIC's performance was a record level, with adjusted operating profit including joint ventures up 13% in constant currency. Volumes were up by 5% and strategically important royalty revenue was up 10%, with increases across all regions. ABS's volumes rose by 3% and adjusted operating profit also rose by 5%. Demand for Sexual, our proprietary bovine sexed product, continued to increase, as well as our IntelliGen third-party sexed processing, supporting an 18% rise in sexed volumes and further growth in our proprietary NuEra beef genetics. There was adjusted operating profit growth across most regions, with North America increasing adjusted operating profit by 17% in constant currency. Latin America's profits were stable, despite the region continuing to suffer from challenging market conditions. Europe's adjusted operating profit grew by 7%, due to growth across most countries, and in Asia adjusted operating profit was 4% higher, due to strong growth in our India IntelliGen business. Central costs were stable, at £16.8m (2022: £16.9m) in constant currency, primarily due to prudent cost management. STRATEGIC REPORT 32 GENUS PLC / ANNUAL REPORT 2023 # FINANCIAL REVIEW CONTINUED STATUTORY PROFIT BEFORE TAX The table below reconciles adjusted profit before tax to statutory profit before tax: | | 2023 £m | 2022 £m | | --- | --- | --- | | Adjusted Profit Before Tax | 71.5 | 71.5 | | Operating profit attributable to non-controlling interest | (0.4) | 0.3 | | Net IAS 41 valuation movement on biological assets in JVs and associates | 3.6 | (1.4) | | Tax on JVs and associates | (3.9) | (2.6) | | Adjusting items: | | | | Net IAS 41 valuation movement on biological assets | (16.9) | (5.4) | | Amortisation of acquired intangible assets | (7.7) | (8.3) | | Share-based payment expense | (6.0) | (3.7) | | Other gains and losses | 2.7 | | | Exceptional items | (3.5) | (2.0) | | Statutory Profit Before Tax | 39.4 | 48.4 | Statutory profit before tax was £39.4m (2022: £48.4m), with improved trading performance being offset by higher interest expense, a higher non-cash fair value net charge for IAS 41 biological asset movement, higher share-based payment expenses and higher net exceptional items. Within this, there was a £24.9m reduction (2022: £24.5m uplift) in porcine biological assets, primarily due to the temporary destocking of the Aurora farm in Canada to complete a facility and health upgrade, and a £8.0m uplift (2022: £29.9m reduction) in bovine biological assets, due to certain fair value model estimate changes. Share-based payment expense was £6.0m (2022: £3.7m). These reconciling items are primarily non-cash, can be volatile and do not correlate to the underlying trading performance in the year. # EXCEPTIONAL ITEMS There was a £3.5m net exceptional expense in the year (2022: £2.0m net expense), which included legal fees of £5.4m (2022: £1.4m) primarily related to Genus ABS's ongoing litigation with STgenetics and a £0.9m credit for a part that was settled during the year. It also included a £1.7m credit relating to an in-year sale of our Canadian ABS facilities, following the prior year ABS restructuring. The prior year benefited from a £3.3m credit relating to a non-refundable cash receipt related to a legacy legal claim in Brazil, and £2.8m of restructuring expense, principally related to the closure of ABS supply chain loans in Canada and £0.5m of one-time costs to resolve an IT security incident. # NET FINANCE COSTS Net finance costs increased to £14.3m (2022: £6.2m), primarily due to interest rate rises during the year. Average interest rates more than doubled to 6.9k% (2022: 2.27%), raising the cost of like-for-like borrowings by £4.6m. Average borrowings increased by 50% to £226.9m (2022: £173.9m), primarily due to the cash investments in the prior period on supply chain capacity and the acquisition of Olymel's AlphaGene programme, resulting in a further £2.6m increase in interest costs in this year. The interest rate increases were partially mitigated by the Company's fixed interest cover, which reduced the impact of rate increases by around £0.0m. Amortisation costs in the year were £1.1m (2022: £0.9m) and within other interest there was IFRS 16 finance lease interest of £1.2m (2022: £1.1m) and both a discount interest unevind on the Group's pension liabilities and put options totalling £0.5m (2022: £0.4m). Foreign interest in the year was an expense of £0.2m (2022: £0.3m income). # TAXATION The statutory profit tax charge for the period, including share of income tax of equity accounted investees, of £11.5m (June 22: £14.3m) represents an effective tax rate (ETR) of 26.6% (June 22: 28.0%). The reduction in the statutory ETR of 1.4 points results from the recognition of additional deferred tax assets, net of increased UK and foreign tax rates, as explained further below. The adjusted profit tax charge for the year of £15.9m (June 22: £17.4m) represents an ETR on adjusted profits of 22.2% (June 22: 24.3%), a reduction of 2.1 points. Of this, a decrease of 6.2 points is due to the recognition of deferred tax assets for brought forward losses in Genus's Australia and France subsidiaries. This is offset by a 1.5 point increase, due to the rise in the UK and Consolidation Tax rates from 19% to 20.5%, and by a further 2.6 point increase in overseas taxes during the year. These higher overseas taxes are due to an increased share of Group profits in higher tax jurisdictions and reduced tax credits relating to agricultural activity in China. The Group's anticipated adjusted ETR for 2024 is 26% to 27%, which is higher than the current year due to the full year impact of the UK tax rate increase to 25% that took effect from April 2023 and the above noted change in profit mix to higher tax rate jurisdictions. # EARNINGS PER SHARE Adjusted basic earnings per share increased by 3% (5% reduction in constant currency) to 84.8 pence (2022: 82.7 pence), reflecting the improved trading performance and lower effective tax rate and offset by higher interest expenses. Basic earnings per share on a statutory basis were 50.8 pence (2022: 62.5 pence), taking into account the factors above and the impact of a higher non-cash fair value net charge for IAS 41 biological asset movement, higher share-based payment expenses and higher net exceptional items. # BIOLOGICAL ASSETS A feature of the Group's net assets is its substantial investment in biological assets, which under IAS 41 are stated at fair value. At 30 June 2023, the carrying value of biological assets was £364.7m (2022: £387.7m), as set out in the table below: | | 2023 £m | 2022 £m | | --- | --- | --- | | Non-current assets | 318.2 | 333.7 | | Current assets | 23.8 | 33.1 | | Inventory | 22.7 | 20.9 | | | 364.7 | 387.7 | | Represented by: | | | | Porcine | 242.7 | 278.8 | | Dairy and beef | 122.0 | 108.9 | | | 364.7 | 387.7 | The movement in the overall balance sheet carrying value of biological assets of £23.0m includes the effect of an exchange rate translation decrease of £17.2m. Excluding the translation effect there was: - a £23.7m reduction in the carrying value of porcine biological assets, due principally to the depopulation of animals held in Aurora, our genetic nucleus farm in Canada, in preparation for an upgrade to the farm facilities and health status, and higher global interest rates which impact the valuation discount rates; and - a ETRP increase in the bovine biological assets carrying value, primarily reflecting increases in average selling prices. The historical cost of these assets, less depreciation, was £83.4m at 30 June 2023 (2022: £77.2m), which is the basis used for the adjusted results. The historical cost depreciation of these assets included in adjusted results was £13.4m (2022: £10.7m). STRATEGIC REPORT 33 GENUS PLC / ANNUAL REPORT 2023 # **RETIREMENT BENEFIT OBLIGATIONS** The Group's retirement benefit obligations at 30 June 2023 were £6.9m (2022: £8.3m) before tax and £5.6m (2022: £7.0m) net of related deferred tax. The largest element of this liability now relates to some legacy unfunded pension commitments dating prior to Genus's acquisition of PIC. Despite difficult stock market conditions, robust investment strategies and higher bond yields during the year mean our two main defined benefit obligation schemes remained in sound financial positions. Prior to any IFRIC 14 amendments, both the Dalgerty Pension Fund and our share of the MIA Pension Fund reported IAS 19 surpluses. # **CASH FLOW** | Cash flow (before debt repayments) | 2023 £m | 2022 £m | | --- | --- | --- | | Cash generated by operations | 78.7 | 56.6 | | Interest and paid taxes | (28.3) | (22.3) | | Capital expenditure | (35.2) | (50.0) | | Net cash received from JVs | 0.7 | 3.2 | | Other | 2.3 | (0.1) | | Free cash flow | 18.2 | (13.5) | | Acquisitions and investments | 1.2 | (10.5) | | Dividends | (21.0) | (20.0) | | **Net cash outflow (before debt repayments)** | **(1.6)** | **(5.9)** | Cash generated by operations of £78.7m (2022: £56.6m) represented cash conversion of 100% (2022: 82% of adjusted operating profit including joint ventures). The cash conversion rate of adjusted operating profit to cash exceeded our objective to achieve conversion of at least 90% annually. We expect to continue meeting this objective in the coming year. The increase in cash generation primarily reflected a record adjusted EBITDA performance of £110.6m (2022: £99.9m), along with lower working capital and biological asset outflows. Working capital improvement was aided particularly by focused accounts receivable collections, which improved days sales outstanding by 8 days to 48 days. Capital expenditure cash flow of £35.2m (2022: £50.9m) was significantly lower as planned, after our peak year of investment in 2022. Spend included £19.8m of continued investment in our global facilities, as well as work to upgrade our Whenby UK facility, further investment in global IntelliGen capabilities and investment in software development, including the continued rollout of our GenusOne platform and improvements to our digital platform. Net cash inflow from joint ventures was £0.7m (2022: £3.2m). After interest and tax paid, total free cash flow was £18.2m inflow (2022: £13.5m outflow). The cash inflow from investments was £1.2m (2022: £19.5m outflow), with proceeds from the sale of Caribou shares of £3.4m being offset by investments in our China joint ventures of £1.0m, to increase production capacity, and £0.8m of deferred consideration payments from previous acquisitions. The prior-year investments included £4.5m to acquire the intellectual property in Olympic's elite porcine genetics. # **NET DEBT AND CREDIT FACILITIES** Net debt increased to £195.8m at 30 June 2023 (2022: £185.0m). Cash inflows and outflows in the year largely balanced, with the increase in net debt primarily driven by new lease agreements. The ratio of net debt to EBITDA as calculated under our financing facilities at the year-end has reduced to 1.6 times (2022: 1.7 times) which remains in line with our medium-term objective of having a ratio of net debt to EBITDA of between 1.0–2.0 times. At the end of June 2023, interest cover was at 10 times (2022: 27 times). During the year, the Group's principal credit facilities comprised a £190m multi-currency revolving credit facility (WCF), a USD 150m RCF and a USD 20m bond and guarantee facility. An additional £40m of accordion facility remains available for the duration of the facility agreement. The maturity date of the facility was extended by a further year in August 2022, to 24 August 2025. EBITDA, as calculated under our financing facilities, includes cash received from joint ventures. Net debt as calculated under our financing facilities excludes IFRS 16 lease liabilities up to a cap of £30m but includes bank guarantees. On 30 June 2023, the Group had headroom of £118.7m (2022: £77.8m) under its available credit facilities. # **CAPITAL ALLOCATION PRIORITIES AND RETURN ON ADJUSTED CAPITAL** Our capital allocation prioritises the investment of cash in areas that will deliver future earnings growth and strong cash returns on a sustainable basis. This includes investment for organic growth as a first priority through investment in our existing businesses, including capital expenditure in infrastructure, innovation in new products and the development of our people. We supplement organic growth with value enhancing acquisitions in current and adjacent market niches, aligned with our purpose. This brings new technology, intellectual property and talent into the Group and expands our market reach, keeping Genus well-positioned in growing markets over the long term. The return on adjusted invested capital, as defined in the alternative performance measures glossary, was higher at 14.7% (2022: 13.9%), reflecting growth of 14% in adjusted operating profit including joint ventures after tax to £66.8m (2022: £58.8m), due to the 10% increase in operating profit including joint ventures, and a 2.1 point improvement in the adjusted effective tax rate. Adjusted invested capital increased at a slower rate, by 8% to £455.0m (2022: £422.0m), as we continued to invest in facilities, IntelliGen capacity, digital capability and our biological assets. # **DIVIDEND** Recognising the importance of balancing investment for the future with ensuring an attractive return for shareholders, the Board is recommending a final dividend of 21.7 pence per ordinary share, consistent with the prior year final dividend. When combined with the interim dividend, this will result in a total dividend for the year of 32.0 pence per ordinary share (2022: 32.0 pence per share). Dividend cover from adjusted earnings of 2.7 times (2022: 2.6 times), is within the medium-term target of an adjusted earnings cover range of 2.5 to 3.0 times. It is proposed that the final dividend will be paid on 8 December 2023 to the shareholders on the register at the close of business on 10 November 2023. STRATEGIC REPORT ![img-2.jpeg](img-2.jpeg) ### 34 GENUS PLC / ANNUAL REPORT 2023 ### PEOPLE AND CULTURE ## PASSIONATE AND ## PURPOSE-DRIVEN ## PEOPLE Our global jobs framework maps out career paths for colleagues and clarifies ### Across 24 countries, we the skills and competencies needed to ### employ a global team of support their development and career progression. This year, we also introduced ### 3,500 colleagues, many a global jobs portal to help colleagues ### of them world-leading search and apply for vacancies around the world. This also enables employees ### experts in their field. to upload CVs and career goals, to STRATEGIC REPORT aid internal talent sourcing for roles. ANGELLE ROSATA Group HR Director We offer a wide range of training and development opportunities to help our MAINTAINING OUR CULTURE people progress through career paths, We nurture an open, supportive and including the bespoke leadership and enjoyable working environment, built on management programmes explored mutual respect and equal opportunity. opposite. We also empower colleagues ## We empower, equip Our Company values remain at the heart to advance their own development of this culture. Our global employee through a suite of on-demand courses ## and support our handbook sets out behaviours expected and content, with much of the material of all Genus employees to ensure a available in multiple languages. ## talented global workplace free from discrimination of All employees also take a series of any kind. We embed this philosophy in mandatory annual training modules, ## team to fulfil practice through recruitment, onboarding, including on our Code of Conduct and training and performance management. role-specific health and safety topics. ## their potential. These steps are helping us build an increasingly diverse team and inclusive REVIEWING PAY AND BENEFITS Company. Examples include our ongoing We regularly review our range of focus on recruiting, developing and employee benefits to ensure it caters promoting more women across the for colleagues with different needs, Company. We are continuing to enhance making improvements where we inclusion of people with different needs, identify opportunities. This year, with steps including the establishment we also introduced a new benefits of a Company-wide minimum level of ### OUR VALUES portal in several countries to increase leave for parents or carers when a new understanding of, and access to, benefits child joins their family (through natural information and well-being resources. birth, adoption or a long-term fostering CUSTOMER CENTRIC arrangement). Our employee resource This year, we also launched TakeStock, group AWAKE (Advancing Women’s a new share plan enabling employees Advocacy, Knowledge and Empowerment) to become shareholders in the business. is also helping us strengthen efforts RESULTS DRIVEN Employees receive one free share for to enhance gender inclusion. every three purchased. We introduced the plan in the US and UK, with over 25% of eligible employees taking part, spanning ATTRACTING AND DEVELOPING TALENT PIONEERING all segments of our workforce. To build on We continue to offer a wide range of this success, we are now exploring how we internships, trainee schemes and graduate can roll out this plan in other countries. programmes in different parts of the PEOPLE FOCUSED | world. Since 2018, for example, we have | More widely, we continue to benchmark | | --- | --- | | attracted nearly 175 people to join our | local pay in the markets where we operate, | | programmes in the UK and North America. | to ensure we are offering a competitive | | This year, we received recruitment | package to attract and retain talent. | RESPONSIBLE industry recognition for our early career hiring programme in North America. ### 35 GENUS PLC / ANNUAL REPORT 2023 ENHANCING ENGAGEMENT We continue to increase employee involvement in the Company through a multimedia communication and engagement programme (from newsletters and videos to town halls and CEO round table discussions). Our two Non-Executive Director ‘employee representatives’, Lesley Knox and Lykele van der Broek, also held a breakfast discussion with employees at our Uberaba site in Brazil, gathering feedback and insights that they shared with the Board. We introduced our new CEO, Jorgen Kokke, to colleagues across the Company through a range of communications. Jorgen also held informal discussions and Q&A discussions with colleagues on site visits during his onboarding programme. We are planning our next global employee engagement survey, Your Voice, for late 2023. ### DEVELOPING LEADERS We complement these activities with ### SAFEGUARDING HEALTH AND SAFETY Our global jobs framework, training on behavioural competencies, We maintained our focus on continuous ### which contains career helping people managers role model improvement of health and safety, our values. We also offer an annual CEO ### with developments this year including paths for each role across Scholarship, which helps an aspiring a redesign of health and safety ### Genus, has strengthened leader accelerate their development audit reports, which are shared with by sponsoring them for a part-time ### conversations regarding a wide range of leaders and key or online leadership programme. ### stakeholders to enhance understanding career goals, development of performance and inspire action This year, we also held our first Global ### and progression. It also on findings. We also introduced a STRATEGIC REPORT Leadership Conference since COVID-19. ### dashboard for managers, providing underpins a process that This drew together more than 100 leaders real-time incident data for their teams. to review business progress, align with ### invests in tailored support peers and learn from external speakers. ### More widely, we continued to support for colleagues at different employee wellbeing through a range ### stages of their career. of initiatives. These included holding a series of webinars exploring different Our process spans four key elements: aspects of mental well-being, in support of World Mental Health Day. • Learning through online courses and content, either on an individual’s own ## Our recordable injury rate for the year 62% initiative or following discussion with was 2.03 incidents per 100 employees, their manager slightly lower than last year and in line of people managers have • Targeted training for front-line people with our target of a 5% reduction year-on- completed a leadership leaders, relevant to both new and year (which we established three years development programme experienced managers ago). We also reduced vehicle incidents • A programme to help colleagues by 13% compared to the previous year, transition from leading individuals For details of current career surpassing our 5% reduction target. to leading teams opportunities at Genus, please visit • Support for colleagues who lead www.genusplc.com/work-for-us other leaders ROUTES FOR RAISING CONCERNS We have established a range of routes, available in multiple languages, through which employees can raise any issues We monitor this through the same HUMAN RIGHTS about unethical behaviour, including an process used for the policies independent and anonymous hotline Genus is committed to respecting the outlined earlier and there were no (which supports our whistleblowing human rights of workers throughout our issues identified during the year. policy). Any reports are immediately value chain and the local communities in referred to the Group General Counsel which we operate. We aim to ensure that and Company Secretary. They are anyone who might be affected by Genus investigated and discussed with the Group can enjoy the human rights described HR Director, Head of Risk Management in the International Bill of Human Rights and Internal Audit and the Company’s and the ILO Declaration on Fundamental Audit & Risk Committee. This process is Principles and Rights at Work. regularly reviewed as part of our annual Audit & Risk Committee activity. ### 36 GENUS PLC / ANNUAL REPORT 2023 ### SUSTAINABILITY REPORT ## SUSTAINABILITY ## AT THE HEART OF ## OUR BUSINESS Our operations will always have animal- We are continuing to focus on efforts to related emissions associated with them, improve health and safety standards across ### Our genetic improvement so our environmental focus is on delivering our business. We set and monitor progress ### work is directly focused on practical solutions to reduce or offset our of key performance indicators (see pages 38 2 residual emissions to net zero by 2050 , to 39). We also ensure employees have ### helping farmers to meet the whilst our genetic improvement programmes multiple routes to raise any concerns ### challenge of producing more will make our animals more efficient. (including the independent whistleblowing hotline explained earlier (page 35 Routes for ### healthy and happy animals We fulfil our commitment by challenging Raising Concerns). ### with less resources. ourselves and those around us to think differently. From small improvements During the year Genus was not subject to in working practices to innovations any enforcement action by regulators in STRATEGIC REPORT that address stakeholder needs, we any jurisdiction where we operate for Sustainability lies at the heart of our constantly develop and explore new health, safety or environmental reasons. business. It informs our purpose of ideas for enhancing our contribution and We had no environmental incidents and pioneering animal genetic improvement delivering positive, sustainable change. continued to maintain high standards to help nourish the world and infuses To reflect the importance of sustainability across the business. the core values that shape our work, to our business, we continued to every day. refine our governance to ensure that External assurance sustainability issues are receiving focus DNV Business Assurance Services UK We make a positive contribution to the at the highest levels of our organisation. Limited (‘DNV’) were commissioned by world around us. According to the UN, Our Sustainability Committee, chaired Genus to provide limited assurance over today the global population is over eight by the Chief Executive, is attended by selected information presented in the 2023 billion people and is projected to reach our executive team, along with Lysanne Annual Report for the FY23 reporting year. 9.7 billion people by 2050. Our genetic Gray, our Non-Executive sustainability The scope of the assurance was designed improvement work is directly focused on champion. The Committee’s activities are to reflect some of the important FY23 helping farmers to meet the challenge reported directly to the Board of Directors, sustainability goals and was restricted to of producing meat and milk more ensuring that oversight of sustainability the non-financial metrics identified below: efficiently and sustainably, increasing the is a matter for the Board as a whole. • total Scope 1 emissions – combustion of availability of high-quality, affordable fuel, own transport and livestock animal protein around the world. This For Genus, sustainability also means emissions; challenge is exacerbated by global ensuring our operations around the world • total Scope 2 emissions – purchased climate change, and the risks to food are underpinned by policies and practices electricity (and renewable generated), security which flow from it. As a result of which reflect our core principles such as steam, heat and cooling; bovine and porcine genetic improvement, the protection of animal well-being, • total energy consumed; our customers require fewer animals and supporting community causes, and • the percentage of women in use far less land, water and other natural ensuring we foster a dynamic, inclusive management roles; and resources to produce more milk or meat and safe working environment for our • for health and safety, the recordable than they did some decades ago. We people. We articulate expectations, injury frequency rate. are therefore providing fundamental provide information and deliver training sustenance to the world whilst reducing where needed to embed responsible We have published DNV’s the impact agriculture has on the business practices across our organisation Assurance Statement on our environment. We continue to drive our and the people we work with. website with its observations and genetic improvement and gene editing opportunities for improvement see: programmes as we aim to lead the market For more information, refer to: www.genusplc.com/sustainability/ in sustainable animal protein production. www.genusplc.com/sustainability. policies-and-reports/. In parallel, we continue to reduce the Genus commits to equality across all of its environmental impact of our own businesses. It recognises these targets are operations, guided by our Climate Change challenging given the current availability of Policy. This policy, which is available on the women within the overall global agriculture Company’s website, commits us to a 25% workforce. Our People and Culture reports 1 reduction in our primary intensity ratio provide information on the targets we have 1 More information can be found on our website: against our 2019 baseline by 2030, and internally to promote or recruit more women www.genusplc.com/sustainability becoming a net zero greenhouse gas Full details of how we measure the primary intensity to management grade roles. The agriculture | (‘GHG’) emissions business by 2050. | | ratio can be found in our Basis of Reporting for | | --- | --- | --- | | | sector has an unenviable safety record both | Non-Financial Metrics | | | here in the UK and internationally, and we | 2 Becoming a net zero business means that our | | | are seeking to be class leaders in this area. | business activities and our value chain will have no | net impact on the climate from our GHG emissions ### 37 GENUS PLC / ANNUAL REPORT 2023 ### SUSTAINABILITY STRATEGY ### Our sustainability strategy ### comprises five pillars which ### support our purpose. ### H A N D D E V E L O ### A R C P M ### S E E N ### R E T ### ANIMAL ### WELL-BEING ### RESPONSIBLE ### ENVIRONMENT ### EMPLOYER OF ### CHOICE ### PIONEERING ### SUSTAINABLE ### ANIMAL GENETIC ### PROTEIN ### PRODUCTION AND IMPROVEMENT ### COMMUNITY ### FOOD QUALITY ### TO HELP NOURISH ### THE WORLD STRATEGIC REPORT ### GOVERNANCE Underpinning our strategy is a strong decision making and governance system ### BOARD AND CLIMATE TRAINING AND RISK ### MANAGEMENT CHANGE AND DEVELOPMENT MANAGEMENT ### OVERSIGHT OTHER POLICIES ### AND STANDARDS Our progress with our sustainability strategy, ### PROGRESSING OUR including key performance indicators ### SUSTAINABILITY STRATEGY where relevant, is summarised overleaf. For more information on our work, ### Our Sustainability Committee contains progress against the five pillars of ### experts from around our global Company. our strategy and our Sustainability Committee, please see our website: ### The Committee sets our sustainability www.genusplc.com/sustainability ### strategy, articulates annual objectives ### and monitors progress. ### 38 GENUS PLC / ANNUAL REPORT 2023 ### SUSTAINABILITY REPORT CONTINUED SUSTAINABILITY OBJECTIVE HIGHLIGHTS IN FY23 FY24 GOALS (AND RELATED SDG) SUSTAINABLE PROTEIN • Genetic improvement targets have • Continue driving porcine and bovine genetic PRODUCTION AND been met for the year. improvement and rapidly disseminate the genetics FOOD QUALITY • The PRRSv project is on track. to customers globally by: Advancing animal genetic • The Life Cycle Assessment (‘LCA’) for the (i) increasing porcine genetic improvement index 1 improvement to help our porcine business is nearing completion by 0.75 standard deviation per generation customers breed more for North America and Europe. Data for (ii) increasing dairy genetic improvement index 1 productive and resilient China and Japan is being sourced and by one standard deviation per generation animals which produce validated for the standard market pig to (iii) increasing beef genetic improvement index 1 | high-quality milk and meat | act as a comparator against our elite | | by one standard deviation | per generation | | --- | --- | --- | --- | --- | | more efficiently and | genetics and our PRRSv-resistant pigs. | • Using LCA to quantify the potential reduction of | | | | sustainably | • LCA work for our T14 beef cattle has | GHG emissions from the use of PIC genetics and | | | | | commenced and will follow the same | PRRSv-resistant pigs. | | | | | approach as used for the porcine LCA. | • Using LCA to quantify the benefits and reduction | | | zero hunger | | • UK Biotechnology and Biological | of GHG emissions from the use of T14 beef cattle. | | --- | --- | --- | | | Sciences Research Council project with | • Working on projects to understand the common | | | Roslin/Scotland’s Rural College (‘SRUC’) | causes of early death on US beef feedlots, and the | | productivity and | to look at inheritability of traits linked | impact of genetic selection. | | incomes of small-scale | to enteric methane emissions has | • Working with Innovate UK and SRUC to examine the | | food producers | been started. | impact of genetics and the micro-biome in T14 and | T15 beef cattle to drive reductions of GHG emissions. strengthen resilience and adaptive capacity to climate-related hazards and natural disasters in all countries STRATEGIC REPORT | ENVIRONMENT | | • Initiated manure methane capture at | • Examine and quantify water and waste use to better | | | --- | --- | --- | --- | --- | | Reduce the environmental | | slurry ponds at our PIC Aurora facility. | determine risks and opportunities. | | | impact of our own operations | | • Initiated an energy contract for all of | • Pilot project to install electricity sub-metering at | | | | | our UK facilities that ensures use of | a UK site to better assess energy savings and the | | | | | renewable electricity. | benefits of solar photovoltaics. | | | | waste/manures | • Commissioned independent external | • Transitioning to hybrid and electric vehicles for | | | | | assurance of our Scope 1 and 2 emissions. | all new pool vehicles in the UK. | | | | | • Captured and validated remotely | • Continue our investment in renewable energy | | | | | sensed satellite carbon data for 11 | projects at: | | | | renewables and | Genus facilities. This project was | (i) Bluegrass (US) – anaerobic digestion | | | | energy efficiency | cancelled as the technology did not | (ii) Aurora (US) – biogas project commission | | | | | meet our expectations. | | and assess investment opportunities | | | | • Initiated solar projects in Cheshire (UK), | (iii) Atlas and Aurora (US) – solar photovoltaics | | | | low carbon transition | Cremona (Italy), and Atlas (Canada). | • Continue to implement an energy efficiency | | | | | • Manure management project at | programme, with energy audits in the UK at key | | | | | the Dekorra site in Wisconsin (US) | facilities and an updated UK energy savings plan. | | | | | was completed. | • Further work on improving emissions data collection | | | | | • Conducted environmental audits of | and reporting of Scope 3 emissions. | | material facilities (Brazil and China). ### 39 GENUS PLC / ANNUAL REPORT 2023 SUSTAINABILITY OBJECTIVE HIGHLIGHTS IN FY23 FY24 GOALS (AND RELATED SDG) | ANIMAL WELL-BEING | • 100% of employees with animal care | • Update the Animal Welfare Policy and ensure revised | | --- | --- | --- | | Continuously improve | responsibilities received training on | policy is rolled out globally. | | animal well-being across | Genus animal care standards. | • Ensure employees with animal care responsibilities are | | our business worldwide | • Continued investment in PIC and ABS | regularly trained on Genus animal care standards. | animal housing facilities including construction of Atlas and investment at Gourley and Bluegrass. • Maintained animal care standards • Published updated Animal Health & Welfare Principles document. RESPONSIBLE EMPLOYER • Achieved recordable injury frequency • Achieve at least a rolling 5% year-on-year reduction 2 | OF CHOICE | rate | of 2.03 against a target of 2.36 | in recordable injury frequency rate, equivalent to at | | | --- | --- | --- | --- | --- | | Be a people magnet with a | • Commissioned independent external | | least 2.24 or less. | | | dynamic, inclusive and safe | assurance of our health and safety | | • Maintain or improve employee engagement, by: | | | working environment | data, and total number of women in | | (i) implementing ‘Your Voice’ Action Plans and | | | | management (M-Grade) roles. | | | publishing the key opportunities in our | | | • Percentage of women in M-Grade roles | | | FY24 report. | gender equality | currently at 30.2%, with the number of | (ii) launching an awareness campaign of | | | --- | --- | --- | | women newly recruited or promoted to | | Company values. | | M-Grade roles in FY23 at 36.2%. | (iii) increasing the proportion of female employees | | recruited or promoted to M-Grade roles (target new female appointments: minimum 33%; stretch 50%). STRATEGIC REPORT | COMMUNITY | • Roll out of our PIC Aurora & Atlas ‘Never | • Support measures to prevent and respond to local | | --- | --- | --- | | Proactively engage and | Stop Improving’ high school scholarship | community issues. | | make a positive contribution | programme (see page 40). | • Recruit locally into nucleus farms, and encourage | | in communities of which we | • The Company has been working in | support for local charities that align with our mission. | | are a part | partnership with the Gates Foundation, | • Continue our ‘Never Stop Improving’ high school | | | Land O’Lakes, Vetline and AbacusBio to | scholarship programme and our intern programme to | | | bring our elite genetics to farmers in | invest in future skills our business needs (see page 40). | disaster deaths Africa (see page 41). • Continue to deliver elite genetics to farmers in Ethiopia, Kenya and Uganda in collaboration with the local partners. equitable sharing of genetic resources 1 Genetic improvement considers factors that shape each animal’s carbon footprint during their lifetime. These include farm inputs which support growth (such and feed, supplements and water) and outputs from the animals and their manures (including direct emissions and manure methane/nitrous oxide emissions). By calculating inputs and outputs in this way, we can identify total emissions involved in the production of milk or meat and track the reduction from one generation to the next. For a detailed explanation of how these targets are set and calculated, and the impact of genetic improvement on our and our customers’ carbon footprints, see our website: www.genusplc.com/sustainability 2 Recordable injury frequency rate is the number of work related incidents that result in injury or illness, work restriction, or require treatment other than first aid ### 40 GENUS PLC / ANNUAL REPORT 2023 ### SUSTAINABILITY REPORT CONTINUED ### The year’s highlights from our sustainability programme ### REDUCING GREENHOUSE COMMUNITY ### GAS EMISSIONS ENVIRONMENT – Further investments of £1.5m are planned ABS GENETIC IMPROVEMENT METHANE CAPTURE FROM MANURE to install solar photovoltaic panels during IN ETHIOPIA AND KENYA FY24 at our PIC Aurora and Atlas facilities As a business producing animals used ABS has been working in partnership in Canada to displace the relatively dirty in breeding programmes across the with the Gates Foundation and Land grid electricity and to build resilience to globe, Genus’s GHG emissions are O’Lakes to deliver a $10m project to bring climate change through the generation largely from livestock sources – the our elite genetics to farmers in Ethiopia of low carbon renewable energy. methane from animals’ manures. and Kenya. The project aims to deliver safe, affordable and locally sourced ENVIRONMENT – We have invested £1.2m at our PIC Aurora dairy protein to meet local consumer CARBON CAPTURE IN SOILS | facility in Canada to install covers across | | demand. We also aim to develop local | | --- | --- | --- | | our slurry lagoons that will enable the | In the current year, we have also changed | acceptance of the East African Dairy Profit | | biogas to be captured. Preparatory | the way we manage our land and | Index, to increase the adoption of sexed | | works started in FY23 and the project | soils, to provide greater opportunity | genetics and to improve profitability for | | will reduce emissions by ~1,000 tonnes | for carbon sequestration into soils and | local farmers. Currently, these farmers | | of carbon from methane that would | improve soil biomass. We have examined | are unable to meet domestic demand or | | have been emitted from the surface of | the use of satellite remote sensing | compete with cheaper dairy imports. | | the lagoon. Commissioning of the full | technology to look for and to track | | STRATEGIC REPORT | system will take place in autumn 2023 and | carbon sequestration opportunities on our | The dairy industry in Ethiopia and Kenya | | --- | --- | --- | | spring 2024, with a break for the winter | farmland. Unfortunately, the technology | faces a number of issues that block its | | where the amount of biogas generated is | was not mature enough for us to | progress. For example, calf mortality | | expected to slow, due to the cold weather | accurately record the capture of carbon | can be as high as 16%, which is further | | conditions. This project builds on our | and we are reassessing how we can | compounded by the young stock having | | successful project in Granja in Brazil with | demonstrate carbon capture in our soils. | slow growth rates and maturing later. This | | our joint venture partners, Agroceres. | | results in less milk being produced, higher | input costs and higher GHG emissions per unit of milk produced. Lower fertility rates of sub 50%, further delay the time to maturity of the animal, and increase, by almost a third, the proportion of the dairy cattle that are non-productive, yet still emitting methane and consuming feed. The amount of milk produced by the traditional breeds of cattle in Ethiopia and Kenya are also low (0.5–2 litres per day), whereas on average a cow in the UK will produce 26 litres per day with peak production at around 60 litres per day. Our partnership with Land O’Lakes ensures they can work with farmers to improve animal husbandry, health, nutrition and welfare. This has already delivered results through improved health and growth rates, and lower mortality. ABS has been providing elite genetics of cattle that are more capable of delivering greater milk yields, with health traits that are more suited for the East African environment. This has increased productivity and reduced the costs of production, increasing the farmer’s ability to meet domestic market needs, compete with imports and reduce GHG emissions. Over the next three years the project will deliver: (i) 46,000 improved dairy cows; (ii) 10,000 genomic samples to contribute towards developing an East African dairy index; (iii) 170 million litres of additional milk; and (iv) provide valuable new skills and jobs for technicians in these countries. ### 41 GENUS PLC / ANNUAL REPORT 2023 PIC GENETIC IMPROVEMENT IN UGANDA We were very excited to announce our ### SUSTAINABLE PROTEIN first recipients of the PIC ‘Never Stop PIC, Vetline and AbacusBio are working ### Improving’ high school scholarship PRODUCTION together to improve Uganda’s pig in Kipling & Carlyle, Canada. Alexys production, health, and welfare in a Roppel is a graduate from Kipling High sustainable way. The aim of the venture GENETIC IMPROVEMENT School. She is continuing her education is to provide economic stability for pig at the University of Saskatchewan for As global climate change increases the farmers and their families in Uganda, Agriculture in Crop Science, and hopes to risks to global food security, our work in while ultimately addressing broader become an agronomist, travelling from genetic improvement provides livestock food production and food safety issues farm to farm advising farmers with their which is more robust and resilient to in the supply chain to deliver nutritious, crops. Kerri Lachapelle graduates from climatic extremes, helping farmers healthy, and safe food. This will be done Carlyle’s Gordon F. Kells High School and is produce milk and meat more efficiently through an integrated combination of enrolled at the Saskatchewan Polytechnic and sustainably, using fewer natural PIC genetics and expertise, artificial College in Saskatoon. She is working resources. We measure progress by insemination and veterinary services, towards a career first in nursing and assessing the factors that shape each provided by Vetline, underpinned then hopes to become an obstetrician. animal’s carbon footprint during their by the database and information lifetime, including the efficiency with which platform delivered by AbacusBio. In 2018 our North American ABS the animal feeds, the production of milk, business started its award-winning and the health and robustness of the By focusing on areas surrounding urban ‘early careers’ intern programme animal during its lifetime. We set genetic development in Uganda and exploring www.startingatgenus.com. To date we improvement targets each year, which sustainable modern pig production have sponsored 133 students who have now relate to life cycle carbon emissions. We techniques, the venture has the potential successfully completed the programme. met all of our genetic improvement targets to positively impact the wider Ugandan society. Pig farming is one of the fastest in FY23 (see page 38). Of the students recruited 60% are female growing livestock activities in Uganda and and 40% male, and we have retained 44% Based on genetic improvements the is a means of increasing food, income, of the interns within our own business, use of our improved genetics produces and employment. Uganda is among the whilst providing opportunities for others the following estimated annual largest per capita consumers of pork in to join the sector or to go onto new 1 reductions in carbon emissions : sub-Saharan Africa, but productivity is | | roles elsewhere within agriculture or the | • Porcine – 429,000 tonnes CO | | e; | | --- | --- | --- | --- | --- | | low, and demand outstrips supply. This | | | | 2 | | | biotech industry. The interns that we | • Dairy – 851,000 tonnes CO | e; and | | | venture with PIC, Vetline and AbacusBio | | | 2 | | | | have retained have gone on to hold a | • Beef – 70,800 tonnes CO | e. | | | will greatly benefit local farmers in | | | 2 | | range of diverse positions in ABS such as producing pigs more efficiently and Beef Sustainability Scientist, Livestock sustainably. Through this project we aim Supervisor, Sales Team Leader, Technical to provide more affordable nutrition Services Consultant and Beef Business 1 These reductions in GHG emissions are estimates for the benefit of the local farmers and Development Specialist. This year we only based on the calculation of CO 2 e reduction STRATEGIC REPORT their communities which fully aligns to from genetic improvement multiplied by the welcomed our new intake of interns who the core of our sustainability goals. estimated number of animals created each year received a warm welcome from the ABS using our genetics. See page 56 and Genus management team and were INTERNS AND SCHOOL given an opportunity to hear and meet SCHOLARSHIP PROGRAMME some of the leaders covering topics The PIC Aurora & Atlas ‘Never Stop such as sustainability, leadership, and Improving’ high school scholarship to learn more about our elite genetics. programme was started this year with the goal of supporting our local youth to use that very motto in their education, career and family. Applicants were required to submit a letter about themselves describing their career plans and goals. They also submitted an essay on the topic ## of our PIC motto: ‘Never Stop Improving’ – 44% outlining why this motto is important in the swine industry and how PIC has applied of interns were retained this method to the agricultural industry. within our own business ## 133 students sponsored who have now successfully completed the programme ### 42 GENUS PLC / ANNUAL REPORT 2023 ### SUSTAINABILITY REPORT CONTINUED ### CLIMATE CHANGE POLICY AND GREENHOUSE GAS (‘GHG’) REPORTING ### Genus acknowledges the reality of climate change ### and recognises the lasting impact it will have on our ### business and our communities. | Genus has committed to take action | For Scope 1 and 2 emissions, we use | The transformation of our vehicle fleet | | | --- | --- | --- | --- | | on climate change in a number of | the percentage of our equity stake in | is making less progress than we had | | | ways, including: | joint ventures to determine our share of | hoped for. Emissions have continued | | | • driving porcine and bovine genetic | joint venture emissions, and omit some | to increase by 10% relative to the FY19 | | | improvements which support | livestock held by third parties where we | Baseline due to increased travel following | | | productivity gains and improve | have limited information or control over | on from COVID, but they are down on | | | health and feed efficiency, enabling | the management of livestock. We have | the FY22 absolute emissions by 208 | | | a reduction in the production of | determined and reported the emissions | tonnes of CO | 2 e. The roll out of cleaner | | GHG emissions per unit of milk or | we are responsible for within this boundary | vehicles is still being constrained by the | | | meat produced; | and believe there are no material | availability of replacement vehicles from | | | • reducing the carbon footprint of our | omissions for Scope 1 and 2 emissions. | the manufacturers. In North America, the | | | operations through better manure | | lack of vehicles and infrastructure are | | | management, applying renewable | | major barriers to progress. As an interim | | EXTERNAL ASSURANCE | STRATEGIC REPORT | power solutions to our vehicles and | | measure for North America, we are seeking | | --- | --- | --- | --- | | | facilities and more efficient power | DNV provided limited assurance over our | to reduce the dependence of the business | | | use; and | Scope 1 and 2 emissions (see page 36). | on large V8 petrol engine vehicles and | | | • partnering and advocating for policies | | to move to smaller V6 petrol trucks with | | | that advance positive climate goals and | | turbo support to improve fuel efficiency. | GHG EMISSIONS REPORTING OUTCOMES identified United Nations Sustainable The average fuel efficiency of vehicles in Our GHG emissions are primarily methane Development Goals (‘SDGs’). the North American market is generally produced by our animals, and carbon half of the European fleet. In the UK we dioxide from consuming fuel and other currently have a fleet of 235 cars and vans. OUR REPORTING APPROACH materials for energy, and from transport. We have stopped replacing vehicles with We are committed to reducing GHG petrol or diesel only vehicles and have Our total Scope 1 and 2 emissions have | emissions in our operations and we | | | | been switching to petrol hybrid vans. We | | --- | --- | --- | --- | --- | | | reduced from 81,051 tonnes of CO | | 2 e in | | | use the ‘primary intensity ratio’ (‘PIR’) | | | | have 36 pure electric vehicles in our fleet. | | | FY22 to 77,366 tonnes of CO | 2 e in FY23, a | | | | to report emissions reductions. In FY20, | | | | The transition to lower carbon vehicles will | | | reduction of 3,685 tonnes of CO | | 2 e. This is | | | we refined our methods to measure | | | | continue with a further 26 diesel/petrol | a 4.6% reduction year-on-year, and is a GHG emissions and developed an FY19 vehicles being replaced with hybrids this 13.5% reduction against our FY19 Baseline. emission baseline (FY19 Baseline). We year. By the end of 2026 we will no longer When the data is normalised using our | aim to reduce the PIR by 25% by 2030 | | | | | have any diesel vehicles in our fleet. | | --- | --- | --- | --- | --- | --- | | | | PIR, the ratio has reduced from 6.98t CO | | 2 e | | | compared to our FY19 Baseline, and to | | | | | From 2026 onwards we will then seek to | | | 1 | per tonnes of animal weight in FY22 to | | | | | have net zero GHG emissions by 2050 | . | | | | transition to electric vehicles if the market | | | | 6.04t CO | 2 e per tonnes of animal weight | | | | This means that even as our business | | | | | is able to support this transition, and this | in FY23. This is a reduction of 13.5% year- grows, we are seeking to ensure that should be completed as the four-year on-year and a 35.5% reduction from our over time our GHG emissions shrink. replacement cycle for our vehicles works FY19 Baseline which is driven by improved through. Scope 3 Category 6 business | Genus is on a journey to meet the | efficiency of producing animals, the | | | | --- | --- | --- | --- | | | | travel emissions for FY23 were 5,245 tCO | 2 e. | | TCFD recommendations and as with | closure of some older farms and opening | | | | most businesses, measuring emissions | of newer facilities, improved manure | | | We have published our Basis of is difficult. In FY24 we will take time to management to reduce methane and Reporting on our website: examine our processes and procedures nitrous oxide emissions, improved energy www.genusplc.com/sustainability/ for calculating emissions, to ensure efficiency, and increased herd size. policies-and-reports/. our data is accurate and robust, with 1 More information on our pathway to net zero a focus on Scope 3 emissions. Many emissions by 2050 can be found on our website: businesses are currently grappling with www.genusplc.com/sustainability complexities associated with measuring Scope 3 emissions, but the agriculture sector presents additional challenges with obtaining reliable data in support of production and carbon performance, which can become more complex when managing globally traded commodities. ### 43 GENUS PLC / ANNUAL REPORT 2023 | | | FY23 | | | | FY22 | | | | FY21 | | | | FY20 | | | | FY19 | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Tonnes of CO | | | 2 | Tonnes of CO | | | 2 e | Tonnes of CO | | | 2 e | Tonnes of CO | | | 2 e | Tonnes of CO | | | 2 e FY23 | | | | | | Global | | | | | Global | | | Global | | | | Global | | | | Global | | | | | | | (excluding | | | | (excluding | | | | (excluding | | | | (excluding | | | | (excluding | | % change | | | UK and | | UK and | | UK and | | UK and | | UK and | | UK and | | UK and | | UK and | | UK and | | UK and | | from FY19 | | Emissions from | offshore | | offshore) | | offshore | | offshore) | | offshore | | offshore) | | offshore | | offshore) | | offshore | | offshore) | | Baseline | Scope 1 – combustion of fuel, own transport and livestock emissions 2,923 64,677 2,461 68,217 2,626 72,314 2,630 77,673 3,178 78,773 Total Scope 1 67,601 70,678 74,940 80,303 81,951 -18% Scope 2 – purchased electricity, steam, heat and cooling 162 9,603 150 10,223 130 6,695 168 6,850 171 7,268 Total Scope 2 9,765 10,373 6,825 7,018 7,439 31% Total Scope 1 and 2 3,086 74,280 2,611 78,440 2,756 79,009 2,798 84,523 3,349 86,041 -14% Scope 3 emissions 13,542 16,195 14,664 16,119 21,489 -37% Total emissions 90,908 97,246 96,429 103,440 110,879 -18% Primary intensity measure – animal weight (tonne) 12,812 11,611 9,839 10,488 9,543 34% Primary intensity ratio – Scope 1 and 2 (tCO 2 e/tonne animal weight) 6.04 6.98 8.31 8.33 9.37 -36% GENUS ENERGY DATA In line with the UK Government’s energy and carbon reporting requirements, further information on our energy consumption for FY23 and FY22 across Genus is set out on the next page, along with historic data back to FY19. This is sourced from data for the carbon data reported and is tracked internally. All data is collected from metered data for electricity. Biogas combustion information is calculated using assumptions based on records in China and Brazil. Fuel use is reported based on financial records of fuel purchased. We have applied assumptions on standard calorific values to convert all liquid and gas fuel types to a common energy metric (kWh) and data is reported for the period 1 July 2022 to 30 June 2023. STRATEGIC REPORT Annual emissions figures have been calculated based on actual nine-month data for July to March for travel and distribution and ten-month data for July to April, with both extrapolated to full year. % change from FY19 Energy type Source Units FY23 FY22 FY21 FY20 FY19 Baseline Electricity Electricity imported kWh 21,423,724 16,871,327 15,309,577 20,156,010 17, 599,380 41% Electricity generated from renewable sources and used on site kWh 1,120,678 590,330 384,012 334,670 303,800 269% Electricity generated from renewable sources and exported kWh 251,901 – – – – – Electricity Imported – UK kWh 769,580 629,120 511,703 559,905 584,405 32% Electricity Imported – RoW kWh 20,654,143 16,242,207 14,797,874 19,596,105 17,014,975 21% ### 44 GENUS PLC / ANNUAL REPORT 2023 ### SUSTAINABILITY REPORT CONTINUED ### GENUS’S NET ZERO ROADMAP ACTIONS FOR CONTINUING OUR ## Taking positive actions JOURNEY TOWARDS NET ZERO ## The TCFD recommendations and to reduce our emissions recommended disclosures recommend that companies that have made GHG reduction commitments should describe their plans for the transition to a low- carbon future and economy. ## 2019 2023 2025 For Genus we have a wide range of | activities that will contribute to our own | 100% | | | | --- | --- | --- | --- | | decarbonisation efforts (as shown in | | Ongoing Genetic | Ongoing investment in | | the graphic opposite) and in helping | | Improvement | renewables in Europe and | | our farmers and the wider value chain | | | the Americas | to collectively move towards net zero using our elite genetics. We are currently reviewing our 2030 and 2050 targets to ensure that they remain relevant and continue to meet stakeholders’ Investment in Solar PV Aurora biogas project expectations. The review will include Dekorra, USA; Cremona, Italy; commissioned Green Power the outcomes from the TCFD scenario APEX, Canada; Cheshire UK Procurement contract for UK analysis (see TCFD disclosures section) and aim to ensure that our strategy and financial planning considers the future climate risks and opportunities Biogas projects 36 new petrol-hybrid vans that may have a material impact. 75% Brazil and Canada and 4 EVs. Charging infrastructure review STRATEGIC REPORT KEY | Energy | Water | | | | --- | --- | --- | --- | | | | No new petrol or diesel cars | Ongoing transition to fuel | | | | in UK. Fleet of 235 cars/vans, | efficient vehicles in the US | with 98 hybrids and 36 EVs Genetic Data improvement | | | Composting Project | Assurance of Scope 1 and 2 | | --- | --- | --- | --- | | | | Dekorra, USA | emissions and PIR | | Financial | PRIMARY INTENSITY RATIO | | | Environment impact 50% Hybrid and Capital Develop Scope 3 assessment electric vehicle investment for porcine. Target FY24 Annual Report No diesel or petrol-only vehicles in fleet 2026 New Power Purchase Agreement for energy needs 25% GENUS PLC PRIMARY INTENSITY RATIO Set water and waste baselines and .0 reduction targets 10.0 .0 8 .0 LCAs for Porcine and Beef 6 genetics used to measure .0 emissions and set targets 4 .0 2 0% 0 FY19 FY20 FY21 FY22 FY23 ### 45 GENUS PLC / ANNUAL REPORT 2023 ## Building a climate resilient Achieving net zero ## business and continuing and a climate ## towards net zero resilient business ## 2030 20502040 Develop comprehensive Offset remaining emissions Biodiversity Footprint to achieve net zero Achieve 25% reduction of Primary Intensity Ratio Ongoing Genetic Ongoing Genetic Update LCAs for Porcine and Improvement Improvement Bovine Elite Genetics Update LCAs for Porcine and Update LCAs for Porcine Bovine Elite Genetics and Bovine Elite Genetics Phase out of hybrid Water and waste vehicles and transition baselines and reduction to EVs in Europe targets achieved STRATEGIC REPORT Ongoing investment in Climate Change renewable energy globally Adaptation investment Ongoing investment in slurry pond covers and anaerobic digesters Ongoing investigation into carbon sequestration in soils Ongoing investment in improvement in electricity use efficiency ## NET ## ZERO ## CO e 2 ### 46 GENUS PLC / ANNUAL REPORT 2023 ### SUSTAINABILITY REPORT CONTINUED ### TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (‘TCFD’) STATEMENT During the year the Financial Reporting business to carbon taxes and emission Council (‘FRC’) Corporate Review team trading. This is also linked to the energy ### The following statement is | | carried out a review of our Annual | transition opportunities, and to a lesser | | --- | --- | --- | | consistent with the TCFD | Report and Accounts for the year ended | extent, to increased costs of producing | | | 30 June 2022 (‘FY22 Report’). Their | raw materials. The findings from this | ### Recommendations and review highlighted areas where the FY22 scenario analysis support the climate ### Recommended Disclosures, Report did not comply with the TCFD strategy that we have followed to date. Recommendations and Recommended ### identifying the risks and | | Disclosures. The FRC noted that the FY22 | We have made commitments to reduce | | --- | --- | --- | | opportunities arising | Report did not include a clear statement | our PIR and carbon footprint for Scope | | | explaining whether the report included | 1 and 2 emissions (see page 38) where | ### from climate change, the climate-related financial disclosures we are investing ~£2m per annum in ### potential impact on our biogas, renewables and similar energy consistent with the Recommendations and Recommended Disclosures of the projects. These projects reduce our ### business and the actions TCFD, as required by Listing Rule 9.8.6(8)R, exposure to future increases in energy ### we’re taking to respond, prices and significantly reduce the Scope and identified a number of areas where improvements could be made to the 1 and 2 emissions from our business ### except as identified on Company’s disclosures. Genus welcomed operations that could be subject to ### page 57. This provides a this feedback and is providing a clearer future carbon taxation. Genus is also STRATEGIC REPORT ### description of the specific statement in this year’s Annual Report. working to improve its understanding of its Scope 3 emissions and will work to ### TCFD Recommendations reduce these embedded emissions. ### and Recommended TCFD AND CLIMATE CHANGE SUMMARY Genus has a global reach that seeks Genus recognises that climate change is a ### Disclosures with which to support leading farmers with more significant systemic and strategic risk and ### we have not yet achieved productive and resilient breeding animals, that livestock farming and management is which enables farmers to produce meat a contributor to climate change. Climate ### compliance and a response and milk more efficiently and sustainably. change may exacerbate fluctuations in ### to explain how we plan As a global company we are aware of the animal feed costs (over the medium to regional and global risks and opportunities ### to close this gap. long term), cause more frequent impacts linked to changes of diet. Our elite animal from adverse weather conditions, and genetics have a significant impact on the limit access to water or increase the costs whole protein value chain and benefit of accessing and treating water. Our multiple stakeholders. With an increasing qualitative and initial quantitative risk world population that is expected to assessments show that whilst we may be reach 8.6 billion in 2030, and 9.8 billion at a greater risk from these events in the in 2050, we recognise that there will be short to medium term, the geographical regional variations in demands for animal spread of our sites (largely driven by the protein, but see an overall increasing need to meet market demand and to global demand, requiring our improved mitigate biosecurity risks), in conjunction genetics to feed a growing global with our normal business continuity plans population with greater aspirations to eat (‘BCPs’) ensures that we are unlikely to a safe, affordable, and sustainable diet. experience a material climate-related loss in the next two to five years. In the next sections we will examine our progress in each of the core We are continuing to assess our exposure elements of TCFD reporting, being to climate risks, and recently conducted Governance, Strategy, Risk Management, an independent consultant scenario and Metrics and Targets. analysis that indicates, in the long term, physical climate risks are not likely to result in material losses for the business in GOVERNANCE North America, Brazil or the UK. However, The Board has overall responsibility and the scenario analysis has its limitations, accountability for our Climate Change and for example excludes our operations Policy and TCFD reporting. Genus’s Chief in Asia which currently sit below the Executive has formal responsibility for materiality thresholds used in the analysis. implementing and monitoring the strategy We recognise that we will need to revisit to manage climate-related risks and the assumptions for Asia as the business realise the opportunities, and the Board grows to meet the growing demand for reviews the business’s annual budgets, sustainably produced animal protein in strategic plans and capital investments that region. The scenario analysis also to ensure that the Company’s climate identifies the material climate transition change action plans are implemented risks, with the most significant transition and integrated into the Company’s risk relating to the exposure of the wider financial planning and strategy. ### 47 GENUS PLC / ANNUAL REPORT 2023 | Sustainability Committee | Our current actions to reduce emissions, | These activities are described in further | | --- | --- | --- | | Genus updated its oversight on climate- | BCPs and the isolated location of our | detail below. | | related issues in FY23 to ensure that | facilities provide additional climate | | | climate change risks and opportunities | change mitigation and adaptation | Risks and opportunities | | receive management focus at the highest | benefits that will seek to ensure that, in the | identification project | | level. As a result of this review, all members | short to medium term, there is no material | We performed a detailed business- | | of the GELT as well as the Chairman of | detriment to our business. In the longer | wide review of all sustainability risks | | the Board’s Audit & Risk Committee have | term, increases in the frequency and | (this included climate change) and | | been appointed to the Sustainability | severity of physical risks, such as extreme | opportunities, with an update to include | | Committee, alongside operational | weather events, water stress and higher | an assessment of risks and opportunities | | leaders, and subject matter experts with | ambient temperatures could have a | by geographic region. We ran a series | | accountability for delivering the Group’s | greater potential to impact sites, supply | of workshops to validate the risks and | | sustainability objectives, including | networks and consumer value chains, | opportunities within finance, sustainability, | | emissions reduction. The Sustainability | whilst changes to regional climates may | and business leadership teams across | | Committee meets three times a year and | lead to changes to costs, the availability | Genus. We ensured that we had a | | is chaired by Genus’s Chief Executive. | of raw materials, and the ability of our | common understanding of the risk | | | customers to produce feed and livestock. | horizon, the qualitative understanding | | Remuneration Policy | | of the risk impact to our financial | | Genus has incorporated incentives for | Risk Management | position and the variation within the | | the management of climate-related | As part of our Group Risk Management | geographical regions where we operate. | | issues into its remuneration policy for | process, the Sustainability Committee | We have also taken the decision to | | Executives. Strategic objectives covering | oversees our sustainability principal risk, | align our use of climate scenarios with | | strategy, leadership and culture, | including the impacts of climate change. | the latest TCFD Recommendations | | innovation, and sustainability account | For more information, see page 61. The | and Recommended Disclosures. The | | for 25% of the Executive Directors’ and | Sustainability Committee oversees the | risk assessment was between RCP 2.6 | | other Group executives’ total annual | Company’s performance against its | climate scenario (where global warming | | bonus opportunity. From FY23 20% of | emissions reduction targets and makes | is limited to below 2°C of pre-industrial | | the Performance Share Plan opportunity | recommendations to the Board in relation | temperatures) and RCP 8.5 (which | | for the Executive Directors is linked to | to our business strategy and risk | assumes business as usual and therefore | | the delivery of specific actions targeted | management processes. | catastrophic global warming of 4.5°C). | at emissions reductions within the | Company’s operations and driving | We regularly review and update our | Qualitative Assessment | | | --- | --- | --- | --- | | genetic improvements which make our | sustainability risks, including climate | of Risks and Opportunities | | | customers’ operations more efficient | change, and update our Group Risk | We commissioned Marsh Consulting | | | and sustainable (see page 103). | Registers. We include in our review | to undertake a deep-dive qualitative | | | | climate-related risks for alternative | assessment of the following climate | | | | climate scenarios (1.5°C and 4.0°C of | change risks – sea level rise, riverine | STRATEGIC REPORT | | STRATEGY AND RISK MANAGEMENT | warming). This has informed our risk | flooding, flash flooding, drought, | | | | descriptions and management response | extreme temperatures, cyclone and | | Strategy in relation to our aim to lead the market in wildfires. The sources utilised for this In the short to medium term, the most climate-focused breeding and our focus analysis include private risk information significant impacts for Genus and its towards our customers’ challenge of providers, such as Think Hazard, and strategies around porcine and bovine managing fluctuations in animal feed global entities such as the World Bank. genetic improvement are likely to arise costs which we believe will be Academic sources were also used to gain from transition risks, specifically policy- exacerbated by climate-related factors a qualitative understanding of specific driven carbon price increases. This over the medium to long term. regional complexities to complement risk may impact the cost of feed and the quantitative risk data. Marsh also electricity used in the animal protein Climate-Related Risks and Opportunities reviewed relevant news sources to gather supply chain, increasing the price of the – Identification, Determining Materiality information on local natural disasters product for the consumer in some regions. At the end of FY22, Genus had not that have occurred in recent years. We also recognise consumer preference complied with TCFD Recommendations and technological change could have and Recommended Disclosures to an impact on our business strategies. undertake a qualitative and quantitative assessment of our climate-related risks Genus believes that our ongoing and opportunities under different climate climate change mitigation activities, in scenarios. We had only undertaken a connection with our genetic improvement limited qualitative analysis of climate- programmes and our carbon footprint, related risks and opportunities for along with our continued investment in alternative climate scenarios (RCP 2.6 R&D, will continue to deliver sustainability versus RCP 4.5) and this had previously and environmental benefits. been used to form an initial risk description and management response. Genus derives almost all of its revenue from products and services that make We enhanced the risk and opportunity a positive contribution towards climate assessment process through the change mitigation and adaptation, following initiatives: by breeding animals which are healthier, • Risks and opportunities grow faster, consume less feed and emit identification project; fewer emissions, whilst being more • Qualitative risks and opportunities profitable for the farmers. We see strong assessment, using Marsh demand for our improved genetics, and Consulting; and anticipate that this demand will grow over • Quantitative risks and opportunities time, particularly where customer demand scenario analysis using a big four is supported and stimulated by environmental consultancy team. decarbonisation policies. ### 48 GENUS PLC / ANNUAL REPORT 2023 ### SUSTAINABILITY REPORT CONTINUED ### TCFD STATEMENT CONTINUED FY23 Risk and Opportunity Identification and Management Process | The table opposite shows the most | RISK OR | | TIME HORIZON POTENTIAL IMPACT VARIATION BY REGION HOW WE MANAGE RISKS | | | | | --- | --- | --- | --- | --- | --- | --- | | significant physical and transition risks | OPPORTUNITY | | | | | | | | | 1-2 | | 3-5 | 5+ | UK/EU NAM LATAM ASIA | identified by Genus and the qualitative YEARS YEARS YEARS assessment of their impact through the Marsh input. Our risk assessment included Extreme weather events disrupting 1. Review the existing infrastructure (i.e., that outside of our business) and supply over one hundred individual risks that the value chain or our operations chain to evaluate the robustness in the event of regional/countrywide weather event, have been assessed as being of minor (e.g. flooding, drought, extremes of and review BCPs. concern because they are either unlikely temperature, cyclones, and wildfires 2. Identify any opportunities for value chain diversification across different locations to materialise or they are of low materiality impacting the value chain, including to reduce the impact of localised disruptions. for our business. The risks identified the cost of raw materials). 3. Review existing insurance policies and BCPs along with identifying key sites that opposite are those we consider most warrant investment to mitigate risks. significant. In line with the requirements | of the TCFD, we have assessed how these | Increased prevalence of pests, | 1. Identify the regions where in the long-term new pests, diseases and zoonotic | | | --- | --- | --- | --- | | risks may vary by region. Generally, most | diseases, and zoonotic infections | | infections may migrate to. | | of the risks apply at a global level, but in | (e.g. climate change expands | 2. Review the biosecurity and BCP controls to ensure they remain fit for purpose. | | | some cases, we have considered specific | the range and rate of spread | | | | geographies, supply chain and transition | for diseases). | | | risks at a market level (i.e., diet change | | for environmental and climate reasons). | | Risks to critical infrastructure | 1. Periodically, conduct a comprehensive infrastructure vulnerability assessment | | | --- | --- | --- | --- | --- | --- | | STRATEGIC REPORT | | Physical Risks | | | | | | We will continue to keep these risks under | | (e.g. risk to critical facilities or utilities, | | to identify potential weak points and develop contingency plans to update | | | review, and to evaluate market trends | | including increased costs of, or | | BCP processes. | | | over time and by region and market | | disruption to, water, energy, | 2. Continue to diversify and secure alternative sources of energy and transportation | | | | demographics, where appropriate. | | transport, information technology). | | to reduce reliance on vulnerable infrastructure. | 3. Recognise that some regions have less resilient infrastructure and stress test the Genus assesses risk by considering BCP plans and assumptions on a more regular basis with the need for extended the likelihood of the risk or opportunity resilience measures. materialising within the time horizons noted in the time horizons table and Increasing consumer interest 1. Watching brief. In the EU/UK we may see reduced protein consumption linked to having a potential financial impact of in alternative proteins. environmental concerns or government policy, balanced by increased consumption >£3m. Where risks are deemed to be high in other regions. or medium, they have received additional Failure to produce genetic 1. Genus is well placed to produce elite genetics or cross breeds that are suited focus, and we plan to look at additional improvement that adapts to to different climatic environments. climate mitigation actions in FY24. Once different climatic environments. 2. Ensure that product development and R&D processes continue to manage these the mitigating actions have been agreed, genetic improvement opportunities. we will re-score the risk, minus the impact of the mitigating actions, to ensure we Influence of regulators, investors, 1. EU/UK greater focus on disclosure and interest from stakeholders versus other regions. have reached an acceptable level of risk or other stakeholders The LCAs will provide third-party validation and a strong business case for our genetics. or to identify further mitigation activities. (e.g. increased disclosure 2. In the short to medium term we are likely to see the greatest changes in EU/UK/US requirements in the medium markets. Ensure environmental legislation register continues to be updated to monitor In FY24, we will disclose how we have to long term). changing regulations and ensures compliance with applicable legal requirements. improved our physical climate risk 3. Genus is well placed to produce elite genetics that are suited to different climates. exposure. The changes may be relatively Ensure that product development and R&D processes continue to manage these small given that our sites are not exposed genetic improvement opportunities. to significant physical climate risks, ### Transition Risks because they are reasonably isolated Government policies encouraging 1. Genus is well placed to produce elite genetics that will reduce GHG emissions. and not near forested areas, the coast or carbon emissions reduction 2. Continued refinement of risks and opportunities through focused R&D programmes. major rivers. For the purposes of this report (e.g. carbon pricing which is a cost or 3. EU/UK greater focus on disclosure and interest from stakeholders versus other regions. we have only presented the gross-risk incentive imposed by governmental The LCAs will provide third-party validation and a strong business case for our genetics. score (i.e., pre-mitigation and re-scoring). or sub-governmental authority This simple assessment helped Genus to on carbon emissions, generating prioritise our operational sites where there a financial motivation for companies is the greatest potential for a material to decarbonise). loss or disruption to our operations. ### 49 GENUS PLC / ANNUAL REPORT 2023 KEY TO TABLE Low risk No material difference relative to the global risk Medium risk Elevated relative to global risk High risk Low relative to global risk Opportunity RISK OR TIME HORIZON POTENTIAL IMPACT VARIATION BY REGION HOW WE MANAGE RISKS OPPORTUNITY 1-2 3-5 5+ UK/EU NAM LATAM ASIA YEARS YEARS YEARS Extreme weather events disrupting 1. Review the existing infrastructure (i.e., that outside of our business) and supply the value chain or our operations chain to evaluate the robustness in the event of regional/countrywide weather event, (e.g. flooding, drought, extremes of and review BCPs. temperature, cyclones, and wildfires 2. Identify any opportunities for value chain diversification across different locations impacting the value chain, including to reduce the impact of localised disruptions. the cost of raw materials). 3. Review existing insurance policies and BCPs along with identifying key sites that warrant investment to mitigate risks. Increased prevalence of pests, 1. Identify the regions where in the long-term new pests, diseases and zoonotic diseases, and zoonotic infections infections may migrate to. (e.g. climate change expands 2. Review the biosecurity and BCP controls to ensure they remain fit for purpose. the range and rate of spread for diseases). Risks to critical infrastructure 1. Periodically, conduct a comprehensive infrastructure vulnerability assessment ### Physical Risks (e.g. risk to critical facilities or utilities, to identify potential weak points and develop contingency plans to update | including increased costs of, or | | BCP processes. | | --- | --- | --- | | disruption to, water, energy, | 2. Continue to diversify and secure alternative sources of energy and transportation | | | transport, information technology). | | to reduce reliance on vulnerable infrastructure. | 3. Recognise that some regions have less resilient infrastructure and stress test the BCP plans and assumptions on a more regular basis with the need for extended resilience measures. STRATEGIC REPORT Increasing consumer interest 1. Watching brief. In the EU/UK we may see reduced protein consumption linked to in alternative proteins. environmental concerns or government policy, balanced by increased consumption in other regions. Failure to produce genetic 1. Genus is well placed to produce elite genetics or cross breeds that are suited improvement that adapts to to different climatic environments. different climatic environments. 2. Ensure that product development and R&D processes continue to manage these genetic improvement opportunities. Influence of regulators, investors, 1. EU/UK greater focus on disclosure and interest from stakeholders versus other regions. or other stakeholders The LCAs will provide third-party validation and a strong business case for our genetics. (e.g. increased disclosure 2. In the short to medium term we are likely to see the greatest changes in EU/UK/US requirements in the medium markets. Ensure environmental legislation register continues to be updated to monitor to long term). changing regulations and ensures compliance with applicable legal requirements. 3. Genus is well placed to produce elite genetics that are suited to different climates. Ensure that product development and R&D processes continue to manage these genetic improvement opportunities. ### Transition Risks Government policies encouraging 1. Genus is well placed to produce elite genetics that will reduce GHG emissions. carbon emissions reduction 2. Continued refinement of risks and opportunities through focused R&D programmes. (e.g. carbon pricing which is a cost or 3. EU/UK greater focus on disclosure and interest from stakeholders versus other regions. incentive imposed by governmental The LCAs will provide third-party validation and a strong business case for our genetics. or sub-governmental authority on carbon emissions, generating a financial motivation for companies to decarbonise). ### 50 GENUS PLC / ANNUAL REPORT 2023 ### SUSTAINABILITY REPORT CONTINUED ### TCFD STATEMENT CONTINUED TIME HORIZONS AND MATERIALITY We use the following definitions and classifications to help us ensure alignment of the TCFD qualitative and quantitative scenario analysis with our existing annual and strategic business planning cycles (see table below). We have set the materiality threshold at £3m, which is consistent with our internal risk management assessment process. Genus Time Horizon Alignment within Genus Scenario Analysis Time Horizon Short 0–2 years linked to our annual business planning and risk management cycle. N/A 0–2 years (2023–2025) Medium 3–5 years links to our strategic planning cycle, but it also captures the transition Short-term 3–5 years risks and opportunities, and links to the planned R&D investment cycle (which is (2023–2030) also linked to government funded opportunities with this time horizon). Long 5 years plus runs beyond our normal strategic planning cycle. This captures Medium Term 5+ years physical and transition risks over the longer term, our achievement of net zero (2031-2040) goals, and emerging risks and opportunities that we are tracking. Asset planning and depreciation is evaluated and considered by Genus within Long Term these timeframes. See note 17 To the Group Financial Statements for the Year (2041–2050) ended 30 June 2023. | Quantitative Scenario Analysis | The significance of any exposure was | The scenario analysis assessed physical | | --- | --- | --- | | Genus also sought a consultant’s | assessed in line with Genus’s materiality | risk at 11 Genus sites (see figure opposite) | | support to conduct scenario analysis to | threshold of £3m and the data from the | using consistent assessment criteria which | | understand the potential financial impact | Marsh qualitative analysis was reviewed | included both physical and transition | | of key physical and transition risks and | and used to assess the physical and | risks. We have modelled price changes | STRATEGIC REPORT | opportunities. The scenario analysis also | transition risks for the scenario analysis. | for our key raw materials (i.e., soya and | | --- | --- | --- | | supports Genus with strategic business | | corn) where we have an active hedging | | planning as findings from scenario | Scenario Analysis – Method | strategy. Energy costs and usage were also | | analysis can highlight key elements of | The scenario analysis modelled the | modelled for the 11 Genus sites. The outputs | | a possible future and draw attention | impacts for the 1.5°C (Paris agreement | from the qualitative review of climate- | | to the key factors that will drive future | aligned) and 4°C (Business as usual) | related risks and opportunities were | | developments. The scenario analysis | climate projections and across the | considered, through a series of reviews and | | sought to review and shortlist key risks and | Shared Socioeconomic Pathway 2 (‘SSP2’) | workshops to enable the transition risks to | | opportunities to be quantified relating to: | transition pathway and used the ‘best- | be rationalised for the scenario analysis | | • Transition risks and opportunities – | fit’ sectors for Genus (i.e., agriculture, | to those shown in the table on page 48. It | | carbon pricing, electricity cost (energy | manufacturing and energy intensive | should be noted that some of our transition | | transition), raw material costs. | technology). These climate scenarios are | risks were deemed to be intangible and | | • Physical risks – across 11 key Genus sites | considered to highlight the variation in | therefore unsuitable for modelling at this | | in the US, Canada, UK and Brazil (but not | risks and opportunities directly, and model | stage. For example, we explored how | | including Asia). | ‘best-case’ and ‘worst-case’ outcomes for | diet change and interest in alternative | | | our business and the planet. The scenario | proteins could impact our business | | A scenario analysis is a tool used to explore | analysis used our financial data from FY22, | in the short, medium, and long term. | | different futures, by capturing different | because this data had been audited and | Unfortunately, the diet change transition | | assumptions about policy and physical | the FY23 financials were still incomplete. | risk is extremely difficult to quantify and | | climate impacts to project into a range | | model, and we will continue to manage | | of potential future outcomes. The main | | this risk and opportunity using a qualitative | | benefits of the scenario analysis are its | | assessment. Other climate risks such as | | value in informing strategic business | | new regulations, influence of investors, | | decisions, in that we can: (i) enhance | | stakeholders, and disclosure requirements | | our risk management and identify | | were also deemed to be unsuitable for the | | potential new revenue opportunities; | | quantitative scenario analysis. The scenario | | (ii) identify the appropriate climate | | analysis does not model transition risks | | change adaptation and mitigation | | associated with access to, or the cost of | | options to support our transition; and | | water, or the interaction with biodiversity. | (iii) meet regulatory requirements and provide enhanced disclosures to our stakeholders. However, there are limitations as scenarios are hypothetical, usually limited in scope and do not encompass all business activities or locations. ### 51 GENUS PLC / ANNUAL REPORT 2023 | The regions and locations that were | When considering emissions across both | | | --- | --- | --- | | assessed for the scenario analysis for | scenarios, emissions decline significantly in | SELECTED CLIMATE SCENARIOS | | both transition and physical climate risks. | a 1.5°C scenario due to decarbonisation | AND QUANTIFICATION | measures across all sectors and countries. • In line with TCFD Recommendations Residual emissions derive from hard-to- and Recommended Disclosures, our abate sectors such as steel, cement and consultants have considered Genus’s petrochemicals. In a 4°C scenario global climate risks and opportunities emissions still grow notably. ### 2 against two temperature pathways, ### 4 1.5°C (Paris-aligned) and 4°C In each climate transition pathway, (business-as-usual). economic and sector performance was ### 1 • Both scenarios are aligned to the aligned with SSP2 which was a middle SSP2, which also feeds into the of the road assumption, with moderate IPCC’s sixth assessment report. population growth levelling in the second • The scenarios were selected to half of the century, and GDP growing in line represent two potential outcomes of with historical trends. global emission trajectories and their potential financial impact for Genus. ### 3 The consultant constructed a proprietary • The scenario analysis conducted economic model that calculates multiple to quantify Genus’s key risk involved variables for the future climate and overlaying Genus specific scope economic projects (e.g., labour supply and data (e.g. electricity cost/ and costs, cost and availability of capital, volume and Scope 1 emissions) carbon emissions, economic activity, with a proprietary integrated 1. USA 2. CANADA price changes for key commodities). assessment models economic and The output is then used to assess • Apex • Atlas climate science impact projects to how Genus’s financials are potentially • Dekorra • Aurora calculate the cost of decarbonising affected in these potential futures. • DeForest the economy. The carbon price used 3. BRAZIL • Leeds is calculated as the cost to the Method for assessment of Genus’s • Waunakee • Uberaba economy in order to meet a transition risks, sites and scenario • Windsor 1.5°C scenario. 4. UK analysis parameters. (Pepsi Way) • Ruthin • Towcester SELECTION METHODOLOGY | The consultant used workshops to identify | • Our consultants considered Genus’s | | | --- | --- | --- | | three key transition risks and opportunities | documents and data for physical | STRATEGIC REPORT | | (carbon pricing, electricity cost, and raw | and transition themes to identify | | | material cost) in addition to the physical risk | a long-list of relevant risks | | | assessment of the 11 sites. | and opportunities. | | • We reviewed the impact/likelihood | As mentioned, the consultant considered | as well as specificity of transition | | --- | --- | | Genus’s climate risks and opportunities | risks to determine a short-list of risks | | against a 1.5°C and a 4°C pathway. In a | for quantified scenario analysis. For | | 1.5°C scenario, GDP is shown to increase | physical risk analysis on Genus sites, | | over time across all countries, with all | we assessed site replacement value, | | developed/service-based economies | strategic importance, and existing | | faring well, including countries included in | physical hazard analysis to down- | | this analysis: the USA, UK, Canada and | select a proposed list. | | Brazil. Economic performance is relatively | • In workshops, we identified and | | constrained in Canada and the USA when | agreed upon three key transition | | compared to a 4°C scenario, due in part to | risks and opportunities, as well as 11 | | carbon pricing. In comparison, constraints | Genus sites for a deep dive physical | | in Brazil’s economy in a 1.5°C scenario are | risk assessment. | | offset by a relatively low carbon price and | • Risks and opportunities that | | already significant hydropower generation, | are relevant but identified to be | | resulting in a lower cost of transition relative | non-quantifiable were excluded. | | to other emerging economies. In a 4°C | We have provided some qualitative | | scenario, GDP could increase at a greater | narrative in this annual report. Risks | | rate in all countries. In particular, emerging | classed as non-quantifiable are | | economies grow at an accelerated pace in | those that, while may be significant, | | this scenario. This is driven by business-as- | are broad, without clear metrics | | usual production pathways with no further | used to track materiality necessary | | policy intervention to curb emissions, | for quantified scenario analysis. | thereby avoiding potential lost production, stranded labour or assets. ### 52 GENUS PLC / ANNUAL REPORT 2023 ### SUSTAINABILITY REPORT CONTINUED ### TCFD STATEMENT CONTINUED | Scenario Analysis – Findings | • An opportunity to reduce electricity | The scenario analysis showed that Genus’s | | --- | --- | --- | | The findings of the scenario | cost through the use of renewables in | physical risk exposure at its 11 sites is | | analysis indicate: | countries where the electricity grid is | limited. The table below, quantifies the | | • Genus’s most significant risk is carbon | fossil fuel based. There is a greater risk | exposure at the sites to physical risk | | cost – carbon pricing poses a potentially | to Genus’s electricity cost from carbon | including, extreme heat, forest fires, | | significant financial impact to Genus | pricing in a 1.5°C scenario. On an annual | extreme wind and soil subsidence. | | in a 1.5°C scenario, with the analysis | basis, the electricity cost in a 1.5°C | | | indicating an additional annual cost | scenario will be around £1.8m by 2050. | The 2025 physical risk figures only include | | of approximately £22m (NPV from | • There are limited physical risks to Genus | potential business interruption, but from | | 2022-2050 ~£53m) by 2050 for Scope 1 | sites from extreme weather, with risk | 2030 to 2050 the figures include additional | | emissions (e.g. fuel and livestock) across | highlighted at the low level across | costs that could be associated with site | | the 11 sites. At present, Genus currently | extreme heat, extreme wind, soil | damage. While the risk is limited, the | | does not incur any carbon costs at | subsidence and forest fire. | aggregated financial impact for extreme | | these sites. | • There is limited physical risk for feed and | heat could become more significant | | | raw materials. The transition risk for raw | between 2040 and 2050. | materials and feed costs also indicated a low significance. Potential Financial Impact NPV 1.5°C Scenario 4°C Scenario Aggregated Potential Impact Type Risk/Opportunity (2050 NPV) Region Genus (2025) Short (2030) Medium (2040) Long (2050) Genus (2025) Short (2030) Medium (2040) Long (2050) Drivers and if no mitigating actions taken by Genus 1 | Extreme Heat | £1.2m | NAM | Local temperatures changing based on climate | | --- | --- | --- | --- | | | Business interruption | | projections. Heat extremes are assumed to | | | by 2050 for NAM | | be associated with site disruption rather than | | | | EMEA | asset damage. | STRATEGIC REPORT LATAM | Forest Fires £0.2m | | NAM | Change in local temperature, humidity, wind speeds | | --- | --- | --- | --- | | | Negligible for | | and forest fire prone land based on climate projections. | | | most sites | | Very few of Genus’s sites are near heavily forested | | | | EMEA | areas. Across all assets the overall financial impact is | negligible in both scenarios, but more likely for Brazil and DeForest in a 4°C scenario. LATAM Extreme Wind <£0.2m NAM Change in baseline wind gust speed based on Limited, but more changing weather systems. Analysis does not include Physical Risk likely in the USA tropical cyclones, hurricanes or tornadoes because EMEA these are difficult to predict and model at an appropriate scale. LATAM | Soil Subsidence <£0.2m | | NAM | Change in soil moisture, and for soils that are | | --- | --- | --- | --- | | | Potentially low | | particularly prone to shrinkage during prolonged | | | financial impact | | drought occurring at a site’s location, increases the | | | | EMEA | probability of soil subsidence that results in damage | to buildings, drainage, and other site infrastructure. LATAM 1 Extreme heat only considers the impacts to business disruption such as drought, but not the direct impacts on the welfare of our people and livestock. We are aware that extreme heat can cause semen production and quality to drop in our bulls. This will be an area for more detailed discussion and future analysis. The scenario analysis indicates we have sufficient time to review and implement cost-effective mitigation options before 2040-2050 ### 53 GENUS PLC / ANNUAL REPORT 2023 KEY TO SCENARIO POTENTIAL IMPACTS Potential saving Potential costs Low <£1m Medium £1-3m High >£3m Potential Financial Impact NPV 1.5°C Scenario 4°C Scenario Aggregated Potential Impact Type Risk/Opportunity (2050 NPV) Region Genus (2025) Short (2030) Medium (2040) Long (2050) Genus (2025) Short (2030) Medium (2040) Long (2050) Drivers and if no mitigating actions taken by Genus 1 | Extreme Heat | £1.2m | NAM | Local temperatures changing based on climate | | --- | --- | --- | --- | | | Business interruption | | projections. Heat extremes are assumed to | | | by 2050 for NAM | | be associated with site disruption rather than | | | | EMEA | asset damage. | LATAM | Forest Fires £0.2m | | NAM | Change in local temperature, humidity, wind speeds | | | --- | --- | --- | --- | --- | | | Negligible for | | and forest fire prone land based on climate projections. | | | | most sites | | Very few of Genus’s sites are near heavily forested | | | | | EMEA | areas. Across all assets the overall financial impact is | | | | | | negligible in both scenarios, but more likely for Brazil | STRATEGIC REPORT | and DeForest in a 4°C scenario. LATAM Extreme Wind <£0.2m NAM Change in baseline wind gust speed based on Limited, but more changing weather systems. Analysis does not include Physical Risk likely in the USA tropical cyclones, hurricanes or tornadoes because EMEA these are difficult to predict and model at an appropriate scale. LATAM | Soil Subsidence <£0.2m | | NAM | Change in soil moisture, and for soils that are | | --- | --- | --- | --- | | | Potentially low | | particularly prone to shrinkage during prolonged | | | financial impact | | drought occurring at a site’s location, increases the | | | | EMEA | probability of soil subsidence that results in damage | to buildings, drainage, and other site infrastructure. LATAM ### 54 GENUS PLC / ANNUAL REPORT 2023 ### SUSTAINABILITY REPORT CONTINUED ### TCFD STATEMENT CONTINUED | The scenario analysis also concluded that | A failure of sufficient action to | The Next Steps | | --- | --- | --- | | Genus’s overall transition risk exposure | decarbonise the business could lead | Following the scenario analysis, it is | | is limited. The table below identifies the | to significant costs in the future of | anticipated that the following will occur: | | transition risks of carbon price, energy and | approximately £53m in net present value | • Continued review and analysis of the | | raw materials (expressed with no mitigating | in a 1.5°C scenario for carbon taxation | implications of the scenario analysis; | | actions) and an aggregated potential | and pricing, along with an additional | • Embedding the scenario analysis within | | financial impact to 2050. | potential exposure of approximately £2m | the business to seek to mitigate risks | | | in electricity costs. In each case, much | and capture opportunities; | | | of the additional cost impacts were in | • Conduct a broader scenario analysis | | | the US with a lower share of renewable | which includes Genus’s Asian sites; | | | energy, and more aggressive transition | • Create a more holistic transition | | | towards the Paris agreement goals. | plan; and | • Improve Scope 3 emissions data. Potential Financial Impact NPV 1.5°C Scenario Aggregated Potential Impact | Type Risk/Opportunity | | (2022-2050 NPV) Region | | Genus (2025) Short (2030) Medium (2040) Long (2050) 4°C Scenario | | | --- | --- | --- | --- | --- | --- | | | Carbon Cost Potential exposure of | | NAM | | Not applicable | | | | £53.3m concentrated | | | – The scenario | | | | in USA and Canada | | | analysis | | | | | EMEA | | considers | the potential remaining LATAM exposure between a BAU 4°C scenario | STRATEGIC REPORT | Energy | Potential Exposure of | NAM | and the | | --- | --- | --- | --- | --- | | | Transition | £2.0m with the USA | | transition to a | | | | more exposed | | 1.5°C scenario. | EMEA LATAM Raw Materials Low Risk £0.1m NAM 1 Transition Risk (Corn) None EMEA Not applicable because corn is not used in this region’s operations. LATAM Not applicable because corn is not used in this region’s operations. Raw Materials Low Risk £0.9m NAM 1 (Soya) EMEA LATAM KEY TO SCENARIO POTENTIAL IMPACTS Potential saving Potential costs Low <£1m Medium £1-3m High >£3m 1 Physical risk analysis for heat stress on crop production, water availability etc have not been considered as part of this initial scenario analysis ### 55 GENUS PLC / ANNUAL REPORT 2023 In view of the impact our products have METRICS AND TARGETS on carbon emissions in our value chain, Genus has committed to climate-related we have adopted genetic improvement carbon reduction targets to drive targets which consider generational performance in areas both directly change in the carbon impact of pork, controlled by us and which provide beef and dairy products. We believe usefulness across our value chain, including: that animal genetics are core to helping • Total Scope 1 & 2 emissions; producers meet the increased demands • Primary Intensity Ratio (Tonnes of for affordable, nutritious food for all, using CO 2 e/Tonne Live weight of animals fewer resources of water, energy and produced); and land, at a fraction of the greenhouse gas • Genetic Improvement (separate indices emissions of alternative systems. Through for Pork, Beef and Dairy sectors) our genetic improvement programmes, which we have pioneered over many Genus also has goals and incentives for decades, we offer our customers an Executives and executive management opportunity for measurable reductions for these climate-related targets in their carbon emissions, use of water, (see Remuneration Committee Report). land and other natural resources. Scope 1 and 2 emissions The figures in the table overleaf highlight and Primary Intensity Ratio the value our genetics provide per animal. Our total Scope 1 and 2 emissions and PIR The real strength of our elite genetics targets, and performance against those builds down successive generations and targets, are set out on page 43. with the number of animals produced by our farmers across the globe. When we Genetic Improvement Targets have completed our LCA for our porcine We believe genomic approaches to and bovine beef genetic lines, we will be animal breeding offer the most cost- able to provide an accurate assessment of effective way to lower carbon emissions. the value our genetics brings to the value Our approach focuses not only on chain and the corresponding savings in improved animal performance, but also carbon emissions. on improved health and wellbeing, which has the potential to reduce the need for antibiotics and veterinary care. We are pioneering a number of breakthrough technologies, such as gene editing and advanced reproductive techniques. STRATEGIC REPORT These offer an immediate and effective response to food security threats such as those posed by novel viruses like PRRS. ### 56 GENUS PLC / ANNUAL REPORT 2023 ### SUSTAINABILITY REPORT CONTINUED ### TCFD STATEMENT CONTINUED GENETIC TARGET DESCRIPTION KPI FY23 KPI COMMENTARY IMPROVEMENT ACHIEVED TARGETS | PORCINE 2.22 kg reduction in life | | One standard deviation of | | 22.4 points | The improvement of the PIC | | | --- | --- | --- | --- | --- | --- | --- | | | cycle carbon emissions | improvement equivalent to | | improvement in | index translates into a reduction | | | | required to produce one | 20 index points on PIC’s | | PIC index per | of 2.18 kg CO | 2 e per market pig | | | market pig. | proprietary index. -2.22 kg | | market pig. | in FY23. | | | | | CO | 2 e per market pig. | | | | We will be seeking to replace this metric in FY24 with data obtained from our peer reviewed LCA. | BOVINE | 0.127 kg reduction in the | Change in feed conversion | | 0.287 kg CO | 2 e/kg | Reduction of 0.287 kg CO | | 2 e/kg | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | — BEEF | life cycle carbon emissions | ratio (‘FCR’) of 0.8, equivalent | | carcass weight. | | carcass weight exceeds | | | | | required to produce 1 kg | to a yearly change in CO | 2 e | | | target of 0.127 kg CO | 2 e/kg | | | | of beef. | emissions of 0.127 kg CO | 2 e/kg | | | carcass weight. | | | carcass weight. The work to develop a beef LCA will over time replace this metric. STRATEGIC REPORT | BOVINE | Yearly improvement | Yearly improvement of $NM | $NM 133 Annual improvement of $NM 133 | | | --- | --- | --- | --- | --- | | — DAIRY | of $66.9 in the $ net | 66.9 index. | | index, exceeding annual | | | merit index (a public | | | improvement target of $NM 66.9. | US dairy industry index measuring commercial FY23-sired cows would produce performance traits). 279 kg less CO 2 e than the FY22-sired cows to produce the equivalent amount of lifetime milk. For a detailed explanation of our genetic improvement targets, how these targets are calculated, and the impact of genetic improvement on the animals ultimate carbon footprint, see our website: www.genusplc.com/sustainability. ### 57 GENUS PLC / ANNUAL REPORT 2023 Metrics and Targets NON-COMPLIANCE WITH THE TCFD We have not complied with Metrics and RECOMMENDATIONS AND Targets recommendations B and C. RECOMMENDED DISCLOSURES TCFD requires companies to disclose Strategy and Risk Management Scope 1, Scope 2, and if appropriate, We have not complied with Strategy Scope 3 emissions, and the related recommendations B and C. TCFD requires risks, and describe the targets used by companies to describe the impact of the organisation to manage climate- climate related risks and opportunities on related risks and opportunities, including the organisation’s business, strategy, and the performance against targets. financial planning and to describe the Whilst we have disclosed our Scope resilience of the organisation’s strategy, 3 emissions relating to business travel taking into consideration different climate and waste management, we have not related scenarios, including a 2°C or lower yet established a robust baseline for scenario. We have recently undertaken our our Scope 3 value chain emissions, nor first scenario analysis (see above), which have we published details of how the assessed the physical and transitional boundary for the Scope 3 emissions risks and opportunities at 11 sites. We will has been set. In addition, we do not yet expand this assessment to additional have the processes and governance Genus sites in FY24, as well as performing in place to enable us to work with our a quantitative analysis of the Company’s strategic value chain partners to agree climate-related opportunities. In relation and deliver Scope 3 emission reductions. to the scenario analysis, we note that we need more time to: (i) fully evaluate In FY24, we will use the scenario analysis to the scenario analysis findings; (ii) review inform and update our transition plan and and update our climate transition plan; road map (see page 44). In addition, we will and (iii) fully understand how we can examine and report on material porcine work in partnership with our value chain Scope 3 emissions and follow this in FY25 to drive down Scope 3 emissions. This with material beef Scope 3 emissions. will be the focus of further work in FY24. STRATEGIC REPORT ### 58 GENUS PLC / ANNUAL REPORT 2023 ### STAKEHOLDER ENGAGEMENT ### The Group actively CUSTOMERS AND CONSUMERS ### engages with its Board representative: ### stakeholders, to keep them All Directors ### updated and ensure we ### understand their priorities. HOW WE ENGAGE KEY ISSUES IDENTIFIED • The Board visits key customers • Need for a high-quality and operators at different levels customer experience at an We look to understand our customers’ of the supply chain, including appropriate cost to serve and consumers’ priorities, support meeting with farmers, meat our employees in pursuing our ACTIONS ARISING packers and processors, strategic goals and maintain strong to understand what they • Continued to roll out GenusOne relationships with shareholders look for in genetics to meet for customers in Latin America, while being a responsible and consumer demands Europe and the UK environmentally conscious citizen within • Regular Board updates on • The Board scrutinised ABS our communities. The Board carries targeted customers and management’s strategy, plans out some engagement directly, while customer wins and actions to address its other engagement occurs during the • Regular customer visits as part go-to market approach in running of the business, with the Board of our service offering, enabling five key markets being kept informed through reports our teams to work closely with from management. The table opposite customers to better understand describes our key stakeholders and their needs examples of engagement during • Keeping under review growth of the year and actions which arose. alternative non-animal proteins, STRATEGIC REPORT in light of consumer preference ### EMPLOYEES Board representative: Lesley Knox, Lykele van der Broek HOW WE ENGAGE KEY ISSUES IDENTIFIED • Direct engagement by • Improvement areas raised in the Workforce Engagement Directors Your Voice survey: • Employee Your Voice survey – Strengthen employee • Chief Executive video updates, experience manager-led updates and – Learning and development updates via intranet following – Increase focus on results announcements sustainability • Global town hall meetings – Health and safety • Leadership calls and quarterly ACTIONS ARISING manager briefings | • Regular internal communications | • The Board reviewed feedback | | --- | --- | | from management | from employees received directly | | • Employee-led resource groups | and continued to monitor | | • Health and safety training | management’s plans to address | | programme and regular | the key points raised in the FY22 | | updates/briefings | Your Voice survey | • Ensuring safe working environments with a strong focus on health and safety strategy and culture ### 59 GENUS PLC / ANNUAL REPORT 2023 ### SHAREHOLDERS Board representative: Iain Ferguson HOW WE ENGAGE KEY ISSUES IDENTIFIED • Investor roadshows, led by the • Ongoing shareholder interest in Chief Executive and Chief sustainability and environmental Financial Officer performance • Results announcements, ACTIONS ARISING presentations and webcasts • AGM and trading update in • Continued focus on November 2022 sustainability (see page 36 to 57) • Annual Report • Regular news flow on key developments • Shareholder consultation on governance matters STRATEGIC REPORT ### COMMUNITIES AND ENVIRONMENT Board representative: Lysanne Gray HOW WE ENGAGE KEY ISSUES IDENTIFIED • A range of placement and • Potential impact of climate employment opportunities change on the business and offered for students our communities and apprentices ACTIONS ARISING • Support for charities close to local businesses • The Board continued • Providing educational support to scrutinise management’s for agriculture and animal strategy, plans and actions science programmes to achieve climate • Investing in activities designed change targets to reduce GHG emissions, • The Board reviewed consistent with our Climate and approved the Company’s Change Policy TCFD disclosures, including an updated assessment of the Company’s climate-related risks and opportunities and related climate scenario analysis (see pages 50 to 54) ### 60 GENUS PLC / ANNUAL REPORT 2023 ### NON-FINANCIAL INFORMATION STATEMENT The table below, and the information it refers to, is intended to help stakeholders understand our position on key non-financial matters in line with the non-financial reporting requirements contained in sections 414CA and 414CB of the Companies Act 2006. Policies and standards which Risk management and Reporting requirement govern our approach additional information Environmental matters Sustainability Framework See pages 36 to 56 Employees Global Employee Handbook; See pages 35 to 35 Whistleblower Policy See page 35 Human rights Global Employee Handbook; See page 35 Whistleblower Policy See page 35 Social matters Charitable Donations Policy See page 39 Anti-corruption and anti-bribery Anti-Bribery and Corruption Policy See page 35 Policy embedding, due diligence Global Employee Handbook See Strategic Report on pages 1 to 33 and outcomes Description of principal risks and impact n/a See Principal Risks and Uncertainties on of business activity pages 61 to 64 Description of the business model n/a See Business Model on pages 1 to 10 Non-financial key performance indicators Sustainability Framework See page 38 to 39 STRATEGIC REPORT ### SECTION 172 STATEMENT Section 172(1) of the Companies Act 2006 MANAGING OUR STAKEHOLDER ENVIRONMENTAL IMPACT imposes a general duty on every company RELATIONSHIPS Information on the Group’s environmental director to act, in good faith, in the way To effectively consider the impact of impact can be found on pages 36 to 56. they consider would be most likely to decisions on our stakeholders, we must promote the success of the company for have a good understanding of their needs Lysanne Gray is the Board’s Sustainability the benefit of its shareholders. In doing so, and issues. We therefore actively listen Sponsor. She is a member of the directors must take into account a list of to our stakeholders at all levels of the Sustainability Committee, which monitors factors that include: organisation, to ensure we take account of progress against the five pillars of the • the likely long-term consequences and respond to their interests. Information Group’s sustainability framework including of board decisions; on how we engage with our stakeholders, the actions identified in the Group’s • how the company’s actions and including the Board’s direct and indirect Climate Change Policy. behaviours affect customers, engagement with them, can be found employees, suppliers, the community on page 58 to 59. and the environment; TREATING SHAREHOLDERS FAIRLY • the desirability of maintaining a The agenda for each Board meeting The Company’s shares are owned by a reputation for high standards of indicates the relevant stakeholder groups wide range of institutional and individual business conduct; and against each item, ensuring the Directors shareholders, with no shareholder having • the need to act fairly between are aware of the stakeholder interests they a majority holding or significant influence shareholders. need to consider in their decisions. over the Group. As a result, no situations This statement explains how the Board arise in which any shareholders can be has complied with its obligations under treated differently, ensuring fair treatment STANDARDS OF BUSINESS CONDUCT section 172. for all. The Board is aware of the need to maintain high standards of business LONG-TERM CONSEQUENCES conduct. The Group has a strong ethical OF BOARD DECISIONS culture, underpinned by our values and policies, which are endorsed by the Board. Genus has a business model and strategy The Group also has specific policies that deliver results on a multi-year basis. and procedures to prevent bribery and For example, we target customers where corruption, as described on pages 34 to 35 we can build long-term and mutually and as made available on our website beneficial relationships, rather than www.genusplc.com. seeking one-off transactions. Our investment in R&D can also take several Maintaining high standards of business years to result in revenue generating conduct also relies on having the right products, meaning our success in the culture within the Group. Page 72 short-term depends on long-term describes how the Board maintains decisions taken in previous years. As a oversight of culture. consequence, long-term decision making is a natural part of the Board’s approach. ### 61 GENUS PLC / ANNUAL REPORT 2023 ### PRINCIPAL RISKS AND UNCERTAINTIES ## RISK MANAGEMENT | | Some of these risks relate to our business | From our broad risk universe, we have | | --- | --- | --- | | Genus is exposed to | operations, while others relate to future | identified 11 principal risks, which | | | commercial exploitation of our leading- | we regularly evaluate based on an | ### a wide range of risks and edge R&D programmes. We are also assessment of the likelihood of occurrence ### uncertainties as it fulfils exposed to global economic and and the magnitude of potential political risks such as trade restrictions impact, together with the effectiveness ### its purpose of providing | | attributed to the on-going Russia- | of our risk mitigation controls. | | --- | --- | --- | | farmers with superior | Ukraine conflict and slow economic | | | | recovery in China post COVID-19. | The Directors confirm that they have | ### genetics, which in turn undertaken a robust assessment of ### supports the fulfilment As part of our risk management the principal and emerging risks and process we monitor emerging risks uncertainties facing the Group. More ### of its vision of nourishing | | and consider when to include them in | information on our risk management | | --- | --- | --- | | the world more sustainably. | our main risk assessment process. This | framework can be found in the Corporate | | | year our reviews of risks focused on: | Governance Statement on pages 72 to 79. | • the continued impact of the Russia- Ukraine conflict; STRATEGIC REPORT • geopolitical tensions across the globe; LINK TO STRATEGY • macroeconomic conditions; • impacts of climate change; Read more on pages 20 to 21 • carbon pricing; and • cyber security. Delivering a differentiated proprietary genetic offering There have been two changes to our principal risks this year. The first is Focusing on large and progressive an increase to our Sustainability risk protein producers globally given increased regulations, reporting requirements and carbon pricing. The second is a reduction in our Hiring and Sharing in the value delivered Retaining Talented People risk based on our successful recruitment and succession planning for key positions. Last year we Considered for Viability Assessment elevated cyber security to a principal risk and we continue to see an increase Risk item focused on sustainability in the sophistication and frequency and TCFD reporting of cyber crime across industries. ### 62 GENUS PLC / ANNUAL REPORT 2023 ### PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED RISK RISK DESCRIPTION HOW WE MANAGE RISK RISK CHANGE IN FY23 ### Strategic Risks DEVELOPING • Development programmes Dedicated teams align our No change. Our analysis PRODUCTS WITH fail to produce best genetics product development to customer and benchmarking COMPETITIVE for customers. requirements. We use large-scale continue to support our ADVANTAGE • Increased competition to secure data and advanced genomic analysis genetic improvements. elite genetics. to ensure we meet our breeding STRATEGIC LINK goals. We frequently measure our performance against competitors in customers’ systems, to ensure the value added by our genetics remains competitive. We also partner with universities and other bodies to further our developments. CONTINUING TO • Failure to manage the technical, Our continued development of the No change. We have SUCCESSFULLY production and financial technology and its deployment to new expanded the number of DEVELOP risks associated with the markets is supported by dedicated machines and our customer INTELLIGEN rapid development of the internal resources and agreements base this year and continue IntelliGen business. with suppliers. To ensure optimum to optimise performance. TECHNOLOGY performance we provide maintenance Continued uncertainty over STRATEGIC LINK and specialist training to our customers further legal actions and and continuously monitor productivity. uncertainties in relation to Current patent infringement patent infringements. proceedings initiated by STgenetics in the US continue to be vigorously defended. STRATEGIC REPORT DEVELOPING AND • Failure to develop successfully We stay aware of new technology No change. Key initiatives COMMERCIALISING and commercialise gene editing opportunities through a wide network continue to progress through GENE EDITING AND technologies due to technical, of academic and industry contacts. the R&D life cycle, and we OTHER NEW intellectual property (‘IP’), Our Genus Portfolio Steering maintain the high level of market, regulatory or Committee oversees our research, investment needed to bring TECHNOLOGIES financial barriers. ensures we correctly prioritise our the end products to market. STRATEGIC LINK • Competitors secure ‘game- R&D investments and assesses the We work closely with regulators changing’ new technology. adequacy of resources and the to ensure our products meet relevant IP landscapes. We have exacting standards. We are formal collaboration agreements with expecting US FDA regulatory key partners, to ensure responsible approval for our PRRSv-resistant exploration and development of pigs in the first half of 2024. technologies and the protection of IP. The Board is updated regularly on key development projects. CAPTURING • Failure to identify appropriate We have a rigorous acquisition analysis No change. We continue VALUE THROUGH investment opportunities or to and due diligence process, with the to work diligently to identify ACQUISITIONS perform sound due diligence. Board reviewing and signing off all areas of opportunity consistent • Failure to successfully integrate material projects. We also have a with our strategic plans. STRATEGIC LINK an acquired business. structured post-acquisition integration Values, and our aim to planning and execution process accelerate growth and create focused on maximising value. value for our shareholders. Our experiences with post-acquisition integration provide a platform for successfully integrating newly acquired businesses. | SUCCEEDING IN | • Failure to appropriately develop | Our organisation blends local and | No change. The global | | --- | --- | --- | --- | | GROWTH MARKETS | our business in China and other | expatriate executives, supported | macroeconomic conditions | | | growth markets. | by the global species teams, to | driven by post COVID-19 | | STRATEGIC LINK | | allow us to grow our business in | recovery and the Russia-Ukraine | | | | key markets, while managing risks | conflict have driven market | | | | and ensuring we comply with our | price volatility. This has been | | | | global standards and comply with | especially felt in the China | | | | sanctions. We also establish local | porcine market. The risks | | | | partnerships where appropriate, | to our business in Russia | | | | to increase market access. | are described in note 4. | ### 63 GENUS PLC / ANNUAL REPORT 2023 RISK RISK DESCRIPTION HOW WE MANAGE RISK RISK CHANGE IN FY23 ### Strategic Risks continued SUSTAINABILITY • Failure to lead the market in We have a global sustainability Increased. There is increasing sustainable animal protein strategy and Climate Change Policy regulation and demand STRATEGIC LINK production and help our that are approved, and regularly for transparency and customers to meet the reviewed, at Board level. Our accuracy of reporting on challenge of producing Sustainability Committee oversees sustainability targets. There meat and milk efficiently the implementation of the strategy is an increase in carbon cost and sustainably as climate and the annual objective setting and a notable change in more change increases demand. process as well as monitoring frequent weather related • Failure to fulfil our commitment progress using key performance events across the globe. to reduce the environmental indicators and our sustainability risk Our carbon reduction plans are impact of our own operations and register. We have developed our on track to meet our 2030 goals implement our Climate Change 2030 emissions reduction plan (and and we have achieved a Policy and TCFD reporting. 2050 net zero plan) and developed significant reduction in our quantifiable, robust performance intensity measures since 2019. indicators in relation to life cycle carbon reduction (per generation) of pigs, beef and dairy cows. See our TCFD reporting on pages 46 to 57. ### Operational Risks PROTECTING IP • Failure to protect our IP could We have a global, cross-functional No change. We continue actively mean Genus-developed genetic process to identify and protect to protect our IP by filing patents STRATEGIC LINK material, methods, systems and our IP. Our customer contracts attributed to our R&D activity. technology become freely and our selection of multipliers available to third parties. and joint venture partners include appropriate measures to protect our IP. We maintain IP appropriate landscape watches and where necessary conduct robust ‘freedom to operate’ searches, to identify third-party rights to technology. STRATEGIC REPORT ENSURING • Loss of key livestock, We have stringent biosecurity No change. There continue to be BIOSECURITY owing to disease outbreak. standards, with independent global supply chain challenges AND CONTINUITY • Loss of ability to move reviews throughout the year to driven by the current economic OF SUPPLY animals or semen freely ensure compliance. We investigate climate, increased trade (including across borders) biosecurity incidents, to ensure sanctions, and, the continued STRATEGIC LINK due to disease outbreak, learning across the organisation. spread of ASF, especially environmental incident or We regularly review the geographical in China. international trade sanctions diversity of our production facilities, and disputes. to avoid over-reliance on single sites. • Lower demand for our products, due to industry-wide disease outbreaks. HIRING AND • Failure to attract, recruit, We have a robust talent and succession Reduced. We have been able to RETAINING develop and retain the planning process, including annual attract and recruit key talent to TALENTED PEOPLE global talent needed to assessments of our global talent pool critical roles including the new deliver our growth plans and active leadership development CEO. Post-COVID employee STRATEGIC LINK and R&D programmes. programmes. The Group’s reward turnover in certain areas has and remuneration policies are now returned to normal levels. reviewed regularly, to ensure their competitiveness, and we have a long- term retention incentive scheme. We work closely with several specialist recruitment agencies, to identify candidates with the skills we need. ### 64 GENUS PLC / ANNUAL REPORT 2023 ### PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED RISK RISK DESCRIPTION HOW WE MANAGE RISK RISK CHANGE IN FY23 ### Operational Risks continued | CYBER SECURITY | • Failure to adequately detect and | We utilise a flexible multi-layered | No change. There has been | | --- | --- | --- | --- | | | mitigate a malicious cyber attack | approach that focuses on employee | a continued rise in the | | STRATEGIC LINK | by internal or external activists | awareness and training, policies, | sophistication, methods of | | | and the ability to quickly recover. | software, and a third-party 24/7 | attack and frequency of | | | • Failure to properly protect | monitoring Security Operations Centre | cyber crime against global | | | our data and systems from | and follow ISO 27001 standards. We | organisations. Increased | | | an attack. | have improved our system and data | geopolitical tensions also | | | | backup procedures and hardened | heighten the risks of a | | | | our servers to further strengthen our | targeted cyber attacks. | resilience and have a programme To mitigate these risks, our focused on continued cyber security programme of enhancing improvements. Our GenusOne cyber protection following programme continues to progress well, the IT security incident in improving our operational controls and June 2022 was successfully IT security as we move to the cloud. implemented in the year. ### Financial Risks | MANAGING | • Fluctuations in agricultural | We continuously monitor markets | No change. There has been a | | --- | --- | --- | --- | | AGRICULTURAL | markets affect customer | and seek to balance our costs and | slow post-COVID 19 economic | | MARKET AND | profitability and therefore | resources in response to market | recovery and global inflationary | | COMMODITY | demand for our products | demand. We actively monitor and | pressure, however agricultural | | | and services. | update our hedging strategy to | input prices are now reducing | PRICES VOLATILITY • Increase in our operating costs manage our exposure. Our porcine for producers in many of STRATEGIC REPORT STRATEGIC LINK due to commodity pricing royalty model and extensive use our markets. volatility. of third-party multipliers mitigates The China pork market • Longer-term influence of the impact of cyclical price and/ continues to deal with the climate factors on the cost or cost changes in pig production. challenges of ASF, volatile and availability of agricultural prices and weak demand. inputs (animal feed). • Geopolitical tensions and the Russia-Ukraine conflict impact on agricultural markets. ### 65 GENUS PLC / ANNUAL REPORT 2023 ### GOING CONCERN AND VIABILITY STATEMENT | In assessing the appropriateness of | As part of the Directors’ consideration | | We have considered the position if each of | | --- | --- | --- | --- | | adopting the going concern basis of | of the appropriateness of adopting the | | the identified principal risks materialised | | preparing the financial statements as | going concern basis in preparing the | | individually and where multiple risks occur | | well as in assessing viability, the Board | financial statements, as well as their | | in parallel. In addition, we have overlaid | | have considered: | assessment of the Group’s viability, the | | this downside scenario, net of mitigating | | • Genus’s Strategic Plan which forms | Board considered several key factors, | | actions, with reverse stress tests on both | | management’s best estimate of the | including our business model (see page 2) | | our headroom and banking covenants to | | future performance and position of | and our strategic framework (see page 20). | | ensure the range beyond the downside | | the Group; | In addition, all principal risks identified by | | scenario is fully assessed. | | • Genus’s results on 30 June 2023 | the Group were considered in a downside | | | | whereby the Group recorded | scenario within the viability assessment | | Based on this assessment our headroom | | adjusted profit before tax of £71.5m | with specific focus paid to those that | | remains adequate under these sensitivities | | in actual currency; | could reasonably have a material impact | | and reverse stress tests, including our | | • Genus’s cash position on 30 June 2023 | within our outlook period, including: | | mitigating actions and expectation of | | with net debt of £195.8m (2022: £185.0m) | | | renewing appropriate facilities. | | and had substantial headroom of £119m | | Three-year | | | | | cumulative | In their assessment of the Group’s viability, | over available facilities (2022: £78m); impact to • Genus’s credit facility agreement which the Directors have determined that a free cash consists of a £190m multi-currency RCF, flow three-year time horizon, to June 2026, is £m an appropriate period to adopt. This was a 150m US dollar RCF and a US 20m USD | bond guarantee. The term of the facility | | | based on the Group’s visibility of its | | --- | --- | --- | --- | | | Growing in emerging markets, | (114.7) | | | is for four years to August 2025 having | | | product development pipeline, for | which we have modelled already exercised both extension example, because of the genetic lag of through reductions to options. Additionally, there is an approximately three years between the short-term growth uncommitted £40m accordion option porcine nucleus herds and customers’ expectations, particularly which can be requested a further two production systems and the pipeline of in China; occasions over the remaining lifetime young bulls. The Board also considered of the facility. The Group have yet to the nature of the principal risks affecting Managing agricultural market enter discussions with the banking Genus, including the agricultural markets and commodity prices syndicate regarding a new facility, in which it operates. volatility; modelled through however given the current standing reductions in price Based on this assessment, the Directors of our business relationship with the expectations, particularly have a reasonable expectation that syndicate we have a reasonable in China; the Group has adequate resources expectation that a new facility would Developing products with (1.5) to continue its operational existence be offered on appropriate terms; and competitive advantage, for the foreseeable future and for a • the potential use of mitigating actions modelled through reductions period of at least 12 months from the STRATEGIC REPORT including reduction in dividends and to short-term growth date of this report. Accordingly, the postponing certain capital spend expectations because of Directors continue to adopt and consider and investments. failing to produce best appropriate the going concern basis genetics for our customers or in preparing the Annual Report. to secure elite genetics; Also, based on this assessment, the | Ensuring biosecurity or | (42.4) | Directors have a reasonable expectation | | --- | --- | --- | | continuity of supply, which is | | that the Group will be able to continue in | | modelled through one-off | | operation and meet its liabilities as they | | impacts of disease outbreaks | | fall due over the period to 30 June 2026. | and border closures; and There are no indications from this Impact of the war in Ukraine, (47.2) assessment that change this expectation modelled through reduction when looking beyond 30 June 2026 at the in profit expectations and Group’s longer-term prospects. cash restrictions. The Strategic Report was approved by the Board of Directors on 6 September 2023 and signed on its behalf by: Jorgen Kokke Chief Executive 6 September 2023 Alison Henriksen Chief Financial Officer 6 September 2023 ### 66 GENUS PLC / ANNUAL REPORT 2023 ### CHAIRMAN’S LETTER ## ENSURING ## SUSTAINABLE SUCCESS Dear Shareholder In last year’s report, we outlined our reasons for continuing to operate in This section of the report explains our Russia, following the invasion of Ukraine. corporate governance arrangements and In summary, we concluded that we had demonstrates how we complied with the been granted licences from HM Treasury UK Corporate Governance Code and the Department of International throughout the year. Trade to continue to trade and while we continued to comply with all laws As I outlined in my statement in the and sanctions, we should adhere to our Strategic Report, the key governance purpose and principles and maintain event of the year was the recruitment our operations in the country. In our IAIN FERGUSON CBE of Jorgen Kokke as our new Chief view, this was in the best interests of Non-Executive Chairman Executive. Having joined the Board on our employees, our animals and the CORPORATE GOVERNANCE 2 May 2023, Jorgen formally took over many people who ultimately depend on | from Stephen Wilson on 1 July 2023, with | our work for their food. The Board has | | --- | --- | | Stephen supporting the transition of | reviewed this position throughout the | | responsibility until he retires at the end | year and our view is currently unchanged. | | of September. Jorgen has undertaken a | We will continue to keep a close eye | | thorough induction programme and more | on the situation as it develops. | information on this and his recruitment ## We devote time can be found in the Nomination For the coming year, the Board has Committee report on page 80. a number of priorities. These include ## at every Board ensuring a successful CEO transition Approving and overseeing the Group’s and recruiting a replacement for Lykele ## meeting to discuss strategy is one of our most important van der Broek, who will retire as a Non- responsibilities as a Board. In addition to Executive Director at November’s AGM. ## strategy and our annual strategy session (see page We will also play close attention to the 75), we are devoting time within every Group’s key strategic initiatives, such ## ensure we are Board meeting to discussing strategy and as the commercialisation of PRRSv- ensuring we are focused on the areas resistant pigs and the refinement of ## focused on the that are critical to Genus’s sustainable ABS’s go-to-market approach. ## areas critical success. The Non-Executive Directors’ external perspective is particularly | to Genus’s | valuable when considering questions such | | | --- | --- | --- | | | as the Group’s geographical balance | Iain Ferguson CBE | | sustainable | and where best to commit the Group’s | Non-Executive Chairman | | | people and capital. Our work this year | 6 September 2023 | | success. | has reaffirmed our opinion that Genus’s | | strategy is correct and will continue to deliver for all our stakeholders. ### 67 GENUS PLC / ANNUAL REPORT 2023 ### UK CORPORATE GOVERNANCE CODE COMPLIANCE STATEMENT ### CODE PRINCIPLES CORPORATE The UK Corporate Governance Code 2018 (the ‘Code’) applied to the financial Page(s) ### GOVERNANCE year ended 30 June 2023. The Code 1. Board leadership 72 ### is available at www.frc.org.uk. HEADLINES and Company purpose ### AT A GLANCE During the year ended 30 June 2023, The Board’s role 72 Genus applied all the principles of the Purpose, culture, values 72 UK Corporate Governance Code and and strategy complied with all of the Code’s provisions. ## 32.0p Stakeholder engagement 72 More information on our application of Full Year Dividend the Code can be found in the sections The Board’s year in review 73 indicated in the table opposite. 2. Division of responsibilities 76 The Board is recommending a final dividend of 21.7p per share, which will Board roles and 76 give a total dividend of 32.0p (2022: responsibilities 32.0p. The final dividend will be paid Board and Committee 76-77 on 8 December 2023, to shareholders structure on the register at the close of business on 10 November 2023. Non-Executive Director 76 independence BOARD TENURE 1 3. Composition, succession 78-82 CORPORATE GOVERNANCE | and evaluation | | | 1 0-2 years 1 | | --- | --- | --- | --- | | | | 1 | 2 2-4 years 3 | | Board composition 78 | 5 | | | 3 4-6 years 2 | Board effectiveness 78 | | | | | 4 6-8 years 0 | | --- | --- | --- | --- | --- | --- | | | | | 4 | | 5 8-9 years 2 | | Election and re-election | | 79 | | 2 | | | of Directors | | | 3 | | | | Nomination Committee | 80-82 | | | | | report 1 As at 30 June 2023 4. Audit, risk and internal 83-88 control Audit & Risk Committee 83-88 INDEPENDENCE OF THE BOARD 2 report (Excluding the chair) 5. Remuneration 89-113 Directors’ remuneration 89-113 report A Independent 4 (57%) B Executive 3 (43%) 2 Board members as at 30 June 2023 and remains correct as at the date of publication of the Annual Report BOARD ETHNIC DIVERSITY 3 A White 7 (87%) B Mixed 1 (13%) 3 See the Company’s 2022 submission to the Parker Review for more information. A B A B ### 68 GENUS PLC / ANNUAL REPORT 2023 ### BOARD OF DIRECTORS AND COMPANY SECRETARY IAIN FERGUSON CBE JORGEN KOKKE STEPHEN WILSON ALISON HENRIKSEN LYSANNE GRAY LYKELE VAN DER BROEK LESLEY KNOX PROFESSOR DAN HARTLEY Non-Executive Chairman Chief Executive Executive Director Chief Financial Officer Non-Executive Director Non-Executive Director; Senior Independent JASON CHIN Group General Counsel Workforce Engagement Director Non-Executive Director and Company Secretary Director COMMITTEE MEMBERSHIP BOARD July 2020 May 2023 January 2013 January 2020 April 2016 July 2014 June 2018 April 2021 June 2014 APPOINTMENT | SKILLS AND | • Extensive Board, governance | • Deep experience in the | • Six years as Group | • Over 25 years of | • Significant experience | • Vast experience of | • Broad international, | • Extensive experience | • Significant experience | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | EXPERIENCE | and leadership experience | international food and | Finance Director at | international experience | of risk management, | growing companies and | strategic and financial | in academic and | in multi-jurisdictional | | | • Strong commercial, science and | agriculture sectors | Genus with wide- | in finance, mergers and | audit, business | working in agricultural | services experience, both | commercial research | patent litigation, mergers | | | agribusiness expertise across a | • 14 years in global | ranging operational, | acquisitions, business | operations, acquisitions | businesses throughout | through executive and | institutions, giving him | and acquisitions, | CORPORATE GOVERNANCE | range of industries, with a particular | leadership roles at | strategic and | transformation and | and disposals, and | the world, including in | non-executive roles | deep scientific expertise | patent and technology | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | focus on consumer goods and food | Ingredion Incorporated, | business development | investor relations, | corporate governance, | emerging markets | • Has advised numerous | • Working to develop | licensing and managing | | • Deep appreciation of capital | a leading New York | responsibilities | operating across Europe, | gained within the | • One of our designated | companies including | and apply methods | product life cycles | | markets and investor sentiment | listed food and | • Extensive experience over | Australia, Asia, the US | food sector | Workforce Engagement | manufacturers and | for reprogramming | • Degrees in science | | | beverage ingredient | 30 years in technology | and South Africa | • Qualified Chartered | Directors | distributors of food | the genetic code | and law | | | solutions company | businesses, including | • Proven track record of | Accountant | | products, encompassing | of living organisms, | | | | • Led Ingredion’s North | finance, mergers | driving performance | • The Board’s | | poultry and poultry | spanning chemistry, | | | | and South American | and acquisitions, IT | in public and privately | Sustainability Sponsor | | breeding companies | chemical biology and | | | | businesses, driving | transformation and | held organisations, both | | | • One of our designated | synthetic biology | | | | growth by leveraging | investor relations | business to business and | | | Workforce Engagement | • Associate Faculty | | | | R&D-led innovation | • International experience, | business to consumer | | | Directors | at the Wellcome | | | | and commercial and | living and working in | • Qualified as a | | | | Sanger Institute, | | | | operational excellence | Europe and the US | Chartered Accountant | | | | where he researches | | | | • Masters in Economics | • Fellow of the Chartered | with Ernst & Young | | | | synthetic genomics | | | | from the University | Institute of Management | | | | | • Fellow of the Academy of | | | | of Amsterdam | Accountants | | | | | Medical Sciences; Trinity | | College, Cambridge; and the Royal Society | CURRENT | Chairman of Crest Nicholson | None Non-Executive Director | | None Executive Vice President | | Chair of Eden Research plc Senior Independent | | Head of the Centre for | None | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | APPOINTMENTS | Holdings plc; Chairman of Personal | | of Renishaw plc; Non- | | Sustainable Business | | Director of 3i Group plc; | Chemical and Synthetic | | | | Assets Trust plc; Pro-Chancellor | | Executive Director of | | Performance and Reporting | | Non-Executive Director | Biology at the Medical | | | | of Cranfield University. | | Canonical Holdings Limited. | | at Unilever plc. | | of Legal & General, | Research Council | | | | | | | | | | where she also chairs the | Laboratory for Molecular | | | | | | | | | | Remuneration Committee. | Biology; Director and Chief | | Scientific Officer of Constructive Biology; Non-Executive Director of Department for Science, Innovation and Technology. PAST Senior Independent Director of Senior roles at Ingredion, Group Finance Director Chief Financial Officer of Financial Controller at Member of the Board of Founder Director of British Positions on the scientific Senior Vice President and APPOINTMENTS Sygen International plc; Chairman including Executive Vice of Genus plc; Executive V.Group, a global leader in Unilever plc and Unilever NV; Management of Bayer Linen Advisers; senior roles advisory boards of a International Counsel of of Berendsen plc; Chairman of President & President Vice President and Chief ship management; Finance Chief Auditor of Unilever; CropScience, a division of at Dresdner Kleinwort number of companies, Shire plc; and senior and Stobart Group Ltd; Senior Independent Americas, president, Asia Financial Officer of Misys Director, UK & Ireland and Chief Financial Officer of Bayer AG; senior Benson; solicitor at including Synaffix BV. global roles in private Director of Balfour Beatty plc; Pacific and EMEA, and plc; finance and business Finance Director, Australia, Unilever’s global food international roles including Slaughter & May; and practice, in the UK Non-Executive Director of Greggs plc; president, North America; development roles at IBM; at Compass Group plc; service business; and a the Head of Bayer numerous non-executive and Australia. Lead Independent Director at the Vice President of Food & and Non-Executive Director and Chief Financial number of other senior CropScience’s BioScience roles, including Centrica, Department for Environment, Food and Nutrition and Director of and Audit Committee Chair Officer of Specialty operational and financial division; and President of the SAB Miller, Alliance Trust, Rural Affairs; Chief Executive of Tate & Strategy and Business of Xchanging plc. Fashion Group Ltd, a former positions within Unilever. Bayer HealthCare Animal Hays, Scottish Provident, Lyle plc; General Manager of Unilever Development at Corbion, ASX-listed company. Health division. Bank of Scotland, Grosvenor AgriBusiness; Chair, Unilever Plantations a producer of sustainable Group and Thomas Cook. and Plant Sciences Group; and ingredient solutions; and Senior Vice President, Corporate leadership positions at Development at Unilever. Loders Croklaan. ### 69 GENUS PLC / ANNUAL REPORT 2023 OARD GENDER BREAKDOWN KEY TO COMMITTEES = Male Member of the Nomination Committee = Female Member of the Remuneration Committee M F Member of the Audit & Risk Committee Committee Chair IAIN FERGUSON CBE JORGEN KOKKE STEPHEN WILSON ALISON HENRIKSEN LYSANNE GRAY LYKELE VAN DER BROEK LESLEY KNOX PROFESSOR DAN HARTLEY Non-Executive Chairman Chief Executive Executive Director Chief Financial Officer Non-Executive Director Non-Executive Director; Senior Independent JASON CHIN Group General Counsel Workforce Engagement Director Non-Executive Director and Company Secretary Director COMMITTEE MEMBERSHIP BOARD July 2020 May 2023 January 2013 January 2020 April 2016 July 2014 June 2018 April 2021 June 2014 APPOINTMENT | SKILLS AND | • Extensive Board, governance | • Deep experience in the | • Six years as Group | • Over 25 years of | • Significant experience | • Vast experience of | • Broad international, | • Extensive experience | • Significant experience | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | EXPERIENCE | and leadership experience | international food and | Finance Director at | international experience | of risk management, | growing companies and | strategic and financial | in academic and | in multi-jurisdictional | | | | • Strong commercial, science and | agriculture sectors | Genus with wide- | in finance, mergers and | audit, business | working in agricultural | services experience, both | commercial research | patent litigation, mergers | | | | agribusiness expertise across a | • 14 years in global | ranging operational, | acquisitions, business | operations, acquisitions | businesses throughout | through executive and | institutions, giving him | and acquisitions, | | | | range of industries, with a particular | leadership roles at | strategic and | transformation and | and disposals, and | the world, including in | non-executive roles | deep scientific expertise | patent and technology | | | | focus on consumer goods and food | Ingredion Incorporated, | business development | investor relations, | corporate governance, | emerging markets | • Has advised numerous | • Working to develop | licensing and managing | | | | • Deep appreciation of capital | a leading New York | responsibilities | operating across Europe, | gained within the | • One of our designated | companies including | and apply methods | product life cycles | | | | markets and investor sentiment | listed food and | • Extensive experience over | Australia, Asia, the US | food sector | Workforce Engagement | manufacturers and | for reprogramming | • Degrees in science | | | | | beverage ingredient | 30 years in technology | and South Africa | • Qualified Chartered | Directors | distributors of food | the genetic code | and law | | | | | solutions company | businesses, including | • Proven track record of | Accountant | | products, encompassing | of living organisms, | | | | | | • Led Ingredion’s North | finance, mergers | driving performance | • The Board’s | | poultry and poultry | spanning chemistry, | | | | | | and South American | and acquisitions, IT | in public and privately | Sustainability Sponsor | | breeding companies | chemical biology and | | | | | | businesses, driving | transformation and | held organisations, both | | | • One of our designated | synthetic biology | | | | | | growth by leveraging | investor relations | business to business and | | | Workforce Engagement | • Associate Faculty | | | | | | R&D-led innovation | • International experience, | business to consumer | | | Directors | at the Wellcome | | | | | | and commercial and | living and working in | • Qualified as a | | | | Sanger Institute, | | | | | | operational excellence | Europe and the US | Chartered Accountant | | | | where he researches | | CORPORATE GOVERNANCE | | | | • Masters in Economics | • Fellow of the Chartered | with Ernst & Young | | | | synthetic genomics | | | | | | from the University | Institute of Management | | | | | • Fellow of the Academy of | | | | | | of Amsterdam | Accountants | | | | | Medical Sciences; Trinity | | | College, Cambridge; and the Royal Society | CURRENT | Chairman of Crest Nicholson | None Non-Executive Director | | None Executive Vice President | | Chair of Eden Research plc Senior Independent | | Head of the Centre for | None | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | APPOINTMENTS | Holdings plc; Chairman of Personal | | of Renishaw plc; Non- | | Sustainable Business | | Director of 3i Group plc; | Chemical and Synthetic | | | | Assets Trust plc; Pro-Chancellor | | Executive Director of | | Performance and Reporting | | Non-Executive Director | Biology at the Medical | | | | of Cranfield University. | | Canonical Holdings Limited. | | at Unilever plc. | | of Legal & General, | Research Council | | | | | | | | | | where she also chairs the | Laboratory for Molecular | | | | | | | | | | Remuneration Committee. | Biology; Director and Chief | | Scientific Officer of Constructive Biology; Non-Executive Director of Department for Science, Innovation and Technology. PAST Senior Independent Director of Senior roles at Ingredion, Group Finance Director Chief Financial Officer of Financial Controller at Member of the Board of Founder Director of British Positions on the scientific Senior Vice President and APPOINTMENTS Sygen International plc; Chairman including Executive Vice of Genus plc; Executive V.Group, a global leader in Unilever plc and Unilever NV; Management of Bayer Linen Advisers; senior roles advisory boards of a International Counsel of of Berendsen plc; Chairman of President & President Vice President and Chief ship management; Finance Chief Auditor of Unilever; CropScience, a division of at Dresdner Kleinwort number of companies, Shire plc; and senior and Stobart Group Ltd; Senior Independent Americas, president, Asia Financial Officer of Misys Director, UK & Ireland and Chief Financial Officer of Bayer AG; senior Benson; solicitor at including Synaffix BV. global roles in private Director of Balfour Beatty plc; Pacific and EMEA, and plc; finance and business Finance Director, Australia, Unilever’s global food international roles including Slaughter & May; and practice, in the UK Non-Executive Director of Greggs plc; president, North America; development roles at IBM; at Compass Group plc; service business; and a the Head of Bayer numerous non-executive and Australia. Lead Independent Director at the Vice President of Food & and Non-Executive Director and Chief Financial number of other senior CropScience’s BioScience roles, including Centrica, Department for Environment, Food and Nutrition and Director of and Audit Committee Chair Officer of Specialty operational and financial division; and President of the SAB Miller, Alliance Trust, Rural Affairs; Chief Executive of Tate & Strategy and Business of Xchanging plc. Fashion Group Ltd, a former positions within Unilever. Bayer HealthCare Animal Hays, Scottish Provident, Lyle plc; General Manager of Unilever Development at Corbion, ASX-listed company. Health division. Bank of Scotland, Grosvenor AgriBusiness; Chair, Unilever Plantations a producer of sustainable Group and Thomas Cook. and Plant Sciences Group; and ingredient solutions; and Senior Vice President, Corporate leadership positions at Development at Unilever. Loders Croklaan. B M 5 (62.5%) F 3 (37.5%) ### 70 GENUS PLC / ANNUAL REPORT 2023 ### GENUS EXECUTIVE ### LEADERSHIP TEAM (‘GELT’) | | | ANGELLE ROSATA | DR MATT CULBERTSON | JERRY THOMPSON | DR NATE ZWALD | DR ELENA RICE | | --- | --- | --- | --- | --- | --- | --- | | | | Group HR Director | Chief Operating Officer, | Chief Operating Officer, | Chief Operating Officer, | Chief Scientific Officer and | | | | | Genus PIC | Genus ABS Beef | Genus ABS Dairy | Head of R&D | | | SKILLS AND EXPERIENCE | • Deep and broad expertise spanning | • Spent entire career in | • Natural entrepreneur with substantial | • Significant expertise and | • Deep expertise in running R&D | | | | resourcing, talent management, | porcine industry | industry knowledge, commercial | experience of dairy genetics, | programmes, regulatory science | | | | succession planning, leadership | • Has led the development and | skills and international experience | strong commercial focus and | and portfolio management | | | | development and health and safety | implementation of Genus PIC’s | • Has helped Genus establish | passion for people development | • Has led the development and | | | | • Extensive HR strategic planning | genetic strategy and technical | and grow businesses in | • Board member of the Council | introduction of genetic improvement | | | | skills and commercial acumen | services capability, as well | countries as diverse as the UK, | on Dairy Cattle Breeding and | technologies and nurtured a | | | | • Masters in Human Resource | as leading the commercial | Russia, India and China | Vice President of the National | portfolio of gene editing projects | | | | Development from | engagement with many of PIC’s | • Degree in Agriculture from the | Association of Animal Breeders | • BSc and MSc in Biology from | | | | Vanderbilt University | most significant customers | University of Plymouth and a | • Degree in Dairy Science and MBA | Moscow State University, and PhD in | | | | | • Doctorate in Animal Breeding | graduate of Harvard Business | and PhD in Dairy Cattle Genetics | Plant Physiology and Biochemistry | | CORPORATE GOVERNANCE | | | and Genetics from the | School’s Advanced Management | from the University of Wisconsin | from the Timiryazev Institute of | | | | | University of Georgia | | | Plant Physiology in Moscow | | | CAREER | • Joined Genus in September | • Joined Genus in 2011 as PIC’s | • Joined PIC in 1992, working initially | • Joined Genus in January 2017 after | • Joined Genus as Chief Scientific | | | | 2013, following more than 20 | Director of Genetic Services | in the UK and then Siberia and | 15 years at Alta Genetics, including | Officer on 15 July 2019 | | | | years in the healthcare sector | and Sales and took on the role | Romania, before leading PIC | ten years as General Manager of | • Spent 18 years in increasingly senior | | | | • Developed and delivered PIC’s | of Global Product Development | in Central and Eastern Europe | its US business and more than two | roles at Bayer, leading teams using | | | | people strategy, before becoming | and Technical Services Director | and then Europe as a whole | years as Global Marketing Director | pioneering science and cutting- | | | | HR Director for ABS and then | in 2012 before becoming Chief | • Led PIC and ABS in Russia and Asia | • Remains involved in his family’s | edge technology to help farmers | | | | Group HR Director on 1 July 2017 | Operating Officer in July 2023 | Pacific, before becoming COO for | commercial dairy operation, Bomaz | grow food more sustainably | | | | | • Previously spent nine years working | Genus Asia in 2012 and then COO | farm in the US, which has produced | | | | | | for Murphy-Brown (now Smithfield | for Genus ABS Beef in July 2016 | high-ranking industry and ABS sires | | Foods), where he managed the internal genetics programme and technical operations for its Eastern operations ### 71 GENUS PLC / ANNUAL REPORT 2023 GENDER BREAKDOWN = Male 6 (67%) = Female 3 (33%) M F ANGELLE ROSATA DR MATT CULBERTSON JERRY THOMPSON DR NATE ZWALD DR ELENA RICE JORGEN KOKKE Group HR Director Chief Operating Officer, Chief Operating Officer, Chief Operating Officer, Chief Scientific Officer and Chief Executive Genus PIC Genus ABS Beef Genus ABS Dairy Head of R&D SKILLS AND EXPERIENCE • Deep and broad expertise spanning • Spent entire career in • Natural entrepreneur with substantial • Significant expertise and • Deep expertise in running R&D resourcing, talent management, porcine industry industry knowledge, commercial experience of dairy genetics, programmes, regulatory science succession planning, leadership • Has led the development and skills and international experience strong commercial focus and and portfolio management development and health and safety implementation of Genus PIC’s • Has helped Genus establish passion for people development • Has led the development and • Extensive HR strategic planning genetic strategy and technical and grow businesses in • Board member of the Council introduction of genetic improvement skills and commercial acumen services capability, as well countries as diverse as the UK, on Dairy Cattle Breeding and technologies and nurtured a • Masters in Human Resource as leading the commercial Russia, India and China Vice President of the National portfolio of gene editing projects Development from engagement with many of PIC’s • Degree in Agriculture from the Association of Animal Breeders • BSc and MSc in Biology from Vanderbilt University most significant customers University of Plymouth and a • Degree in Dairy Science and MBA Moscow State University, and PhD in • Doctorate in Animal Breeding graduate of Harvard Business and PhD in Dairy Cattle Genetics Plant Physiology and Biochemistry and Genetics from the School’s Advanced Management from the University of Wisconsin from the Timiryazev Institute of University of Georgia Plant Physiology in Moscow STEPHEN WILSON CAREER • Joined Genus in September • Joined Genus in 2011 as PIC’s • Joined PIC in 1992, working initially • Joined Genus in January 2017 after • Joined Genus as Chief Scientific Executive Director | 2013, following more than 20 | Director of Genetic Services | in the UK and then Siberia and | 15 years at Alta Genetics, including | Officer on 15 July 2019 | | --- | --- | --- | --- | --- | | years in the healthcare sector | and Sales and took on the role | Romania, before leading PIC | ten years as General Manager of | • Spent 18 years in increasingly senior | | • Developed and delivered PIC’s | of Global Product Development | in Central and Eastern Europe | its US business and more than two | roles at Bayer, leading teams using | | people strategy, before becoming | and Technical Services Director | and then Europe as a whole | years as Global Marketing Director | pioneering science and cutting- | | HR Director for ABS and then | in 2012 before becoming Chief | • Led PIC and ABS in Russia and Asia | • Remains involved in his family’s | edge technology to help farmers | | Group HR Director on 1 July 2017 | Operating Officer in July 2023 | Pacific, before becoming COO for | commercial dairy operation, Bomaz | grow food more sustainably | | | • Previously spent nine years working | Genus Asia in 2012 and then COO | farm in the US, which has produced | | | | for Murphy-Brown (now Smithfield | for Genus ABS Beef in July 2016 | high-ranking industry and ABS sires | | Foods), where he managed the internal genetics programme CORPORATE GOVERNANCE and technical operations for its Eastern operations ALISON HENRIKSEN Chief Financial Officer DAN HARTLEY Group General Counsel and Company Secretary See pages 68 and 69 for Jorgen’s, Stephen’s, Alison’s and Dan’s biographies. EXEC M F ### 72 GENUS PLC / ANNUAL REPORT 2023 ### CORPORATE GOVERNANCE STATEMENT ## BOARD LEADERSHIP ## AND PURPOSE These values are aligned to both THE BOARD’S ROLE OVERSEEING STRATEGY our purpose and our strategy. The Board is responsible for ensuring The Group’s corporate governance More information on our values our long-term success. It: framework plays a key role in the successful can be found on page 34. | | • approves our strategy and corporate | | delivery of our strategy. The table on pages | | --- | --- | --- | --- | | | goals and monitors our performance | The Board has a number of ways of | 74 to 75 shows how the Board’s discussions | | | against them; | understanding and monitoring the culture | during the year related to specific aspects | | | • determines that we have the necessary | around the business. In particular, these | of the strategy. In addition, the Board | | | resources, systems and controls to | include the results of the Group’s Your | holds an annual strategy session, focusing | | | achieve our objectives; and | Voice employee survey and the Workforce | on the strategic direction and goals of | | | • sets the culture and standards of behaviour | Engagement Directors’ interactions with | the Group and its business units. More | | | we want to see throughout Genus. | employees during the year, as described | information on this can be found in the | | | | below. The Board believes that health | Board’s Year in Review on page 73. | | CORPORATE GOVERNANCE | The Board is also responsible for other | | | and safety performance is another critical decisions. These include: important indicator of culture and the WORKFORCE ENGAGEMENT • approving the corporate budget; Directors monitor performance on a • stress-testing our scenario planning, Lykele van der Broek and Lesley Knox are regular basis. The Directors also review to ensure we have the right funding; the designated Workforce Engagement other measures that indicate the Group’s • approving material contracts, acquisitions, Directors. They continued to engage with culture, such as employee churn rates licences and investments; and employees this year, holding face-to-face and success with developing people and • reporting to shareholders. meetings with ABS employees in Brazil. The filling vacancies from within the Group. key points raised at town hall meetings are set out in our Section 172 Statement The Directors also meet numerous PURPOSE, CULTURE AND VALUES on page 60. The Board will continue to people from around the Group, including Genus is a purpose-driven business, which monitor progress made against these members of management who present is reflected in our vision of pioneering points as well as feedback received in at Board meetings and through site animal genetic improvement to help our global employee survey, Your Voice, visits, giving them further insight into nourish the world. This purpose provides which will be conducted again in FY24. For the culture and talent within the Group. the bedrock for our strategy, with its focus more information see page 35. In addition, During the year, the Board undertook on improving genetics for the benefit of Lesley Knox and Lysanne Gray met with visits to sites in Brazil (see page 73). progressive livestock farmers and helping members of our employee resource them to maximise their performance on group AWAKE to share insights into their The Board ensures its own culture is aligned their farms, and with a growing emphasis personal and professional journeys. to the culture across the Group, through on using genetic advances to reduce the the annual evaluations of the Board and environmental impact of animal protein The Workforce Engagement Directors its Committees. More broadly, the Group’s production. The Board regularly revisits will continue to work around the Group’s employee performance management the Group’s purpose, including as part different sites, to collect feedback and process also has a strong focus on of its annual strategy sessions, to ensure wherever possible to hold face-to-face behaviours that are aligned to our values. it remains relevant to the business. meetings with employees as part of the The Group has a Whistleblowing Policy and Board’s programme of annual visits. To deliver our strategy and achieve an independent hotline to allow employees our purpose, we must have the right to raise any concerns anonymously. This ENGAGEMENT WITH OTHER culture. Genus aims to maintain a process is overseen by the Audit & Risk STAKEHOLDERS positive, inclusive and cooperative Committee on the Board’s behalf. More culture, with a global outlook and a The Group’s interactions with its other information can be found on page 83. focus on excellent customer service. stakeholders, including engagement undertaken directly by the Board, is The Board is therefore satisfied that This culture is underpinned by a set of values summarised on page 58 in the the Group’s culture is aligned with that exemplify the business we want to be: Strategic Report. its purpose, values and strategy customer centric, results driven, pioneering, and that our workplace policies and people-focused and responsible. practices are consistent with them. INFORMATION FLOW TO THE BOARD | | The Chairman | | A week before | Board meetings | The Group | The updated | | --- | --- | --- | --- | --- | --- | --- | | The diagram to the right sets out our process for providing | sets the agenda | | the meeting, the | take place at | Company | list of actions | | information to the Directors, ahead of scheduled Board | for the meeting, | | agenda and | least eight times | Secretary | becomes part of | | meetings. This ensures our Board is well informed and | with input from | | Board papers | per year. | monitors | the agenda for | | the Directors can contribute effectively to discussions. | the Chief | | are sent to the | | decisions and | the next Board | | To assist the Directors with discharging their duties under | Executive, Chief | | Directors using a | | actions agreed | meeting. | | Section 172 of the Companies Act, each item included in | Financial Officer | | secure electronic | | at each meeting. | | | the Board papers indicates the relevant considerations. | and Group | | system. | | | | | More information can be found in the Section 172 statement | Company | | | | | | | on page 60. | Secretary. | 1 2 3 4 5 | | | | | ### 73 GENUS PLC / ANNUAL REPORT 2023 ## THE BOARD’S YEAR ## IN REVIEW The Board held eight scheduled meetings during the year. At each scheduled meeting, the Board receives updates on: • business performance, business development, talent development and competitive landscape developments from the Chief Executive Officer; • financial performance of the business and forecasts from the Chief Financial Officer; and • corporate governance and legal issues from the Group General Counsel and Company Secretary, and external advisers. The table below shows how many scheduled Board and Committee meetings each Director attended during the year. Director Board Nomination Audit & Risk Remuneration Non-Executive Chairman Iain Ferguson 8/8 2/2 5/5 5/5 Executive Directors ### VISITING OUR SITES Stephen Wilson 8/8 0/2 3 5/5 2 5/5 ### Jorgen Kokke 1 1/1 N/A 1/1 2 1/1 Site visits are an important part of the CORPORATE GOVERNANCE | Alison Henriksen 8/8 2/2 | 2 | 5/5 | 2 | 5/5 | Board’s annual programme. | | --- | --- | --- | --- | --- | --- | | Non-Executive | | | | | In May 2023, the Board went to the Group’s locations | | Directors | | | | | in Uberaba, Brazil. This included tours of ABS production | facilities, ABS genetic nucleus, IntelliGen and embryo Lysanne Gray 8/8 2/2 5/5 5/5 laboratories, customer site visits and business presentations, Lykele van der as well as PIC and ABS business presentations. The Board also Broek 7/8 2/2 5/5 5/5 had opportunities to meet with employees at all locations. Lesley Knox 8/8 2/2 4/5 4/5 Jason Chin 8/8 2/2 5/5 5/5 Note: The maximum number of meetings that Directors could have attended during the year: Board eight, Nomination Committee two, Audit & Risk Committee five and Remuneration Committee five. 1 Jorgen Kokke was appointed to the Board on 2 May 2023 2 By invitation 3 Stephen Wilson did not attend committee meetings dealing with his own successor ### 74 GENUS PLC / ANNUAL REPORT 2023 ### CORPORATE GOVERNANCE STATEMENT CONTINUED KEY TO STRATEGY KEY TO STAKEHOLDERS Deliver a differentiated proprietary genetic offering E Employees SC Supply Chain Focus on progressive protein producers globally S Shareholders EN Environment C Customers Share in the value delivered The table below provides more detail of the Board’s discussions and activities, and the outcomes from them. It also sets out how each topic supports the delivery of our strategy and the fulfilment of the Directors’ duties under s172 of the Companies Act. Topic and link to our strategy Activity Actions arising Progress Leadership and Monitor Board Internal evaluation undertaken during the year. Focus areas identified Effectiveness effectiveness (see page 79) LINK TO OUR STRATEGY | | Monitor pipeline of | Board visits identify and set time aside to meet | | --- | --- | --- | | | senior talent | talent within the organisation. | | STAKEHOLDERS | | Workforce Engagement Directors meet talent | | E, S | | at employee meetings. | | S172 CONSIDERATIONS | | Presentations to AWAKE members. | a, b CORPORATE GOVERNANCE Business Monitor progress against Held strategy session with GELT and other See page 75 Development our strategic objectives business leaders. and Strategy Review and approve Approved: LINK TO OUR STRATEGY business activities • PIC investment in SwineTech Monitor strategic Received updates on: STAKEHOLDERS S, C, SC developments • The activities of the Sustainability Committee and the Company’s sustainability strategy S172 CONSIDERATIONS a • The ABS digital and go-to-market strategies • Material business development opportunities • Continued regulatory progress of the PRRSv development programme • The Company’s cyber security improvements • The Company’s activities in Russia • Collaborations and potential collaborations including business activities in China Research and Monitor R&D progress Received updates on: See pages 28-29 Development • The scientific progress of the PRRSv development LINK TO OUR STRATEGY programme and other gene editing projects • Ongoing improvements in IntelliGen technology and its global rollout STAKEHOLDERS • R&D programmes including the progress in reproductive S, C biology and other material projects | S172 CONSIDERATIONS | | • The activities of the GPSC and the Scientific | | | --- | --- | --- | --- | | a, c | | Advisory Board | | | People | Review recruitment | Received updates on: | See pages 34-35 | | LINK TO OUR STRATEGY | pipeline | | | • Key vacancies and hires including key roles in the business, Group Finance and R&D • Talent development in leadership below GELT level STAKEHOLDERS E Update on employee Held Town Hall meetings with employees and the Chief See pages 34-35 feedback Executive, and received updates on meetings between S172 CONSIDERATIONS employees and the Workforce Engagement Directors. a, b Your Voice updates. Shareholders Monitor investor attitudes Updated on meetings with shareholders, potential See pages 58-59 LINK TO OUR STRATEGY towards Genus investors and analysts. STAKEHOLDERS S S172 CONSIDERATIONS c, f ### 75 GENUS PLC / ANNUAL REPORT 2023 KEY TO S172 CONSIDERATIONS (a) Consequence of decisions in the long-term (d) Impact of the Company’s operations on the community and environment (b) Interests of the Company’s employees (e) Desirability of the Company maintaining a reputation for (c) Need to foster the Company’s business relationships with high standards of business conduct suppliers, customers and others (f) Need to act fairly between members of the Company Topic and link to our strategy Activity Actions arising Progress Company Monitor performance Received updates on the operational performance See pages 24-29 Performance and against plan of the business units and market conditions. Finance Monitored the Group’s performance against LINK TO OUR STRATEGY its strategy, budget and goals. Review past and Approved the annual and interim results and dividends. STAKEHOLDERS projected financial Approved the FY23 budget and the FY24-27 strategic plan. S performance S172 CONSIDERATIONS Monitor key financial Received tax and treasury updates. See pages 30-33 a, f issues Received pension updates. Monitor performance Received updates on renewal of the Group’s external against plan borrowing facilities. Reviewed going concern and viability, and reviewed reports from the Company’s auditors. Executive/GELT Monitor business unit Received financial and operational performance updates. Updates performance and plans Received regular presentations from each business unit. LINK TO OUR STRATEGY Conducted strategy session setting out medium-term strategic goal of the business unit and comparing performance of each business unit against previously STAKEHOLDERS presented strategic goals. E, S, C, SC CORPORATE GOVERNANCE S172 CONSIDERATIONS a | Sustainability, | Ensure strong culture of | Receive updates from the Sustainability Committee | See pages 36-57 | | --- | --- | --- | --- | | Health and Safety | health and safety | discussions outlining the Group’s progress against goals. | | | LINK TO OUR STRATEGY | | Reviewed the Group’s health and safety strategy and | | FY23 targets for health and safety and reviewed progress throughout the year. STAKEHOLDERS Received updates from the Head of Health and Safety, E including progress against relevant KPIs. S172 CONSIDERATIONS b Risk Management Monitor risk management Monitored the Group’s risk register. See pages 61-64 LINK TO OUR STRATEGY and control Received updates on the whistleblowing hotline reports and investigations. Receive updates on supply chains, biosecurity and animal STAKEHOLDERS welfare from the business units. S S172 CONSIDERATIONS a, c BOARD STRATEGY SESSION The Board held its annual strategy meeting in January 2023. In preparation for the session, management provides the Board with a pack of pre-reading and other information, including relevant videos such as industry seminars. This enables the Board to attend the session well-informed about the latest context for the strategy discussion. The session focused on a number of key areas, including the importance of the Group’s work on gene editing and its commercialisation, the growth of IntelliGen and making the technology available to a broader group of customers, and the establishment of the Group’s Scientific Advisory Board under Jason Chin’s leadership. This will enhance Genus’s horizon-scanning ability, which is important to sustained success in a long-cycle business. At the end of the strategy session, the Board concluded that the strategy for FY24-27 remained appropriate. ### 76 GENUS PLC / ANNUAL REPORT 2023 ### CORPORATE GOVERNANCE STATEMENT CONTINUED ## DIVISION OF ## RESPONSIBILITIES BOARD ROLES AND RESPONSIBILITIES BOARD COMMITTEES To ensure we have clear responsibilities at the top of the The table below shows Board Committee membership at the Company, the Board has set out well-defined roles for the year end: Chairman and Chief Executive Officer. These, along with the responsibilities of our other Directors, are summarised in the Committee table below. Director Audit & Risk Nomination Remuneration Title Responsibilities Iain Ferguson – C M Chairman Iain’s primary responsibility is to lead the Board Jorgen Kokke – – – Iain Ferguson and ensure it operates effectively. He achieves Stephen Wilson – M – this in part through promoting an open culture, which allows people to challenge the status Alison Henriksen – – – CORPORATE GOVERNANCE quo, and holding meetings with the NEDs Lysanne Gray C M M without the Executives present. Iain also communicates directly with shareholders. Lykele van der Broek M M M Chief Executive Jorgen is responsible for devising and Lesley Knox M M C Jorgen Kokke implementing our strategy and for managing Jason Chin M M M our day-to-day operations. He is accountable to the Board for the Group’s development, in C Chair line with its strategy, taking into account the M Member risks, objectives and policies set out by the Board and its Committees. The Committee Chairs oversee and lead the Committees’ activities, within their terms of reference, and are responsible for Chief Financial Alison is responsible for helping the Chief their effective operation. More information about the roles and Officer Executive Officer to devise and implement work of the Board Committees can be found in their statements Alison the strategy, and for managing the Group’s on pages 80 to 113, and in their terms of reference on our website Henriksen financial and operational performance. at www.genusplc.com. Senior Lesley provides a sounding board for the Independent Chairman and is an alternative line of NON-EXECUTIVE DIRECTOR INDEPENDENCE NED communication between the Chairman and Lesley Knox 1 The Board believes that all of the NEDs are independent in other Directors. She leads meetings of the NEDs, character and judgement, and that there are no relationships or without the Chairman present, to appraise circumstances that are likely to affect (or could appear to affect) the Chair’s performance, and consults with their judgement. As required by the Code, the Chairman was shareholders in the absence of the Chairman independent on appointment. and Chief Executive Officer. | NEDs | | | The NEDs constructively challenge, oversee and | | --- | --- | --- | --- | | Lysanne Gray | | 2 , | help to progress the execution of our strategy, | | Lykele van der | | | the management of the Group and the | | Broek | 1 , Jason | | management of our governance structures, | | Chin | | | within the risk and control framework set by | the Board. 1 Also a Workforce Engagement Director 2 Also the Board’s Sustainability Sponsor ### 77 GENUS PLC / ANNUAL REPORT 2023 BOARD AND COMMITTEE STRUCTURE The diagram below shows the Board and the Committees that report to it: ### BOARD COMMITTEES | AUDIT & RISK COMMITTEE | REMUNERATION COMMITTEE | NOMINATION COMMITTEE | | --- | --- | --- | | Ensures the integrity of our financial | Determines remuneration for our Executive | Reviews the Board’s structure, size and | | reporting, evaluates our risk management | Directors and senior management, to | composition and proposes candidates for | | and internal control system, and oversees | support our growth strategy and deliver | appointment to the Board. Refer to the | | the internal and external auditors. Refer to | value for stakeholders. Refer to the | Committee’s report on pages 80-82 | | the Committee’s report on pages 83-88 | Committee’s report on pages 89-113 | | ### GENUS PLC BOARD ### OTHER TEAMS REPORTING ### TO THE BOARD SUSTAINABILITY COMMITTEE GELT GENUS PORTFOLIO STEERING Provides direction and oversight for Leads our strategic delivery and ensures COMMITTEE continuous improvement in our environmental organisational alignment, engagement Gives us a comprehensive view of our R&D sustainability, health and safety, animal and efficient execution programme and involves our business units well-being and community engagement in prioritising our R&D initiatives. Jason Chin attends the GPSC and reports to the Board on its activities CORPORATE GOVERNANCE ### 78 GENUS PLC / ANNUAL REPORT 2023 ### CORPORATE GOVERNANCE STATEMENT CONTINUED ## COMPOSITION, ## SUCCESSION AND ## EVALUATION YEAR 1 An external Board effectiveness review produces an action plan for the areas of focus identified by the review. CORPORATE GOVERNANCE YEAR 2 A follow-up | | | YEAR 3 | | questionnaire by | | --- | --- | --- | --- | --- | | | An internal review | | | the same external | | using questionnaires | | | consultant enables us | | | and interviews with the | | | to monitor our progress | | | | Chair of the Board. | | with the focus areas. | | THE BOARD’S COMPOSITION ASSESSING THE BOARD’S EFFECTIVENESS At the year end, the Board comprised the Non-Executive To ensure the Board provides effective leadership to Chairman, four independent Non-Executive Directors and the Group, we have a three-year evaluation cycle, using three Executive Directors – the Chief Executive Officer, the a mixture of internal and external evaluations. Chief Executive Officer Designate and the Chief Financial Officer. The Non-Executive Directors therefore form a majority This was the second year of the current three-year cycle, following on the Board, as required by the Code. Stephen Wilson last year’s external evaluation, and we therefore followed the stepped down as CEO on 1 July 2023 and will retire from process shown in the diagram above. the Board on 30 September 2023, resulting in the number of Executive Directors reducing to two from that date. The Board has an appropriate blend of skills and professional backgrounds. Almost all of our Directors have held leadership positions in international companies, with several having run businesses overseas. Several of our Directors, including the Chair of the Audit & Risk Committee, have significant financial experience, while others have strong backgrounds in scientific research or in leading science-based businesses. This breadth helps to ensure the Board provides even- handed oversight, works in a constructive and focused manner and has the capabilities to manage the challenges of a complex and evolving global business environment. ### 79 GENUS PLC / ANNUAL REPORT 2023 ### THE EVALUATION’S CONCLUSIONS The review showed that the Board remains effective in most areas, with the feedback echoing the positive sentiments of the previous year’s review. The Board is well led, and recommendations from the previous year’s evaluation had been well embedded within its governance processes. The review demonstrated that the Board’s priorities are focused on the successful transition between Stephen Wilson and Jorgen Kokke, as well as on broader executive and non-executive succession planning. In addition, the evolution of the ABS strategy remains a high priority for the Board going forward. ### BOARD FOCUS AREAS FOR FY23 Last year’s internal evaluation identified the following priorities for FY23: Priority Progress Enhanced engagement from the Board in shaping the Board’s The Board now has a balanced score card in place, which is agenda, including the preparation of a balanced score card used to track progress with key issues and initiatives at each of actions from the annual strategy session, to ensure that scheduled Board meeting. All Directors are consulted in advance the Board is able to spend its time discussing and challenging on the meeting agendas, to ensure that priority themes and management on its highest priority strategic topics. topics are identified. Using time around Board meetings, such as at Board dinners, The Board has taken a structured approach to using time around to discuss key themes emerging from management briefings by meetings, for example, by using the dinner the night before each the Chief Executive Officer, Chief Financial Officer, and General meeting as a forum for discussing strategic issues. Counsel and Company Secretary, allowing the Board more time during its meetings for discussion of its highest priority strategic topics. Ensuring an ongoing focus on succession issues including Board The Board has continued to focus on succession, including succession, Board size and skills, and executive team succession. the appointment of an internal candidate (Matt Culbertson) as Chief Operating Officer of Genus PIC, following Bill Christianson’s retirement. The Nomination Committee’s remit includes the Board’s size and balance of skills, which remain appropriate. ELECTION AND RE-ELECTION OF DIRECTORS As noted above, Stephen Wilson stepped down as Chief Executive at the end of June 2023 and will step down from the Board on 30 September 2023. Having completed nine years on the Board, Lykele van der Broek will retire as a Non-Executive Director at the AGM in November 2023. All the other Directors will offer themselves for re-election (or election for Jorgen Kokke) at the next AGM, as required by the Code. CORPORATE GOVERNANCE Details can be found in the Notice of AGM. The Board considered the effectiveness of each individual Director through the performance evaluation described above. This included specific consideration of each Director’s other commitments and their ability to discharge their duties to the Company. The Board recognises and is cognisant of shareholders’ guidelines regarding the number of external mandates held by Directors, and has observed that a minority of shareholders voted against the re-election of Iain Ferguson at the 2022 Annual General Meeting. The Board, through the Senior Independent Director, has engaged with those shareholders to understand their concerns. Iain is a highly experienced public company Chairman, Non-Executive Director and former FTSE 100 CEO with extensive and diverse leadership experience and a sound and practical understanding of corporate governance. Iain has a deep appreciation of capital markets and investor sentiment which he brings to Board deliberations, in addition to financial expertise and food industry experience. Iain is Chairman of the Company, and also chairs the boards of Crest Nicholson plc and Personal Assets Trust plc. The Board explored Iain’s capacity as part of the Board effectiveness review and remains satisfied that, Iain has sufficient time to dedicate to Genus. This review takes into account the externally managed nature of Personal Assets Trust plc and the corresponding reduction in time commitment required as compared to FTSE 250 appointments. The Board further remains satisfied that Iain has consistently demonstrated his ability to dedicate a significant and appropriate portion of his time to meet the Company’s requirements. The Board is further satisfied that Iain’s external appointments neither result in overboarding nor do they count as conflicts of interest. The Board confirms that all the Directors continue to be effective in their roles and recommends their re-election as set out in the Notice of AGM. ### 80 GENUS PLC / ANNUAL REPORT 2023 ### NOMINATION COMMITTEE REPORT Dear Shareholder RECRUITMENT OF A NEW CHIEF EXECUTIVE OFFICER The Committee’s primary focus this | year was on managing the Chief | On 23 February 2023, the Company | | --- | --- | | Executive succession, following Stephen | announced Stephen Wilson’s decision to | | Wilson’s decision to retire, which we | retire as Chief Executive. The Committee | | announced in February 2023. We were | began a formal search for Stephen’s | | delighted to recruit a high-calibre | successor, using the services of Russell | | replacement in Jorgen Kokke. As noted | Reynolds Associates, a leading executive | | on page 66, Lykele van der Broek will | search and advisory firm. Russell Reynolds | | retire as a Non-Executive Director | has no other connection with the | | at the next AGM and the process for | Company or with individual Directors. | recruiting a new NED is under way. As Chair of the Committee, I led the search IAIN FERGUSON CBE More generally, the Committee has process, with the support of Senior Chair of the Nomination Committee remained focused on succession planning Independent Director Lesley Knox and our and talent management, reflecting the Group Human Resources Director, Angelle critical importance to Genus’s success Rosata. Our key criteria included: Meetings • proven international leadership of having the right leadership in place and ensuring we bring through the capability; Iain Ferguson CBE (Chair) 2/2 next generation of talented people. • a background in businesses where Jason Chin 2/2 research and development and developing differentiated products are Lysanne Gray 2/2 key; and Lesley Knox 2/2 Iain Ferguson CBE • a deep understanding of the Chair of the Nomination Committee environments our customers operate in. Lykele van der Broek 2/2 6 September 2023 CORPORATE GOVERNANCE 1 Russell Reynolds conducted a thorough Stephen Wilson 0/2 international search, which generated THE COMMITTEE’S ROLE AND 1 Stephen did not attend Committee meetings a strong shortlist of candidates dealing with his own succession RESPONSIBILITIES for the role. Following a rigorous The Committee is responsible for: selection process, we concluded that Jorgen Kokke and Alison Henriksen also • making recommendations to the Board Jorgen Kokke was the outstanding attended the Committee’s meetings on the structure, size and composition candidate and the Committee by invitation. of the Board and its Committees; recommended his appointment to the | • evaluating the balance of skills, | Board. More information on Jorgen’s | | --- | --- | | experience, independence, knowledge | skills and experience can be found | | and diversity on the Board; | in his biography on page 68. | • succession planning for the Non- | Executive and Executive Directors | Jorgen joined the Board as Chief | | --- | --- | | and other senior executives; and | Executive Designate on 2 May 2023 and | | • identifying and recommending suitable | became Chief Executive on 1 July 2023. | candidates to become Directors, based on merit. INDUCTION FOR JORGEN KOKKE Since joining Genus, Jorgen has FOCUS AREAS FOR FY23 undergone an intensive induction process In last year’s report, we identified two supported by Stephen Wilson to ensure focus areas for the Committee in FY23. the smooth transition of responsibility. These were to continue to focus on talent development and succession planning, Jorgen has visited key sites in the US and ensuring we remain cognisant and the UK including: ABS sites at of the Financial Conduct Authority’s DeForest, Leeds, Dekorra and Ruthin; (‘FCA’) targets for Board diversity. R&D and IntelliGen sites at Pepsi Way; and PIC sites including Hendersonville As part of our succession planning for for an introduction to pig production. the Chief Executive role, we conducted an external search and had developed In addition, Jorgen has attended a relationships with leading search firms, meeting of the GPSC, and visited ABS which supported our recruitment of and customer sites in Brazil with the Jorgen Kokke, as described below. Board. Jorgen has met key customers Our consideration of other critical roles in the Netherlands, the US and China. highlighted that Dr Matt Culbertson was a strong internal candidate to succeed Bill Christianson as COO of Genus PIC, and we were pleased that Matt has taken on this role following Bill’s retirement in June 2023. Information on Matt’s skills and experience The Committee has written terms can be found in his biography on page 70. of reference, which set out the authority delegated to it by the The Committee supports the FCA’s Board. These are available from targets for Board diversity and more our website: information can be found in the Diversity www.genusplc.com section opposite. ### 81 GENUS PLC / ANNUAL REPORT 2023 SUCCESSION PLANNING The Committee has a formal three-phase succession planning process: ### ASSESSMENT APPROACH EXECUTION The Committee reviews the The Committee applies The Committee identifies the Board’s current skills and engagement rules for succession desired skills for any new NED, for experiences across a range planning, including use in filling any future vacancies of relevant areas. • ensuring succession planning on the Board. is in line with the Committee’s This results in a skills matrix terms of reference; Potential internal candidates for (see below), which identifies • considering the need to promotion to Executive Director the skills coverage across all replace the skills of any are identified. Board members. departing NED; and • filling any missing skills Potential skills gaps are required for the Company’s identified, so they can be strategic direction. incorporated into future succession planning at Board Job specifications and Executive level. for the Non-Executives and Executives are Areas for ongoing kept up to date. Board upskilling ## are identified 1 3 2 and discussed. Management succession planning is one of the business’s top priorities and the Committee has continued to assess the succession plans for GELT members. The Group HR Director engaged with the Board during the year to discuss these plans. BOARD SKILLS MATRIX The table below shows the key experience and skills the Committee has identified as desirable and indicates their depth on the Genus Board, as at the date of this report. Competence Low/medium Good/high CORPORATE GOVERNANCE Board and corporate governance 0% 100% Strategy 0% 100% Finance, banking and capital markets 38% 62% Risk, culture change and change management 0% 100% Politics and public affairs 38% 62% Stakeholder and customer communications 13% 87% Sustainability implementation and communications 50% 50% Human resources 0% 100% IT systems, transformation and data/cyber security 50% 50% Science and biotechnology 38% 62% Food sector 0% 100% Review, launch and marketing of FDA regulated products 87% 13% International business 13% 87% North America market 25% 75% EMEA market 25% 75% Asia market 38% 62% LATAM market 62% 38% The Committee believes the Board has an appropriate balance of skills and experience and will keep the skills matrix in mind in any future recruitment to the Board. ### 82 GENUS PLC / ANNUAL REPORT 2023 ### NOMINATION COMMITTEE REPORT CONTINUED DIVERSITY POLICY BOARD TRAINING AND DEVELOPMENT GENDER BREAKDOWN Our Board diversity policy aims to ensure The Group provides continuing education = Male 1,228 (34.57%) that we consider diversity in its broadest to its leaders, including Board members, = Female 2,308 (64.98%) sense. A diverse Board has members whose training needs are identified M F with different skills, backgrounds, through the Board effectiveness review regional and industry experiences, described on page 79. The Committee is races, genders and other qualities. More information about diversity currently reviewing options for providing across Genus can be found in the training for Non-Executive Directors The Board, with the support of the Strategic Report on pages 34 to 35. when they join the Board, to help them Nomination Committee: carry out a company director’s duties. • considers all aspects of diversity when SERVICE CONTRACTS AND LETTERS reviewing the Board’s composition and The Group General Counsel and OF APPOINTMENT when conducting the annual Board Company Secretary plays an important Copies of service contracts and letters effectiveness evaluation; role in keeping the Board up to date of appointment between the Directors • encourage development of internal with any changes to corporate and the Company will be available high-calibre people, to help develop a governance requirements. for inspection at the Company’s pipeline of potential Executive Directors; registered office during normal business • considers a wide pool of candidates for DIVERSITY hours until the conclusion of the AGM appointment as Non-Executive on 22 November 2023, and at the The Committee believes that the Directors, including those with little or AGM from at least 15 minutes prior different viewpoints represented on no listed company board experience; to the meeting until its conclusion. | a diverse Board can help Genus to | • ensures a significant portion of the | | | --- | --- | --- | | maintain its competitive advantage. | long list for Non-Executive Director | | | Diversity also links to our values, by being | positions are women and candidates | FOCUS AREAS FOR FY24 | | people-focused and responsible, and | from a minority ethnic background; | | For FY24, the Committee will focus on the to our strategy by encouraging new • considers candidates against objective following areas: CORPORATE GOVERNANCE ideas which deliver for our customers criteria and with regard to the benefits • supporting the transition from Stephen and ultimately drive our results. of Board diversity; and Wilson to Jorgen Kokke as Chief • only engages executive search firms Executive; and We therefore look to ensure that our who have signed up to the voluntary • recruiting a Non-Executive Director to fill recruitment and leadership development Code of Conduct on gender and ethnic the vacancy created by Lykele van der programmes support inclusivity in diversity and best practice. Broek’s forthcoming retirement, seeking our succession planning and talent a candidate with Lykele’s skills and development, including appropriate The Board complied with the policy experience in science-based representation from female and ethnic throughout the period. A copy of the agricultural businesses. minority candidates. The Group has policy can be found on our website: an employee-led forum called AWAKE www.genusplc.com. The Committee (Advancing Women’s Advocacy, reviewed the policy during the year and Knowledge and Empowerment), which concluded that it remained appropriate. brings together female leaders and a cross-section of other women to BOARD AND EXECUTIVE MANAGEMENT GENDER BREAKDOWN develop ideas for increasing diversity and improving working practices. Number of senior positions Number of Percentage on the Board Number in Percentage At the year end, three of the eight Board of the (CEO, CFO, SID executive of executive Directors were female (37.5%), ahead of the members Board and Chair) management management 33% target set by the Hampton-Alexander Men 5 63% 2 6 67% Review. From October 2023, the proportion of female Directors will revert to 43%, Women 3 37% 2 3 33% following Stephen Wilson stepping down from the Board on 30 September 2023. Not specified/prefer not to say – – – – – There were also three female members of GELT, comprising 33% of the total. The BOARD AND EXECUTIVE MANAGEMENT ETHNICITY direct reports to GELT, excluding support Number of staff, were 23.5% female and 76.5% male. senior positions Number of Percentage on the Board Number in Percentage The FCA reporting requirements on Board of the (CEO, CFO, SID executive of executive diversity have come into force this year. members Board and Chair) management management The Company already exceeds the FCA’s White British or targets of 40% female representation other White (including on the Board and that at least one minority-white groups) 7 87% 4 8 100% of the Chair, Chief Executive, CFO or SID should be female, with both Mixed/Multiple Ethnic Groups 1 13% – – – our CFO and SID being women. Asian/Asian British – – – – – The FCA has also set a target for at Black/African/Caribbean/ least one Board member to be from an Black British – – – – – ethnic minority background. We support this and amended our Diversity Policy in Other ethnic group, FY22 to ensure we fully consider ethnic including Arab – – – – – diversity in any recruitment to the Board. Not specified/prefer not to say – – – – – The Board currently has one Director from a minority ethnic background. WORKFORCE Gender and ethnicity data has been self-reported by Directors and Executives. M F ### 83 GENUS PLC / ANNUAL REPORT 2023 ### AUDIT & RISK COMMITTEE REPORT Dear Shareholder An external cyber security review was carried out in December 2022 to validate | The Audit & Risk Committee acts on | that the IT security improvement plan | | --- | --- | | behalf of the Board and shareholders, to | put in place after the June 2022 security | | ensure the integrity of the Group’s | incident was effective. The review | | financial reporting, evaluate its system of | identified some areas of improvement | | risk management and internal control, | which are being addressed to further | | and oversee the performance of the | strengthen our cyber security controls. The | | internal and external auditors. We have | Committee is satisfied with the progress | | an annual work programme that is | made on cyber security, but recognises | | designed to deliver these commitments, | the need to continue to focus on this area. | which we followed during the year. We reviewed the progress being made LYSANNE GRAY There were no changes to the Committee’s with regard to the implementation of the Chair of the Audit & Risk Committee membership this year and I am happy to GenusOne enterprise management report that the membership continues to system, having reached an important comply with the UK Corporate Governance milestone this year with over half of our Code and related guidance. All members operations on GenusOne. This included Meetings | | are independent NEDs, who bring a | updates on the approach being taken to | | --- | --- | --- | | Lysanne Gray (Chair) 5/5 | sound range of financial, commercial and | realise opportunities to standardise and | | | scientific expertise to the Committee. This | strengthen the Group’s processes and | Jason Chin 5/5 year we welcomed Jorgen Kokke to the controls as the system rollout continues Board as Chief Executive. Jorgen is invited to progress. Lesley Knox 4/5 to attend all of the Committee’s meetings. | Lykele van der Broek 5/5 | | We have carefully considered the critical | | --- | --- | --- | | | All members received regular updates | accounting policies and judgements and | | | from the external auditor, to ensure they | assessed the quality of disclosures and | | Iain Ferguson, Jorgen Kokke, | continue to have current knowledge of | | compliance with financial reporting Stephen Wilson and Alison Henriksen the accounting and financial reporting standards, including responding to the also attended the Committee’s standards relevant to the Group and FRC correspondence, and reviewed the meetings by invitation. the regulatory changes and revisions half-year and Annual Report, together to auditing standards relevant to the with the related management and provision of external audit services. external audit reports. We also supported The Committee was also briefed on the the Board in reviewing the going concern Financial Reporting Council’s (‘FRC’) and viability statements and supporting UK Corporate Governance Code analysis and disclosure. consultation document and changes related to internal controls, fraud and We have assessed the effectiveness of CORPORATE GOVERNANCE | audit and assurance policy. We continue | internal and external audit during the year | | --- | --- | | to prepare for the changes to ensure | by reviewing the work done, interviews, | | compliance when they potentially | and questionnaires. We continue to | | become effective after January 2025. | focus on improving communication and | leveraging learnings. The Committee was Our focus on risk management continued satisfied with the performance of both the throughout the year, with regular reviews internal and external auditors. and assessment of the Group’s existing and emerging risks. During the year, we received and discussed detailed input | from management on key risks and | Lysanne Gray | | --- | --- | | mitigation plans. In particular, we focused | Chair of the Audit & Risk Committee | | on the risks associated with cyber security, | 6 September 2023 | biosecurity and animal wellbeing, and TCFD reporting requirements, the impacts of the Russia-Ukraine conflict, and a deep dive on our growth markets, as well as the developing macroeconomic conditions and their impact on our global operations. ### 84 GENUS PLC / ANNUAL REPORT 2023 ### AUDIT & RISK COMMITTEE REPORT CONTINUED | COMMITTEE COMPOSITION | COMMITTEE EFFECTIVENESS | | --- | --- | | The Committee members’ biographies, | Every three years the Board appoints | | along with information on Genus’s other | an external consultant to independently | | Board members, can be found on pages | evaluate its performance, and that | | 68 to 69. | of its Committees. The last external | review was performed in 2022. The next The Board has confirmed that it is external evaluation will be in 2025. satisfied that Committee members possess an appropriate level of In 2023, the Committee’s effectiveness The Committee has formal terms of independence and relevant financial and was assessed through a structured reference, approved by the Board, commercial experience across various questionnaire issued by Gould Consulting, that comply with the UK Corporate industries relevant to the Company. and concluded that the Committee Governance Code. These are continued to operate effectively, available from our website: The Committee has formal terms of independently and with a strong focus www.genusplc.com reference, approved by the Board, on risk identification and management. that comply with the UK Corporate The Committee’s annual review of these Governance Code. These are available terms took place during the year. THE COMMITTEE’S MAIN ACTIVITIES from our website: www.genusplc.com. DURING THE YEAR The Committee’s annual review of these terms took place during the year. During the year, the Committee held five meetings and invited the Group’s Chairman, Chief Executive, the Chief COMMITTEE ROLE AND RESPONSIBILITIES Financial Officer, the Group Financial The Committee’s role and responsibilities Controller, the Head of Financial include reviewing and monitoring: Reporting, the Head of Financial Control, • the financial reporting process the Head of Risk Management and CORPORATE GOVERNANCE and any significant financial Internal Audit, and senior representatives reporting judgements; of the external auditor to attend these • the integrity of the Group’s meetings. The Committee also held financial statements and any separate private sessions during the year formal announcements relating with the Head of Risk Management and to financial performance; Internal Audit and the external audit lead • the Annual Report, to ensure it is fair, partner. At its meetings, the Committee balanced and understandable; focused on the following topics: • the Group’s reporting to shareholders; • the effectiveness of the Group’s accounting and financial reporting systems; • the effectiveness of the Group’s system of risk management and internal controls; • the effectiveness of the internal audit function; and • the effectiveness, independence and objectivity of the Group’s external auditor, including any non-audit services it provides to the Group. The Committee also: • ensures that the Group maintains suitable confidential arrangements for employees to raise concerns; and • reviews the Group’s systems and controls for preventing bribery. The Committee reports its findings to the Board, identifying any matters that require action or improvement, and making recommendations about the steps to be taken. ### 85 GENUS PLC / ANNUAL REPORT 2023 FINANCIAL REPORTING The main areas of focus and matters where the Committee specifically considered and challenged management’s judgements are set out below: Financial reporting area Judgements and assumptions considered IMPACT OF RUSSIAN The Committee has reviewed the Group’s assessment of the impact of Russian sanctions on the year-end SANCTIONS ON financial reporting. FINANCIAL REPORTING In assessing the impact the Committee considered whether the Group still has control, as defined under IFRS 10 ‘Consolidated financial statements’, over the assets and operations of the Russian entities and whether it is still appropriate to consolidate the entities in the Group’s financial statements. In addition, the Committee considered whether any impairment of assets held in those entities is required and whether the Russian entities have sufficient cash resources to allow for day-to-day operations to continue. In making their assessment the Committee debated and considered management assumptions on whether it has control, as defined under IFRS 10 ‘Consolidated financial statements’, over the operations and assets, given the current international sanctions in place on Russia, reviewed management’s impairment analysis and discussed the FY24 plans and cash flow projections over a period of 18 months. The Committee was satisfied with management’s conclusion that it is still appropriate to consolidate the Russian entities, as defined under IFRS 10 ‘Consolidated financial statements’, that there is no impairment of assets required at the year end and that the entities have sufficient cash flow to enable the businesses to operate on a day-to-day basis and be able to meet their liabilities as they fall due. The Committee also reviewed the disclosures in note 4 – Critical Accounting Judgements, relating to restricted cash balances held in Russia, the judgements that management has made in applying the accounting policies and the key assumptions and sources of estimation that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. Following this detailed review and discussion with management the Committee has concluded that the presentation of the financial statements and the associated disclosures is appropriate. BIOLOGICAL ASSETS In compliance with IAS 41, Genus records its biological assets at fair value in the Group Balance Sheet VALUATION (£342.0m), with the net valuation movement shown in the Income Statement. The Committee has reviewed the methodology, which has remained unchanged, and outcomes of the biological assets valuation. The Committee debated and considered management’s assumptions and estimates, through the current period, and discussed and reviewed the external auditor’s report on this area, before concurring with management’s proposals. The Committee also received updates on management’s streamlining and automation of the models which are used for the valuation process CORPORATE GOVERNANCE including control improvements identified to strengthen both the model and the review of its output. The Committee was satisfied with management’s accounting treatment, including the Income Statement decrease of £24.9m in the value of porcine biological assets and the increase of £8.0m in the value of bovine biological assets. GOING CONCERN AND The Committee has reviewed the Group’s assessment of going concern over a period of 12 months and VIABILITY STATEMENT viability over a period of three years. In assessing viability, the Committee has considered the Group’s budget and strategic plan, its credit facility agreement, its principal risks and uncertainties, as detailed on pages 43 to 46, and the liquidity and capital projections over the period and is satisfied that this is appropriate in supporting the Group as a Going Concern. The Committee has concluded that the assumptions are appropriate and that the viability statement could be provided, and advised the Board that three years was a suitable period of review. The Committee was also satisfied with the disclosures in relation to the appropriateness of the assessment period selected, the assumptions made and how the underlying analysis was performed. The going concern and viability statement is disclosed on page 65 of the report. PRESENTATION AND Genus had £30.6m of adjusting items, including £3.5m of net exceptional items in the Group Income DISCLOSURE OF Statement. The Committee considered the presentation of these items in the financial statements, EXCEPTIONAL AND due to the nature of these items and the guidelines on the use of alternative performance measures, ADJUSTING ITEMS issued by the European Securities and Markets Authority. The Committee received detailed reports from management outlining the judgements applied in relation to the disclosure of adjusting items, which include net IAS 41 valuation movement on biological assets, amortisation of acquired intangible assets, share-based payment expense and exceptional items. For adjusting items, the Committee took into consideration their volatility and lack of correlation to the core operational progress and performance of the business. Specifically, for exceptional items, the Committee took into consideration the materiality, frequency and nature of the items. Following this detailed review and active discussion with management, the Committee has concluded that the presentation of the financial statements is appropriate. ### 86 GENUS PLC / ANNUAL REPORT 2023 ### AUDIT & RISK COMMITTEE REPORT CONTINUED MONITORING BUSINESS RISKS The Committee conducted its annual External audit review of the effectiveness of the Group’s The Committee discussed the principal Deloitte LLP was first appointed as the internal controls and disclosures. The risks identified with management and the Company’s external auditor for the Committee’s review of the effectiveness of external and internal auditors, along with period ended 30 June 2006. Following internal controls has encompassed a management’s plans to mitigate them, a formal tender process, Deloitte review of various reports provided by and received regular detailed updates was reappointed for the audit of the management, Risk and Internal Audit, from the risk owners and their direct financial year ended 30 June 2016. Internal Control and External Audit. The reports. In addition to reviewing the Committee reviewed the results of the key In accordance with the current audit firm principal risks, the Committee received financial controls self-assessment process, rotation timeline, the Committee is in the detailed updates on the following: which is performed every six months; process of conducting a competitive • Sustainability matters: the related internal audit’s findings at each scheduled external audit tender process for our FY25 current and emerging risks and the meeting, including updates on the audit and is satisfied with the progress roadmap of actions identified in support implementation of management’s actions; to date. The Company has complied of the climate change action plan and and the Group’s Whistleblowing Policy and with the Statutory Audit Services Order TCFD reporting requirements and bribery prevention procedures. for the financial year under review. improvements in the disclosures from the FRC review letter. The review did not identify any significant The Committee reviewed and agreed • Biosecurity and continuity of supply: the financial reporting control failings. All the external auditor’s scope of work risk of losing key livestock or losing our control issues have been remediated and fees, held detailed discussions of ability to move animals and/or semen and discussed with the Committee. the results of its audit and continued freely (including across borders), due to However, Genus routinely identifies to meet the external auditor without disease outbreak. and implements control improvement management being present. The • Cyber security: the cyber security risk opportunities and the Committee Committee reviewed the external auditor’s faced by the Group and the actions discussed with management various objectivity and independence and the being taken to strengthen infrastructure opportunities to further strengthen the Group’s policy on engaging the external and systems security. Group’s system of internal control. auditor to supply non-audit services. CORPORATE GOVERNANCE • Russia-Ukraine conflict: regular updates provided to the Board to understand The Committee assessed the external the impact on our operations and OVERSIGHT OF INTERNAL AUDIT auditors performance in conducting people in these regions and report AND EXTERNAL AUDIT the audit for the June 2022 year end. on how compliance with sanctions Internal audit The Committee considered the quality, are ensured. The Committee reviewed and approved effectiveness, independence, and • Growth markets: a review of our growth the internal audit function’s scope, terms objectivity of the external auditors markets was held to better understand of reference, resources and activities. through the review of all reports provided, the varying risks and opportunities, This year with the end of the COVID-19 regular contact and dialogue both during with a focus on China and Brazil. travel restrictions the internal audit team Committee meetings and separately • Regular updates on the project to was able to travel to audit locations. without management. Continuing from implement GenusOne, a Group-wide The Committee was satisfied that the the process in the previous year, the enterprise management system, coverage and quality of the internal Committee conducted an audit quality which now operates in over fifty percent audit process remained appropriate. The and effectiveness review through a of our operations. Head of Risk Management and Internal questionnaire to Committee members, Audit provided regular reports to the management, and members of the INTERNAL CONTROL SYSTEM Committee on the work undertaken and finance team, which delivered focused Management is responsible for identifying management’s responses to proposals insight into Deloitte’s effectiveness. and managing risks, and for maintaining made in the internal audit reports issued The Committee considered the audit a sound system of internal control. The during the year. The Committee continued quality reviews on the firm and sought internal control framework is intended to meet the Head of Risk Management confirmation that recommendations to effectively manage rather than and Internal Audit without management were appropriately actioned where eliminate entirely the risks to achieving being present. The Committee reviewed relevant to the audits of our Company. our business objectives. The key and was satisfied with the internal elements of the Group’s internal control audit function’s performance. framework are monitored throughout the year and the Committee has conducted a review of the effectiveness of the Group’s risk management and internal control systems on behalf of the Board. Our risk management process and system of internal control are described in detail on pages 61 to 64. ### 87 GENUS PLC / ANNUAL REPORT 2023 External Auditor Independence Financial Reporting Council RISK MANAGEMENT AND correspondence Maintaining the objectivity and INTERNAL CONTROLS independence of the external auditors During the year the FRC Corporate is essential. The Committee has taken Review team carried out a review of RISK MANAGEMENT appropriate steps to ensure that the our Annual Report and Accounts for The Board is responsible for our risk Company’s external auditors are the year ended 30 June 2022. The management system, which is designed to independent of the Company and review was based solely on the Group’s identify, evaluate and prioritise the risks obtained written confirmation from Annual Report and Accounts and did and uncertainties we face. The Board sets them that they comply with guidelines not benefit from detailed knowledge our risk appetite, monitors the Group’s risk on independence issued by the relevant of our business or an understanding exposure for our principal risks and ensures accountancy and auditing bodies. of the underlying transactions entered appropriate executive ownership for all into. The review highlighted questions risks. This ongoing risk management Additional non-audit services provided requiring a response on TCFD disclosures. process for the Group’s significant risks by the auditors may impair their The FRC noted that the Group’s Annual was in place for the year under review and independence or give rise to a perception Report did not include a clear statement up to the date of approval of the Annual that their independence may be impaired. explaining whether the report included Report and Accounts. Our principal risks The Group has a policy in relation to climate-related financial disclosures and how we mitigate them are the provision of non-audit services that consistent with the Recommendations summarised on pages 62 to 64. is aligned with the EU Regulation and and Recommended Disclosures of the Statutory Audit Directive to provide TCFD, as required by the Listing Rules, To further assist its understanding of risk, further clarity over the type of work and also identified a number of areas the Board has restarted its programme of that is acceptable for the external where improvements could be made to visits to our local operations as COVID-19 auditors to carry out. The policy sets the Company’s TCFD disclosures. As a travel restrictions have eased, visiting out the process required for approval result of the FRC’s review the Company our ABS operations in Brazil. The Board and a cap to the total non-audit fees has provided a clearer statement in this received regular political, economic and for permitted services (at 70% of the report including providing explanations industry risk updates from the relevant audit fee). The policy was last reviewed about TCFD recommendations and business groups. The Board performed in the year ended 30 June 2023. recommended disclosures as required its annual risk review in May 2023. This by the Listing Rules and made a number involved a fresh review of the types and Audit and non-audit fees paid to Deloitte of improvements to the TCFD disclosures levels of risk facing Genus as it executes in the year were £1.0m and an analysis is consistent with the recent thematic its strategy and was designed to identify presented in note 8 to the consolidated review. These enhancements are and evaluate any new or emerging risks financial statements. Non-audit fees included in the company’s sustainability and ascertain whether the risk register represent 2% of the audit fee. Non- report within this Annual Report and covered all relevant risks. No changes audit services provided by the external Accounts (see pages 36-59). There were to the principal risks were identified, auditors during the 2023 financial year also a number of matters raised for however the Board recognises the impact comprised audit related assurance our attention which we considered in of the continued Russia-Ukraine conflict, services. The Committee concluded relation to our 2023 Annual Report and CORPORATE GOVERNANCE and increasing global macroeconomic that the provision of such services was Accounts. As a result of the FRC’s review, conditions has had on our operations. appropriate given that they were closely we have considered and enhanced the related to the work performed in the clarity of disclosures in relation to: external audit process and, for reasons INTERNAL CONTROL • Alternative Performance Measures | of effectiveness and efficiency, it was | (‘APMs’) glossary on pages 200-207 | The key elements of our internal control | | --- | --- | --- | | considered advantageous to engage | regarding the exclusion of amortisation | system are set out below. An internal | | the external auditors due to their | of acquired intangibles; and | control system cannot completely | | knowledge and expertise. Resolutions | • IFRS 13 Fair Value Measurement | eliminate the risks we face or ensure we do | | to reappoint Deloitte as auditors and | disclosures in note 4 and note 16. | not have a material misstatement or loss. | to authorise the Directors to agree their remuneration will be put to shareholders We have responded to and thanked at the Annual General Meeting that the FRC for their observations. will take place on 22 November 2023. ### 88 GENUS PLC / ANNUAL REPORT 2023 ### AUDIT & RISK COMMITTEE REPORT CONTINUED MANAGEMENT STRUCTURE INVESTMENT APPRAISAL EFFECTIVENESS OF INTERNAL CONTROLS The Board sets formal authorisation levels We control our capital expenditure The Board, with the help of the Audit & Risk and other controls that allow it to through our budget process and by having Committee, reviewed the effectiveness of delegate authority to run our businesses clear authorisation levels, above which our our internal control system, as well as our to the Chief Executive, GELT and their businesses must submit detailed written financial, operational and compliance management teams. Our management proposals to the Board for approval. controls and our risk management. The supplements these controls by setting the review considered our internal control operating standards that each subsidiary We carry out due diligence for business self-assessment process, which is needs for its business and location. acquisitions and material licences, and designed to assess compliance with our conduct post-completion reviews of major minimum control standards, the GELT regularly reviews our performance projects, to ensure we identify areas for independent internal audit programme, against strategy, budget and a defined improvement and correct any areas of and the reports management prepared set of operational key performance underperformance or overspend. when the Board approved the interim and indicators. The Chief Executive, Group final results and financial statements. Finance Director, Group General Counsel INTERNAL AUDIT and Company Secretary, and Group It also assessed: Financial Controller also hold monthly Our internal audit activities are provided • whether we had identified, evaluated, reviews with each business unit. by in-house and external resources, managed and controlled significant under the leadership of our Head of Risk risks; and whether any significant Management and Internal Audit. During weaknesses had arisen, and QUALITY AND INTEGRITY OF OUR PEOPLE the year, Internal Audit completed a risk- • if so, whether we had addressed them. We strive to operate with high integrity in based audit programme agreed by the everything we do. Our control environment Audit & Risk Committee. The Committee The assessment also took into account depends on high-quality people who reviews the results of these audits and the any risk or control issues we identified maintain our ethical standards. We ensure subsequent actions we take, which we through our divisional business reviews, our people’s ability and integrity through also communicate to the external auditor. Board and GELT meetings, and insurers’ CORPORATE GOVERNANCE our recruitment standards, training and reviews. consistent performance management. All business units complete risk and The Board is informed of appointments to control self-assessments twice a We have an internal control continuous our most senior management positions. year. Internal audit, as part of its work improvement work programme and programme, performs independent routinely identify opportunities to reviews of these assessments to identify strengthen our control environment and INFORMATION AND FINANCIAL any deficiencies in our controls and how improve our risk management capabilities. REPORTING SYSTEMS | | we should address them. An annual | However, the Board has not identified or | | --- | --- | --- | | We create detailed operational budgets | Fraud Risk Assessment is carried out by | been told of any significant failings in our | | for the year ahead, along with five-year | internal audit with all the business units; | internal controls. | | strategic plans, which the Board reviews | the results and mitigation actions were | | | and approves. We then monitor our | presented to the Committee in February | | | performance throughout the year, so we | 2023. The external auditor also provides | | | can address any issues. The information | observations on the control environment | | | we consider includes our monthly financial | arising from its audit work. The results are | | | results, key performance indicators and | communicated to senior management | | | variances, updated full-year forecasts | and the Audit & Risk Committee. | | and key business risks. The main internal control and risk management processes relating to our preparation of consolidated accounts are our Group-wide accounting policies and procedures, segregation of duties, system access controls, a robust consolidation and reporting system, various levels of management review and centrally defined process control points and reconciliation processes. ### 89 GENUS PLC / ANNUAL REPORT 2023 ### REMUNERATION COMMITTEE REPORT ### SECTION A – ANNUAL STATEMENT On behalf of the Board, I am pleased to present the Directors’ ### REMUNERATION Remuneration Report for 2023. ### COMMITTEE REPORT We were pleased with the Shareholder ### CONTENTS response to our Remuneration Policy at the 2022 AGM, with over 93% of Page(s) shareholders voting for the new Policy, A. Annual Statement 89-91 including the changes we had proposed following extensive consultation Transition of leadership/ 89 across our shareholder base. appointment of new Chief Executive TRANSITION OF LEADERSHIP/ Other leadership changes 90 LESLEY KNOX APPOINTMENT OF NEW CHIEF EXECUTIVE Senior Independent Non-Executive Reward outcomes for 2023 90 On 3 April 2023 we announced that Jorgen Director and Chair of the Kokke would join the Board as Chief Looking forward to 2024 91 Remuneration Committee Executive Designate on 2 May 2023, and Wider workforce and 91 ### KEY MESSAGES become Chief Executive Officer on 1 July employee engagement 2023. Stephen Wilson has supported this • Strong endorsement from transition of responsibilities, stepping B. At a Glance 2023 & 2024 92-95 shareholders for our updated down from the CEO role but remaining Remuneration Policy at last AGM What Executive Directors 92 an active Executive Director through to were paid in 2023 his retirement on 30 September 2023 • Modest awards under annual bonus to support effective transition. I would What Executive Directors 93 and Performance Share Plan (‘PSP’) like to extend my thanks to Stephen can earn in 2024 reflecting challenging external for his significant contribution to the market conditions Appointment of New Chief 94 business since joining in 2013 as Chief Executive: Jorgen Kokke | • Transition of leadership completed | Finance Officer and his subsequent | | | | --- | --- | --- | --- | | with key external hire | appointment as Chief Executive in 2019. | | | | | | C. Remuneration and | 96 | Performance Statement • Adjustment to CFO salary to reflect Jorgen is an exceptional successor for Stephen, with an established track record Genus’s Strategy 96 changed responsibilities following of working across global organisations and its link to CEO recruitment to create shareholder value. Performance-Related Pay • Some changes to the way we will Executive Directors’ 96 assess performance within incentive As highlighted during our consultation, alignment to Share Price plans from 2024, aligned to our there continues to be significant and CORPORATE GOVERNANCE | business strategy | often growing differences between | D. Annual Report on | | 97-111 | | --- | --- | --- | --- | --- | | | remuneration structures for senior | | Remuneration | | | Terms of Reference | leadership in the US compared to the | | | | | The terms of reference for the Committee are in line | | 1. Reward outcomes for | | 97-100 | UK, where Genus is listed. In particular with the 2018 UK Corporate Governance Code and Executive Directors for 2023 available to view at www.genusplc.com. this focuses on the quantum available under variable plans and the range of 2. Forward looking policy 101-104 incentive vehicles utilised within typical and implementation in 2024 US-based organisations. Indeed, we Committee attendance identified these differences early into 3. The Process the 105-106 1 our succession planning discussions. Committee followed Meetings 2 4. How the CEO’s pay 106-107 Lesley Knox (Chair) 6/7 In making Jorgen’s appointment we compares to shareholder operated fully within the Remuneration Iain Ferguson 7/7 returns over the past 10 Policy approved by over 93% of years and to employees’ Jason Chin 7/7 shareholders in November 2022. pay Lykele van der Broek 7/7 | | We focused on how we could transition | 5. The Chairman and | 107-108 | | --- | --- | --- | --- | | Lysanne Gray 7/7 | Jorgen successfully onto our reward | Non-Executive Directors’ | | | | structure, while recognising that the | Fees | | | 1 The Committee had five scheduled and two | composition and quantum of reward | | | | ad hoc meetings during the year | | 6. Details of the Directors’ | 108-111 | available within the US market does 2 Lesley Knox was unable to attend one shareholding and rights scheduled meeting due to a prior commitment. differ from that typically seen within The meeting was chaired by the Company to shares the UK FTSE 250 landscape. Chairman in her absence E. Wider Workforce 112-113 Remuneration Jorgen Kokke, Stephen Wilson and Alison Henriksen also attended the CEO pay ratios 112-113 Committee’s meetings by invitation. 90 GENUS PLC / ANNUAL REPORT 2023 # REMUNERATION COMMITTEE REPORT CONTINUED SECTION A – ANNUAL STATEMENT The full details of his buyout of previous incentive awards from Ingrection, determination of base salary and his ongoing reward structure are outlined in the report. We wanted a structure that was sufficient to attract, but which also aligned Jorgen to future Genus performance through high levels of share ownership. Some key aspects of the design of the arrangements are: - Annual base salary of $825k - Buyout of legacy awards from his former employer Ingrection Inc.) totaling c$4.5m, with conversion into awards over Genus shares with similar vesting timelines. This includes conversion into Genus shares of multiple reward elements, covering market priced share options, performance shares and restricted stock units - A guaranteed bonus payment payable in cash in September 2023 of $412.5k (recognising the forfeiting of eligibility for annual bonus at his previous employer) - An exceptional award under PSP plan of 400% of salary for award to be granted in September 2023 only (with performance based on Genus performance over the period 2023-26) - Ongoing variable opportunity of 200% of salary for annual bonus (for year ending June 2024) and 200% of salary for PSP awards (for grants scheduled for September 2024 and beyond) - Shareholding requirement of 2x salary as per existing Remuneration Policy Jorgen will operate in a global capacity, and be initially based in the US. To fulfil his role he will travel (as required, including to attend Board meetings of Genus plc (of which he is a Director). OTHER LEADERSHIP CHANGES Stephen stepped down from his role as Chief Executive on 1 July 2023 and will retire from the business on 30 September 2023. He was determined to be a good leaver from the business due to retirement and will be eligible for future vestings from in-flight share awards, subject to Company performance and prorated for the period he was employed during each respective performance period. He will additionally have eligibility for an annual bonus for 2024, prorated for his period in employment during the respective financial year. In line with our Policy, he will have a post-cessation shareholding obligation for the period of two years following retirement. Full details of his agreed arrangements are provided within the report. We evaluated the role of the CFO in light of the appointment of Jorgen to the business. In particular, we noted that Alison would become the sole permanent Executive Director based in the UK, and with a broadened set of responsibilities which represented an extension to her previous role. We agreed to a change of her base salary to £480,930 (+15%) effective 1 July 2023, which is not expected to be reviewed again until September 2025. REWARD OUTCOMES FOR 2023 Overall profit outcomes were just below the threshold of the range previously set by the Committee, resulting in nil awards under this metric. This was due to a number of factors during the year as discussed within the wider Annual Report, and the impact of interest rate costs which were higher in practice than that forecast where budgets were set. Wider cash performance was good with high levels of cash conversion achieved. Final cash flow performance was slightly below the free cash flow budget set, with a corresponding award level of 21% of maximum. We discussed the broader strategic progress made during the year and performance against the strategic targets set for each Executive Director. We saw clear evidence of progress in key areas in support of our agreed long term strategy for the business and accordingly made awards under this element of the bonus reflecting this attainment. This included the role of progress of genetic gain achieved during the year, and submissions towards gaining FDA approval for our gene editing activities. Overall bonus awards for the CEO and CFO were 23% and 20% of maximum respectively. In line with our agreed policy, one-third of these awards will be delivered in Genus shares that will vest after three years subject to continued employment (or on the third anniversary reflecting the agreed leaver treatment for Stephen Wilson). The Committee determined that while material progress had been made across parts of the business (and through enhanced cash flow) the formulaic outcomes under the bonus were a fair reflection of underlying performance. Awards under the Performance Share Plan granted in September 2020 were subject to our EPS performance over the three financial years ending 30 June 2023. Against a performance range of 5% to 15% annual EPS growth the actual annual growth achieved (of 7%) equates to a vesting level of 36% of maximum. The Committee also confirmed that the overall vesting level was consistent with the business performance achieved over the three year period. Overall we confirmed that the Policy has operated as expected during the past year, and that the formulaic outcomes generated through the bonus are a fair reflection of underlying business attainment. No discretion was applied to performance outcomes during the year by the Committee. CORPORATE GOVERNANCE ### 91 GENUS PLC / ANNUAL REPORT 2023 We remain committed to our stated LOOKING FORWARD TO 2024 double-digit medium term growth We have agreed some changes to aspirations and will continue to assess the way we will assess performance the majority of the PSP award linked to under the Annual Bonus for 2024. These our EPS performance over a three-year are all consistent with our agreed period, rewarding sustained long-term Remuneration Policy and reflect the growth of the business. We have agreed evolution of our agreed strategy. to use the same EPS range as for awards made in 2022, requiring annual EPS We will move to assess profit performance growth over the three year performance based on Operating Profit. This drives period of 4% at threshold through to alignment with the way we assess 12% or above for maximum vesting. performance at a business unit level for other participants in the annual bonus plan across the business, WIDER WORKFORCE AND and the desire to cascade and EMPLOYEE ENGAGEMENT standardise incentive structures. We have provided insights on our people and culture elsewhere within the Annual We will also separate out profit Report, including the role played by our assessment, so that part is linked designated Non-Executive Directors to PIC China performance, and the (Lykele van der Broek and myself) in majority linked to the wider Group understanding the overall employee performance excluding PIC China. experience and satisfaction with This change recognises the role of reward. As a Committee we spent time PIC China within our strategic plan as reviewing the progress on our gender referred to in the Chairman’s report, pay position within Genus Breeding and is designed to align reward to both Limited, our largest UK subsidiary. this business unit performance and the We additionally received updates on performance of the rest of the Group. enhancements to family leave policies globally, and the launch of our new We will continue to exclude gene employee share plan ‘TakeStock’ which editing costs for 2024, consistent is global in design and was launched with our approach in previous years in the UK and the US during the year. but anticipate this will be the last year we do this as we move closer toward commercialisation of PRRSv. Lesley Knox Profit targets for each metric will be Chair of the Remuneration Committee set in advance by the Committee CORPORATE GOVERNANCE 6 September 2023 and disclosed retrospectively in line with prevailing market practice. We will move to an alternative metric to measure cash performance, moving from a free cash flow metric to one based on cash conversion. This change is designed to drive focus on effective cash performance across inventory management and prioritisation of capital expenditure. ### 92 GENUS PLC / ANNUAL REPORT 2023 ### REMUNERATION COMMITTEE REPORT CONTINUED ### SECTION B – AT A GLANCE 2023 (YEAR ENDING 30 JUNE 2023) For more detail please see pages 97 to 100 ### WHAT EXECUTIVE DIRECTORS WERE PAID IN 2023: | CHIEF EXECUTIVE | CHIEF FINANCIAL OFFICER | CHIEF EXECUTIVE | | --- | --- | --- | | STEPHEN WILSON | ALISON HENRIKSEN | DESIGNATE | | (Stephen ceased to be CEO on | | JORGEN KOKKE | | 1 July 2023 and will step down from | | (Jorgen joined on 2 May 2023 as | | the Board on 30 September 2023) | | CEO Designate and was appointed | as CEO effective 1 July 2023) BASE SALARY AND BENEFITS £616,900 £418,200 $119,523 • Benefits include a car £62,068 £37,783 $11,136 ## 1 allowance for each Executive Director Salary Salary Salary • The pension allowance for Pension and Benefits Pension and Benefits Pension and Benefits Stephen Wilson was reduced from 10% of salary to 6% of salary from 1 January 2023 (in line with our stated commitment to shareholders) • The allowance payable for Alison Henriksen and Jorgen | CORPORATE GOVERNANCE | Kokke is 6% of salary | | | | | --- | --- | --- | --- | --- | | | ANNUAL BONUS 2023 | Maximum Opportunity | Maximum Opportunity | N/A | | | | 175% of salary | 175% of salary | | • Metrics used and weighting: Jorgen did not participate ## 2 Adjusted profit before tax MAXIMUM MAXIMUM £1,079,575 £731,850 in the Genus annual bonus (60%), Cash generation (15%), plan for year ended Strategic measures (25%) 23% 20% 30 June 2023 • Overall award 23% of FINAL OUTCOME = 23% OF MAXIMUM FINAL OUTCOME = 20% OF MAXIMUM maximum for Stephen Wilson (£244,524) (£149,297) and 20% of maximum for Alison Henriksen • One third of the total award under this element made | in shares deferred for | Profit before tax | 0% | | | | | --- | --- | --- | --- | --- | --- | | three years | | | 21% | | | | | Strategic objectives (CEO) | | | | 78% | | | Strategic objectives (CFO) | | | 69% | | | | | 1 | | | 1 | | | --- | --- | --- | --- | --- | --- | --- | | PSP | Indicative value | | | Indicative value | N/A | | | Awards granted linked to | | | MAXIMUM | | | MAXIMUM | | 3-year performance ending on | | | £794,156 | | | £471,113 | ## 3 30 June 2023 vested at 36% of maximum based on average TOTAL £285,896 TOTAL £169,601 annual adjusted earnings per share growth achieved of 7% per annum REMUNERATION BREAKDOWN 1 £1,209,348 1 £774,881 1 $130,659 2 £285,896 2 £169,601 2 $0 ## 4 | 3 | | £244,524 | 3 | | £149,297 | 3 | $0 | | --- | --- | --- | --- | --- | --- | --- | --- | | 4 | £62,028 | | 4 | £37,783 | | 4 | $11,136 | | 5 | £616,900 | | 5 | £418,200 | | 5 | $119,523 | 1 Total 2 Performance share plan 3 Annual bonus 4 Pension and benefits PERFORMANCE METRIC 5 Base salary 1 1 1 1 Calculated based on the average share price for the final quarter of the year ending 30 June 2023 (2,572p) Cash generation | 2 2 2 | | | | | --- | --- | --- | --- | | 1 1 1 | | | | | 2 2 2 | | | | | | 0% | % OF MAXIMUM AWARD | 100% | 0 100 ### 93 GENUS PLC / ANNUAL REPORT 2023 ### WHAT EXECUTIVE DIRECTORS CAN EARN IN 2024 (AND HOW): | CHIEF EXECUTIVE | CHIEF EXECUTIVE | CHIEF FINANCIAL | | --- | --- | --- | | STEPHEN WILSON | (CEO FROM 1 JULY 2023) | OFFICER | | (Stephen ceased to be CEO | JORGEN KOKKE | ALISON HENRIKSEN | on 1 July 2023 and will step down from the Board on 30 September 2023) BASE SALARY AND BENEFITS Annual Salary £616,900 Salary $825,000 Salary £480,930 (no change) • Benefits include a car allowance for ## 1 each Executive Director • Increase in salary for Alison Henriksen effective 1 July 2023 with next scheduled review September 2025 ANNUAL BONUS Maximum Bonus Maximum Bonus Maximum Bonus opportunity = 175% opportunity = 200% opportunity = 175% • Metrics used and weighting: Genus of salary of salary of salary ## 2 Group Operating Profit exc. PIC China Salary (prorated for (50%), PIC China (10%), Cash conversion employment between (15%), Strategic measures (25%) 1 July 2023 and • One-third of the total award under this 30 September 2023) element made in shares deferred for three years PSP FROM SEPTEMBER 2020 Awards over 21,979 Not applicable Awards over 13,037 Genus shares Genus shares • Vesting of these awards depends on the ## 3 adjusted earnings per share (excluding gene editing costs) achieved in the three CORPORATE GOVERNANCE financial years ending 30 June 2024 PSP (AWARDED SEPTEMBER 2023) Not applicable 400% of salary 200% of salary • These awards will vest subject to (Note this uses the ## 4 performance against identified metrics exceptional limit • 80% of the awards is linked to adjusted permissible within earnings per share with the 2026 the Policy to support adjusted earnings per share compared recruitment of Jorgen to the 2023 adjusted earnings per share to the business (including gene editing costs) as outlined within • This will be assessed based on a scale this disclosure) of 4% annual growth (threshold with 20% vesting) through to full vesting at 12% annual growth or above (straight-line basis) • Remainder linked to metrics core to our strategy (greenhouse gas reduction and genetic improvement) Salaries are normally reviewed annually and any changes made in September. Salaries for Stephen Wilson and Jorgen Kokke will be unchanged for the year ahead. Following review by the Committee (discussed later in this disclosure) of salary for Alison Henriksen was increased as shown, effective 1 July 2023. No further increases of salary for Alison is scheduled until September 2025. Annual Salary to 1 Sep Revised Change 2023 Annual Salary Effective Date % Stephen Wilson £616,900 £616,900 n/a Nil Jorgen Kokke $825,000 $825,000 n/a Nil Alison Henriksen £418,200 £480,930 1 July 2023 15 Note – the salary for Jorgen Kokke is denominated in USD$ and he is paid in USD. A currency conversion is completed ahead of making any share awards to convert a USD$ denominated value into GBP£ to determine the number of Genus shares to be awarded. Other Executive Directors are paid in GBP. ### 94 GENUS PLC / ANNUAL REPORT 2023 ### REMUNERATION COMMITTEE REPORT CONTINUED ### SECTION B – AT A GLANCE 2023 (YEAR ENDING 30 JUNE 2023) ### APPOINTMENT OF NEW CHIEF EXECUTIVE OFFICER: JORGEN KOKKE BUYOUT DETERMINATION | Jorgen joined the business on 2 May 2023 | Our approach was to place a fair value on | All elements were denominated in USD, | | --- | --- | --- | | from Ingredion Incorporated. We followed | Ingredion awards, replicate expected | and we agreed as part of contractual | | our core policy to allow us to recognise | vesting timings where possible, to ensure | discussions to base any exchange of | | that certain awards in place at Ingredion | Jorgen was aligned to Genus | value into Genus shares using a 60-day | | would be forfeited as a result of joining | performance from appointment and to | average of the Genus and Ingredion share | | Genus. This included reward elements | mitigate or remove any future financial | prices immediately prior to appointment, | | under incentive vehicles which are | exposure for Genus that could be created | and the average exchange rate between | | typically offered within the US, but not | by changes in Ingredion performance | the GBP and USD over the same period. | | currently offered within the Genus Policy, | (positive or negative) after hire. | The final approach for each element | | such as market priced share options. | | is outlined below. | Ingredion reward element Calculation and approach (where applicable) Genus shares awarded 1 Vesting details Restricted Stock Units Unvested awards from Ingredion were converted into Genus shares 26,226 shares 15,435 shares with vesting timing designed to replicate intended vesting at Ingredion. 23 February 2024 10,791 shares 28 February 2025 CORPORATE GOVERNANCE Performance Share Awards Unvested awards were in place with performance linked to performance 77,762 shares 43,620 shares conditions focused on relative Total Shareholder Return (‘TSR’) and 23 February 2024 Adjusted Return On Invested Capital (‘ROIC’). A performance estimate 34,142 shares for each metric was obtained and validated against publicly available 28 February 2025 data for reasonableness. This value was then converted into GBP and an award made over Genus shares with vesting dates designed to mirror the awards that were previously held at Ingredion. This approach was designed to provide certainty to Genus and avoid ongoing linkage to Ingredion performance beyond the point of hire. Market Priced Share Options Various unvested market priced options were held, with a range of 22,947 shares 7,649 shares option prices in place. An independent Black-Scholes calculation 2 May 2024 was performed to determine the fair value of these options, with a 7,649 shares subsequent award made over Genus Shares which will vest equally 2 May 2025 on the first three anniversaries of employment. 7,649 shares 4 May 2024 Total 126,935 shares 1 Genus shares were derived based on a Ingredion stock price of $100.62, a Genus share price of £28.78 and a GBP:USD exchange rate of £1:$1.23 TRANSITIONAL ELEMENTS We agreed two transitional elements to support transition to the ongoing Genus reward structure as follows: Amount Detail Annual Bonus $412,500 Cash bonus payable in September 2023. This is in recognition of eligibility to participate in the annual (payable bonus plan at Ingredion for 2023 that was forfeited through resignation. This award recognised that there September 2023) was a period of six months where eligibility to an annual bonus would be forfeited (January to June 2023) with Jorgen participating in the Genus Annual Bonus Plan from July 2023. PSP Award 400% of salary Use of exceptional limit within existing Policy to make an award of 400% of salary under the PSP plan in (to be made September 2023. These awards will vest after three years subject to achievement against Company September 2023) performance targets, and will be subject to a further two year holding period following vesting. ONGOING REWARD STRUCTURE Value Detail Base Salary $825k Reviewed annually with any changes expected in September each year, commencing September 2024. Benefits $20k car allowance Benefits (Retirement) 6% of salary This is set at a level consistent with other Executive Directors and is consistent with the wider workforce rate for UK employees as outlined within our Policy. Benefits In accordance with our Participation in our core benefits offering for eligible US employees, including healthcare, life insurance Remuneration Policy and disability cover. Annual Bonus Up to 200% of salary The first participation would be for the year commencing 1 July 2023. One-third of any award is made in deferred shares which vest after three years subject to continued employment. PSP Up to 200% of salary From September 2024 Jorgen will be eligible to participate in the Genus Performance Share Plan, with awards in line with the standard level permissible under our Remuneration Policy (currently 200%). ### 95 GENUS PLC / ANNUAL REPORT 2023 ### SECTION B – AT A GLANCE 2024 (YEAR ENDING 30 JUNE 2024) For more detail please see pages 101 to 104 ### 1 YEAR — ANNUAL BONUS Element/Weighting Description of target Alignment to strategy Profit Growth (60%) Delivery of year-on-year profit growth • Sharing in value created to deliver returns for shareholders Cash (15%) Cash conversion • Generation of cash for reinvestment and dividends Strategic Objectives (25%) Delivery of strategic objectives in pursuit of • Building foundations for future growth stated business strategy ### LONG TERM — PERFORMANCE SHARE PLAN Element/Weighting Description of target Alignment to strategy | EPS Performance (80%) Average annual growth in adjusted earnings | | • Alignment to our stated medium-term | | | --- | --- | --- | --- | | | per share | growth aspirations | | | Genetic Improvement (10%) Improvement (expressed in standard | | • Helping farmers produce more output | | | | deviations of improvement per generation) of | with fewer inputs | | | | genetics in Porcine, Bovine and Dairy | • At the heart of our business: | | | | | ‘Pioneering animal genetic | CORPORATE GOVERNANCE | improvement to help nourish the world’ | Greenhouse Gas Reduction (10%) Reduction in overall primary intensity ratio of | | • Driving reduction in carbon intensity | | --- | --- | --- | | | our operations in pursuit of our stated 25% | of our operations | | | reduction by 2030 against our 2019 baseline | • Alignment to our stated target of | 25% reduction by 2030 against our 2019 baseline ### 96 GENUS PLC / ANNUAL REPORT 2023 ### REMUNERATION COMMITTEE REPORT CONTINUED ### SECTION C – REMUNERATION AND PERFORMANCE STATEMENT GENUS’S STRATEGY AND ITS LINK TO PERFORMANCE-RELATED PAY Our strategy and the way this is linked to variable reward is shown below. INCREASE GENETIC R&D and business innovation Strategic measures within CONTROL AND PRODUCT the Annual Bonus focus on DIFFERENTIATION key activities in pursuit of our defined longer-term strategy Proprietary genetic improvement Strategic objectives and dissemination positions Link to remuneration policy recognise wider progress than Success measured by financial measures alone TARGETING KEY MARKETS AND SEGMENTS Volume growth Measured through the profit element of the Annual Bonus Over the longer term will flow into EPS and Genetic Operating profit Improvement, both used to SHARING IN THE determine vesting under the PSP VALUE DELIVERED Cash conversion Measured through the cash element of the Annual Bonus CORPORATE GOVERNANCE PERFORMANCE COMPONENTS AND THEIR IMPACT ON REMUNERATION 2022 2023 Movement % Impact on remuneration Adjusted results Revenue £593.4m £689.7m 16% Input to Annual Bonus profit and earnings per share in PSP Adjusted profit before tax £71.5m £71.5m 0% Annual Bonus measure Generation of free cash flow £(13.5)m £18.2m n/a Annual Bonus measure Adjusted earnings per share 82.7p 84.8p 3% PSP performance condition Dividend per share 32.0p 32.0p 0% Executives rewarded via dividends on shares held post vesting Share price at year end 2,508p 2,166p (14)% Determines the value of deferred bonuses and PSP awards Values in the table are in actual currency as shown in the Annual Report. A number of adjustments are made to these for the purposes of calculating awards under our incentive plans as described in this report and in line with our Remuneration Policy. EXECUTIVE DIRECTORS’ ALIGNMENT TO SHARE PRICE The table below shows the value of shares currently held by the Executive Directors and those awarded under the Deferred Share Bonus Plan (‘DSBP’), but not yet released (on a post-tax basis). It does not include those awards under the PSP which are scheduled to vest in the future subject to Company performance, which have the potential to significantly increase the alignment of the Executives, subject to the resulting level of vesting. Shares | | awarded | | | | | Consequence | | | --- | --- | --- | --- | --- | --- | --- | --- | | | under the | | | | Indicative | | of a +/- 10% | | Shares | | DSBP | Total share | | value on 30 | | share price | | owned | (post-tax) | | exposure | June 2023 (£) | | 1 | change (£) Conclusion | Stephen Wilson 76,757 8,618 85,375 2,195,853 219,585 Outgoing CEO is aligned to share price movement through post-cessation shareholding requirement Jorgen Kokke Nil Nil Nil Nil N/A Incoming CEO has significant alignment to Genus through share awards made on appointment (buying out awards from previous employer) and through ongoing incentive opportunity available Alison Henriksen 10,298 4,709 15,006 385,958 38,596 CFO aligned to share price movement through existing ordinary shareholding and in-flight incentive awards 1 Value calculated using the average share price for the final quarter of the financial year ended 30 June 2023 (2,572p) ### 97 GENUS PLC / ANNUAL REPORT 2023 ### SECTION D – ANNUAL REPORT ON REMUNERATION INTRODUCTION This section of the Directors’ Remuneration Report is subject to an advisory vote at the 2023 AGM. Remuneration in respect of 2023 is determined by our Remuneration Policy agreed by over 93% of shareholders at the 2022 AGM. The detailed Policy can be found in our 2022 Annual Report which is available from our website at www.genusplc.com. We have split this section into the following chapters to balance our formal disclosure obligations with our desire to have a clear and understandable report: 1. Reward outcomes for Executive Directors for 2023. 2. Forward Looking Policy and Implementation in 2024. 3. The Process the Committee Followed to Arrive at These Decisions. 4. How the Chief Executive’s Pay Compares to Shareholder Returns Over the Past Ten Years and to Employees’ Pay. 5. The Chairman and Non-Executive Directors’ Fees. 6. Details of the Directors’ Shareholdings and Rights to Shares. 7. Details of the Executive Directors’ Contracts and Non-Executive Directors’ Letters of Appointment. 1. REWARD OUTCOMES FOR EXECUTIVE DIRECTORS FOR 2023 EXECUTIVE DIRECTORS’ SINGLE TOTAL REMUNERATION FIGURE (AUDITED) The following table shows a single total figure of remuneration for the 2023 financial year for each of the Executive Directors and compares this figure to the prior year. | | Salary | | | | | Subtotal for | | Annual | | Subtotal for | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | and fees | Benefits | 1 | Pension | 2 | fixed pay | | bonus | PSP | variable pay | | Total | | Year | £000s | £000s | | £000s | | | £000s | £000s | £000s | | £000s | £000s | 4 | Stephen Wilson 2023 617 13 49 679 245 286 | | | | | 531 1,210 | | --- | --- | --- | --- | --- | --- | | | | 3 | | 5 | | | | 2022 614 13 61 689 192 | | 499 | | 691 1,380 | 4 Alison Henriksen 2023 418 13 25 456 149 170 319 775 4 2022 417 13 25 454 192 269 461 915 1 Benefits included an annual car allowance of £12,000 for Stephen Wilson and Alison Henriksen respectively. Insured benefits include life assurance, private medical insurance and a medical screen 2 Executive Directors receive a cash allowance in lieu of pension, which is shown in the Pension column. The percentage contribution payable to Stephen Wilson was reduced from 10% to 6% of salary effective 1 January 2023, as previously confirmed through our Remuneration Policy. Alison Henriksen receives a pension contribution of 6% of salary 3 Bonus earned includes the part of the award which is deferred into Company shares. The value shown for Stephen Wilson in 2022 is after the application of downward discretion to align the bonus value to that for the CFO 4 The value of the PSP is determined by the number of awards vesting in relation to performance in the period ended 30 June 2023. Dividend equivalents are not added to awards made under the PSP. The value shown for 2023 is based on the average share price for the final three months of the 2023 financial year (which was 2,572p). This CORPORATE GOVERNANCE compares to the share price at grant of 3,898p (-34%) 5 The 2022 values shown as estimated in the previous Annual Report have been restated to reflect the actual value at point of vesting. The share price was £28.94 on 12 September 2022 when awards vested for Stephen Wilson and Alison Henriksen Executive Directors with Pay denominated in USD: | | Salary | | | Subtotal for | | Annual | | Subtotal for | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | and fees | Benefits | Pension | fixed pay | | bonus | PSP | variable pay | | Total | | Year | $000s | $000s | $000s | | $000s | $000s | $000s | | $000s | $000s | Jorgen Kokke 2023 120 5 6 131 Nil Nil Nil 131 HOW THE BONUSES FOR 2023 WERE CALCULATED Annual Bonus Both Stephen Wilson and Alison Henriksen were eligible to participate in the Annual Bonus for 2023. Jorgen Kokke did not participate and his eligibility for the Genus annual bonus plan commenced from 1 July 2023. Awards were calculated by reference to performance against a challenging sliding scale of profit, cash flow and strategic measures. Targets were set by the Committee to exclude the costs of gene editing. This was a decision by the Committee (as was the case in prior years) to ensure that management’s reward was not unfairly affected by decisions to make the right long-term investment decisions on behalf of the business. The following results were achieved for each element of the annual bonus incentive. Extent to Actual 2023 Threshold Target Stretch which targets Bonus target 1 Strategic objective Weighting performance (0% award) (50% award) (full award) were met (%) 2 Adjusted profit before tax Year-on-year profit growth 60% £79.2m £79.4m £84.7m £88.9m 0% Generation of free cash flow Generate cash for reinvestment and dividends 15% £18.2m £15.7m £21.7m £24.7m 21% Strategic measures To build the foundation for Stephen Wilson 78% future growth 25% See table Alison Henriksen 69% 1 The financial elements of the bonus are payable on a straight-line basis between each threshold, target and stretch level 2 Bonuses are calculated in constant currency and excludes gene editing costs. This explains the difference between the value shown and the Adjusted profit before tax number on page 96 ### 98 GENUS PLC / ANNUAL REPORT 2023 ### REMUNERATION COMMITTEE REPORT CONTINUED ### SECTION D – ANNUAL REPORT ON REMUNERATION STRATEGIC MEASURES The Committee reviewed and discussed achievement against targets set for strategic measures for each Executive Director in determining overall award levels. Performance against these targets is disclosed retrospectively, as follows: Payout against | | Theme Objective Key achievements in year | | | maximum | | | --- | --- | --- | --- | --- | --- | | Stephen Wilson Strategy | | Maintain/grow genetic | • Genetic gain ahead of target in each | | 78% | | | Development | leadership in dairy, beef | species with rate of progress accelerating | | | | | and Execution | and porcine | vs prior years | | | | | | Grow PIC Key accounts globally | • Grew share in key regions – exceeded | | | goal for key new porcine customer wins Drive growth of Gene Advance • Gene Advance targets exceeded. and digital sales in ABS Overall digital sales behind plan | | Leverage technology/genetics | • Global sexing deal with CRV signed, | | --- | --- | --- | | | across bovine sector | expansion of IntelliGen footprint | | | Optimise ABS sales delivery | • Go to market (‘GTM’) activity identified future | | | and supply chain model | benefits and will continue into FY24 | | Leadership | Sustain leadership effectiveness | • Internal promotion of Matt Culbertson to | | and culture | | GELT to lead PIC business following retirement | of Bill Christianson CORPORATE GOVERNANCE • Smooth transition to incoming CEO Improve gender diversity at • Increase in proportion of new manager Manager level appointment who were female in line with goal Maintain strong health and • 13% reduction in vehicle incidents. Recordable safety culture injury rate decreased 5% and was better than set goal Innovation Gene editing • Completion of FDA submissions ahead of target date and good progress with international regulatory agencies Lead industry in reproductive • Implementing new IVF technologies biology with better outcomes. Good progress with other research programmes Improve technology and • Strong delivery on IntelliGen process performance technology roadmap within IntelliGen Deliver positive user adoption • Successful deployment in most European of GenusOne globally countries. Positive user feedback and many stated adoption and optimisation goals achieved Sustainability Drive adoption and • 15% improvement in primary intensity ratio implementation of ‘Delta C’ during year • Absolute carbon emissions reduced by 5% (and 16% below 2019 levels), exceeding goal ### 99 GENUS PLC / ANNUAL REPORT 2023 Payout against | | Theme Objective Key achievements in year | | | maximum | | | --- | --- | --- | --- | --- | --- | | Alison Henriksen Strategy | | Maintains strong investor | • Positive reaction to investor interactions, | | 69% | | | Development | relations activity, expanding | including following site visits to facilities | | | | | and Execution | knowledge of Genus outside | | | | of the UK and growing understanding of ESG progress Strengthen BCA relationship • Strong relationship in place with BCA and robust collaboration and alignment Drive strategy development • Active partnering with ABS to shape and execution and evolve their go to market strategy, implementing instrumental changes in FY24 • Active partnering with IntelliGen to achieve bull efficiency, implemented at Leeds doubling straws per billion cells • Procurement initiatives supporting the businesses, IT and HR led to significant incremental costs savings and cost inflation avoidance • Enhanced the processes to manage working capital across the Group leading to good improvements in cash outflows through reductions in DSO and ABS’s inventory holdings Leadership and Rollout of Finance Target • Step change in insights from real time culture Operating Model (‘FTOM’) – reporting delivered through Reporting Centre people and org design, process of Expertise (‘COE’) rollout, reporting and • Rollout of standardised accounting performance management, processes in North America and Europe and finance technology shift of repeatable processes to Asia, resulting in efficiencies Build on career development for • Created key new hires and roles within finance team, taking account finance team driving strength and enhanced CORPORATE GOVERNANCE of changes linked to FTOM clarity of roles and responsibilities Innovation Deliver positive user adoption • Successful deployment in most European of GenusOne globally countries. Positive user feedback and many stated adoption and optimisation goals achieved Sustainability Drive adoption and • 15% improvement in primary intensity ratio implementation of ‘Delta C’ during year • Absolute carbon emissions reduced by 5% (and 16% below 2019 levels), exceeding goal As a result of this performance, the total Annual Bonus awarded to the Executive Directors was: Annual Bonus Extent to | which overall | | | | Annual Bonus | | | | | --- | --- | --- | --- | --- | --- | --- | --- | | | targets | Annual Bonus | | | – deferred | | | | | were met | | – cash | | | shares | 1 | Stephen Wilson 23% £163,016 £81,508 Alison Henriksen 20% £99,532 £49,766 1 The number of shares awarded will be calculated in September 2023 when bonuses are paid. One-third of bonus payable is deferred into Genus shares for three years HOW THE PSP FIGURE WAS CALCULATED IN THE SINGLE TOTAL REMUNERATION TABLE PSP awards granted to Stephen Wilson and Alison Henriksen on 14 September 2020 were subject to a performance condition, based on the growth in adjusted earnings per share from 2020 to 2023. The range of targets applicable to the award, which had a value of 200% and 175% of salary at grant for Stephen and Alison respectively was as follows: % of award Average annual growth in adjusted earnings per share vesting 1 Less than 5% per annum Nil 5% per annum 20% 15% per annum 100% 1 Straight-line vesting between the points in the above table ### 100 GENUS PLC / ANNUAL REPORT 2023 ### REMUNERATION COMMITTEE REPORT CONTINUED ### SECTION D – ANNUAL REPORT ON REMUNERATION The Committee set targets to calculate the long-term award after excluding gene editing costs incurred during the performance period, to avoid an unintended impact on the Executives’ remuneration whilst making long-term decisions in support of value creation. This is consistent with the approach previously communicated to shareholders within our Policy and as taken in each of the last three years. 1 The adjusted 2023 earnings per share after the cost of share-based payments and adjusting for costs relating to gene editing was 94.7p. This represents an average annual growth in adjusted earnings per share of 7% compared to the comparable 2020 adjusted earnings per share figure (after the cost of share-based payments). The resulting level of vesting is 36% of maximum. Therefore, the number of shares that will vest will be 11,115 for Stephen Wilson and 6,594 for Alison Henriksen, and these will vest on 14 September 2023. The Company’s average share price for the period from 1 April 2023 to 30 June 2023 (the final three months of the financial year) was 2,572p, meaning that the value shown for these awards within the single figure table is £285,896 for Stephen Wilson and £169,601 for Alison Henriksen. Breakdown of value of PSP for 1,400k Outgoing CEO £1,203,585 (2020–2023 Performance) 1,200k 1,000k Share price on award = £38.98 800k Share price (three months ending 600k 30 June 2023) = £25.72 £433,291 | 400k | | | £285,896 | | | --- | --- | --- | --- | --- | | | £770,295 | | | Share price change over period = (34)% | | 200k | | £(147,394) | | | 0 CORPORATE GOVERNANCE Value at award Value of Value of Share price Final value at 1 The average annual earnings per share growth including gene editing costs after share-based payments was 3% and the associated vesting level would have been nil (below threshold level of 5%) JOINING AWARD Joining awards were made to our incoming CEO – Jorgen Kokke – as detailed elsewhere within this disclosure. MATERIAL CONTRACTS There were no other contracts or arrangements during the financial year in which a Director of the Company was materially interested and/or which were significant in relation to the Group’s business. PAYMENTS FOR LOSS OF OFFICE AND PAYMENTS TO FORMER DIRECTORS (AUDITED) There were no payments for loss of office in the year or to any former Directors of the business. Stephen Wilson will retire on 30 September 2023 and details of his leaver arrangements are outlined elsewhere in this report. DISCRETION No discretion was applied by the Committee during the year. EXTERNAL DIRECTORS’ EXTERNAL APPOINTMENTS Executive Directors are permitted to accept an external non-executive position, with the Board’s approval. Any fees received in respect of these appointments may be retained by the Executive. Stephen Wilson is a Non-Executive Director of Renishaw plc and he received fees totalling £75,000 during the year. £ shares lapsed shares vesting reduction 30 June 2023 ### 101 GENUS PLC / ANNUAL REPORT 2023 2. FORWARD LOOKING POLICY AND IMPLEMENTATION IN 2024 We gained shareholder approval for our new Directors’ Remuneration Policy at the 2022 AGM. The full Policy as agreed by Shareholders can be found in the 2022 Annual Report or at our website at www.genusplc.com. KEY DESIGN/PHILOSOPHY OF OUR FUTURE REMUNERATION POLICY What we are trying to achieve How we are looking to achieve it • Continued transformation into a global agricultural • Draw upon the aspects of our current Policy that are working biotechnology pioneer • Include strategic/ESG measures within PSP assessment, linked • Pursuit of leading-edge technology and focus on long-term to core strategy innovation and opportunity to enable future value creation • Enable an increase in the level of exceptional awards for shareholders permissible under the PSP (with no change to the standard • Sustainable robust short-term delivery of financial award level) – designed primarily to support recruitment performance as we invest in the future if needed • Ability to recognise innovation and progress, which are crucial to securing long-term bottom-line performance • Ability to attract and motivate a high-quality leadership team and drive focus and behaviours on long-term achievement in a global market for talent • Recognise expectations of shareholders on reward and governance We are confident that our Policy provides strong alignment against Section 40 the Provisions of the 2018 Code as summarised below: ALIGNMENT OF OUR REMUNERATION POLICY TO THE 2018 CODE CLARITY SIMPLICITY ALIGNMENT TO CULTURE Implementation of the strategy is We look to describe the structure of The Policy aligns to our business monitored through KPIs including reward clearly to both participants model and focus on the experience those used within the Annual Bonus and shareholders through effective of customers and employees. Metrics and PSP. This ensures alignment disclosures, so all stakeholders linked to culture are used within between strategy execution and are clear on the underlying reward variable plans, alongside delivery of reward outcomes. principles and the way reward long-term sustainable performance. outcomes are determined. CORPORATE GOVERNANCE PREDICTABILITY PROPORTIONALITY RISK Examples of the range of outcomes A significant proportion of the total The Committee retain ultimate under the Policy are shown reward opportunity is performance discretion to vary outcomes from within the scenario graphs. driven, with clear linkage between formulaic results if they do not business metrics and reward outcomes judge this to accurately reflect This demonstrates the way that through clear targets and use of KPIs. underlying business performance. different performance levels change reward outcomes for individuals and Shares form the majority of variable Malus and clawback provisions apply the associated impact of changes reward and Executives are required to all awards and we operate post- in the Company share price. to develop and maintain a material cessation shareholding requirements shareholding in the business to fully to further align Executives to long- align to the shareholder experience. term business performance. ### 102 GENUS PLC / ANNUAL REPORT 2023 ### REMUNERATION COMMITTEE REPORT CONTINUED ### SECTION D – ANNUAL REPORT ON REMUNERATION POLICY IMPLEMENTATION – EXECUTIVE DIRECTORS A summary of this section is given on page 93. Policy Area 2024 Implementation Base Salary Following review by the Committee the salary for Alison Henriksen was increased Key features as shown, effective 1 July 2023. No further increases of this salary are scheduled • To provide competitive fixed remuneration that until September 2025. will attract and retain employees with the experience necessary to develop and execute Annual Salary to Revised 1 Sep 2023 Annual Salary Effective Date our strategy • Normally reviewed annually effective Stephen Wilson £616,900 £616,900 n/a 1 September • Factors used to review include Jorgen Kokke $825,000 $825,000 n/a – Wider workforce changes in country where Alison Henriksen £418,200 £480,930 1 July 2023 individual is based – Comparable salaries when benchmarked against relevant market comparators – Experience of the individual and the contribution they are making – Overall group performance and wider economic conditions Benefit Provision The Executive Directors receive benefits including a car allowance, life assurance, Key features an annual medical screen and private medical insurance. The Company will also • To provide a competitive range of benefits to provide tax support assistance for preparation of foreign tax returns for Jorgen drive engagement and commitment to Genus Kokke as required, as well as tax equalisation provision as required for any CORPORATE GOVERNANCE • Benefits generally include a car allowance and employment income taxable outside of the US. insured benefits (e.g. life assurance and private medical insurance) • Where Executive Directors are recruited from overseas or required to relocate (including on an international assignment), benefits such as travel and relocation costs and tax equalisation arrangements may be provided Pension/Retirement Benefits Executive Directors receive a pension allowance worth 6% of salary, consistent with Key features our stated Policy to align rates for new hires to the wider workforce. • To provide a competitive Company contribution that enables effective retirement planning Executive Directors can participate in Company-wide arrangements as may exist • To provide a benefit in line with the rate (including the benefit of a Company provided match on employee contributions) available to the wider workforce and/or receive a cash allowance of equivalent value. Annual Bonus Annual Bonus Key features Value of bonus A maximum of 200% of salary for Jorgen Kokke and 175% for • To motivate and incentivise delivery of annual Alison Henriksen. Stephen Wilson will be eligible for a bonus of performance targets covering a combination of up to 175% of salary, prorated for the period of employment financial and strategic measures from 1 July 2023 to 30 September 2023. • One third of the annual bonus is deferred into | Company shares for a period of three years, | Performance | Assessed across the following metrics: | | --- | --- | --- | | subject to continued service. The remaining | measures | • Genus Group Operating Profit (exc PIC China) – | | award is payable in cash | | 50% of opportunity | | • Malus and clawback provisions exist for | | • PIC China Operating Profit – 10% of opportunity | | awards made under the Annual Bonus | | • Cash Conversion – 15% of opportunity | • Strategic measures – 25% of opportunity Calibration of The targets for the coming year have been determined and will profit and cash be disclosed on a retrospective basis. The targets have been targets set considering agreed budgets and represent stretching business performance. The Committee considered analyst expectations and market conditions in our key countries in determining the range and is comfortable that the range set is stretching. Group targets will exclude gene editing costs in line with prior years, as we move towards PRRSv commercialisation. Calibration of Specific measurable targets have been set against this strategic category linked to our strategic priorities identified by the measures Board for the year ahead. It would be commercially sensitive to disclose these targets in advance and we will retrospectively disclose the targets and associated performance against them in the subsequent Annual Report. Bonus deferral One-third of any bonus award will be deferred by way of shares for three years and will vest subject to continued employment, other than in certain leaver circumstances. ### 103 GENUS PLC / ANNUAL REPORT 2023 Policy Area 2024 Implementation Performance Share Plan (‘PSP’) Awards to be granted in September 2023 will be granted under the 2019 PSP approved Key features by shareholders on 14 November 2019. Alison Henriksen will be granted awards over 200% • To incentivise Executives of salary in line with that permitted under the Policy. The award for Jorgen Kokke will be to achieve superior returns worth 400% of salary, using the exceptional limit within the agreed Remuneration Policy, to shareholders over a as outlined within this disclosure. Grants will be determined in line with the Plan Rules, using three-year period, to retain annual salary as at the point of grant to determine awards. Awards granted will continue key individuals and align to require the Executive to retain the after-tax number of shares vesting in September with shareholder interests 2026 for two years. Enhanced clawback and malus provisions will apply to these awards • Awards scheduled to vest three as outlined within our Remuneration Policy, including for reputational damage and years from grant, subject to corporate failure. continued employment and Three performance targets will be used for the awards to be granted in September 2023 satisfaction of challenging as shown below will be assessed independently of each other. three-year performance targets | • Following vesting the post-tax | Metric Weighting Metric detail Target for 2023 awards | | | | | | | --- | --- | --- | --- | --- | --- | --- | | number of vested shares must | Earnings | 80% Average annual growth | | Average annual growth in | | Vesting % | | | | | | adjusted earnings per share | 1 | | | be held for at least a further | Per Share | | in adjusted earnings per | | | | | two-year period. | | | share, measured over | Less than 4% per annum 0% | | | | • Malus and clawback provisions | | | three years, inclusive of | | | | 4% per annum 20% may apply for a period of gene editing costs in the three years base year and final year 12% per annum 100% of calculation. Straight-line vesting between performance points shown above. | Genetic | 10% Improvement (expressed | | Overall assessment guidelines | Indicative | | | --- | --- | --- | --- | --- | --- | | | | | (Final award will be determined | | award | | Improvement | | in standard deviations | | | | | | | | by Committee having reviewed | (max 10%) | | | | | of improvement per | progress in each of the | | | | | | generation) of genetics in | respective species) | | | | | | Porcine, Bovine and Dairy. | Performance at or | | 8–10% | exceeding target | Target of one standard | over period across all | | --- | --- | | deviation of genetic | species or significant | | improvement per | outperformance in one | | generation across Dairy | or more species with | | and Bovine, and 0.75 | no ‘weak’ progress | standard deviations Progress overall in line 5–7% of improvement per with stated target CORPORATE GOVERNANCE generation in Porcine. Robust performance 2–4% in one or two species, slower progress elsewhere Progress below target No award each year in all species Greenhouse 10% Reduction in overall Cumulative % reduction across three years ending June 2025 Vesting % | Gas | primary intensity ratio of | | | | --- | --- | --- | --- | | Reduction | our operations for the | Below 3% | Nil | | | three-year period | 3% (threshold) | 20% | | | commencing 1 July 2023 | 10% (stretch) | 100% | and ending 30 June 2026. Straight-line vesting between threshold and stretch values in the above table 1 Growth in adjusted earnings per share over the three-year performance period will be calculated on a simple average annual growth rate after the cost of share-based payments The Committee retains the discretion to be able to scale back overall vesting if it does not consider the vesting result to be consistent with the progress achieved against the Company’s strategy during the performance period. This is considered appropriate to broaden the Executive team’s focus beyond financial performance. The Committee also recognise that material changes in the Company share price can materially change the number of shares that are awarded through PSP grants. The Committee will make these awards in the usual way in September 2023 and will review the ultimate level of vesting and associated business performance. In the event that the share price used to determine awards was not felt to be representative (or gave rise to what were deemed to be any unjustified gains by recipients having considered the overall reward experience for Executives and Shareholders) then the Committee has the ability to adjust ultimate vesting levels. Shareholding Key features • To align executives and shareholders, executives are required to achieve a shareholding of 200% of salary. It is expected that this is achieved within five years of appointment, and that this shareholding is generated through retention of at least half of the shares that vest under the Deferred Share Bonus Plan and Performance Share Plans 104 GENUS PLC / ANNUAL REPORT 2023 # REMUNERATION COMMITTEE REPORT CONTINUED # SECTION D – ANNUAL REPORT ON REMUNERATION POLICY IMPLEMENTATION – NON-EXECUTIVE DIRECTORS | Policy Area | 2024 Implementation | | --- | --- | | Fees | No changes to core fees payable to Non-Executive Directors fees will be implemented for 2024 | | Key features | | | • To provide compensation that attracts high-calibre individuals and reflects their experience and knowledge | | | • The Board periodically reviews Non-Executive Directors' fees | | | • Additional fees are paid to Non-Executive Directors who chair a Board Committee and to the Senior Independent Director (SID) | | | • No Directors take part in meetings where their own remuneration is discussed | | | • Fees are based on the time commitments involved in each role and set with reference to the fees paid in other similarly sized UK listed companies | | # REWARD FOR OUTGOING CHIEF EXECUTIVE OFFICER (STEPHEN WILSON) # REWARD ARRANGEMENTS AND FUTURE LEAVER TREATMENT FOR STEPHEN WILSON On 23 February 2023 we announced that Stephen Wilson would be retiring from Genus after ten years with the business. In line with a request from the Board, and to facilitate a smooth period of transition, he will work through to 30 September 2023. The Committee determined the following in relation to his reward: # REWARD FOR 2024 (PERIOD BEGINNING 1 JULY 2023 TO 30 SEPTEMBER 2023) - Continuing salary payments and ongoing eligibility to benefits - Eligibility for annual bonus for period 1 July to 30 September 2023. (This will be determined based on combination of strategic and financial targets, with financial targets consistent with those used for other Executive Directors). Awards will be determined after the conclusion of the financial year ending 30 June 2024, and awards will be delivered partly in cash and partly in deferred shares that will vest after three years (in line with our Policy). # TREATMENT OF IN-FLIGHT SHARE AWARDS UPON LEAVING Upon retirement from Genus on 30 September 2023, Stephen has been determined to be a good leaver and the Committee have determined that treatment of awards should be consistent with the approach within our agreed Policy. In-flight awards under our PSP plan will be provided (based on the period employed within the respective performance period) with vesting determined at the end of the three year period. Stephen will have a six month window to exercise any nil cost options that vest. Previously awarded share awards under the Deferred Bonus share plan will vest in full at their scheduled vesting dates. Stephen will have a post cessation shareholding Policy requiring him to hold onto shares for 24 months following cessation of employment on the terms described in our agreed Remuneration Policy. The Committee have discussed and agreed which shares this relates to and how this will be operationalised. Any further payments made to Stephen will be disclosed in future Annual Reports as we are required to disclose. # SALARY LEVEL FOR CHIEF FINANCIAL OFFICER (ALISON HENRIKSEN) # ADJUSTMENT TO SALARY LEVEL The Committee discussed the future role and responsibilities for Alison following the appointment of Jorgen to the business. We determined that the future scope of the role was broader, in particular reflecting the fact that she will be the sole Executive Director based primarily in the UK following change of CEO. We viewed this as an extension of her current role, and following wider review of her responsibilities, agreed on increase in base salary to £480,930 (+15%) effective 1 July 2023. No further increases will be made in September 2023 or September 2024 with next scheduled review in September 2025. CORPORATE GOVERNANCE ### 105 GENUS PLC / ANNUAL REPORT 2023 3. THE PROCESS THE COMMITTEE FOLLOWED TO ARRIVE AT THESE DECISIONS The Committee complies with the UK Corporate Governance Code. It makes recommendations to the Board, within agreed terms of reference, on remuneration for the Executive Directors and other members of GELT. The Committee’s full terms of reference are available on the Company’s website at www.genusplc.com. During 2023, the Committee comprised: Attendance Director Independent at meetings 1 Lesley Knox (Chair) Yes 6/7 Iain Ferguson Yes 7/7 Jason Chin Yes 7/7 Lykele van der Broek Yes 7/7 Lysanne Gray Yes 7/7 1 The Committee had five scheduled and two ad hoc meetings during the year None of the Committee members has any personal financial interest (other than as shareholders), conflicts of interests arising from cross-directorships or day-to-day involvement in running the business. The Chief Executive and the Chief Financial Officer attend meetings at the Committee’s invitation but are not present when their own remuneration is being discussed. The Committee is supported by the Group HR Director, Group Reward Director, Finance and Company Secretariat functions. During the year, the Committee continued to use PricewaterhouseCoopers (‘PwC’) for advice it considers is of value, objective and independent. PwC’s fees were £50k for its remuneration advice to the Committee. PwC were appointed by the Committee following a competitive tender process and their performance and independence as advisers is regularly reviewed. PwC is a member of the Remuneration Consultants Group and complies with its Code of Conduct. Separate teams within PwC provide unrelated advisory service to the Group, including taxation and actuarial advice to the Group. During the year to 30 June 2023, the Committee met seven times and considered the following matters: | | 1 | | 1 | | 2 | | 1 | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | July 2022 | | September 2022 | | January 2023 | | April 2023 | | | | • Proposed objectives for CEO | | • Approve vesting of | | • CEO Leaver treatment | | • Gender Pay insight | | | | for FY22 | | Performance Share Plan | | • Future CEO recruitment | | (Genus Breeding) | | | | • Review draft DRR disclosure | | for 2018 awards | | and reward approach | | • Wider reward landscape | | | | • Market Update on reward | | • Approve DRR | | | | across Genus | | CORPORATE GOVERNANCE | | | | • Review GELT shareholding | | | | • CFO Remuneration | | | at year end • Approve future long-term incentive awards (for GELT and below) | | 1 | | 1 | | 2 | | --- | --- | --- | --- | --- | --- | | August 2022 | | November 2022 | | February 2023 | | | • Targets for Annual bonus | | • Review of shareholder vote | | • Reward review across GELT | | | for 2023 | | post AGM | | • Future CEO recruitment | | | • EPS target range for | | • Spotlight on reward | | | | | PSP award to be made | | within R&D | | | | in September • 2022 Annual Bonus outcomes for GELT 1 Scheduled meeting 2 Ad hoc meeting HOW SHAREHOLDERS’ VIEWS ARE TAKEN INTO ACCOUNT We consulted with shareholders ahead of proposing our existing Remuneration Policy to shareholders at our 2022 AGM which received high levels of shareholder support. The results of the most recent votes were as follows: | | Vote on Directors’ | | | | Vote on Directors’ | | | | --- | --- | --- | --- | --- | --- | --- | --- | | | Remuneration Report | | | | Remuneration Policy | | | | | 2022 AGM (advisory) | | | | 2022 AGM (binding) | | | | Total number | | % of votes | | Total number | | % of votes | | | | of votes | | cast | | of votes | | cast | For 48,707,946 98.3 46,353,666 93.1 Against 876,515 1.7 3,433,110 6.9 Total number of shares in respect of which votes were validly made 49,584,461 100 49,786,776 100 Votes withheld 211,121 8,806 106 GENUS PLC / ANNUAL REPORT 2023 # REMUNERATION COMMITTEE REPORT CONTINUED SECTION D - ANNUAL REPORT ON REMUNERATION # HOW EMPLOYEES' PAY IS TAKEN INTO ACCOUNT While the Company does not consult employees on matters of Directors' remuneration, the Committee does take account of the policy for employees across the workforce when determining the Remuneration Policy for Directors. The Group Reward Director facilitates this process, presenting to the Committee reward structures and approach across the organisation including the way reward levels are set with reference to internal and external factors, and how performance metrics align with those used for GELT members (including Executive Directors). The process also includes sharing feedback received through staff engagement surveys that include questions on pay, as well as consulting employees informally on their views of the current overall Remuneration Policy. Additionally, discussions on reward have formed part of dialogue between the nominated Non-Executive Directors and employees as part of wider engagement activity as outlined elsewhere in the Annual Report. This forms part of the feedback provided to the Committee and is used to assess the Remuneration Policy's ongoing effectiveness and any changes that should be made. When setting the Executive Directors' base salaries, the Committee compares the salary increases proposed for each Executive Director with those proposed for employees in their geographical location, as well as considering the typical increase proposed across our UK business and the wider Group. # 4. HOW THE CHIEF EXECUTIVE'S PAY COMPARES TO SHAREHOLDER RETURNS OVER THE PAST TEN YEARS AND TO EMPLOYEES' PAY # TOTAL SHAREHOLDER RETURN The following graph shows the Company's performance measured by total shareholder return (TSR), compared with the TSR performance of the FTSE 250 Index. The FTSE 250 Index was selected as it represents a broad equity market of which the Company is a member. Ten years of total shareholder return ![img-3.jpeg](img-3.jpeg) As required under the reporting regulations, the table below shows the 'single figure' pay for the Chief Executive over the same period, to allow comparison between variability in reward and the shareholder experience over the same period. | | Kohm Bray | | | | | | | | Stephen Wilson | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | 2022 | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2030 | 2031 | 2032 | 2033 | | Total remuneration (£000s) | £868 | £877 | £1,622 | £1,704 | £2,856 | £2,349 | £875 | £783 | £2,161 | £2,888 | £1,380 | £1,210 | | Annual Bonus (% of max) | 31% | 32% | 99% | 78% | 59% | 64% | NA | NA | 91% | 95% | 18% | 23% | | Total PSP vesting (% of max) | - | - | 26% | 34% | 79% | 56% | NA | NA | 44.9% | 81.2% | 41.4% | 36% | 1 Includes the award under the Company's finance element of the Annual Bonus under the previous Remuneration Policy. 2 No awards were payable following the decision of Kohm to resign from the business. 3 Vesting was in its Kohm's employment cessation date was before scheduled vesting of PSP awards. CORPORATE GOVERNANCE 107 GENUS PLC / ANNUAL REPORT 2023 # DIRECTOR REMUNERATION COMPARED TO GENUS EMPLOYEES # Change in remuneration received The table below shows the percentage change in the annual remuneration of Directors from 2019 onwards. Also provided for comparison is a UK comparator number for each respective time period which considers all employees of Genus plc on 30 June 2023 (excluding Directors) and calculating on an FTE basis changes in salary, benefits and bonus compared to the previous year. | | Salary/fees (% change) | | | | Benefits (% change) | | | | Bonus (% change) | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | 2022 to 2023 | 2021 to 2022 | 2020 to 2021 | 2019 to 2020 | 2022 to 2023 | 2021 to 2022 | 2020 to 2021 | 2019 to 2020 | 2022 to 2023 | 2021 to 2022 | 2020 to 2021 | 2019 to 2020 | | Stephen Wilson^{1} | 0 | 2 | 9 | 40 | (17) | 2 | 0 | 0 | 27 | (81) | 6 | 158 | | Alison Henriksen^{2} | 0 | 2 | 2 | n/a | 0 | 3 | 0 | n/a | (22) | (72) | 7 | n/a | | Jorgen Kokke | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | | Iain Ferguson | 0 | 46 | n/a | n/a | 0 | 0 | n/a | n/a | n/a | n/a | n/a | n/a | | Lylele van der Broek | 0 | 0 | 0 | 0 | 0 | (100) | (60) | 25 | n/a | n/a | n/a | n/a | | Lysonne Gray | 8 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | n/a | n/a | n/a | n/a | | Lesley Knox | 8 | 0 | (5) | 157 | 0 | 0 | 0 | 0 | n/a | n/a | n/a | n/a | | Jason Chin | 15 | 0 | n/a | n/a | 0 | 0 | n/a | n/a | n/a | n/a | n/a | n/a | | UK comparators | 5.1 | 2.5 | 2.6 | 2.3 | 0 | 0 | 0 | 0 | 51 | (66) | 24 | 124 | 1. Stephen was appointed into the CEO role on 15 September 2019. The 2020 year (July 2019 to June 2020) includes part year of salary as CEO through to 15 September 2019 and part year as CEO. Salary increase received in September 2020 was 25. 2. Amounts have been annualized for 2020 for about no effect the coming date of 15 January 2020. 3. Includes book payments for membership of respective Committees not received during 2019. # DISTRIBUTION STATEMENT | | 2022 | 2023 | % change | | --- | --- | --- | --- | | Employee costs (£m) | £197m | £230m | 17% | | Distributions to shareholders^{1} | £20.9m | £21m | 0% | 1 Includes dividends and share buy-backs. # 5. THE CHAIRMAN AND NON-EXECUTIVE DIRECTORS' FEES Fees payable to the Non-Executive Directors per annum effective from 1 July 2023 are as follows: | Position | 2021 fees | 2022 fees | 2023 fees | | --- | --- | --- | --- | | Chairman | £230,000^{2} | £230,000 | £230,000 | | Base Non-Executive Director fee | £55,000 | £55,000 | £55,000 | | Additional fee for Chair of Audit & Risk Committee/Remuneration Committee | £5,000 | £10,000 | £10,000 | | Additional fee for Scientific Adviser to R&D Global Portfolio Steering Committee (GPSC) | £10,000 | £10,000 | £10,000 | | Additional fee for Chair of Scientific Advisory Board^{3} | n/a | £10,000 | £10,000 | 1. The Chairman fee was reviewed prior to the appointment of Iain Ferguson and was determined following a review of market data, as disclosed in the 2020 Annual Report. The fee level was applied following appointment to Iain Ferguson as Chairman effective 25 November 2020. 2. Note held by Jason Chin. CORPORATE GOVERNANCE ### 108 GENUS PLC / ANNUAL REPORT 2023 ### REMUNERATION COMMITTEE REPORT CONTINUED ### SECTION D – ANNUAL REPORT ON REMUNERATION Total single figure of remuneration (audited) for 2022 and 2023 are as follows: | | | Taxable | | Total | | --- | --- | --- | --- | --- | | | Fees | expenses | Benefits | | | Non-Executive Directors | £000s | £000s | £000s | £000s | Iain Ferguson 2023 230 – – 230 2022 230 – – 230 Lykele van der Broek 2023 55 1 2 58 2022 55 – – 55 Lysanne Gray 2023 65 – – 65 2022 60 – – 60 Lesley Knox 2023 65 3 – 68 2022 60 – – 60 Jason Chin 2023 75 1 – 76 2022 65 – – 65 Total 2023 490 5 2 497 2022 470 – – 470 The Non-Executive Directors’ taxable expenses are travel expenses related to their role and have been grossed up for tax where applicable, in line with HMRC rules. 6. DETAILS OF THE DIRECTORS’ SHAREHOLDINGS AND RIGHTS TO SHARES CORPORATE GOVERNANCE DIRECTORS’ SHAREHOLDINGS (AUDITED) At the year end, the Directors had the following interests in the Company’s shares: Unvested PSP awards | | | | | | | | Unvested | | or nil-cost | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Ordinary | | | | | | | DSBP | options held | | | Ordinary | | shares as at | | | | | | | awards at | | | at | shares as at | | | 30 June 2023 | | | % of | Shareholding | | 30 June 2023 | | | 30 June 2023 | | 30 June 2022 | | | | Number | salary held | | 1 | guideline | 2 | Number | | Number | | | Number | Iain Ferguson 10,000 n/a n/a n/a n/a 9,000 Stephen Wilson 76,757 356% 200% 16,261 96,360 64,047 Jorgen Kokke – 0% 200% n/a 126,935 – Alison Henriksen 5,375 92% 200% 8,884 60,846 – Jason Chin – n/a n/a n/a n/a – Lesley Knox 2,000 n/a n/a n/a n/a 2,000 Lykele van der Broek 3,750 n/a n/a n/a n/a 3,750 Lysanne Gray – n/a n/a n/a n/a – Total 97,882 25,145 157,206 78,797 1 Based on the combined number of beneficially held shares and the net of tax DSBP awards held and the average closing share price over the three months to 30 June 2023 of 2,572p 2 Executive Directors are expected to work towards achieve a shareholding of 200% of salary as set out in our Remuneration Policy There were no changes in the Directors’ interests between 30 June 2023 and the date of this report. COMPANY SHARE PRICE The market price of the Company’s shares on 30 June 2023 was 2,166p and the lowest and highest share prices during the financial year were 2,132p and 3,272p respectively. ### 109 GENUS PLC / ANNUAL REPORT 2023 PERFORMANCE SHARE AWARDS GRANTED IN 2023 (AUDITED) The awards granted under the 2019 PSP were as follows: Number of | | | shares | Face/maximum value of | | | % of award | | --- | --- | --- | --- | --- | --- | --- | | | comprising | | awards at grant date | | | vesting at | | Executive | | award | | (% salary) | 1 | threshold Performance period | Stephen Wilson 43,504 £1,233,800 (200%) 20 01.07.22–30.06.25 Alison Henriksen 29,492 £836,400 (200%) 20 01.07.22–30.06.25 1 The closing average share price over the three days prior to the award being granted has been used to determine the maximum face value of the awards which was 2,836p (award granted on 14 September 2022) The awards were granted as nil-cost share options and vesting will be subject to achievement against Company performance targets and operate with a broader strategic underpin, consistent with our Remuneration Policy. The targets are based on: Earnings per share (weighting 80% of the total award) The adjusted earnings per share growth performance target for the above awards is: Vesting Average annual growth in adjusted earnings per share 1 (% award) Less than 4% per annum 0% 4% per annum 20% 12% per annum 100% Straight-line vesting between performance points. 1 Growth in adjusted earnings per share over the three-year performance period will be calculated on a simple average annual growth rate after the cost of share-based payments Genetic Improvement (weighting 10% of the total award) Measured using standard deviations of genetic improvement per generation of genetics in Porcine, Bovine and Dairy. Assessment determined by the Committee having reviewed progress in each of the respective species against a target of 1 standard deviation of improvement per generation in Dairy and Bovine, and 0.75 standard deviations of improvement per generation in Porcine. Greenhouse Gas Reduction (weighting 10% of the total award) CORPORATE GOVERNANCE Measured using cumulative reduction in overall primary intensity ratio of our operations for the three years ending 30 June 2025 against the following scale: The adjusted earnings per share growth performance target for the above awards is: Vesting Cumulative % reduction across three years ending 30 June 2025 1 (% award) Below 3% 0% 3% (Threshold) 20% 10% (Stretch) 100% Straight-line vesting between performance points. 1 Scope 1 and Scope 2 emissions based on tCO 2 e/tonne animal weight DEFERRED BONUS AWARDS GRANTED IN 2023 (AUDITED) The following DSBP awards were granted in relation to the 2022 annual bonus: Number of | | | shares | Face value of | | | | --- | --- | --- | --- | --- | --- | | | comprising | | | awards at | | | Executive | | award | | grant date | 1 | Stephen Wilson 2,257 £64,037 Alison Henriksen 2,257 £64,037 These awards are not subject to any further performance conditions and will normally vest in full on 14 September 2025 subject to continued service. 1 The closing average share price over the three days prior to the award being granted has been used to determine the maximum face value of the awards. This was 2,836p (award granted on 14 September 2022) ### 110 GENUS PLC / ANNUAL REPORT 2023 ### REMUNERATION COMMITTEE REPORT CONTINUED ### SECTION D – ANNUAL REPORT ON REMUNERATION SUMMARY OF SCHEME INTERESTS (AUDITED) As at 30 June 2023, the Executive Directors had the following beneficial interests in share awards and share options: Stephen Wilson | | | | | At | Granted | Lapsed | Exercised | | | At | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Share price | 30 June 2022 | | | in year | in year | in year | 30 June 2023 | | | | Grant date Award Vesting period | at grant | | Number | | Number | Number | Number | | Number | | | 11 September 2019 PSP 11 September 2019 to | 2,832p 41,666 – (24,417) (17,249) 0 | | | | | | | | | | 11 September 2022 11 September 2019 DSBP 11 September 2019 to 2,832p 7, 382 – – (7, 382) 0 11 September 2022 14 September 2020 PSP 14 September 2020 to 3,898p 30,877 – – 30,877 14 September 2023 14 September 2020 DSBP 14 September 2020 to 3,898p 8,079 – – 8,079 14 September 2023 15 September 2021 PSP 15 September 2021 to 5,613p 21,979 21,979 15 September 2024 15 September 2021 DSBP 15 September 2021 to 5,613p 5,925 5,925 15 September 2024 14 September 2022 PSP 14 September 2022 to 2,836p 0 43,504 – – 43,504 14 September 2025 14 September 2022 DSBP 14 September 2022 to 2,836p 0 2,257 – – 2,257 CORPORATE GOVERNANCE 14 September 2025 Total 115,908 45,761 (24,417) (24,631) 112,621 Alison Henriksen | | | | | | At | Granted | Lapsed | Exercised | | | At | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Share price | | 30 June 2022 | | | in year | in year | in year | 30 June 2023 | | | | Grant date Award Vesting period | | at grant | | Number | | Number | Number | Number | | Number | | | 7 April 2020 PSP 7 April 2020 to | | 3,120p 22,435 – (13,147) 0 9,288 | | | | | | | | | | 11 September 2022 14 September 2020 PSP 14 September 2020 to 3,898p 18,317 – – 18,317 14 September 2023 14 September 2020 DSBP 14 September 2020 to 3,898p 2,536 – – 2,536 15 September 2021 15 September 2021 PSP 15 September 2021 to 15 September 2024 5,613p 13,037 13,037 15 September 2021 DSBP 15 September 2021 to 15 September 2024 5,613p 4,091 4,091 14 September 2022 PSP 14 September 2022 to 14 September 2025 2,836p 0 29,492 29,492 14 September 2022 DSBP 14 September 2022 to 14 September 2025 2,836p 0 2,257 2,257 Total 60,416 31,749 (13,147) 0 79,018 For the share awards to Stephen Wilson and Alison Henriksen granted on 14 September 2022, the closing average share price over the three trading days prior to 14 September 2022 (the grant date for the PSP awards) of 2,836p was used to determine the number of shares comprising individual awards. The performance targets applying to the PSP awards made during the year are as described above. An earnings per share range also applied to awards made in previous years to recipients. No further performance conditions apply to DSBP awards other than continued employment with the business. ### 111 GENUS PLC / ANNUAL REPORT 2023 Jorgen Kokke | | | | | | | | At | Granted | Lapsed | Exercised | | | At | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | Share price | 30 June 2022 | | | in year | in year | in year | 30 June 2023 | | | | Grant date Award | | 1 | Vesting period | at grant | 2 | Number | | Number | Number | Number | | Number | | | 2 May 2023 Nil-Cost | | | 2 May 2023 to | 2,878p 0 59,055 – – 59,055 | | | | | | | | | | | | Options | | 23 February 2024 | | | | | | | | | | | | 2 May 2023 Nil-Cost | | | 2 May 2023 to | | | | | | | | | | | | | Options | | 2 May 2024 2,878p 0 7,649 – – 7,649 | | | | | | | | | | | | 2 May 2023 Nil-Cost | | | 2 May 2023 to | | | | | | | | | | | | | Options | | 28 February 2025 2,878p 0 44,933 – – 44,933 | | | | | | | | | | | | 2 May 2023 Nil-Cost | | | 2 May 2023 to | | | | | | | | | | | | | Options | | 2 May 2025 2,878p 0 7,649 7,649 | | | | | | | | | | | | 2 May 2023 Nil-Cost | | | 2 May 2023 to | | | | | | | | | | | | | Options | | 4 May 2026 2,878p 0 7,649 7,649 | | | | | | | | | | | Total 0 126,935 – – 126,935 1 These awards have been granted pursuant to Listing Rule 9.4.2R as nil-cost share options over ordinary shares on substantially similar terms to the Genus 2019 Performance Share Plan (‘PSP’), but without further Genus company performance conditions and have been determined to be a fair value for awards that have been forfeited at Ingredion, with vesting dates designed to mirror the operation of those awards where applicable 2 The share price was based on the average of the Genus share price for the 60 days prior to appointment, as agreed with Jorgen Kokke as part of the recruitment process. More detail on the calculation of these joining awards is provided elsewhere in this disclosure DILUTION The aggregate dilution of all relevant share incentives is 3.6% as at 30 June 2023, which is less than the permissible 10% in ten years dilution limit. 7. DETAILS OF THE EXECUTIVE DIRECTORS’ CONTRACTS AND NON-EXECUTIVE DIRECTORS’ LETTERS OF APPOINTMENT Director Appointment date Current contract date Expiry date Notice period (months) Executives Stephen Wilson 12 December 2012 13 September 2019 n/a 12 (from Company), 6 (from Executive) Jorgen Kokke 2 May 2023 2 April 2023 n/a 12 (from Company), 6 (from Executive) CORPORATE GOVERNANCE Alison Henriksen 13 January 2020 14 November 2019 n/a 12 (from Company), 6 (from Executive) Non-Executives Iain Ferguson 1 July 2020 1 July 2020 1 July 2026 6 Jason Chin 1 April 2021 1 April 2021 1 April 2024 1 Lesley Knox 1 June 2018 1 June 2021 1 June 2024 1 Lykele van der Broek 1 July 2014 4 September 2020 1 July 2024 1 Lysanne Gray 1 April 2016 1 April 2022 1 April 2025 1 Non-Executive Directors’ service contracts, which include details of remuneration, will be available for inspection at the AGM or at the Company’s registered office. 112 GENUS PLC / ANNUAL REPORT 2023 # REMUNERATION COMMITTEE REPORT CONTINUED SECTION E – WIDER WORKFORCE REMUNERATION The Committee developed the Remuneration Policy agreed by shareholders in 2022 having reviewed the wider framework for reward across the organisation and the way that this drives alignment of individuals towards organisational goals. It receives updates annually on any material changes to wider workforce arrangements and additionally considers employee feedback on reward matters. This is from Group-wide mechanisms (such as our Your Voice survey) but additionally from direct interaction between designated Non-Executive Directors and employees. Our reward principles apply to all employees within the business and are designed to ensure we can attract, motivate and retain people fundamental to achieving our vision, and be part of a global organisation. We want people within the business engaged and delivering because they are excited by our vision, the part they can play in this, and the difference they can make. These principles are applied as consistently as we can, such that reward is standardised wherever possible, and delivered in line with our values. While the quantum may vary between roles, the principle of aligning reward outcomes with performance is fundamental to the way we operate. | Reimbursement | Our approach | | --- | --- | | **Base salary** | Pay rates are determined with reference to the skill set and experience of the individual. Most pay rates are reviewed annually across the Group, with adjustments with reference to individual performance levels, market pay competitiveness and overall business affordability. | | **Benefits** | The countries we operate in display different practices in terms of benefit provision. Typical benefits include access to life insurance, pension or retirement provision and may include medical cover. Our approach is typically driven by local market factors which may include legislative requirements rather than a single common benefit offering globally. On some People Policies we have established global minimum levels of benefit provision that should apply (e.g. our Family Leave Policy) to Genus employees. | | **Variable pay** | We operate a range of annual variable reward schemes and most of our employees participate in one of these arrangements. These include: **Annual Bonus** • Based on a combination of financial performance and non-financial metrics assessed through our performance management processes (which all employees participate in). • Financial metrics based around profitability and cash performance. • Where metrics are consistent with those used for Executive Directors or G&T members, then the same target/performance scale is used for everyone to drive alignment. **Production facilities – KPI plans** • Linked to the bottomed scorecard of local KPIs for facility, covering metrics such as production output levels and health and safety. **Commissions** • Derived from individual sales performance of the individual. In addition, we make discretionary awards of shares across the business annually, reflecting the contribution of the individual and to drive future alignment with our performance. | # OUR CEO PAY RATIO FOR 2023 Our CEO pay ratio is shown below: | Year ended | CEO range figure in | 25th percentile | | Median | | 75th percentile | | Median total in CEO target remuneration | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | ITU reward | Ratio | ITU reward | Ratio | ITU reward | Ratio | | | 30 June 2023 | 1,210 | £30,345 | 4.01 | £35,924 | 3.41 | £50,199 | 2.41 | 511 | No elements of pay have been omitted from the calculation and pay quartiles determined as at 30 June 2023 and values are calculated based on those employed at this date. Where required, actual levels of remuneration were adjusted to create full-time equivalent (FTE) values by considering both the employees full-time equivalent hours and (where applicable) the proportion of the year that the individual was employed. The quartile values, split between salary and benefits are as follows: | | 25th percentile | Median | 75th percentile | | --- | --- | --- | --- | | **Salary (FTE)** | £27,379 | £31,950 | £41,208 | | **Total pay and benefits** | £30,345 | £35,924 | £50,199 | The median ratios consistent with pay and reward policies in operation within the business. Salaries are set with reference to market levels of pay, with progression linked to experience and performance in role. The structure of reward in operation means that a greater proportion of pay is linked to variable pay in more senior roles and will therefore fluctuate linked to business and individual performance outcomes against targets set, and to changes in the Genus share price. CORPORATE GOVERNANCE 113 GENUS PLC / ANNUAL REPORT 2023 # OUR CEO PAY RATIO HISTORY To provide additional context we have also shown the ratio for the previous four years. For illustration we have also shown the ratios against the target level of reward we disclosed within our Remuneration Policies as agreed by shareholders and provided commentary below. ![img-4.jpeg](img-4.jpeg) The CEO ratio (the ratio of CEO pay as shown within the single figure) to the median full-time equivalent (FTE) level of pay in the UK fell from 391 in 2022 to 341 in 2023. This can be attributed to a number of factors outlined below: # CEO PAY Reward structure – That the overall CEO package is more highly geared towards variable pay than most other employees within the UK. Business performance – Overall the single figure for the year was a reduction on 2022 levels. This is the combined impact of slightly higher Annual Bonus awards offset by a lower vesting level for the FSP award vesting for 2023 (36% of maximum) compared to 41.4% for the award that vested in 2022. # COMPARATOR PAY Median total pay and benefits – Total Median reward (calculated on the same basis as the single figure within the CEO disclosure) increased by just over 5.5% between 2022 and 2023. | Total pay and benefits Year ended | CEO single figure | | 25th percentile | | Median | | 75th percentile | | Median ratio vs target CEO single figure | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | CEO | FTE reward | Ratio | FTE reward | Ratio | FTE reward | Ratio | FTE reward | Ratio | Ratio | | 30 June 23 | £1,210k | £30,345 | 40.1 | £35,924 | 34.1 | £50,199 | 24.1 | 51.1 | | | | 30 June 22 | £1,327k | £27,774 | 48.1 | £33,999 | 39.1 | £44,818 | 30.1 | 54.1 | | | | 30 June 21 | £2,948k^{1} | £27,374 | 108.1 | £32,464 | 91.1 | £43,796 | 67.1 | 54.1 | | | | 30 June 20 | £2,257k^{1} | £25,230 | 89.1 | £31,748 | 71.1 | £42,426 | 53.1 | 56.1 | | | | 30 June 19 | £815k | £24,638 | 33.1 | £31,867 | 26.1 | £41,792 | 20.1 | 57.1 | | | | 30 June 18 | £2,549k | £24,204 | 105.1 | £30,759 | 83.1 | £40,203 | 63.1 | 59.1 | | | 1 The CEO single figure has been switched to reflect the actual value of FSP awards of the point they vested (see page 91 for further detail). 2 This value reflects the change in CEO during the year and includes salary and benefits for Kerm Bitar through to its designation and all applicable reward elements for Stephen Brown from the date of its appointment as CEO (3 September 2019) to 30 June 2020. # METHOD OF CALCULATION AND RATIONALE We have elected to use calculation Method A as outlined within the legislation. We have done this to get as accurate a picture as possible for the reward of all our UK employees compared to the CEO. This contrasts with our disclosure on gender pay which focuses on our largest UK subsidiary (Genus Breeding Limited) only as required by the respective legislation. Approved by the Board and signed on its behalf by: Lesley Knox Chair of the Remuneration Committee 6 September 2023 CORPORATE GOVERNANCE ![img-5.jpeg](img-5.jpeg) ### 114 GENUS PLC / ANNUAL REPORT 2023 ### DIRECTORS’ REPORT | INFORMATION INCORPORATED | EQUAL OPPORTUNITIES/EMPLOYEES | | --- | --- | | BY REFERENCE | WITH DISABILITIES | | The following information required to be | Genus values diversity and aims to | | included in an Annual Financial Report | make best use of everyone’s skills and | | in accordance with the UK Financial | abilities. We are therefore committed | | Conduct Authority’s Listing Rule 9.8.4R | to equal opportunities at every | | and in a Directors’ Report is provided | stage of our employees’ careers. Our | | elsewhere in the Annual Report and is | policy on employees with disabilities | | incorporated into the Directors’ Report | is to fully and fairly consider people | | by cross reference as appropriate. | with disabilities for all vacancies. | | Content Location | We interview and recruit people with | disabilities and endeavour to retain DAN HARTLEY Business Model Pages 2 to 11 employees if they become disabled while Group General Counsel and Key Performance Indicators Pages they work for us. Where possible, we will Company Secretary 22 to 23 retrain employees who become disabled and adjust their working environment, Directors Pages so they can maximise their potential. 68 to 69 Dividends Page 33 POLITICAL CONTRIBUTIONS Principal risks Pages The Group does not make political 62 to 64 contributions. Financial results Pages 30 to 33 SHARE CAPITAL Audit and Risk Committee Pages Note 31 gives details of the Company’s CORPORATE GOVERNANCE 83 to 88 issued share capital and any movements in the issued share capital during the year. Greenhouse gas emissions Pages and energy consumption 36 to 57 The Directors may only issue shares to the extent authorised by the shareholders in Research and Pages general meeting. The current power to development activities 28 to 29 allot shares was granted by shareholder Financial risk management Pages resolution at the 2022 AGM and a new 30 to 33 authority is being sought at the 2023 AGM, within the limits set out in the notice of Future developments in the Pages meeting, that is up to a nominal value of business 24 to 29 £4,401,814 (representing two-thirds of the Going concern and Company’s current issued share capital). viability statement Page 65 The Company has one class of ordinary Directors’ interests Pages share, with the rights set out in the 108 to 111 Articles of Association. All issued shares are fully paid and each share has the Engagement with right to one vote at the Company’s employees, customers, Pages general meetings. There are no specific suppliers and others 58 to 59 restrictions either on the size of a holding Long-term incentive or on the transfer of shares, which schemes Note 30 are both governed by our Articles of Association and prevailing legislation. No person has any special rights of control over the Company’s share capital. Details of the Company’s employee share schemes are set out in note 30. In connection with these schemes, the Genus plc Employee Benefit Trust holds shares in the Company from time to time and abstains from voting in respect of any such shares. For additional information on capital risk management including financial instruments, see note 26. ### 115 GENUS PLC / ANNUAL REPORT 2023 | AUTHORITY TO ACQUIRE THE COMPANY’S | PROVISION OF INFORMATION TO THE | | --- | --- | | OWN SHARES | COMPANY’S AUDITOR | | The Directors may only buy back | Each of the Directors at the date of | | shares to the extent authorised by the | approval of this Annual Report | | shareholders in general meeting. The | confirms that: | | current power to buy back shares was | • so far as the Director is aware, there is | | granted by shareholder resolution at the | no relevant audit information of which | | 2022 AGM and a new authority is being | the Company’s auditor is unaware; and | | sought at the 2023 AGM within the limits | • the Director has taken all the steps that | | set out in the notice of meeting, that | he or she ought to have taken as a | | is up to a nominal value of £660,272.10 | Director in order to make himself or | | (representing 10% of the Company’s | herself aware of any relevant audit | | current issued share capital). | information and to establish that the | Company’s auditor is aware of that The Company did not buy back any information. shares under the authority granted at the 2022 AGM, from the date of that This confirmation is given and should AGM up to the date of this report. be interpreted in accordance with the provisions of section 418 Companies Act 2006. SUBSTANTIAL SHAREHOLDINGS As at 1 September 2023, we were aware of APPOINTMENT OF AUDITOR the following material interests in the Company’s ordinary shares: Deloitte LLP has expressed its willingness to continue in office as auditor and Fund Manager Shareholding % a resolution to reappoint it will be proposed at the forthcoming AGM. Baillie Gifford & Co 5,682,186 8.61 DIRECTORS’ INDEMNITIES Abrdn 4,178,431 6.33 The Company has made qualifying Wellington third-party indemnity provisions for Management 4,103,996 6.22 the benefit of its Directors which were Capital Group 3,285,610 4.98 made during the year and remain in force at the date of this report. BlackRock 3,623,952 5.49 Columbia CONFLICTS OF INTEREST CORPORATE GOVERNANCE Threadneedle The Company has procedures for Investment 3,230,061 4.89 managing conflicts of interest. If a Director Vanguard Group 3,040,575 4.60 becomes aware that they or any of their connected parties have an interest in Devon Equity an existing or proposed transaction with Management 2,785,248 4.22 Genus, they should notify the Chairman and the Company Secretary in writing | There have been no material changes | or at the next Board meeting. Controls | | --- | --- | | in shareholding since 30 June 2023. No | are in place to ensure that any related- | | other person has notified an interest in | party transactions involving Directors, or | | the Company’s ordinary shares, which | their connected parties, are conducted | | is required to be disclosed to us. | on an arm’s length basis. Directors have | an ongoing duty to update the Board on any changes to these conflicts. Approved by the Board and signed on its behalf by: Dan Hartley Group General Counsel and Company Secretary 6 September 2023 ### 116 GENUS PLC / ANNUAL REPORT 2023 ### DIRECTORS’ RESPONSIBILITIES The Directors are responsible for preparing The Directors are responsible for keeping the Annual Report and the Financial adequate accounting records that Statements in accordance with applicable are sufficient to show and explain the law and regulations. Company’s transactions and disclose with reasonable accuracy at any time | Company law requires the Directors to | the financial position of the Company | | --- | --- | | prepare financial statements for each | and enable them to ensure that the | | financial year. Under that law the Directors | Financial Statements comply with the | | are required to prepare the Group | Companies Act 2006. They are also | | Financial Statements in accordance with | responsible for safeguarding the assets | | the international accounting standards | of the Company and hence for taking | | in conformity with the requirements | reasonable steps for the prevention and | | of the Companies Act 2006. | detection of fraud and other irregularities. | | The Directors have chosen to prepare the | The Directors are responsible for the | | Parent Company Financial Statements | maintenance and integrity of the | | in accordance with Financial Reporting | corporate and financial information | | Standard 101 ‘Reduced Disclosure | included on the Company’s website. | | Framework’. Under company law, the | Legislation in the UK governing the | | Directors must not approve the financial | preparation and dissemination of | | statements unless they are satisfied that | Financial Statements may differ from | | they give a true and fair view of the state | legislation in other jurisdictions. | of affairs of the Company and of the profit or loss of the Company for that period. DIRECTORS’ RESPONSIBILITY STATEMENT In preparing the Parent Company We confirm that to the best of our Financial Statements, the Directors knowledge: CORPORATE GOVERNANCE | are required to: | • the Financial Statements, prepared in | | --- | --- | | • select suitable accounting policies | accordance with the relevant financial | | and then apply them consistently; | reporting framework, give a true | | • make judgements and accounting | and fair view of the assets, liabilities, | | estimates that are reasonable | financial position and profit or loss of | | and prudent; | the Company and the undertakings | | • state whether Financial Reporting | included in the consolidation taken | | Standard 101 ‘Reduced Disclosure | as a whole; | | Framework’ has been followed, subject | • the Strategic Report includes a fair | | to any material departures disclosed | review of the development and | | and explained in the Financial | performance of the business and | | Statements; and | the position of the Company and | | • prepare the Financial Statements on | the undertakings included in the | | the going concern basis, unless it is | consolidation taken as a whole, | | inappropriate to presume that the | together with a description of the | | Company will continue in business. | principal risks and uncertainties that | they face; and | In preparing the Group Financial | • the Annual Report and Financial | | --- | --- | | Statements, International Reporting | Statements, taken as a whole, are fair, | | Standard 1 requires that Directors: | balanced and understandable, and | | • properly select and apply | provide the information necessary for | | accounting policies; | shareholders to assess the Company’s | | • present information, including | position, performance, business model | | accounting policies, in a manner that | and strategy. | provides relevant, reliable, comparable and understandable information; Approved by the Board and signed on its • provide additional disclosures when behalf by: compliance with the specific requirements in IFRSs are insufficient to enable users to understand the impact | of particular transactions, other events | Jorgen Kokke | | --- | --- | | and conditions on the entity’s financial | Chief Executive | | position and financial performance; and | 6 September 2023 | • make an assessment of the Company’s ability to continue as a going concern. Alison Henriksen Chief Financial Officer 6 September 2023 ### 117 GENUS PLC / ANNUAL REPORT 2023 ### INDEPENDENT AUDITOR’S REPORT ### TO THE MEMBERS OF GENUS PLC REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS 1. Opinion In our opinion: • the financial statements of Genus plc (the ‘Parent Company’) and its subsidiaries (the ‘Group’) give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 30 June 2023 and of the Group’s profit for the year then ended; • the Group financial statements have been properly prepared in accordance with United Kingdom adopted International Accounting Standards and International Financial Reporting Standards (IFRSs) as issued by the International Accounting Standards Board (IASB); • the Parent Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice, including Financial Reporting Standard 101 ‘Reduced Disclosure Framework’; and • the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. We have audited the financial statements which comprise: • the Group Income Statement; • the Group Statement of Comprehensive Income; • the Group and Parent Company Statements of Changes in Equity; • the Group and Parent Company Balance Sheets; • the Group Statement of Cash Flows; and • the related notes 1 to 40 and C1 to C19. The financial reporting framework that has been applied in the preparation of the group financial statements is applicable law, United Kingdom adopted International Accounting Standards and IFRSs as issued by the IASB. The financial reporting framework that has been applied in the preparation of the Parent Company financial statements is applicable law and United Kingdom Accounting Standards, including FRS 101 ‘Reduced Disclosure Framework’ (United Kingdom Generally Accepted Accounting Practice). 2. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the Group and the Parent Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the Financial Reporting Council’s (the ‘FRC’s’) Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. The non-audit services provided to the Group and Parent Company for the year are disclosed in note 8 to the financial statements. We confirm that we have not provided any non-audit services prohibited by the FRC’s Ethical Standard to the Group or the Parent Company. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. FINANCIAL STATEMENTS 3. Summary of our audit approach Key audit matters The key audit matter that we identified in the current year was the valuation of Biological Assets under IAS 41 ‘Agriculture’. Within this report, key audit matters are identified as follows: Newly identified Increased level of risk Similar level of risk Decreased level of risk Materiality The materiality that we used for the Group financial statements was £3.2m and was determined on the basis of 5% of forecast profit before tax excluding the impact of certain exceptional items and the net IAS 41 valuation movement on biological assets. Our determined materiality equates to 5.4% of this measure at year end. Scoping Our audit scope covered 13 components. Of these, 8 were subject to a full scope audit, and 5 were subject to specified procedures. Our testing achieved coverage of 76% of Group revenue, 87% of Group net assets and 86% of Group profit before tax, excluding the impact of exceptional items and the net IAS 41 valuation movement on biological assets. Significant changes in The key audit matter identified is consistent with the prior year. No significant changes are noted our approach in the scope of our group audit with reference to number of components identified and audit procedures performed. ### 118 GENUS PLC / ANNUAL REPORT 2023 ### INDEPENDENT AUDITOR’S REPORT CONTINUED ### TO THE MEMBERS OF GENUS PLC 4. Conclusions relating to going concern In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the directors’ assessment of the Group’s and Parent Company’s ability to continue to adopt the going concern basis of accounting included: • Obtaining an understanding the Group’s process for assessing the going concern assumption including the relevant management review controls underpinning this assessment; • Gaining an understanding as to the relevant assumptions used in the going concern models, including the Strategic Plan, and challenging these assumptions through comparison with our own understanding of the business, external information, and evidence gathered over the course of our audit, including: – Reading analyst reports, industry data and other external information and inspecting them for both corroborative and contradictory evidence in relation to these assumptions; – Challenging forecasted profit by comparison to recent historical financial information; – Challenging the key underlying data used in forecast scenarios by assessing it for consistency with our understanding of the business model and risks; and – Evaluating the accuracy of current and forecast covenant calculations and performing additional analysis to determine the level of sensitivity in forecast headroom in relation to cash and covenants. • Assessing the mechanical accuracy of the Group’s models; • Reviewing the terms of the Group’s financing arrangements as at the balance sheet date, comprising a £190m multi-currency RCF, a US$150m RCF and a US$20m bond and guarantee facility; reperforming debt covenant computations over the going concern period; and evaluating the associated disclosures; and • Evaluating the Group’s disclosures against the requirements of IAS 1 ‘Presentation of Financial Statements’. Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Group’s and Parent Company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue. FINANCIAL STATEMENTS In relation to the reporting on how the group has applied the UK Corporate Governance Code, we have nothing material to add or draw attention to in relation to the directors’ statement in the financial statements about whether the directors considered it appropriate to adopt the going concern basis of accounting. Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report. 5. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Valuation of Biological Assets under IAS 41 ‘Agriculture’ Key audit matter The Group carries biological assets at fair value in line with the requirements of IAS 41 ‘Agriculture’. Discounted description cash flow analyses are performed in determining the valuation. As at 30 June 2023, the Group held total biological assets (excluding those recognised in inventory) of £342.0m (2022: £366.8m). Certain of the assumptions included within the valuation models are subject to estimation uncertainty, and accordingly, require the exercise of a significant degree of judgement. In planning our audit, we identified the following assumptions as being the most significant in the determination of the valuation of each species: Bovine: the growth rates over the strategic outlook period of proven and genomic semen sales, and the discount rate applied to the forecast cash flows in respect of the Bovine herd. Porcine: the discount rates applied to the forecast cash flows in respect of the Pureline herd. Details of the key sources of estimation uncertainty identified, the Group’s accounting policy, and the biological assets held are disclosed in notes 4 and 16 to the financial statements. The Audit & Risk Committee set out within their areas of focus on page 85 how they have considered the Group’s judgements. 119 GENUS PLC / ANNUAL REPORT 2023 | **How the scope of our audit responded to the key audit matter** | In responding to the identified key audit matter, we completed the following audit procedures: - Obtained an understanding of controls relevant to the review and approval of the valuation of biological assets; - Assessed the appropriateness of the logic and mechanical accuracy of the valuation models prepared and the methodology applied by the Group for compliance with the requirements of IAS 41 'Agriculture'; - Made enquiries of management to understand the rationale applied in the determination of key assumptions and any changes year on year; - Challenged the appropriateness of key assumptions applied within the underlying forecasts, with consideration given to historical forecasting accuracy and third-party benchmarking data, historical transactional data or other comparable sources, and performed a retrospective review of key assumptions applied; - Involved our valuation specialists in our consideration as to the appropriateness of the discount rates applied by the directors in determining the fair value of biological assets; - Performed independent 'stand-back' analysis to assess whether the valuation determined by the directors was consistent with expectation and that any variations on prior year were supportable; and - Assessed the completeness and accuracy of disclosures made within the financial statements in accordance with IAS 41 'Agriculture', and IAS 1 'Presentation of Financial Statements'. | | --- | --- | **Key observations** We are satisfied that the valuation of biological assets and the related disclosures are appropriate. ## 6. Our application of materiality ### 6.1. Materiality We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work and in evaluating the results of our work. Based on our professional judgement, we determined materiality for the financial statements as a whole as follows: | | Group financial statements | Parent company financial statements | | --- | --- | --- | | **Materiality** | £3.2m (2022: £3.1m) | £2.6m (2022: £2.6m) | | **Basis for determining materiality** | We determined materiality on the basis of 5% (2022: 5%) of forecast profit before tax excluding exceptional items (as defined in note 7) and changes in net IAS 41 valuation movement on biological assets. Our determined materiality equates to 5.4% (2022: 5.6%) of this measure at year end. | 1% (2022: 1%) of Net Assets | | **Rationale for the benchmark applied** | We determined adjusted profit before tax as an appropriate benchmark for determining materiality so as to avoid distortion that could otherwise arise from non-recurring or highly volatile items including the IAS 41 fair value movements. | Net Assets were selected as an appropriate benchmark for determining materiality, as the Parent Company acts primarily as a holding company. | ### 6.2. Performance materiality We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and undetected misstatements exceed the materiality for the financial statements as a whole. | | Group financial statements | Parent company financial statements | | --- | --- | --- | | **Performance materiality** | 70% (2022: 70%) of Group materiality | 70% (2022: 70%) of Parent Company materiality | | **Basis and rationale for determining performance materiality** | In determining performance materiality, we considered the following factors: - Our cumulative knowledge of the Group and its control environment; - The low turnover in key management personnel; - The high degree of centralisation in the Group's financial reporting controls and processes; and - The low number of corrected and uncorrected misstatements identified in prior periods. | | FINANCIAL STATEMENTS ### 120 GENUS PLC / ANNUAL REPORT 2023 ### INDEPENDENT AUDITOR’S REPORT CONTINUED ### TO THE MEMBERS OF GENUS PLC 6.3. Error reporting threshold We agreed with the Audit & Risk Committee that we would report to the Committee all audit differences in excess of £160k (2022: £155k), as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit & Risk Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements. 7. An overview of the scope of our audit 7.1. Identification and scoping of components Our audit was scoped by obtaining an understanding of the Group and its environment, including Group-wide controls, and assessing the risks of material misstatement at the Group level. The Group operates globally with PIC and ABS segments operating under different reporting lines in each country, and aggregated into regions. We determined that each segment within a country represents a component to our audit; for example ABS in the United Kingdom is an audit component. Components were selected to provide an appropriate basis for undertaking audit work to address the risks of material misstatement identified. Based on that assessment, we identified 13 components of interest for the purposes of the group audit (2022: 13). Of these components, 8 were designated as subject to full scope audit procedures (2022: 8), with the remaining 5 subject to specified procedures (2022: 5). Excluding the Parent Company, our component audits were performed using materiality between £1.1m and £1.3m (2022: £1.1m and £1.4m). These components represent the principal business units and account for 76% of the Group’s revenue (2022: 73%), 87% of the Group’s net assets (2022: 84%) and 86% of the Group’s profit before tax, excluding the impact of exceptional items and the net IAS 41 valuation movement on biological assets (2022: 84%). At the Group level, we evaluated the consolidation process and carried out analytical procedures to confirm our conclusion that there were no significant risks of material misstatement within the aggregated financial information of the remaining components not subject to full scope audit or specified procedures. FINANCIAL STATEMENTS 3 3 3 2 2 2 1 1 1 | 1 Full audit scope 75% | 1 Full audit scope 77% | | --- | --- | | 2 Specified audit procedures 11% | 2 Specified audit procedures 10% | | 3 Review at Group level 14% | 3 Review at Group level 13% | 7.2. Our consideration of the control environment The Group is currently undergoing continued significant investment in its IT and core business processes, with the ongoing roll out of its global standardisation template, utilising Microsoft D365 technology. That investment, together with the comparative diverse infrastructure that remains across certain components of the Group, led us to an audit strategy that is principally driven by substantive audit procedures. With the involvement of our IT specialists, we have expanded the scope of our IT procedures in the current year. Specifically, we obtained an understanding of, and tested general IT controls operating within the Microsoft Dynamics 365 platform. For all components we obtained an understanding of the relevant controls associated with the financial reporting process, areas of significant risk, and in relation to significant accounting estimates. 7.3. Our consideration of climate-related risks In planning our audit, we have considered the potential impact of climate change on the Group’s business and its financial statements. As discussed on page 46, the Group has assessed the risks and opportunities associated with various future climate-related scenarios REVENUE PROFIT BEFORE TAX NET ASSETS and its own commitment to transition to an operating model that has a reduced level of GHG emissions. As a part of our audit procedures, we have obtained management’s climate-related risk assessment and held discussions with those charged with governance to understand the process of identifying climate-related risks, the determination of mitigating actions and the impact on the Group’s financial statements. We have considered the Group’s assessment of the impact of these risks and opportunities on the financial statements and their conclusion that there is no material impact on the Group’s carrying value of assets and liabilities at the balance sheet date. We have also evaluated the appropriateness of disclosures included in the financial statements in notes 1 to 40, and have read the climate related disclosure in the Sustainability report to consider whether they are materially consistent with the financial statements and our knowledge obtained in the audit. 1 Full audit scope 65% 2 Specified audit procedures 11% 3 Review at Group level 24% ### 121 GENUS PLC / ANNUAL REPORT 2023 7.4. Working with other auditors Where appropriate, the group audit team engaged component audit teams to perform the audit procedures as set out in section 7.1. We engaged component audit teams in the UK, US, China, Brazil and Mexico; the group audit team performed specified audit procedures directly on components in Chile, Canada, and Spain. The group audit team held regular communication with the component auditors in planning for, and throughout, the year-end audit process. Oversight of the component auditors included attending internal planning and status meetings, attending close meetings held with local management, and reviewing relevant audit documentation. We visited the UK components, (ABS & PIC), held in-person discussions and reviewed on site. For the rest of the components, our oversight was remote and we enhanced this oversight through a number of measures (as appropriate to each component), including accessing and directly reviewing their audit files, more frequent dialogue and use of video conferencing and screen-sharing facilities. 8. Other information The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. 9. Responsibilities of directors As explained more fully in the directors’ responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so. FINANCIAL STATEMENTS 10. Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.org.uk/ auditorsresponsibilities. This description forms part of our auditor’s report. 11. Extent to which the audit was considered capable of detecting irregularities, including fraud Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below. 11.1. Identifying and assessing potential risks related to irregularities In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, we considered the following: • the nature of the industry and sector, control environment and business performance including the design of the Group’s remuneration policies, key drivers for directors’ remuneration, bonus levels and performance targets; • the Group’s own assessment of the risks that irregularities may occur either as a result of fraud or error as approved by the board; • results of our enquiries of management, internal audit, and the Audit & Risk Committee about their own identification and assessment of the risks of irregularities, including those that are specific to the Group’s sector; • any matters we identified having obtained and reviewed the Group’s documentation of their policies and procedures relating to: – identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of non-compliance, including in relation to Russian Sanctions (described in the Audit & Risk Committee report on page 85 and in note 4 to the financial statements); – detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged fraud; – the internal controls established to mitigate risks of fraud or non-compliance with laws and regulations; • the matters discussed among the audit engagement team including significant component audit teams and relevant internal specialists, including valuation and IT specialists, regarding how and where fraud might occur in the financial statements and any potential indicators of fraud. ### 122 GENUS PLC / ANNUAL REPORT 2023 ### INDEPENDENT AUDITOR’S REPORT CONTINUED ### TO THE MEMBERS OF GENUS PLC As a result of these procedures, we considered the opportunities and incentives that may exist within the organisation for fraud and identified the greatest potential for fraud in the area of unusual adjustments to revenue. In common with all audits under ISAs (UK), we are also required to perform specific procedures to respond to the risk of management override. We also obtained an understanding of the legal and regulatory frameworks that the Group operates in, focusing on provisions of those laws and regulations that had a direct effect on the determination of material amounts and disclosures in the financial statements. The key laws and regulations we considered in this context included the UK Companies Act, Listing Rules, pensions legislation, and global tax legislation. In addition, we considered provisions of other laws and regulations that do not have a direct effect on the financial statements but compliance with which may be fundamental to the Group’s ability to operate or to avoid a material penalty. These included the Group’s compliance with health and safety regulations, environmental regulations, and the Russian Sanctions. 11.2. Audit response to risks identified As a result of performing the above, we did not identify any key audit matters related to the potential risk of fraud or non-compliance with laws and regulations. Our procedures to respond to risks identified included the following: • reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with provisions of relevant laws and regulations described as having a direct effect on the financial statements; • enquiring of management, the Audit & Risk Committee and in-house and external legal counsel concerning actual and potential litigation and claims; • performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due to fraud; • reading minutes of meetings of those charged with governance, reviewing internal audit reports; • in addressing the risk of non-compliance with the Russian Sanctions, enquiring of internal legal counsel and evaluating correspondence with external legal counsel; • in addressing the risk of fraud through unusual adjustments to revenue, leveraging bespoke analytics to identify revenue entries with FINANCIAL STATEMENTS characteristics that appeared unusual, and testing the appropriateness of these entries by tracing to supporting documentation and evaluating the business rationale; and • in addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries and other adjustments; assessing whether the judgements made in making accounting estimates are indicative of a potential bias; and evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business. We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members including internal specialists and significant component audit teams, and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit. REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS 12. Opinions on other matters prescribed by the Companies Act 2006 In our opinion the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006. In our opinion, based on the work undertaken in the course of the audit: • the information given in the strategic report and the directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and • the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements. In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified any material misstatements in the strategic report or the directors’ report. 13. Corporate Governance Statement The Listing Rules require us to review the directors’ statement in relation to going concern, longer-term viability and that part of the Corporate Governance Statement relating to the Group’s compliance with the provisions of the UK Corporate Governance Code specified for our review. Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance Statement is materially consistent with the financial statements and our knowledge obtained during the audit: • the directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any material uncertainties identified set out on page 65; • the directors’ explanation as to its assessment of the group’s prospects, the period this assessment covers and why the period is appropriate set out on page 65; • the directors’ statement on fair, balanced and understandable set out on page 116; • the board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on pages 61; • the section of the annual report that describes the review of effectiveness of risk management and internal control systems set out on page 87; and • the section describing the work of the Audit & Risk Committee set out on pages 83-88. 123 GENUS PLC / ANNUAL REPORT 2023 # 14. Matters on which we are required to report by exception # 14.1. Adequacy of explanations received and accounting records Under the Companies Act 2006 we are required to report to you if, in our opinion: - we have not received all the information and explanations we require for our audit; or - adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from branches not visited by us; or - the parent company financial statements are not in agreement with the accounting records and returns. We have nothing to report in respect of these matters. # 14.2. Directors' remuneration Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of directors' remuneration have not been made or the part of the Directors' Remuneration Report to be audited is not in agreement with the accounting records and returns. We have nothing to report in respect of these matters. # 15. Other matters which we are required to address # 15.1. Auditor tenure Following the recommendation of the Audit & Risk Committee, we were appointed by the Board of Directors on 8 June 2006 to audit the financial statements for the year ending 30 June 2006 and subsequent financial periods. The period of total uninterrupted engagement including previous renewals and reappointments of the firm is 18 years, covering the years ending 30 June 2006 to 30 June 2023. # 15.2. Consistency of the audit report with the additional report to the Audit & Risk Committee Our audit opinion is consistent with the additional report to the Audit & Risk Committee we are required to provide in accordance with ISAs (UK). # 16. Use of our report This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed. As required by the Financial Conduct Authority (FCA) Disclosure Guidance and Transparency Rule IDTR 4.114R, these financial statements form part of the European Single Electronic Format ("ESEF") prepared Annual Financial Report filed on the National Storage Mechanism of the UK FCA in accordance with the ESEF Regulatory Technical Standard ("ESEF RTS"). This auditor's report provides no assurance over whether the annual financial report has been prepared using the single electronic format specified in the ESEF RTS. # Mark Tolley FCA (Senior statutory auditor) For and on behalf of Deloitte LLP Statutory Auditor Reading, United Kingdom 6 September 2023 FINANCIAL STATEMENTS 124 GENUS PLC / ANNUAL REPORT 2023 # GROUP INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2023 | | Note | 2023 £m | 2022 £m | | --- | --- | --- | --- | | REVENUE | 5, 6 | 689.7 | 593.4 | | Adjusted operating profit | 5 | 74.6 | 68.8 | | Adjusting items: | | | | | – Net IAS 41 valuation movement on biological assets | 16 | (16.9) | (5.4) | | – Amortisation of acquired intangible assets | 15 | (7.7) | (8.3) | | – Share-based payment expense | 30 | (6.0) | (3.7) | | | | (30.6) | (17.4) | | Exceptional items (net) | 7 | (3.5) | (2.0) | | Total adjusting items | | (34.1) | (19.4) | | OPERATING PROFIT | 8 | 40.5 | 49.4 | | Share of post-tax profit of joint ventures and associates retained | 18 | 10.5 | 5.2 | | Other gains and losses | 26 | 2.7 | – | | Finance costs | 10 | (15.4) | (6.6) | | Finance income | 10 | 1.1 | 0.4 | | PROFIT BEFORE TAX | | 39.4 | 48.4 | | Taxation | 11 | (7.6) | (11.7) | | PROFIT FOR THE YEAR | | 31.8 | 36.7 | | ATTRIBUTABLE TO: | | | | | Owners of the Company | | 33.3 | 40.9 | | Non-controlling interest | | (1.5) | (4.2) | | | | 31.8 | 36.7 | | EARNINGS PER SHARE | | | | | Basic earnings per share | 12 | 50.8p | 62.5p | | Diluted earnings per share | 12 | 50.5p | 62.2p | | | | | | | | Note | 2023 £m | 2022 £m | | Alternative Performance Measures | | | | | Adjusted operating profit | | 74.6 | 68.8 | | Adjusted operating loss/(profit) attributable to non-controlling interest | | 0.4 | (0.3) | | Pre-tax share of profits from joint ventures and associates excluding net IAS 41 valuation movement | | 10.8 | 9.2 | | Gene editing costs | | 14.3 | 7.9 | | Adjusted operating profit including joint ventures and associates, excluding gene editing costs | | 100.1 | 85.6 | | Gene editing costs | | (14.3) | (7.9) | | Adjusted operating profit including joint ventures and associates | | 85.8 | 77.7 | | Net finance costs | 10 | (14.3) | (6.2) | | Adjusted profit before tax | | 71.5 | 71.5 | | Adjusted earnings per share | | | | | Basic adjusted earnings per share | 12 | 84.8p | 82.7p | | Diluted adjusted earnings per share | 12 | 84.2p | 82.3p | Adjusted results are the Alternative Performance Measures (APMs) used by the Board to monitor underlying performance at a Group and operating segment level, which are applied consistently throughout. These APMs should be considered in addition to statutory measures, and not as a substitute for or as superior to them. For more information on APMs, see APM Glossary. FINANCIAL STATEMENTS 125 GENUS PLC / ANNUAL REPORT 2023 # GROUP STATEMENT OF COMPREHENSIVE INCOME # FOR THE YEAR ENDED 30 JUNE 2023 | | 2022 £m | 2023 £m | 2022 £m | 2023 £m | | --- | --- | --- | --- | --- | | PROFIT FOR THE YEAR | | 31.8 | | 36.7 | | Items that may be reclassified subsequently to profit or loss | | | | | | Foreign exchange translation differences | | (27.2) | 66.6 | | | Fair value movement on net investment hedges | 26 | — | (0.7) | | | Fair value movement on cash flow hedges | | 0.8 | 19 | | | Tax relating to components of other comprehensive expense/(income) | 11 | 3.1 | (8.2) | | | | | (23.3) | | 59.6 | | Items that may not be reclassified subsequently to profit or loss | | | | | | Actuarial (loss) gains on retirement benefit obligations | 29 | (40.4) | 27.3 | | | Movement on pension asset recognition restriction | 29 | 38.3 | (69.8) | | | Release of additional pension liability | 29 | 3.0 | 43.7 | | | Gain/(loss) on equity instruments measured at fair value | | 1.7 | (6.1) | | | Tax relating to components of other comprehensive expense/(income) | 11 | (1.2) | 11 | | | | | 1.4 | | (3.8) | | OTHER COMPREHENSIVE (EXPENSE)/INCOME FOR THE YEAR | | (21.9) | | 55.8 | | TOTAL COMPREHENSIVE INCOME FOR THE YEAR | | 9.9 | | 92.5 | | ATTRIBUTABLE TO: | | | | | | Owners of the Company | | 11.1 | 97.3 | | | Non-controlling interest | | (1.2) | (4.8) | | | | | 9.9 | | 92.5 | FINANCIAL STATEMENTS 126 GENUS PLC / ANNUAL REPORT 2023 # GROUP STATEMENT OF CHANGES IN EQUITY # FOR THE YEAR ENDED 30 JUNE 2023 | | Actual | Called up share capital £m | Share premium account £m | Own shares £m | Trans- lation reserve £m | Hedging reserve £m | Retained earnings £m | Total £m | Non- controlling interest £m | Total equity £m | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | BALANCE AT 30 June 2021 | | 6.6 | 179.1 | (0.1) | (7.9) | - | 320.4 | 498.1 | (1.5) | 496.6 | | Foreign exchange translation differences, net of tax | | - | - | - | 59.4 | - | - | 59.4 | (0.6) | 58.8 | | Fair value movement on net investment hedges, net of tax | | - | - | - | (0.6) | - | - | (0.6) | - | (0.6) | | Fair value movement on cash flow hedges, net of tax | | - | - | - | - | 1.4 | - | 1.4 | - | 1.4 | | Loss on equity instruments measured at fair value, net of tax | | - | - | - | - | - | (4.6) | (4.6) | - | (4.6) | | Actuarial gains on retirement benefit obligations, net of tax | | - | - | - | - | - | 19.5 | 19.5 | - | 19.5 | | Movement on pension asset recognition restriction, net of tax | | - | - | - | - | - | (49.7) | (49.7) | - | (49.7) | | Recognition of additional pension liability, net of tax | | - | - | - | - | - | 31.0 | 31.0 | - | 31.0 | | Other comprehensive income (expense) for the year | | - | - | - | 58.8 | 1.4 | (3.8) | 56.4 | (0.6) | 55.8 | | Profit (loss) for the year | | - | - | - | - | - | 40.9 | 40.9 | (4.2) | 36.7 | | Total comprehensive income (expense) for the year | | - | - | - | 58.8 | 1.4 | 37.1 | 97.3 | (4.8) | 92.5 | | Recognition of share-based payments, net of tax | | - | - | - | - | - | 4.0 | 4.0 | - | 4.0 | | Dividends | 13 | - | - | - | - | - | (20.9) | (20.9) | - | (20.9) | | Adjustment arising from change in non- controlling interest and written put option | | - | - | - | - | - | - | - | (0.1) | (0.1) | | BALANCE AT 30 June 2022 | | 6.6 | 179.1 | (0.1) | 50.9 | 1.4 | 340.6 | 578.5 | (6.4) | 572.1 | | Foreign exchange translation differences, net of tax | | - | - | - | (24.2) | - | - | (24.2) | 0.3 | (23.9) | | Fair value movement on net investment hedges, net of tax | | - | - | - | - | - | - | - | - | - | | Fair value movement on cash flow hedges, net of tax | | - | - | - | - | 0.6 | - | 0.6 | - | 0.6 | | Gain on equity instruments measured at fair value, net of tax | | - | - | - | - | - | 0.7 | 0.7 | - | 0.7 | | Actuarial loss on retirement benefit obligations, net of tax | | - | - | - | - | - | (30.3) | (30.3) | - | (30.3) | | Movement on pension asset recognition restriction, net of tax | | - | - | - | - | - | 28.7 | 28.7 | - | 28.7 | | Recognition of additional pension liability, net of tax | | - | - | - | - | - | 2.3 | 2.3 | - | 2.3 | | Other comprehensive (expense) income for the year | | - | - | - | (24.2) | 0.6 | 1.4 | (22.2) | 0.3 | (21.9) | | Profit (loss) for the year | | - | - | - | - | - | 33.3 | 33.3 | (1.5) | 31.8 | | Total comprehensive income (expense) for the year | | - | - | - | (24.2) | 0.6 | 34.7 | 11.1 | (1.2) | 9.9 | | Recognition of share-based payments, net of tax | | - | - | - | - | - | 6.3 | 6.3 | - | 6.3 | | Dividends | 13 | - | - | - | - | - | (21.0) | (21.0) | - | (21.0) | | Adjustment arising from change in non- controlling interest and written put option | | - | - | - | - | - | - | - | (0.1) | (0.1) | | BALANCE AT 30 June 2023 | | 6.6 | 179.1 | (0.1) | 26.7 | 2.0 | 360.6 | 574.9 | (7.7) | 567.2 | FINANCIAL STATEMENTS 127 GENUS PLC / ANNUAL REPORT 2023 # GROUP BALANCE SHEET AS AT 30 JUNE 2023 | | Note | 2022 £m | 2021 £m | | --- | --- | --- | --- | | **ASSETS** | | | | | Goodwill | 14 | 107.8 | 111.0 | | Other intangible assets | 15 | 66.2 | 72.0 | | Biological assets | 16 | 318.2 | 333.7 | | Property, plant and equipment | 17 | 164.4 | 171.4 | | Interests in joint ventures and associates | 18 | 53.5 | 41.2 | | Other investments | 19 | 8.8 | 10.2 | | Derivative financial assets | 26 | 4.9 | 2.2 | | Other receivables | 21 | 8.2 | 8.6 | | Deferred tax assets | 11 | 16.5 | 10.1 | | **TOTAL NON-CURRENT ASSETS** | | 748.5 | 760.4 | | Inventories | 20 | 61.3 | 50.9 | | Biological assets | 16 | 23.8 | 33.1 | | Trade and other receivables | 21 | 132.1 | 129.5 | | Cash and cash equivalents | 22 | 36.3 | 38.8 | | Income tax receivable | | 4.0 | 4.0 | | Derivative financial assets | 26 | 1.5 | 1.0 | | Asset held for sale | | - | 0.2 | | **TOTAL CURRENT ASSETS** | | 259.0 | 257.5 | | **TOTAL ASSETS** | | 1,007.5 | 1,017.9 | | **LIABILITIES** | | | | | Trade and other payables | 23 | (122.0) | (124.7) | | Interest-bearing loans and borrowings | 27 | (4.2) | (7.1) | | Provisions | 25 | (1.8) | (1.9) | | Deferred consideration | 38 | - | (0.8) | | Obligations under leases | 28 | (10.0) | (10.1) | | Tax liabilities | | (7.4) | (4.9) | | Derivative financial liabilities | 26 | (1.8) | (1.8) | | **TOTAL CURRENT LIABILITIES** | | (147.2) | (151.3) | | Trade and other payables | 23 | - | (0.2) | | Interest-bearing loans and borrowings | 27 | (196.0) | (182.1) | | Retirement benefit obligations | 29 | (6.9) | (8.3) | | Provisions | 25 | (10.3) | (12.0) | | Deferred consideration | 38 | (0.6) | (0.7) | | Deferred tax liabilities | 11 | (51.2) | (60.3) | | Derivative financial liabilities | 26 | (6.2) | (6.4) | | Obligations under leases | 28 | (21.9) | (24.5) | | **TOTAL NON-CURRENT LIABILITIES** | | (293.1) | (294.5) | | **TOTAL LIABILITIES** | | (440.3) | (445.8) | | **NET ASSETS** | | 567.2 | 572.1 | | **EQUITY** | | | | | Called up share capital | 31 | 6.6 | 6.6 | | Share premium account | | 179.1 | 179.1 | | Own shares | 31 | (0.1) | (0.1) | | Translation reserve | 31 | 26.7 | 50.9 | | Hedging reserve | 31 | 2.0 | 1.4 | | Retained earnings | | 360.6 | 340.6 | | **EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY** | | 574.9 | 578.5 | | Non-controlling interest | 39 | (2.2) | (0.7) | | Put option over non-controlling interest | 39 | (5.5) | (5.7) | | **TOTAL NON-CONTROLLING INTEREST** | | (7.7) | (6.4) | | **TOTAL EQUITY** | | 567.2 | 572.1 | The Financial Statements were approved and authorised for issue by the Board of Directors on 6 September 2023. Signed on behalf of the Board of Directors Jørgen Køkke Chief Executive Alison Henriksen Chief Financial Officer FINANCIAL STATEMENTS 128 GENUS PLC / ANNUAL REPORT 2023 # GROUP STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2023 | | Note | 2023 £m | 2022 £m | | --- | --- | --- | --- | | NET CASH FLOW FROM OPERATING ACTIVITIES | 32 | 50.4 | 34.3 | | CASH FLOWS FROM INVESTING ACTIVITIES | | | | | Dividends received from joint ventures and associates | 18 | 2.6 | 3.2 | | Joint venture and associate loan investment | 18 | (1.9) | - | | Acquisition of joint venture and associate | 18 | (1.0) | (2.2) | | Acquisition of trade and assets | | - | (0.8) | | Acquisition of Olymel AlphaGene assets | | - | (14.5) | | Sale of other investments | | 3.4 | - | | Acquisition of other investments | | (0.4) | (1.0) | | Payment of deferred consideration | 38 | (0.8) | (1.0) | | Purchase of property, plant and equipment | | (25.9) | (42.1) | | Purchase of intangible assets | | (9.3) | (8.8) | | Proceeds from sale of property, plant and equipment | | 2.4 | - | | NET CASH OUTFLOW FROM INVESTING ACTIVITIES | | (30.9) | (67.2) | | CASH FLOWS FROM FINANCING ACTIVITIES | | | | | Drawdown of borrowings | | 126.8 | 138.7 | | Repayment of borrowings | | (111.7) | (83.0) | | Payment of lease liabilities | | (11.1) | (11.2) | | Equity dividends paid | | (21.0) | (20.9) | | Dividend to non-controlling interest | | (0.1) | (0.1) | | Debt issue costs | | (1.1) | (0.6) | | Issue of ordinary shares | | - | - | | NET CASH (OUTFLOW) INFLOW FROM FINANCING ACTIVITIES | | (18.2) | 21.9 | | NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS | | 1.3 | (11.0) | | Cash and cash equivalents at start of the year | | 38.8 | 46.0 | | Net increase/(decrease) in cash and cash equivalents | | 1.3 | (11.0) | | Effect of exchange rate fluctuations on cash and cash equivalents | | (3.8) | 3.8 | | TOTAL CASH AND CASH EQUIVALENTS AT 30 JUNE | 22 | 36.3 | 38.8 | FINANCIAL STATEMENTS 129 GENUS PLC / ANNUAL REPORT 2023 # NOTES TO THE GROUP FINANCIAL STATEMENTS # FOR THE YEAR ENDED 30 JUNE 2023 # 1. REPORTING ENTITY Genus plc (the 'Company') is a public company limited by shares and incorporated in England, United Kingdom under the Companies Act 2006. Its company number is 0297232L and its registered office is Matrix House, Basing View, Basingstoke, Hampshire RG21 4DZ. The Group Financial Statements for the year ended 30 June 2023 comprise the Company and its subsidiaries (together referred to as the 'Group'). We have used the equity method to account for the Group's interests in joint ventures and associates. Our business model on pages 12 to 13 explains the Group's operations and principal activities. # 2. BASIS OF PREPARATION We have prepared the Group Financial Statements in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006. The Group Financial Statements have also been prepared in accordance with International Financial Reporting Standards ('IFRS') as issued by the International Accounting Standards Board ('IASB'). Unless otherwise stated, we have consistently applied the significant accounting policies set out below to all periods presented in these Group Financial Statements. The going concern statement has been included in the Strategic Report on page 65 and forms part of these statements. # Functional and presentational currency We present the Group Financial Statements in Sterling, which is the Company's functional and presentational currency. All financial information presented in Sterling has been rounded to the nearest £0.1m. # Use of estimates Preparing financial statements requires management to make judgements, estimates and assumptions that affect our application of accounting policies and our reported assets, liabilities, income and expenses. Our actual results may differ from these estimates. We review our estimates and underlying assumptions on an ongoing basis, and recognise revisions to accounting estimates in the period in which we revise the estimate and in any future periods affected. Note 6 provides information about significant areas of estimation uncertainty and the critical judgements we made in applying accounting policies that have the most effect on the amounts recognised in the Financial Statements. # Alternative Performance Measures ('APMs') In reporting financial information, the Group presents APMs, which are not defined or specified under the requirements of IFRS and which are not considered to be a substitute for, or superior to, IFRS measures. The Group believes that these APMs provide stakeholders with additional helpful information on the performance of the business. The APMs are consistent with how we plan our business performance and report on it in our internal management reporting to the Board and GELT. Some of these measures are also used for the purpose of setting remuneration targets. For a full list of all APMs please see the Alternative Performance Measures section of the Annual Report on pages 200 to 207. # Change in trade and other receivables It was identified that certain contract assets were previously incorrectly classified as current trade receivables. The prior periods have been restated, reducing current trade receivables by £9.6m in June 2022, with a corresponding increase in current contract assets. # 3. SIGNIFICANT ACCOUNTING POLICIES APPLIED IN THE CURRENT REPORTING PERIOD THAT RELATE TO THE FINANCIAL STATEMENTS AS A WHOLE This section sets out our significant accounting policies that relate to the Financial Statements as a whole. Where an accounting policy is generally applicable to a specific note to the Financial Statements, the policy has been described in that note. We have also detailed below the new accounting pronouncements that we will adapt in future years and our current view of the impact they will have on our financial reporting. # Accounting convention We prepare the Group Financial Statements under the historical cost convention, except for our biological assets, share-based payment expense, pension liabilities and derivative financial instruments. In accordance with IFRS, we measure biological assets at fair value less point-of-sale costs, which represent distribution costs and selling expenses, and share-based payment expense, pension liabilities, and certain financial instruments at fair value. # Basis of consolidation Subsidiaries are entities the Group controls. We have control of an entity when we are exposed, or have the rights, to variable returns from the entity and have the ability to affect the returns through power over the entity. In assessing control, we take into account potential voting rights that we can currently exercise or convert. We fully consolidate the results of subsidiaries we acquire from the date that control transfers to the Group. We cease consolidating the results of subsidiaries that we cease to control from the date that control passes. In preparing the Group Financial Statements, we eliminate intra-Group balances and any unrealised income and expenses arising from intra-Group transactions. Unrealised gains arising from transactions with equity-accounted investees are eliminated against the investment, to the extent of our interest in the investee. We eliminate unrealised losses in the same way as unrealised gains, but only to the extent that there is no evidence of impairment. # Foreign currencies We record foreign currency transactions in the relevant Group entity's functional currency, at the exchange rate on the transaction date. At each balance sheet date, we retranslate monetary assets and liabilities denominated in foreign currencies at the exchange rate on the balance sheet date. We recognise the foreign exchange differences arising on retranslation in the Group Income Statement. FINANCIAL STATEMENTS 130 GENUS PLC / ANNUAL REPORT 2023 # NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED ## 3. SIGNIFICANT ACCOUNTING POLICIES APPLIED IN THE CURRENT REPORTING PERIOD THAT RELATE TO THE FINANCIAL STATEMENTS AS A WHOLE CONTINUED When non-monetary assets and liabilities are measured at historical cost in a foreign currency, we translate them at the exchange rate at the transaction date. When non-monetary assets and liabilities are stated at fair value in a foreign currency, we translate them at the prevailing exchange rate on the date we determined the fair value. We recognise the foreign exchange differences arising on retranslation in the Group Statement of Comprehensive Income. The assets and liabilities of foreign operations, including goodwill arising on consolidation, are translated into Sterling at the prevailing exchange rates at the balance sheet date. The resulting exchange differences are backed into foreign currency translation reserves and reported in the Group Statement of Comprehensive Income. We translate these operations' revenues and expenses using an average rate for the period. When exchange differences arise from the fair value movement of related effective hedges, we take them to the foreign currency translation reserve. When we dispose of a foreign operation, we release these differences to the Income Statement. Exchange movements on inter-company loans considered to be permanent equity are recognised in the Group Statement of Comprehensive Income, together with any related taxation. The principal exchange rates were as follows: | | Average | | | Closing | | | | --- | --- | --- | --- | --- | --- | --- | | | 2021 | 2022 | 2021 | 2021 | 2022 | 2021 | | US Dollar/E | 1.21 | 1.32 | 1.36 | 1.27 | 1.22 | 1.38 | | Euro/E | 1.15 | 1.18 | 1.15 | 1.16 | 1.16 | 1.17 | | Brazilian Reais/E | 6.20 | 6.94 | 7.33 | 6.08 | 6.39 | 6.87 | | Mexican Peso/E | 22.84 | 26.97 | 28.15 | 21.74 | 24.45 | 27.57 | | Chinese Yuan/E | 8.44 | 8.55 | 8.94 | 9.21 | 8.15 | 8.93 | | Russian Revise/E | 86.29 | 98.75 | 102.04 | 112.79 | 66.73 | 101.10 | ### Research and development We undertake research with the aim of gaining new scientific or technical knowledge, and recognise this expenditure in the Income Statement as it is incurred. The Group constantly monitors its research activities. When research projects achieve technical feasibility and are commercially viable, our policy is to capitalise further development costs within intangible assets, in accordance with IAS 38. Our development activities include developing and maintaining our porcine genetic nucleus herd and our bovine pre-stud herds. We do not capitalise development expenditure separately for these herds, as their fair value is included in the fair value of the Group's biological assets, in accordance with IAS 41. We disclose the costs of research and development activities, as required by IAS 38 (see note 8). ### Other income and deferred income During the year ended 30 June 2019, the Company entered into a strategic collaboration with Beijing Capital Agribusiness (BCA) under which BCA will establish and fund a collaboration specific entity (BCA Future Bio-Tech) which will use Genus's intellectual property and know-how to pursue the PFRSV resistance regulatory and development work in China. Genus will receive consideration after meeting certain milestones in the development programme. Each milestone is considered to be either a separate performance obligation, or a set of groups of separate performance obligations, under this agreement and are unbundled in the contractual arrangement as if they are distinct from one another. We assess each separate performance obligation relating to the milestone payments, and upon completion of those performance obligations recognise the fair value of amounts earned in other income. Some performance obligations, such as the transfer of know-how, are recognised at a point in time whereas others, such as the provision of technical services, are recognised over time. We recognise any received but unearned consideration as deferred income. We will apply the same accounting policy to any other comparable agreements. ### Reversals of impairment We reverse an impairment loss in respect of assets other than goodwill when the impairment loss may no longer exist and we have changed the estimates we used to determine the recoverable amount. We only reverse an impairment loss to the extent that the asset's carrying amount does not exceed the carrying amount it would have had, net of depreciation or amortisation, if we had not recognised the impairment loss. ### Climate change In preparing these consolidated financial statements we have considered the impact of both physical and transition climate change risks on the current valuation of our assets and liabilities. We do not believe that there is a material impact on the financial reporting judgements and estimates arising from our considerations and as a result the valuations of our assets or liabilities have not been significantly impacted by these risks as at 30 June 2023. In concluding, we specifically considered the impact of climate change on the growth rates and projected cash flows as part of our goodwill impairment testing (see note 14). As government policies evolve as a result of commitments to limit global warming to 1.5°C, we will continue to monitor implications on the valuations of our assets and liabilities that could arise in future years. FINANCIAL STATEMENTS ### 131 GENUS PLC / ANNUAL REPORT 2023 3. SIGNIFICANT ACCOUNTING POLICIES APPLIED IN THE CURRENT REPORTING PERIOD THAT RELATE TO THE FINANCIAL STATEMENTS AS A WHOLE CONTINUED FINANCIAL STATEMENTS New standards and interpretations In the current year, the Group has applied a number of amendments to IFRS issued by the International Accounting Standards Board that are mandatorily effective for an accounting period that begins after 1 January 2022 and have been implemented with effect from 1 July 2022. These are: • Amendments to IFRS 3 – ‘Business Combinations’ – References to the Conceptual Framework; • Amendments to IAS 12 – ‘Income Taxes’ – International tax reform – Pillar two model rules; • Amendments to IAS 16 – ‘Property, Plant and Equipment’ – Proceeds before Intended Use; • Amendments to IAS 37 – ‘Onerous Contracts’ — Cost of Fulfilling a Contract; and • Annual Improvements 2018-2020 Cycle. Their addition has not had any material impact on the disclosures, or amounts reported in the Group Financial Statements. New standards and interpretations not yet adopted At the date of the Annual Report, the following standards and interpretations which have not been applied in the report were in issue but not yet effective (and in some cases had not yet been adopted by the UK). The Group will continue to assess the impact of these amendments prior to their adoption. These are: • Amendments to IFRS 16 – ‘Lease Liability in a Sale and Leaseback’; • Amendments to IAS 1 – ‘Classification of Liabilities as Current or Non-Current’; • Amendments to IAS 1 and IFRS Practice Statement 2 – ‘Disclosure of Accounting Policies’; • Amendments to IAS 7 and IFRS 7 – ‘Disclosures: Supplier Finance Arrangements’; • Amendments to IAS 8 – ‘Definition of Accounting Estimates’; and • Amendments to IAS 12 – ‘Deferred Tax related to Assets and Liabilities arising from a Single Transaction’. 4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY The preparation of Consolidated Financial Statements requires the Group to make estimates and judgements that affect the application of policies and reported amounts. Critical judgements represent key decisions made by management in the application of the Group’s accounting policies, where a significant risk of materially different outcomes exists due to management assumptions or sources of estimation uncertainty. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. The estimates which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next 12 months are discussed below. Critical accounting judgements Adjusting items The Directors believe that the adjusted profit and earnings per share measures provide additional information to shareholders on the performance of the business. These measures are consistent with how business performance is measured internally by the Board and GELT. The profit before tax and adjusting items measures are not recognised profit measures under IFRS and may not be directly comparable with adjusted profit measures used by other companies. The classification of adjusting items requires significant judgement, after considering the nature and intentions of a transaction. The Group’s definitions of adjusting items are outlined within the Group accounting policies and have been applied consistently year-on-year. Key sources of estimation uncertainty Determination of the fair value of biological assets including those held in equity-accounted investees (note 16) and (note 18) Determining the fair values of our bovine and porcine biological assets requires the application of a number of estimates and assumptions. Below is a list of these estimates and assumptions, showing whether we consider them to be observable or unobservable inputs to the fair value determination. In addition, we identify those inputs that are ‘readily obtainable’ transactional data or ‘open market prices’. Sensitivities of the estimates and assumptions given below are disclosed in note 16. ### 132 GENUS PLC / ANNUAL REPORT 2023 ### NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED ### FOR THE YEAR ENDED 30 JUNE 2023 4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY CONTINUED FINANCIAL STATEMENTS Estimates and assumptions Observable/unobservable Source Bovine Long-term dairy volume growth rate Unobservable n/a Short-term dairy volume growth rate Unobservable n/a Value at point of production 1 Unobservable n/a Current unit prices Observable Readily obtainable Growth in unit prices 1 Unobservable n/a Animals’ useful lifespan Observable Readily obtainable Percentage of new dairy bulls to be produced internally each year 1 Unobservable n/a Age profile of bulls 1 Unobservable n/a Risk-adjusted discount rate 1 Unobservable n/a Porcine (non pure line herds) Animals’ useful lifespan Observable Readily obtainable The proportion of animals that go to slaughter Observable Readily obtainable The mix of boars and gilts Observable Readily obtainable Risk-adjusted discount rate Unobservable n/a Porcine (pure line herds) Number of future generations attributable to the current herds Observable Readily obtainable Fair value prices achieved on sales Observable Open market prices Animals’ expected useful lifespan and productivity Observable Readily obtainable The proportion of animals that go to breeding sales 1 Observable Readily obtainable Risk-adjusted discount rate 1 Unobservable n/a 1 Key sources of estimation uncertainty Impact of Russian Sanctions The Group has two group operating companies that are incorporated in Russia – Limited Liability Co. Genus ABS Russia and PIC Genetics LLC (‘Russian-based subsidiaries/entities’). Following the sanctions that have been put in place by the UK and other governments, the Group implemented a comprehensive screening process with external counsel to ensure that its Russian entities do not trade with sanctioned individuals or entities controlled by them. The main impact of the sanctions regime on our business has been to categorise the banks in Russia into sanctioned and non-sanctioned banks. Where we receive money from sanctioned banks we are unable to use the cash without a licence from His Majesty’s Treasury (‘HMT’). For cash receipts from non-sanctioned banks into the entities’ non-sanctioned banks we are able to use the cash in Russia for day-to-day operations. The Group applied to HMT for a licence on 25 April 2022, to allow the use of payments from sanctioned banks by non-sanctioned Russian customers for the delivery of porcine and bovine genetics; to allow the use of money in a non-sanctioned Russian bank account in the name of Genus Russia to pay Russian suppliers who continue to use sanctioned Russian bank accounts; and to remit any excess money in Genus Russia’s non-sanctioned Russian bank account (regardless of whether it was received from a sanctioned or non- sanctioned Russian bank account) to other Genus Group company UK bank accounts. The UK Office of Financial Sanctions Implementation (‘OFSI’) issued a general licence for trading in agricultural commodities in Russia effective on the 4 November 2022 which provides exemptions to the sanctions regime in connection with the export, production and transport of agricultural commodities. This definition includes reproductive materials such as are supplied by Genus. Under this general licence, receipts from non-sanctioned customers received from and before 4 November 2022 from sanctioned banks no longer need to be frozen and can be freely used. Also receipts from a sanctioned customer, if made through a non-sanctioned bank, no longer need to be frozen and can be freely used. If any customer is or becomes sanctioned and pays through a sanctioned bank, these funds would still need to be frozen even after 4 November 2022. Under the requirements of IAS 7, where there is cash that is not available to be used by the rest of the Group this needs to be disclosed. On 24 February 2023, the UralSib bank was put on the UK financial sanctions list and as such ABS and PIC Russia subsequently opened new bank accounts with the OTP Bank on 21 March 2023 and on 16 May 2023 respectively. Any receipts from sanctioned banks into the sanctioned UralSib account have been frozen and are not used for business disbursements. As at 30 June 2023, we had a cash balance of £3.1m (30 June 2022 £4.5m) in the Russian entities of which £0.8m (30 June 2022: £0.2m) is not currently available to be used by the Group due to being received from sanctioned banks and held in a sanctioned bank. Management has reviewed the operations and cash flow over a period of 18 months from 30 June 2023 to 31 December 2024, based upon the 2024 plans, to determine whether the Russian entities have sufficient non-sanctioned cash flow to enable them to continue day-to-day operations and to meet liabilities as they fall due. The analysis indicates they do have sufficient non-sanctioned cash flow to enable them to meet their day-to-day operational needs. Critical accounting judgement – exercise of control Management has assessed whether the actions of the UK and Russian Governments have caused the Group to lose control of these Russian-based subsidiaries. 133 GENUS PLC / ANNUAL REPORT 2023 # 4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY CONTINUED Genus PLC applied for a licence to the Department for International Trade (DIT) on 22 September 2022, to allow for UK-based employees within the Genus group to provide accounting, business and management consulting services to the Russian-based subsidiaries, for the purpose of helping them carry out business operations in Russia, delivery of humanitarian assistance activity and for the production or distribution of food, provided that it is for the benefit of the civilian population. The licence was authorised by the DIT and came into force on 11 January 2023. It authorises the following services: - The fullest possible range of accounting services, business and management consulting services, to include advisory, guidance and operational assistance services provided for business policy and strategy, and the overall planning, structuring, and control of the organisation. - The oversight that a parent company would typically provide to its subsidiaries in the areas of accounting, financial controls, tax, treasury, finance and human resources, along with similar oversight in the areas of information technology, supply chain and other types of technology. The licence expires on 11 January 2025 and, provided the facts and circumstances surrounding the issuance of the licence currently in place do not change materially we do not foresee any reasons why the licence could not be renewed. We have concluded that we do have control over the Russian-based subsidiaries for the year ended 30 June 2023, as defined under IFRS 10 'Consolidated financial statements', and we are still able to consolidate them despite short-term restrictions on extracting cash. We have also assessed each of the asset balances for impairment. The material areas that could give rise to impairment are: - PIC Russia farm: £2.4m (30 June 2022: £3.7m) – the value of the farm is predicated on the future economic benefit of the animals that are being reared there. We would need to assess if the property's open market price (less cost to sell) would support the carrying value. - Trade receivables: £2.7m (30 June 2022: £6.0m) – the ongoing financial sanctions may affect our customers' ability to pay us for their goods. If determined that our customers are unlikely to repay these amounts, then they should be provided for. - IAS 4f valuation: £3.9m (30 June 2022: £2.8m) – the ongoing impacts of both the local economic outlook and our customers' ability to pay us could result in a reversal of the fair value of the Russian biological assets in the June valuation. Management's impairment analysis indicates that, under the current business environment and based on the plans for the Financial Year 2024 no impairment is required as at 30 June 2023. Management will continue to monitor the situation closely to see if any further changes require additional analysis that may result in a different conclusion. In the event of changes in legislation, such as more restrictive sanctions imposed by the UK Government or actions taken by the Russian Government, we may determine that we do not exercise control, as defined under IFRS 10 'Consolidated financial statements', over the assets and operations of the Russian entities and we would not be able to consolidate these companies into the Financial Statements. The deconsolidation would mean that we would reclassify the Russian entities as investments and we would need to assess for impairment. A charge of up to £11.7m (2022: £16.6m) may need to be recognised in the Income Statement, representing the total net assets of the two Russian entities. Dependent on the nature of the events leading to the decision to deconsolidate the entities, there may be additional expenses incurred which we are unable to estimate at this time. In addition, revenues would not be consolidated into the Financial Statements from the date of any deconsolidation. Revenues from the Russian entities were £21.7m in the year ended 30 June 2023 (2022: £14.6m). # 5. SEGMENTAL INFORMATION IFRS 8 'Operating Segments' requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the Chief Executive and the Board, to allocate resources to the segments and to assess their performance. The Group's operating and reporting structure comprises three operating segments: Genus PIC, Genus ABS and Genus Research and Development. These segments are the basis on which the Group reports its segmental information. The principal activities of each segment are as follows: - Genus PIC – our global porcine sales business; - Genus ABS – our global bovine sales business; and - Genus Research and Development – our global spend on research and development. A segmental analysis of revenue, operating profit, depreciation, amortisation, non-current asset additions, segment assets and liabilities and geographical information is provided below. We do not include our adjusting items in the segments, as we believe these do not reflect the underlying performance of the segments. The accounting policies of the reportable segments are the same as the Group's accounting policies, as described in the Financial Statements. | Revenue | 2023 £m | 2022 £m | | --- | --- | --- | | Genus PIC | 349.5 | 308.6 | | Genus ABS | 318.8 | 272.0 | | Genus Research and Development | | | | Porcine product development | 18.5 | 12.4 | | Bovine product development | 2.8 | 1.7 | | Gene editing | 0.1 | 0.7 | | Other research and development | - | - | | | 21.4 | 14.8 | | | 689.7 | 593.4 | FINANCIAL STATEMENTS 134 GENUS PLC / ANNUAL REPORT 2023 # NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED # FOR THE YEAR ENDED 30 JUNE 2023 5. SEGMENTAL INFORMATION CONTINUED Adjusted operating profit by segment is set out below and reconciled to the Group's adjusted operating profit. A reconciliation of adjusted operating profit to profit for the year is shown on the face of the Group Income Statement. | Adjusted operating profit | 2023 £m | 2022 £m | | --- | --- | --- | | Genus PIC | 135.0 | 112.3 | | Genus ABS | 43.4 | 40.5 | | Genus Research and Development | | | | Porcine product development | (29.7) | (22.6) | | Bovine product development | (25.6) | (22.8) | | Gene editing | (14.3) | (7.9) | | Other research and development | (17.4) | (14.0) | | | (87.0) | (67.5) | | Adjusted segment operating profit | 91.4 | 85.7 | | Central | (16.8) | (16.9) | | Adjusted operating profit | 74.6 | 68.8 | Our business is not highly seasonal and our customer base is diversified, with no individual customer generating more than 2% of revenue. Exceptional items of £3.5m net expense (2022: £2.0m net expense) relate to Genus ABS (£2.7m net expense) (2022: £4.2m net expense), Genus PIC (Ent) (2022: £0.6m net expense) and our central segment (£0.8m net expense) (2022: £2.8m net credit). Note 7 provides details of these exceptional items. We consider share-based payment expenses on a Group-wide basis and do not allocate them to reportable segments. Other segment information | | Depreciation | | Amortisation | | Additions to non-current assets (excluding deferred taxation and financial instruments) | | | --- | --- | --- | --- | --- | --- | --- | | | 2023 £m | 2022 £m | 2023 £m | 2022 £m | 2023 £m | 2022 £m | | Genus PIC | 5.0 | 4.5 | 6.8 | 7.4 | 6.8 | 45.2 | | Genus ABS | 16.0 | 14.3 | 4.4 | 3.4 | 21.8 | 25.4 | | Genus Research and Development | | | | | | | | Research | 1.3 | 1.0 | - | - | 1.6 | 3.3 | | Porcine product development | 4.5 | 2.2 | - | - | 1.2 | 1.3 | | Bovine product development | 1.7 | 2.0 | 0.4 | 0.2 | 4.9 | 2.7 | | | 7.5 | 5.2 | 0.4 | 0.2 | 7.7 | 7.3 | | Segment total | 28.5 | 24.0 | 11.6 | 11.0 | 36.3 | 77.9 | | Central | 1.7 | 2.4 | 1.8 | 1.6 | 7.0 | 5.8 | | Total | 30.2 | 26.4 | 13.4 | 12.6 | 43.3 | 83.7 | | | Segment assets | | Segment liabilities | | | --- | --- | --- | --- | --- | | | 2023 £m | 2022 £m | 2023 £m | 2022 £m | | Genus PIC | 265.4 | 305.4 | (66.0) | (73.4) | | Genus ABS | 281.7 | 261.4 | (72.5) | (78.9) | | Genus Research and Development | | | | | | Research | 11.4 | 14.7 | (4.5) | (4.4) | | Porcine product development | 269.1 | 275.0 | (55.3) | (57.7) | | Bovine product development | 125.0 | 119.6 | (19.6) | (16.7) | | | 405.5 | 409.3 | (79.4) | (78.8) | | Segment total | 952.6 | 976.1 | (217.9) | (231.5) | | Central | 54.9 | 41.8 | (222.4) | (214.7) | | Total | 1,007.5 | 1,017.9 | (440.3) | (445.8) | FINANCIAL STATEMENTS 135 GENUS PLC / ANNUAL REPORT 2023 # 5. SEGMENTAL INFORMATION CONTINUED # Geographical information The Group's revenue by geographical segment is analysed below. This analysis is stated on the basis of where the customer is located. | Revenue | 2023 £m | 2022 £m | | --- | --- | --- | | North America | 288.5 | 238.5 | | Latin America | 105.6 | 94.6 | | UK | 93.1 | 88.7 | | Rest of Europe, Middle East, Russia and Africa | 109.6 | 88.3 | | Asia | 92.9 | 83.3 | | **Total revenue** | **689.7** | **593.4** | # Non-current assets (excluding deferred taxation and financial instruments) The Group's non-current assets by geographical segment are analysed below and are stated on the basis of where the assets are located. | | 2023 £m | 2022 £m | | --- | --- | --- | | North America | 508.6 | 529.6 | | Latin America | 69.6 | 56.7 | | UK | 71.5 | 69.8 | | Rest of Europe, Middle East, Russia and Africa | 43.8 | 45.7 | | Asia | 33.6 | 46.3 | | **Non-current assets (excluding deferred taxation and financial instruments)** | **727.1** | **768.1** | # 6. REVENUE # Accounting policy The Group recognises revenue from the following sources: - • sale of bovine and porcine semen, porcine breeding animals, embryos and ancillary products; - • royalties; - • consulting; - • technical services and advice revenues; - • installation and maintenance of IntellGen technology; - • licensing of IntellGen technology; - • slaughter animal sales; and - • bovine partnership contracts. Revenue is measured based on the consideration the Group expects to be entitled to under a contract with a customer and excludes amounts collected on behalf of third parties. The Group recognises revenue when it transfers control of a product or service to a customer. # The sale of bovine and porcine semen, porcine breeding animals, embryos and ancillary products Revenue from the sale of bovine and porcine semen, porcine breeding animals, embryos and ancillary products is recognised when the control of the goods has transferred to the customer or distributor. This is either when we ship to customers or on delivery, depending on the terms of sale. Payment of the transaction price is due immediately, or within a short period of time, from the point the customer or distributor controls the goods. # Royalties Royalties are recognised when the performance obligation is met. We receive royalty payments from certain porcine customers based on key performance variables, such as the number of pigs born per litter, the number of litters born per sow and the average slaughter weight of the animals born. This amount is confirmed directly to Genus by the customer. Payment of the transaction price is due immediately from the customer, or within a short period of time, once the performance obligation is satisfied. # Consulting Revenue from consulting represents the amounts we charged for services we provided during the year, including recoverable expenses. We recognise consulting services provided but not yet billed as revenue, based on a fair value assessment of the work we have delivered and our contractual right to receive payment. Where unbilled revenue is contingent on a future event, we do not recognise any revenue until the event occurs. # Technical services and advice revenues Revenue from technical services and advice revenues represents the amounts we charged for services we provided during the year, including recoverable expenses. We recognise technical services and advice revenues provided but not yet billed as revenue, based on a fair value assessment of the work we have delivered and our contractual right to receive payment. Where unbilled revenue is contingent on a future event, we do not recognise any revenue until the event occurs. Technical services and advice revenues are presented in ancillary services in the table on the following page. FINANCIAL STATEMENTS 136 GENUS PLC / ANNUAL REPORT 2023 # **NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 30 JUNE 2023** # **6. REVENUE CONTINUED** # **Installation and maintenance of IntelliGen technology** Revenue from the installation of IntelliGen technology is recognised by reference to the stage of completion of the installation and is based on milestones being met. Maintenance is provided as a distinct service to customers and is recognised over the period of the service agreement. These revenues are presented in ancillary services in the following table. # **Licensing of IntelliGen technology** Revenue from the licensing of IntelliGen technology is recognised at a point in time when the licence is granted. In determining the transaction price, any minimum royalties due under the contracts are included in the value apportioned to the grant of the licence, excluding any royalties that arise on units produced in excess of the guaranteed minimums. These additional royalties have been determined to be a usage-based royalty and are recognised as revenue at the point in time that the units are produced. These revenues are presented in ancillary services in the following table. # **Slaughter of animals** Revenue from the slaughter of animals is recognised when control of the goods has transferred to the slaughterhouse, which is generally on the delivery of animals to the slaughterhouse. Payment of the transaction price is due immediately, or within a short period of time, from the point the slaughterhouse controls the goods. # **Bovine partnership contracts** Partnership contracts include the provision of multiple bovine products and services for a single price. The contract price is allocated to the individual performance obligations based on their standalone selling prices. The expected revenue is recognised for the products and services once the individual performance obligation has been satisfied. Revenues from partnership contracts are presented in sale of animals, semen, embryos and ancillary products and services. | | 2023 £m | 2022 £m | | --- | --- | --- | | Genus PLC | 173.5 | 158.4 | | Genus ABS | 307.8 | 262.5 | | Genus Research and Development | 21.4 | 14.8 | | **Sale of animals, semen, embryos and ancillary products and services** | **502.7** | **435.7** | | Genus PLC | 176.0 | 148.2 | | Genus ABS | 1.4 | 1.1 | | Genus Research and Development | - | - | | **Royalties** | **177.4** | **149.3** | | Genus PLC | - | - | | Genus ABS | 9.6 | 8.4 | | Genus Research and Development | - | - | | **Consulting services** | **9.6** | **8.4** | | **Total revenue** | **689.7** | **593.4** | # **Revenue from contracts with customers** The Group's revenue is analysed below by the timing at which it is recognised. | | 2023 £m | 2022 £m | | --- | --- | --- | | Genus PLC | 343.7 | 303.2 | | Genus ABS | 293.0 | 247.2 | | Genus Research and Development | 21.3 | 14.1 | | **Recognised at a point in time** | **658.0** | **564.5** | | Genus PLC | 5.8 | 3.4 | | Genus ABS | 25.8 | 24.8 | | Genus Research and Development | 0.1 | 0.7 | | **Recognised over time** | **31.7** | **28.9** | | **Total revenue** | **689.7** | **593.4** | An analysis of contract assets and contract liabilities is provided in note 24. FINANCIAL STATEMENTS 137 GENUS PLC / ANNUAL REPORT 2023 # 7. EXCEPTIONAL ITEMS # Accounting policy We present exceptional items separately, as we believe it helps to improve the understanding of the Group's underlying performance. In determining whether an item should be presented as exceptional, we consider items which are material either because of their size or their nature, and those which are non-recurring. For an item to be considered as exceptional, it must initially meet at least one of the following criteria: - It is a one-off material/item; - It has been directly incurred as the result of either an acquisition, integration or other major restructuring programme; - It has been previously classified as an exceptional item, and as such consistent accounting treatment is being applied; or - It is unusual in nature, e.g. outside the normal course of business. If an item meets at least one of the criteria, we then exercise judgement as to whether the item should be classified as exceptional. For the tax and cash impact of exceptional items see notes 11 and 32, respectively. | Operating (expense) credit | 2022 £m | 2022 £m | | --- | --- | --- | | Litigation | (4.5) | (1.4) | | Acquisition and integration | (0.4) | (0.3) | | Pension related | – | (0.4) | | Legacy legal claim | – | 3.3 | | ABS production restructuring | 1.7 | (2.8) | | Other | (0.3) | (0.4) | | **Net exceptional items** | **(3.5)** | **(2.0)** | # Litigation Litigation includes legal fees and related costs of £4.5m (2022: £1.4m) related to the actions between ABS Global, Inc. and certain affiliates ('ABS') and Inguran, LLC and certain affiliates (also known as STgenetics I'ST'E). The net expense comprises £3.4m of legal costs and a £0.9m settlement credit (see below for further details). # Material litigation activities to 31 August 2023 In July 2014, ABS launched a legal action against ST in the US District Court for the Western District of Wisconsin and initiated anti-trust proceedings, which ultimately enabled the launch of ABS's IntellGen sexing technology in the US market ('ABS I'). In June 2017, ST filed proceedings against ABS in the same District Court, where ST alleged that ABS infringed seven patents and asserted trade secret and breach of contract claims ('ABS II'). The ABS I and ABS II proceedings in the periods before the year ended 30 June 2021 are more fully described in the Notes to the Financial Statements in previous Annual Reports. On 29 January 2020, ST filed a new US complaint against ABS ('ABS III'). ABS has prepared and filed a response to the ABS III complaint, including a motion to dismiss, on the basis that all these issues were fully resolved in either the ABS I or ABS II litigations. On 10 March 2020, the United States Patent and Trademark Office ('USPTO') issued patent 10,583,439 (the '439 patent'), and subsequently ST asked the court for permission to file a supplemental complaint in ABS III asserting infringement of the '439 patent'. On 15 April 2020, ST filed a new complaint ('ABS IV'), asserting the same claim of infringement of the '439 patent alleged in its supplemental complaint and then moved to consolidate the ABS IV and ABS III litigation. ABS opposed this action and has filed a motion for summary dismissal. On 23 June 2020, the USPTO issued patent 10,689,210 (the '210 patent'), and on 6 July 2020, ST sought a second supplement of ABS III by adding a claim of '210 patent infringement'. ABS opposed this action. On 20 September 2022 the USPTO issued patent 11,446,665 (the '665 patent') and ST subsequently sought a third-party supplement of ABS III by adding a claim of infringement of the '665 patent'. ABS has opposed this action as well, and sought dismissal of all infringement claims. On 26 October 2020 and 10 December 2020, ABS filed Inter Partes Reviews ('IPR') against the '439 and '210 patents with the USPTO'. On 4 May 2021, the Patent Trial and Appeal Board ('PTAB') instituted the '439 patent IPR', and the hearing was completed on 2 February 2022. On 7 June 2021, PTAB declined to institute the '210 patent IPR' and on 28 April 2022, PTAB issued its decision and declined to invalidate the claims of the '439 patent'. ABS has appealed the '439 patent decision (the '439 Appeal'). On 20 December 2021, the Wisconsin Federal Court reached a decision on the ABS III and IV motions, granting ABS's motion to dismiss all claims relating to US patent 8,206,987 (the '987 patent'), and denying ST's motion to amend ABS III to add the '439 and '210 patents'. The court dismissed ABS III in its entirety and entered judgment in favour of ABS. ST appealed certain aspects of the decision relating to technology transfer to third parties, one of the three arguments put forward by ST in ABS III (the 'ABS III Appeal'). On 5 July 2023, the Court of Appeals accepted ST's argument that claim preclusion from the ABS I decision did not apply against ABS III in relation to technology transfer, and that the Federal court improperly broadened the scope of the ABS I judgment to address induced infringement. On 1 July 2022, the court reached a decision on the ABS II post-judgment motions as well as the pending motions in ABS IV. The court deferred to the jury's verdict in ABS II confirming the validity and infringement of US patents 7,371,476, and 7,611,309 (the '476 and '309 patents' respectively) and the '987 patent', and further confirmed the award of costs to ABS of $5.3m in connection with ABS I. In relation to ABS IV, the Court denied ABS's motion to dismiss the '439 and '210 patent claims on the basis that the challenges were too fact-based to be resolved at this stage. ABS filed counterclaims alleging, among other things, anti-competitive conduct and infringement of four ABS patents, later narrowed to three ABS patents. The hearing date of 15 July 2024 has been confirmed for ABS IV. Appeals were filed by ABS on the validity and infringement of the '987 patent (the '987 Appeal'), the '476 and the '309 patents (the 'ABS II Appeal') and ST has appealed the award of the $5.3m costs (the 'Two Award Appeal'). FINANCIAL STATEMENTS 138 GENUS PLC / ANNUAL REPORT 2023 # NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED ## 7. EXCEPTIONAL ITEMS CONTINUED On 27 December 2022, ABS and ST settled the 987 Appeal, the Fee Award Appeal and the Indian Patent Proceedings (along with related patent oppositions in India), delivering lower patent royalty payments for ABS and a settlement exceptional credit of £0.9m. The ABS II Appeal, the ABS III Appeal, the ABS IV litigation, the 439 Appeal, and the CCI Appeal remain ongoing. The 439 Appeal is scheduled for hearing on 5 September 2023 and the ABS II Appeal is likely to be heard before the end of the year. Indian Litigation: In September 2019, ST also filed parallel patent infringement proceedings against ABS in India, alleging infringement of the Indian patent 240790 ('790 patent'). The '790 patent is the equivalent of the US '476, '309 patents and US patent 7, 311,476 asserted in ABS II. ABS had already sought the revocation of the '790 patent in April 2017 before the Indian Patent Office and has now consolidated the revocation petition as a counterclaim in the Indian court proceedings (the 'Indian Patent Proceedings'). In June 2021, ST appealed the decision of the Competition Commission of India ('CCI') which had confirmed that ABS India had not breached the Indian Competition Act in relation to its participation in a sexed semen tender offered by the Utter Pradesh Livestock Development Board (the 'CCI Appeal'). The CCI Appeal is scheduled for 11 October 2023. NZ litigation: On 14 June 2023, ST initiated proceedings against ABS, Genus, ABS Genus (NZ) Limited, CRV International BV and CRV Limited (together 'CRV') in New Zealand, alleging patent infringement and seeking a preliminary injunction. ABS had previously been awarded the semen-seeing services for CRV's bovine semen in New Zealand and other jurisdictions. ABS has sought a stay of the New Zealand proceedings while the US court's consider whether the settlement agreement between ABS and ST dated 27 December 2022 precludes the New Zealand proceedings. The hearing of the ABS's stay application and ST's preliminary injunction application is scheduled for 27 November 2023. ### Acquisitions and integration During the year, £0.4m (2022: £0.3m) of expenses were incurred in relation to potential acquisitions. ### ABS production restructuring A one-off credit of £1.7m primarily related to the sale of our Canadian ABS facilities as part of a production restructuring. The cash inflow of £1.8m is included in investing activities. ### Other Included in Other is an expense of £0.3m relating to the sign-on bonus of the newly appointed CEO, a £0.2m credit resulting from a share forfeiture exercise and £0.2m in relation to the prior year IT incident. In the prior year, a £0.5m expense relating to legal advice, IT consultancy and one-time costs was incurred as the direct result of an IT security incident in June 2022. ## 8. OPERATING PROFIT Operating costs comprise: | | 2021 £m | 2022 £m | | --- | --- | --- | | Cost of sales excluding net IAS 41 valuation movement on biological assets and amortisation of multiplier contract intangible assets | (299.0) | (252.7) | | Net IAS 41 valuation movement on biological assets | (16.9) | (5.4) | | Amortisation of multiplier contract intangible assets | (1.2) | (0.6) | | **Cost of goods sold** | **(317.1)** | **(258.7)** | | Other cost of sales (excluding amortisation of acquired intangibles) | (130.1) | (74.7) | | Amortisation of customer relationship intangible assets | (3.2) | (4.8) | | **Other cost of sales** | **(133.3)** | **(119.5)** | | Research and Development expenditure | (87.1) | (67.3) | | Amortisation and impairment of technology, software and licences and patents | (6.2) | (5.6) | | **Research and Development costs** | **(93.3)** | **(72.9)** | | Administrative expenses (excluding exceptional items) | (93.1) | (85.5) | | Share-based payment expense | (6.0) | (3.7) | | Amortisation of software, licences and patents | (2.9) | (1.1) | | Net exceptional items within administrative expenses | (3.5) | (2.0) | | **Total administrative expenses** | **(105.5)** | **(92.9)** | | **Total operating costs** | **(649.2)** | **(544.0)** | FINANCIAL STATEMENTS 139 GENUS PLC / ANNUAL REPORT 2023 # 8. OPERATING PROFIT CONTINUED Profit for the year is stated after charging/(crediting): | | 2022 £m | 2022 £m | | --- | --- | --- | | Net foreign exchange losses | 0.8 | 0.8 | | Depreciation of owned fixed assets (see note 17) | 18.4 | 14.8 | | Depreciation of right-of-use assets (see note 17) | 11.8 | 11.6 | | (Profit)/loss on disposal of fixed assets and right-of-use assets | (1.4) | 0.4 | | Impairment of owned fixed assets | - | 0.9 | | Rental expense for short-term leases | 0.1 | 0.1 | | Employee costs (see note 9) | 227.9 | 196.8 | | Net decrease in expected credit losses (see note 21) | (0.5) | (0.9) | | Increase/(release) of inventory impairment | 0.6 | (0.2) | | Cost of inventories recognised as an expense | 105.8 | 105.7 | Auditor's remuneration is as follows: | | 2022 £m | 2022 £m | | --- | --- | --- | | Fees payable to the Company's auditor and its associates for the audit of the Company's Annual Report and Financial Statements | 0.5 | 0.6 | | Fees payable to the Company's auditor and its associates for the audit of the Company's subsidiaries | 0.5 | 0.6 | | Total audit fees | 1.0 | 1.0 | | Total fees to the Group's auditor | 1.0 | 1.0 | Fees payable to other auditors of Group companies Non-audit services of £22,000 (2022: £20,000) principally comprise of agreed upon procedures in relation to half-year reporting. These services fall within the non-audit services policy approved by the Company's Audit & Risk Committee at the time of engagement. # 9. EMPLOYEE COSTS This note shows the total employment costs and the average number of people employed by segment during the year. Employee costs, including Directors' remuneration, amounted to: | | 2022 £m | 2022 £m | | --- | --- | --- | | Wages and salaries (including bonuses and sales commission) | 198.1 | 170.9 | | Social security costs | 18.1 | 16.5 | | Contributions to defined contribution pension plans | 7.1 | 6.2 | | Share-based payment expense (excluding National Insurance) | 6.4 | 3.6 | | | 229.7 | 197.2 | The employee costs above include £18m (2022: £0.4m) which has been capitalised into intangible assets as part of the development of GenusOne and other digital projects. The average monthly number of employees and full-time equivalent employees, including Directors, was as follows: | | Number of employees | | Full-time equivalent | | | --- | --- | --- | --- | --- | | | 2022 Number | 2022 Number | 2022 Number | 2022 Number | | Genus PLC | 646 | 602 | 627 | 580 | | Genus ABS | 2,430 | 2,362 | 2,334 | 2,255 | | Research and Development | 472 | 446 | 447 | 422 | | Central | 80 | 80 | 68 | 68 | | | 3,628 | 3,490 | 3,476 | 3,125 | | Included in the totals above: | | | | | | UK | 889 | 909 | 798 | 818 | The Directors' Remuneration Report sets out details of the Directors' remuneration, pensions and share options. FINANCIAL STATEMENTS 140 GENUS PLC / ANNUAL REPORT 2023 # **NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 30 JUNE 2023** # **10. NET FINANCE COSTS** Net finance costs mainly arise from interest due on bank loans, pension scheme liabilities, amortisation of debt issue costs, unwinding of discounts on put options and the results of hedging transactions used to manage foreign exchange and interest rate movements. # **Accounting policy** We recognise interest income and interest expense in the Income Statement, as they accrue, based on the effective interest rate method. Interest income includes income on cash and cash equivalents, and income on other financial assets. Finance costs include interest costs in relation to financial liabilities. This includes interest on lease liabilities, which represents the unwinding of the discount rate applied to lease liabilities. | | 2023 £m | 2022 £m | | --- | --- | --- | | Interest payable on bank loans and overdrafts | (12.3) | (4.1) | | Amortisation of debt issue costs | (1.1) | (0.9) | | Other interest payable | (0.3) | (0.1) | | Unwinding of discount on put options | (0.3) | (0.2) | | Net interest cost in respect of pension scheme liabilities | (0.2) | (0.2) | | Interest on lease liabilities | (1.2) | (1.1) | | **Total interest expense** | **(15.4)** | **(6.6)** | | Interest income on bank deposits | 0.1 | 0.4 | | Net interest income on derivative financial instruments | 1.0 | - | | **Total interest income** | **1.1** | **0.4** | | **Net finance costs** | **(14.3)** | **(6.2)** | # **11. TAXATION AND DEFERRED TAXATION** This note explains how our Group tax charge arises. The deferred tax section of the note also provides information on our expected future tax charges and sets out the tax assets and liabilities held across the Group, together with our view on whether or not we expect to be able to make use of them in the future. # **Accounting policies** Tax on the profit or loss for the year comprises current and deferred tax. We recognise tax in the Income Statement, unless: - it relates to items we have recognised directly in equity, in which case we recognise it in equity; or We provide for current tax, including UK corporation tax and foreign tax, at the amounts we expect to pay (or recover), using the tax rates and the laws enacted or substantively enacted at the balance sheet date, together with any adjustments to tax payable in respect of previous years. Deferred tax is tax we expect to pay or recover due to differences between the carrying amounts of our assets and liabilities in our Financial Statements and the corresponding tax bases used in calculating our taxable profit. We account for deferred tax using the balance sheet liability method. We generally recognise deferred tax liabilities for all taxable temporary differences, and deferred tax assets to the extent that we will probably have taxable profits to utilise deductible temporary differences against. We do not recognise these assets and liabilities if the temporary difference arises from: - our initial recognition of other assets and liabilities in a transaction (other than a business combination) that affects neither our taxable profit nor our accounting profit. We recognise deferred tax liabilities for taxable temporary differences arising on our investments in subsidiaries, and interests in joint ventures and associates, except where we can control the reversal of the temporary difference and it is probable that it will not reverse in the foreseeable future. We calculate deferred tax at the tax rates we expect to apply in the period when we settle the liability or realise the asset. We charge or credit deferred tax in the Income Statement, except when it relates to items we have charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. FINANCIAL STATEMENTS 141 GENUS PLC / ANNUAL REPORT 2023 # 11. TAXATION AND DEFERRED TAXATION CONTINUED | Income tax expense | | | | --- | --- | --- | | | 2022 £m | 2022 £m | | Current tax expense | | | | Current period | 20.6 | 13.6 | | Adjustment for prior periods | 0.9 | 1.8 | | Total current tax expense in the Group Income Statement | 21.5 | 15.4 | | Deferred tax expense | | | | Origination and reversal of temporary differences | (9.2) | (0.5) | | Adjustment for prior periods | (4.7) | (3.2) | | Total deferred tax credit in the Group Income Statement | (13.9) | (3.7) | | Total income tax expense excluding share of income tax of equity-accounted investees | 7.6 | 11.7 | | Share of income tax of equity-accounted investees (see note 18) | 3.9 | 2.6 | | Total income tax expense in the Group Income Statement | 11.5 | 14.3 | | Reconciliation of effective tax rate | | | | | | --- | --- | --- | --- | --- | | | 2021 % | 2022 £m | 2022 % | 2022 £m | | Profit before tax | | 39.4 | | 48.4 | | Add back share of income tax of equity-accounted investees | | 3.9 | | 2.6 | | Profit before tax excluding share of income tax of equity-accounted investees | | 43.3 | | 51.0 | | Income tax at UK corporation tax of 20.5% (2022: 19.0%) | 20.5 | 8.9 | 19.0 | 9.7 | | Effect of tax rates in foreign jurisdictions | 13.6 | 5.9 | 9.2 | 4.7 | | Non-deductible expenses | 6.7 | 2.9 | 4.3 | 2.2 | | Tax exempt income and incentives | (3.0) | (1.3) | (1.8) | (0.9) | | Change in tax rate | (1.2) | (0.5) | 2.5 | 1.3 | | Movements in recognition of tax losses | (5.0) | (2.2) | 0.2 | 0.1 | | Change in unrecognised temporary differences | (7.8) | (3.4) | (3.7) | (1.9) | | Tax over / funded provided in prior periods | 1.8 | 0.8 | (2.1) | (1.1) | | Change in provisions | 0.5 | 0.2 | (0.2) | (0.1) | | Tax on undistributed reserves | 0.5 | 0.2 | 0.6 | 0.3 | | Total income tax expense in the Group Income Statement | 26.6 | 11.5 | 28.0 | 14.3 | The tax rate for the year depends on our mix of profits by country and our ability to recognise deferred tax assets in respect of losses in some of our smaller territories. Tax is calculated using prevailing tax legislation, reliefs and existing interpretations and practice. Included in "Movements in recognition of tax losses" in the year is a credit of £4.5m in respect of the recognition of previously unrecognised losses in the Group's subsidiaries in Australia and France, as these companies have delivered profits and utilised tax losses in each of the last two years and are forecast to continue to be profitable in the future. The Group has also reassessed the deferred tax attributes of its UK subsidiaries in the light of updated forecast information in respect of future profitability, resulting in a £2.4m credit recognised in changes in unrecognised temporary differences, from the recognition of additional timing differences in respect of fixed assets and is £2.0m charge included in movements in recognition of tax losses, in respect of certain company specific losses that are not capable of being group relieved against profits in other UK entities. The Group's future tax charge and effective tax rate could be affected by factors such as countries reforming their tax legislation to implement the OECD's BEPS recommendations and by European Commission initiatives including state aid investigations. During prior periods, the Group provided £1.6m in total for its exposure to the challenge by the European Commission to the UK's Finance Company (FinCo) exemption from its Controlled Foreign Companies (CFC) taxing regime. As at 30 June 2023, Genus had been charged and paid £1.4m (30 June 2022: £1.4m) by HMRC under various charging notices in respect of its assessment of our liability under this judgment, leaving a remaining provision balance at 30 June 2023 of £0.2m (30 June 2022: £0.2m). The Group has appealed the amounts paid to HMRC on the following grounds: - the amount charged is not state aid (i.e. the original EU Commission decision is unsound in law); and - the amount charged is not wholly attributable to UK significant people functions (and therefore either partly or wholly outside the circumstances described by the EU Commission as state aid). HMRC and several other large taxpayers have also appealed against the original EU Commission decision. On 8 June 2022, the EU General Court dismissed HMRC's application to annul the European Commission decision concerning the CFC Group financing exemption. We understand that HMRC has lodged an appeal against the judgment to the Court of Justice of the European Union. As there are many appeals to be considered, it may be a number of years before the full court/appeal process is exhausted and this matter is finally resolved. The tax credit attributable to exceptional items is a credit of £0.9m (2022: credit of £0.8m). FINANCIAL STATEMENTS 142 GENUS PLC / ANNUAL REPORT 2023 # NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 30 JUNE 2023 11. TAXATION AND DEFERRED TAXATION CONTINUED Income tax recognised directly in the Statement of Comprehensive Income and Statement of Changes in Equity | | 2023 £m | 2022 £m | | --- | --- | --- | | Financial instruments | (0.5) | (0.5) | | Foreign exchange differences on long-term intra-Group currency loans and balances | 0.4 | 0.1 | | Gain on equity instruments measured at fair value | (1.0) | 1.5 | | Actuarial movement on retirement benefit obligations | (0.2) | (0.4) | | Foreign exchange differences on translation of biological assets, intangible assets and leases | 3.2 | (7.8) | | **Income tax recognised directly in the Statement of Comprehensive Income and Statement of Changes in Equity** | **1.9** | **(7.1)** | | **Income tax recognised directly to the Statement of Changes in Equity** | | | | Share-based payment expense | (0.1) | (0.4) | | **Income tax recognised directly to the Statement of Changes in Equity** | **(0.1)** | **(0.4)** | Unrecognised deferred tax assets and liabilities At the balance sheet date, the Group had unused tax losses which were available for offset against future profits, with a potential tax benefit of £18.1m (2022: £19.3m). We have recognised a deferred tax asset in respect of £12.6m (2022: £11.6m) of these benefits, as we expect these losses to be offset against future profits of the relevant jurisdictions in the near term. We have not recognised a deferred tax asset in respect of the remaining £5.5m (2022: £7.7m), due to uncertainty about the availability of future taxable profits in the relevant jurisdictions. At 30 June 2023, the expiry dates of deferred tax assets in respect of losses available for the carry forward were as follows: | | Expiring within | | Unlimited £m | Total £m | | --- | --- | --- | --- | --- | | | 1-10 years £m | 11-20 years £m | | | | Losses for which a deferred tax asset is recognised | 0.2 | - | 12.4 | 12.6 | | Losses for which no deferred tax asset is recognised | 0.2 | - | 5.3 | 5.5 | | **Total tax losses** | **0.4** | **-** | **17.7** | **18.1** | In addition, at the balance sheet date, the Group had an unrecognised deferred tax asset in respect of fixed asset timing differences of nil (2022: £2.4m) and other timing differences of £2.3m (2022: £1.3m). These unrecognised timing differences have an unlimited expiry date. At 30 June 2022, the expiry dates of deferred tax assets in respect of losses available for the carry forward were as follows: | | Expiring within | | Unlimited £m | Total £m | | --- | --- | --- | --- | --- | | | 1-10 years £m | 11-20 years £m | | | | Losses for which a deferred tax asset is recognised | 0.6 | 0.4 | 10.6 | 11.6 | | Losses for which no deferred tax asset is recognised | 0.1 | - | 7.6 | 7.7 | | **Total tax losses** | **0.7** | **0.4** | **18.2** | **19.3** | The gross value of losses for which deferred tax assets are recognised is £49.7m (2022: £45.2m). The gross value of losses for which deferred tax assets are not recognised is £19.3m (2022: £24.8m). We have not recognised deferred tax liabilities totalling £4.0m (2022: £3.6m) for the withholding tax and other taxes that would be payable on the unremitted earnings of certain overseas subsidiaries. This is because we can control the timing and reversal of these differences and it is probable that the differences will not reverse in the foreseeable future. Recognised deferred tax assets and liabilities We have offset deferred tax assets and liabilities, to the extent that they arise in the same tax jurisdiction. The analysis of deferred tax balances is set out below: | | 2023 £m | 2022 £m | | --- | --- | --- | | Deferred tax assets | (16.5) | 00.0 | | Deferred tax liabilities | 51.2 | 60.3 | | **Net deferred tax assets** | **34.7** | **50.2** | The UK Finance (No. 2) Act 2023, which contains the UK's provisions addressing the implementation of BEPS Pillar Two, was substantively enacted on 20 June 2023. This legislation implements domestic and multinational top-up taxes, designed to achieve a global minimum effective tax rate of 10% and is expected to first apply to Genus in the year ended 30 June 2025. In the current year, the Group has applied the exception under the related IAS 12 amendment to recognising and disclosing information about deferred tax assets and liabilities related to Pillar 2 income taxes. FINANCIAL STATEMENTS 143 GENUS PLC / ANNUAL REPORT 2023 # 11. TAXATION AND DEFERRED TAXATION CONTINUED Movement in net deferred tax liabilities during the year | | As at 1 July 2022 £m | Recognised in Income Statement £m | Changes in tax rate recognised in Income Statement £m | Prior year adjustments recognised in Income Statement £m | Recognised in equity £m | Foreign exchange differences £m | As at 30 June 2023 £m | | --- | --- | --- | --- | --- | --- | --- | --- | | Property, plant and equipment | 3.5 | 2.6 | 0.4 | (2.4) | (0.1) | (0.3) | 3.7 | | Intangible assets | 6.7 | (0.6) | - | (0.9) | (0.2) | - | 5.0 | | Biological assets | 73.0 | (3.0) | (0.2) | 1.6 | (3.5) | (0.2) | 67.7 | | Retirement benefit obligations | (1.3) | 0.2 | - | (0.4) | 0.2 | - | (1.3) | | Share-based payment expense | (2.4) | (0.1) | - | 0.1 | 0.1 | 0.1 | (2.2) | | Short-term timing differences | (17.7) | (9.1) | (0.8) | (0.6) | 1.8 | 0.8 | (25.6) | | Tax loss carry-forwards | (11.6) | 1.2 | 0.1 | (2.1) | - | (0.2) | (12.6) | | **Net deferred tax assets / (liabilities)** | **50.2** | **(8.8)** | **(0.5)** | **(4.7)** | **(1.7)** | **0.2** | **34.7** | | | As at 1 July 2022 £m | Recognised in Income Statement £m | Changes in tax rate recognised in Income Statement £m | Prior year adjustments recognised in Income Statement £m | Recognised in equity £m | Foreign exchange differences £m | As at 30 June 2023 £m | | --- | --- | --- | --- | --- | --- | --- | --- | | Property, plant and equipment | 3.6 | (1.9) | (0.3) | 1.4 | - | 0.7 | 3.5 | | Intangible assets | 8.2 | (0.6) | (0.3) | (1.3) | 0.4 | 0.3 | 6.7 | | Biological assets | 63.7 | 0.1 | 2.2 | (1.3) | 7.9 | 0.4 | 73.0 | | Retirement benefit obligations | (2.1) | 0.3 | 0.2 | - | 0.4 | (0.1) | (1.3) | | Share-based payment expense | (4.7) | (0.4) | 0.9 | - | 1.9 | (0.1) | (2.4) | | Short-term timing differences | (16.4) | 1.6 | 0.7 | (0.9) | (1.5) | (1.2) | (17.7) | | Tax loss carry-forwards | (7.3) | (2.4) | (0.6) | (1.1) | - | (0.2) | (11.6) | | **Net deferred tax assets / (liabilities)** | **45.0** | **(3.3)** | **2.8** | **(3.2)** | **9.1** | **(0.2)** | **50.2** | # 12. EARNINGS PER SHARE Basic earnings per share is the profit generated for the financial year attributable to equity shareholders, divided by the weighted average number of shares in issue during the year. Basic earnings per share from continuing operations | | 2022 (pence) | 2022 (pence) | | --- | --- | --- | | **Basic earnings per share** | **50.8** | **62.5** | The calculation of basic earnings per share from continuing operations is based on the net profit attributable to owners of the Company from continuing operations of £33.3m (2022: £40.9m) and a weighted average number of ordinary shares outstanding of 65,557,000 (2022: 65,395,000), which is calculated as follows: Weighted average number of ordinary shares (basic) | | 2022 £000s | 2022 £000s | | --- | --- | --- | | Issued ordinary shares at the start of the year | 65,774 | 65,761 | | Effect of own shares held | (468) | (373) | | Shares issued on exercise of stock options | 1 | 7 | | Shares issued in relation to Employee Benefit Trust | 250 | - | | **Weighted average number of ordinary shares in year** | **65,557** | **65,395** | Diluted earnings per share from continuing operations | | 2022 (pence) | 2022 (pence) | | --- | --- | --- | | **Diluted earnings per share** | **50.5** | **62.2** | FINANCIAL STATEMENTS ![img-6.jpeg](img-6.jpeg) 144 GENUS PLC / ANNUAL REPORT 2023 # **NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 30 JUNE 2023** # **12. EARNINGS PER SHARE CONTINUED** The calculation of diluted earnings per share from continuing operations is based on the net profit attributable to owners of the Company from continuing operations of £33.3m (2022: £40.9m) and a weighted average number of ordinary shares outstanding, after adjusting for the effects of all potential dilutive ordinary shares, of 65,988,000 (2022: 65,714,000), which is calculated as follows: # **Weighted average number of ordinary shares (diluted)** | | 2022 000s | 2022 000s | | --- | --- | --- | | Weighted average number of ordinary shares (base) | 65,557 | 65,395 | | Dilutive effect of share awards and options | 441 | 379 | | **Weighted average number of ordinary shares for the purposes of diluted earnings per share** | **65,998** | **65,714** | # **Adjusted earnings per share from continuing operations** | | 2022 (period) | 2022 (period) | | --- | --- | --- | | **Adjusted earnings per share** | **84.8** | **82.7** | | **Diluted adjusted earnings per share** | **84.2** | **82.3** | Adjusted earnings per share is calculated on profit before the net IAS 41 valuation movement on biological assets, amortisation of acquired intangible assets, share-based payment expense, other gains and losses and exceptional items, after charging taxation associated with those profits, of £55.6m (2022: £54.3m), which is calculated as follows: | | 2023 £m | 2022 £m | | --- | --- | --- | | **Profit before tax from continuing operations** | **39.4** | **48.4** | | Add/(deduct): | | | | Net IAS 41 valuation movement on biological assets (see note 16) | 16.9 | 5.4 | | Amortisation of acquired intangible assets (see note 15) | 7.7 | 8.3 | | Share-based payment expense (see note 20) | 6.0 | 3.7 | | Exceptional items (see note 7) | 3.5 | 2.0 | | Other gains and losses (see note 26) | (2.7) | – | | Net IAS 41 valuation movement on biological assets in joint ventures (see note 18) | (3.6) | 1.4 | | Tax on joint ventures and associates (see note 18) | 3.9 | 2.6 | | Attributable to non-controlling interest | 0.4 | (0.3) | | **Adjusted profit before tax** | **71.5** | **71.5** | | Adjusted tax charge | (15.9) | (17.4) | | **Adjusted profit after tax** | **55.6** | **54.1** | | **Effective tax rate on adjusted profit** | **22.2%** | **24.3%** | # **Reconciliation of effective tax rate** | | 2023 Profit £m | 2022 Tax £m | 2023 % | | --- | --- | --- | --- | | **Profit before tax excluding share of income tax of equity-accounted investees** | **43.3** | **11.5** | **26.6** | | Net IAS 41 valuation movement on biological assets | 16.9 | 1.5 | 8.9 | | Amortisation of acquired intangible assets | 7.7 | 1.9 | 24.7 | | Share-based payment expense | 6.0 | 0.8 | 13.0 | | Other gains and losses | (2.7) | (0.7) | 25.0 | | Exceptional items (see note 7) | 3.5 | 0.9 | 25.7 | | Net IAS 41 valuation movement on biological assets in joint ventures | (3.6) | – | – | | Attributable to non-controlling interest | 0.4 | – | – | | **Adjusted profit before tax** | **71.5** | **15.9** | **22.2** | | | 2022 Profit £m | 2022 Tax £m | 2023 % | | --- | --- | --- | --- | | **Profit before tax excluding share of income tax of equity-accounted investees** | **51.0** | **14.3** | **28.0** | | Net IAS 41 valuation movement on biological assets | 5.4 | (1.5) | (27.8) | | Amortisation of acquired intangible assets | 8.3 | 3.3 | 39.8 | | Share-based payment expense | 3.7 | 0.5 | 13.5 | | Exceptional items (see note 7) | 2.0 | 0.8 | 40.0 | | Net IAS 41 valuation movement on biological assets in joint ventures | 1.4 | – | – | | Attributable to non-controlling interest | (0.3) | – | – | | **Adjusted profit before tax** | **71.5** | **17.4** | **24.3** | FINANCIAL STATEMENTS 145 GENUS PLC / ANNUAL REPORT 2023 # **13. DIVIDENDS** Dividends are one type of shareholder return, historically paid to our shareholders in late November/early December and late March. # **Amounts recognised as distributions to equity holders in the year** | | 2022 £m | 2022 £m | | --- | --- | --- | | **Final dividend** | | | | Final dividend for the year ended 30 June 2022 of 21.7 pence per share | 14.3 | – | | Final dividend for the year ended 30 June 2021 of 21.7 pence per share | – | 14.2 | | **Interim dividend** | | | | Interim dividend for the year ended 30 June 2023 of 10.3 pence per share | 6.7 | – | | Interim dividend for the year ended 30 June 2022 of 10.3 pence per share | – | 6.7 | | **Total dividend** | **21.0** | **20.9** | The Directors have proposed a final dividend of 21.7 pence per share for 2023. This is subject to shareholders' approval at the AGM and we have therefore not included it as a liability in these Financial Statements. The total proposed and paid dividend for year ended 30 June 2023 is 32.0 pence per share (2022: 32.0 pence per share). # **14. GOODWILL** # **Accounting policies** When we acquire a subsidiary, associate or joint venture, the goodwill arising is the excess of the acquisition cost, excluding transaction costs, over our interest in the net fair value of the acquiree's identifiable assets, liabilities and contingent liabilities. Identifiable assets include intangible assets which could be sold separately, or which arise from legal rights, regardless of whether those rights are separable. We state goodwill at cost less any accumulated impairment losses. We allocate goodwill to cash-generating units ('CGUs'), which are the smallest identifiable group of assets that generate cash inflows that are largely independent of the cash inflows from other assets or groups of assets. We do not amortise goodwill but we do test it annually for impairment. IAS 21 'The Effects of Changes in Foreign Exchange Rates' requires us to treat the following as assets and liabilities of the acquired entity rather than of the acquiring entity: - goodwill arising on acquisition of a foreign operation; and - any fair value adjustments we make on acquisition to the carrying amounts of the acquiree's assets and liabilities. We therefore express them in the foreign operation's functional currency and retranslate them at the balance sheet date. # **Impairment** We review the carrying amounts of our tangible and intangible assets at each balance sheet date, to determine whether there is any indication of impairment. If any indication exists, we estimate the asset's recoverable amount. For goodwill, and tangible and intangible assets that are not yet available for use, we estimate the recoverable amount at each balance sheet date. The recoverable amount is the greater of their fair value less cost to sell and value in use. In assessing value in use, we discount the estimated future cash flows to their present value, using a pre-tax discount rate, which is derived from the Group's weighted average cost of capital (WACC). For some countries we add a premium to this rate, to reflect the risk attributable to that country. If the asset does not generate largely independent cash inflows, we determine the recoverable amount for the CGU that the asset belongs to. We recognise an impairment loss in the Income Statement whenever the carrying amount of an asset or its CGU exceeds its recoverable amount. When we recognise an impairment loss in respect of a CGU, we first allocate it to reduce the carrying amount of any goodwill allocated to the CGU, and then apply any remaining loss to reduce the carrying amount of the unit's other assets on a pro-rata basis. The aggregate carrying amounts of goodwill allocated to each operating segment are as follows: | | Genus PLC £m | Genus ABS £m | Total £m | | --- | --- | --- | --- | | **Cost** | | | | | Balance at 1 July 2021 | 72.5 | 29.0 | 101.5 | | Business combinations | – | 0.3 | 0.3 | | Effect of movements in exchange rates | 5.8 | 3.4 | 9.2 | | **Balance at 30 June 2022** | **78.3** | **32.7** | **111.0** | | Effect of movements in exchange rates | (2.1) | (1.1) | (3.2) | | **Balance at 30 June 2023** | **76.2** | **31.6** | **107.8** | | **Impairment losses** | | | | | Balance at 1 July 2021, 30 June 2022 and 30 June 2023 | – | – | – | | **Carrying amounts** | | | | | At 30 June 2023 | 76.2 | 31.6 | 107.8 | | At 30 June 2022 | 78.3 | 32.7 | 111.0 | FINANCIAL STATEMENTS 146 GENUS PLC / ANNUAL REPORT 2023 # NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 30 JUNE 2023 # 14. GOODWILL CONTINUED To test impairment, we allocate goodwill to our CGUs, which are in line with our operating segments. These are the lowest level within the Group at which we monitor goodwill for internal management purposes. We test goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired. We determine the recoverable amount of our CGUs by using value in use calculations. The key assumptions for these calculations relate to discount rates, long-term growth rates and short-term growth rates (which includes consideration of expected changes to selling prices, cost savings derived from the IntelliGen technologies, and changes in product mix). We have estimated the pre-tax discount rate using the Group's WACC. We risk-adjusted the discount rate for risks specific to each market, adding between nil and 27% (2022: nil and 17%) to the WACC as appropriate. The pre-tax discount rate of 11.9% (2022: 11.2%) we applied to our cash flow projections equates to a post-tax rate of 9.8% (2022: 9.3%). Our estimates of changes in selling prices and direct costs are based on past experience and our expectations of future changes in the market. The annual impairment test is performed on 31 March (2022: 31 March). There have been no additional indicators of impairment identified after this date that would require the impairment test to be reperformed. It is based on cash flows derived from our most recent financial and strategic plans approved by management, over the next five years taking into account the impact of climate change. A growth rate of 2.5% (2022: 2.5%) has been used to extrapolate cash flows beyond this period. Short-term profitability and growth rates are based on past experience, current trading conditions (including the impact of inflation) and our expectations of future changes in the market. The Genus PIC and Genus ABS CGUs are deemed to be significant. The individual country assumptions used to determine value in use for these CGUs are: | | Risk premium used to adjust discount rate | | Short-term growth rates (CAGR) | | Long-term growth rates | | | --- | --- | --- | --- | --- | --- | --- | | | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | | Genus PIC | nil-19% | nil-15% | nil-64% | nil-44% | 2.5% | 2.5% | | Genus ABS | nil-27% | nil-17% | nil-52% | 1%-42% | 2.5% | 2.5% | | | Weighted average risk-adjusted pre-tax discount rate | | Weighted average risk-adjusted post-tax discount rate | | Weighted average short-term growth rates (CAGR) | | | --- | --- | --- | --- | --- | --- | --- | | | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | | Genus PIC | 11.4% | 11.0% | 9.3% | 9.0% | 12% | 12% | | Genus ABS | 12.4% | 11.3% | 10.3% | 9.5% | 16% | 22% | The rates towards the higher end of the range above represent those which are applied to our smaller entities and those in emerging markets and hence appear high relative to others. # Sensitivity to changes in assumptions Management has performed the following sensitivity analysis: - changing the key assumptions, with other variables held constant; - simultaneously changing the key assumptions and incorporating the potential impact of the principal risks and uncertainties outlined on pages 62 to 64. In particular the impacts of biosecurity, market downturns, continuity of supply, increased competition and the impact of a global pandemic, taking into account the likely degree of available mitigating actions. Management has concluded that there are no reasonably possible changes in any one of the key assumptions that would cause the carrying amounts of goodwill to exceed the value in use of PIC and ABS. # 15. INTANGIBLE ASSETS Our Group Balance Sheet contains significant intangible assets, including acquired technology, customer relationships, software and our IntelliGen development project. # Accounting policies Identifiable intangible assets are recognised when the Group controls the asset. It is probable that future economic benefits attributed to the asset will flow to the Group and the cost of the asset can be reliably measured. For 'Software as a Service' ('SaaS') arrangements, we do not capitalise costs relating to the configuration and customization of SaaS arrangements as intangible assets except where control of the software exists. Intangible assets that we have acquired in a business combination since 1 April 2005 are identified and recognised separately from goodwill, where they meet the definition of an intangible asset and we can reliably measure their fair values. Their cost is their fair value at the acquisition date. After their initial recognition, we report these intangible assets at cost less accumulated amortisation and accumulated impairment losses. This is the same basis as for intangible assets acquired separately. FINANCIAL STATEMENTS 147 GENUS PLC / ANNUAL REPORT 2023 # 15. INTANGIBLE ASSETS CONTINUED The estimated useful lives for intangible assets are as follows: - Porcine and bovine genetics technology 20 years - Multiplier contracts 15 years - Brands 10 to 15 years - Customer relationships 10 to 17 years - IntelliGen 10 years - Patents and licences term of agreement (4 years) - Software 2 to 10 years # Intangible assets acquired separately We carry intangible assets acquired other than through a business combination at cost less accumulated amortisation and any impairment loss. We charge amortisation on a straight-line basis over their estimated useful lives and review the useful life and amortisation method at the end of each financial year, accounting for the effect of any changes in estimate on a prospective basis. | | Porcine and bovine genetics technology £m | Brands, multiplier contracts and customer relationships £m | Separately identified acquired intangible assets £m | Software £m | Assets under construction £m | IntelliGen £m | Patents, licence and other £m | Total £m | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | **Cost** | | | | | | | | | | Balance at 1 July 2021 | 51.7 | 81.6 | 133.3 | 20.0 | 2.7 | 23.6 | 4.3 | 183.9 | | Additions | 4.2 | 10.3 | 14.5 | 0.2 | 8.6 | - | - | 23.3 | | Acquisition | - | 0.4 | 0.4 | - | - | - | - | 0.4 | | Transfers | - | - | - | 7.7 | (7.7) | - | - | - | | Effect of movements in exchange rates | 0.6 | 10.6 | 11.2 | 1.0 | 0.1 | 3.2 | 0.1 | 15.6 | | **Balance at 30 June 2022** | **56.5** | **102.9** | **159.4** | **28.9** | **3.7** | **26.8** | **4.4** | **223.2** | | Additions | - | - | - | - | 9.3 | - | - | 9.3 | | Transfers | - | - | - | 5.9 | (5.9) | - | - | - | | Effect of movements in exchange rates | (0.2) | (4.0) | (4.2) | (0.3) | (0.1) | (1.1) | - | (5.7) | | **Balance at 30 June 2023** | **56.3** | **98.9** | **155.2** | **34.5** | **7.0** | **25.7** | **4.4** | **226.8** | | **Amortisation and impairment losses** | | | | | | | | | | Balance at 1 July 2021 | 36.0 | 66.2 | 102.2 | 13.0 | - | 8.4 | 4.0 | 127.6 | | Amortisation for the year | 3.0 | 5.3 | 8.3 | 1.7 | - | 2.5 | 0.1 | 12.6 | | Effect of movements in exchange rates | 0.1 | 8.6 | 8.7 | 0.8 | - | 1.4 | 0.1 | 11.0 | | **Balance at 30 June 2022** | **39.1** | **80.1** | **119.2** | **15.5** | **-** | **12.3** | **4.2** | **151.2** | | Amortisation for the year | 3.3 | 4.4 | 7.7 | 2.9 | - | 2.7 | 0.1 | 13.4 | | Effect of movements in exchange rates | 0.1 | (3.3) | (3.2) | (0.2) | - | (0.6) | - | (4.0) | | **Balance at 30 June 2023** | **42.5** | **81.2** | **123.7** | **18.2** | **-** | **14.4** | **4.3** | **160.6** | | **Carrying amounts** | | | | | | | | | | At 30 June 2023 | 13.8 | 17.7 | 31.5 | 16.3 | 7.0 | 11.3 | 0.1 | 66.2 | | At 30 June 2022 | 17.4 | 22.8 | 40.2 | 13.4 | 3.7 | 14.5 | 0.2 | 72.0 | | At 30 June 2021 | 15.7 | 15.4 | 31.1 | 7.0 | 2.7 | 15.2 | 0.3 | 56.3 | Included within brands, multiplier contracts and customer relationships are carrying amounts for brands of £0.6m (2022: £0.5m), multiplier contracts of £9.2m (2022: £11.1m) and customer relationships of £7.9m (2022: £11.2m). Included within the software class of assets is £9.5m (2022: £6.9m) and included in assets in the course of construction is £2.3m (2022: £2.7m) that relate to the ongoing development costs of GenusOne, our single global enterprise system and £1.6m (2022: £1m) that relate to IntelliGen. FINANCIAL STATEMENTS ### 148 GENUS PLC / ANNUAL REPORT 2023 ### NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED ### FOR THE YEAR ENDED 30 JUNE 2023 FINANCIAL STATEMENTS 16. BIOLOGICAL ASSETS The Group applies quantitative genetics and biotechnology to animal breeding. We use these techniques to identify and select animals with the genes responsible for superior milk and meat, high health and performance traits. We sell breeding animals, semen and embryos to customers, who use them to produce offspring which yield greater production efficiency and milk and meat quality, for the global dairy and meat supply chain. We recognise that accounting for biological assets is an area which includes key sources of estimation uncertainty. These are outlined in note 4 and sensitivities are provided below. Accounting policies Biological assets and inventories In bovine, we use research and development to identify genetically superior bulls in a number of breeds, primarily the Holstein dairy breed. Each selected bull has its performance measured against its peers, by using genomic evaluations and progeny testing of its daughters’ performance. We collect and freeze semen from the best bulls, to satisfy our customers’ demand. Farmers use semen from dairy breeds to breed replacement milking stock. They use the semen we sell from beef breeds in either specialist beef breeding herds, for multiplying breeding bulls for use in natural service, or on dairy cows to produce animals to be reared for meat. Our research and development also enables us to produce and select our own genetically superior females, from which we will breed future bulls. We hold our bovine biological assets for long-term internal use and classify them as non-current assets. We transfer bull semen to inventory at its fair value at the point of harvest, which becomes its deemed cost under IAS 2. We state our inventories at the lower of this deemed cost and net realisable value. Sorting semen is a production process rather than a biological process. As a result, we transfer semen inventory into sexed semen production at its fair value at the point of harvest, less the cost to sell, and it becomes a component of the production process. We carry sexed semen in finished goods at production cost. In porcine, we maintain and develop a central breeding stock (the ‘nucleus herd’), to provide genetically superior animals. These genetics help make farmers and food processors more profitable, by increasing their output of consistently high-quality products, which yield higher value. So we can capitalise on our intellectual property, we outsource the vast majority of our pig production to our global multiplier network. We also sell the offspring or semen we obtain from animals in the nucleus herd to customers, for use in commercial farming. Pig sales generally occur in one of two ways: ‘upfront’ and ‘royalty’. Under upfront sales, we receive the full fair value of the animal at the point we transfer it to the customer. Under royalty sales, the pig is regarded as comprising two separately identifiable components: its carcass and its genetic potential. We receive the initial consideration, which is approximately the animal’s carcass value, at the point we transfer the pig to the customer. We retain our interest in the pig’s genetic potential and receive royalties for the customer’s use of this genetic potential. The breeding animal biological assets we own, and our retained interest in the biological assets we have sold under royalty contracts, are recognised and measured at fair value at each balance sheet date. We recognise changes in fair value in the Income Statement, within operating profit for the period. We classify the porcine biological assets we are using as breeding animals as non-current assets and carry them at fair value. The porcine biological assets we are holding for resale, which are the offspring of the breeding herd, are carried at fair value and classified as current assets. Determination of fair values – biological assets IAS 41 ‘Agriculture’ requires us to show the carrying value of biological assets in the Group Balance Sheet. We determine this carrying value according to IAS 41’s provisions and show the net valuation movement in the Income Statement. There are important differences in how we value our bovine and porcine assets, as explained below. Bovine – we base the fair value of all bulls on the net cash flows we expect to receive from selling their semen, discounted at a current risk-adjusted market-determined rate. The significant assumptions determining the fair values are the expected future demand for semen, the estimated biological value and the marketable life of bulls. The biological value is the estimated value at the point of production. We adjust the fair value of the bovine herd and semen inventory where a third party earns a royalty from semen sales from a particular bull. Females are valued by reference to market prices and published independent genetic evaluations. Porcine – the fair value of porcine biological assets includes the animals we own entirely and our retained interest in the genetics of animals we have sold under royalty arrangements. The fair value of animals we own is calculated using the animals’ average live weights, plus a premium where we believe that their genetics make them saleable. We base the live weight value and the genetic premium on recent transaction prices we have achieved. The significant assumptions in determining fair values are the breeding animals’ expected life, the percentage of production animals that are saleable as breeding animals and the expected sales prices. For our retained interest in the genetics of animals sold under royalty contracts, we base the initial fair value on the fair values we achieved in recent direct sales of similar animals, less the amount we received upfront for the carcass element. We then remeasure the fair value of our retained interest at each reporting date. The significant assumption in determining the fair value of the retained interest is the animals’ expected life. We value the pigs in our pure line herds, which are the repository of our proprietary genetics, as a single unit of account. We do this using a discounted cash flow model, applied to the herds’ future outputs at current prices. The significant assumptions we make are the number of future generations attributable to the current herds, the fair value prices we achieve on sales, the animals’ expected useful lifespan and productivity, and the risk-adjusted discount rate. 149 GENUS PLC / ANNUAL REPORT 2023 # 16. BIOLOGICAL ASSETS CONTINUED Non-recognition of porcine multiplier contracts where the Group does not retain a contractual interest To manage commercial risk, a very large part of our porcine business model involves selling pigs to farmers (multipliers) who produce piglets on farms we neither manage nor control. We have the option, but not the obligation, to buy the offspring at slaughter market value plus a premium. Because the offspring have superior genetics, we can then sell them to other farmers at a premium. We do not recognise the right to purchase offspring on the Group Balance Sheet, as we enter into the contracts and continue to hold them for the purpose of receiving non-financial items (the offspring), in accordance with our expected purchase requirements. This means the option is outside the scope of IFRS 9. We do not recognise the offspring as biological assets under IAS 41, as we do not own or control them. | Fair value of biological assets | Bovine £m | Porcine £m | Total £m | | --- | --- | --- | --- | | Non-current biological assets | 92.0 | 187.9 | 279.9 | | Current biological assets | - | 39.6 | 39.6 | | Balance at 30 June 2021 | 92.0 | 227.5 | 319.5 | | Increases due to purchases | 23.3 | 225.8 | 249.1 | | Decreases attributable to sales | - | (234.8) | (234.8) | | Decrease due to harvest | (17.7) | (26.3) | (44.0) | | Changes in fair value less estimated sale costs | (19.6) | 69.2 | 41.6 | | Effect of movements in exchange rates | 10.0 | 25.4 | 35.4 | | Balance at 30 June 2022 | 88.0 | 278.8 | 366.8 | | Non-current biological assets | 88.0 | 245.7 | 333.7 | | Current biological assets | - | 33.1 | 33.1 | | Balance at 30 June 2022 | 88.0 | 278.8 | 366.8 | | Increases due to purchases | 23.2 | 228.9 | 252.1 | | Decreases attributable to sales | - | (259.4) | (259.4) | | Decrease due to harvest | (14.6) | (31.4) | (46.0) | | Changes in fair value less estimated sale costs | 6.6 | 38.2 | 44.8 | | Effect of movements in exchange rates | (3.9) | (12.4) | (16.3) | | Balance at 30 June 2023 | 99.3 | 242.7 | 342.0 | | Non-current biological assets | 99.3 | 218.9 | 318.2 | | Current biological assets | - | 23.8 | 23.8 | | Balance at 30 June 2023 | 99.3 | 242.7 | 342.0 | # Bovine Bovine biological assets include £8.9m (2022: £6.9m) representing the fair value of bulls owned by third parties but managed by the Group, net of expected future payments to such third parties, which are therefore treated as assets held under leases. There were no movements in the carrying value of the bovine biological assets in respect of sales or other changes during the year. A risk-adjusted rate of 13.2% (2022: 12.5%) has been used to discount future net cash flows from the sale of bull semen. Decreases due to harvest represent the semen extracted from the biological assets. Inventories of such semen are shown as biological asset harvest in note 20. # Porcine Included in increases due to purchases is the aggregate increase arising during the year on initial recognition of biological assets in respect of multiplier purchases, other than parent gilts, of £91.5m (2022: £101.2m). Decreases attributable to sales during the year of £259.4m (2022: £234.8) include £104.6 (2022: £74.0m) in respect of the reduction in fair value of the retained interest in the genetics of animals, other than parent gilts, transferred under royalty contracts. Also included is £96.5m (2022: £119.0m) relating to the fair value of the retained interest in the genetics in respect of animals, other than parent gilts, sold to customers under royalty contracts in the year. Total revenue in the year, including parent gilts, includes £281.9m (2022: £231.4m) in respect of these contracts, comprising £105.9m (2022: £83.2m) on initial transfer of animals and semen to customers and £176.0m (2022: £148.2m) in respect of royalties received. A risk-adjusted rate of 12.9% (2022: 10.3%) has been used to discount future net cash flows from the expected output of the pure line porcine herds. The number of future generations which have been taken into account is seven (2022: seven) and then estimated useful lifespan is 1.4 years (2022: 1.4 years). FINANCIAL STATEMENTS 150 GENUS PLC / ANNUAL REPORT 2023 # NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 30 JUNE 2023 16. BIOLOGICAL ASSETS CONTINUED Year ended 30 June 2023 | | Bovine £m | Percive £m | Total £m | | --- | --- | --- | --- | | Changes in fair value of biological assets | 6.6 | 38.2 | 44.8 | | Inventory transferred to cost of sales at fair value | 1.4 | (31.4) | (30.0) | | Biological assets transferred to cost of sales at fair value | - | (31.4) | (31.4) | | | 8.0 | (24.6) | (16.6) | | Fair value movement in related financial derivative | - | (0.3) | (0.3) | | Net IAS 41 valuation movement on biological assets | 8.0 | (24.9) | (16.9) | Year ended 30 June 2022 | | Bovine £m | Percive £m | Total £m | | --- | --- | --- | --- | | Changes in fair value of biological assets | (19.6) | 61.2 | 40.6 | | Inventory transferred to cost of sales at fair value | (10.3) | (26.3) | (36.6) | | Biological assets transferred to cost of sales at fair value | - | (10.3) | (10.3) | | | (29.9) | 24.6 | (5.3) | | Fair value movement in related financial derivative | - | (0.1) | (0.1) | | Net IAS 41 valuation movement on biological assets | (29.9) | 24.5 | (5.4) | † This represents the difference between operating profit prepared under IAS 41 and operating profit prepared under historical cost accounting, which forms part of the reconciliation to adjusted operating profit (see APM). Fair value measurement All of the biological assets inputs fall under Level 3 of the hierarchy defined in IFRS 13. Significant increases/(decreases) in any of these inputs in isolation would result in a significantly lower or higher fair value measurement. FINANCIAL STATEMENTS 151 GENUS PLC / ANNUAL REPORT 2023 # 16. BIOLOGICAL ASSETS CONTINUED Unobservable inputs and key sources of estimation uncertainty | | 2023 | 2022 | Sensitivity | | --- | --- | --- | --- | | Bovine | | | | | Risk-adjusted discount rate¹ | 13.2% | 12.5% | 1 percentage point increase in the discount rate would result in approximately a £2.7m (2022: £2.3m) reduction in value. | | Value at point of production² | 32.7% | 32.1% | 1 percentage point decrease in the rate would result in approximately a £6.2m (2022: £5.1m) reduction in value. | | Percentage of new dairy bulls to be produced internally in future years² | FY24.76% FY25.81% FY26.84% FY27 and thereafter 85% | FY23.71% FY24.81% FY25.86% FY26 and thereafter 87% | If percentage remained at FY23 level of 79% (2022: 61%), there would be a decrease in value of approximately £0.4m (2022: £3.6m). | | Age profile of Holstein bulls generating future sales² | FY24 – avg age 4.0 yrs FY25 – avg age 4.0 yrs FY26 – avg age 4.0 yrs FY27 and thereafter – avg age 4.0 yrs | FY23 – avg age 4.0 yrs FY24 – avg age 4.0 yrs FY25 – avg age 4.0 yrs FY26 and thereafter – avg age 4.0 yrs | If age profile remains at FY23 average age of 4.1 years (2022: 4.2 years), there would be an increase in value of approximately £0.5m (2022: £1.4m). | | Age profile of US beef-on-dairy bulls generating future sales² | FY24 – avg age 4.5 yrs FY25 – avg age 4.5 yrs FY26 – avg age 4.5 yrs FY27 and thereafter – avg age 4.3 yrs | FY23 – avg age 5.1 yrs FY24 – avg age 4.8 yrs FY25 – avg age 4.8 yrs FY26 and thereafter – avg age 4.8 yrs | If age profile remains at FY23 average age of 3.9 years (2022: 5.7 years), there would be a decrease in value of approximately £1.2m (2022: £3.0m increase). | | Long-term dairy volume growth rate | 1.8% | 2.4% | 1 percentage point decrease in the growth rate would result in approximately a £0.2m (2022: £0.2m) reduction in value. | | Short-term dairy volume growth rate | 1.9% | 3.7% | 1 percentage point decrease in the growth rate would result in approximately a £1.4m (2022: £1.2m) reduction in value. | | Growth in unit prices¹ | 4.3% | 1.2% | 1 percentage point increase in the forecasted unit price growth would result in approximately £5.0m increase in value (2022: £4.5m). | | Porcine | | | | | Risk-adjusted discount rate – pure line here² | 12.9% | 10.3% | 1 percentage point increase in the discount rate would result in approximately a £3.1m (2022: £3.5m) reduction in value. Any additional increase in the percentage would lead to a linear impact. | | Proportion of animals that go to breeding sales² | Gilts – 10.7% | Gilts – 7.9% | 1 percentage point increase in the go to breeding sales would result in approximately £6.7 (2022: £10.5m) increase in value. | | | Boars – 10.6% | Boars – 8.2% | 1 percentage point increase in the go to breeding sales would result in approximately £7.5m (2022: £12.0m) increase in value. | 1. Key sources of estimation uncertainty | Additional information | 2023 | 2022 | | --- | --- | --- | | Bovine | | | | Quantities at period end | | | | Number of bulls in production | 953 | 1,015 | | Number of bulls under development (including calves) | 749 | 696 | | Total number of bulls | 1,702 | 1,711 | | Number of obese of semen valued in inventory | 16.1m | 17.2m | | Amounts during the year | | | | Fair value of agricultural produce – semen harvested during the period | £14.6m | £17.7m | | Porcine | | | | Quantities at period end | | | | Number of pigs (own farms) | 81,846 | 95,050 | | Number of pigs, excluding parent gilts, despatched on a royalty basis and valued at fair value | 65,407 | 91,591 | | Amounts during the year | | | | Fair value of agricultural produce – semen harvested during the period | £31.3m | £26.3m | FINANCIAL STATEMENTS 152 GENUS PLC / ANNUAL REPORT 2023 # NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED # FOR THE YEAR ENDED 30 JUNE 2023 # 17. PROPERTY, PLANT AND EQUIPMENT We make significant investments in our property, plant and equipment. All assets are depreciated over their useful economic lives. # Accounting policies We state property, plant and equipment at cost, together with any directly attributable acquisition expenses, or at their latest valuation, less depreciation and any impairment losses. Where parts of an item of property, plant and equipment have different useful lives, we account for them separately. We charge depreciation to the Income Statement on a straight-line basis, over the estimated useful lives of each part of an asset. The estimated useful lives are as follows: Freehold buildings 10 to 40 years Leasehold buildings over the term of the lease Plant and equipment 3 to 20 years Motor vehicles 3 to 5 years We do not depreciate land or assets under construction. # Right-of-use assets Right-of-use assets are measured initially at cost, based on the value of the associated lease liability, adjusted for any payments made before inception, initial direct costs and an estimate of the dismantling, removal and restoration costs required in the terms of the lease. Subsequent to initial recognition, we record an interest charge in respect of the lease liability. The related right-of-use asset is depreciated over the term of the lease or, if shorter, the useful economic life of the leased asset. The lease term shall include the period of an extension option where it is reasonably certain that the option will be exercised. Where the lease contains a purchase option, the asset is written off over the useful life of the asset when it is reasonably certain that the purchase option will be exercised. | | Land and buildings £m | Plant, motor vehicles and equipment £m | Assets under construction £m | Total owned assets £m | Land and buildings £m | Plant, motor vehicles and equipment £m | Total right-of-use assets £m | Total £m | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | **Cost or deemed cost** | | | | | | | | | | Balance at 1 July 2021 | 66.6 | 88.0 | 22.1 | 176.7 | 20.7 | 26.0 | 46.7 | 223.4 | | Additions | 0.2 | 3.9 | 40.3 | 44.4 | 9.2 | 6.1 | 15.3 | 59.7 | | Transfers | 23.5 | 12.8 | (36.3) | - | - | - | - | - | | Disposals | (1.4) | (2.0) | - | (3.4) | (0.5) | (6.0) | (6.5) | (9.9) | | Effect of movements in exchange rates | 11.3 | 10.9 | 3.5 | 25.7 | 2.1 | 2.3 | 4.4 | 30.1 | | **Balance at 30 June 2022** | 100.2 | 113.6 | 29.6 | 243.4 | 31.5 | 28.4 | 59.9 | 303.3 | | Additions | 0.2 | 3.1 | 19.8 | 23.1 | 2.0 | 8.9 | 10.9 | 34.0 | | Transferred from assets held for sale | 0.2 | - | - | 0.2 | - | - | - | 0.2 | | Transfers | 18.3 | 12.1 | (30.4) | - | - | - | - | - | | Disposals | (1.3) | (3.7) | (0.3) | (5.3) | - | (4.9) | (4.9) | (10.2) | | Effect of movements in exchange rates | (6.4) | (5.4) | (1.8) | (13.6) | (1.8) | (0.8) | (2.6) | (16.2) | | **Balance at 30 June 2023** | 111.2 | 119.7 | 16.9 | 247.8 | 31.7 | 31.6 | 63.3 | 311.1 | | **Depreciation and impairment losses** | | | | | | | | | | Balance at 1 July 2021 | 24.5 | 56.9 | - | 81.4 | 6.5 | 12.5 | 19.0 | 100.4 | | Depreciation for the year | 3.8 | 11.0 | - | 14.8 | 4.8 | 6.8 | 11.6 | 26.4 | | Disposals | (1.3) | (1.8) | - | (3.3) | (0.5) | (5.9) | (6.4) | (9.5) | | Impairment | 0.8 | 0.1 | - | 0.9 | - | - | - | 0.9 | | Effect of movements in exchange rates | 4.4 | 7.1 | - | 11.5 | 0.6 | 1.6 | 2.2 | 13.7 | | **Balance at 30 June 2022** | 32.2 | 73.3 | - | 105.5 | 11.4 | 15.0 | 26.4 | 131.9 | | Depreciation for the year | 5.6 | 12.8 | - | 18.4 | 4.6 | 7.2 | 11.8 | 30.2 | | Disposals | (1.1) | (2.7) | - | (3.8) | - | (4.7) | (4.7) | (8.5) | | Impairment | - | - | - | - | - | - | - | - | | Effect of movements in exchange rates | (2.2) | (3.6) | - | (5.8) | (0.7) | (0.4) | (1.1) | (6.9) | | **Balance at 30 June 2023** | 34.5 | 79.8 | - | 114.3 | 15.3 | 17.1 | 32.4 | 146.7 | | **Carrying amounts** | | | | | | | | | | **At 30 June 2023** | 76.7 | 39.9 | 16.9 | 133.5 | 16.4 | 14.5 | 30.9 | 164.4 | | **At 30 June 2022** | 68.0 | 40.3 | 29.6 | 137.9 | 20.1 | 13.4 | 33.5 | 171.4 | FINANCIAL STATEMENTS 153 GENUS PLC / ANNUAL REPORT 2023 ### 18. EQUITY-ACCOUNTED INVESTES We hold interests in several joint ventures and associates where we have significant influence. #### Accounting policies Joint ventures are entities over whose activities we have joint control, under a contractual agreement. The Group Financial Statements include the Group's share of profit or loss arising from joint ventures. Associates are entities in which the Group has significant influence, but not control, over the financial and operating policies. The Group Financial Statements include the Group's share of the total recognised income and expense of associates on an equity-accounted basis, from the date that significant influence commences until the date it ceases. When our share of losses exceeds our interest in an associate, we reduce the carrying amount to nil and stop recognising further losses, except to the extent that the Group has incurred legal or constructive obligations or made payments on an associate's behalf. Under the equity method, investments in joint ventures or associates are initially recognised in the Group Balance Sheet at cost and adjusted thereafter to recognise the Group's share of the profit or loss and other comprehensive income of the joint ventures and associates. Related-party transactions with the Group's joint ventures and associates primarily comprise the sale of products and services. As each arrangement is a separate legal entity and control rights are substantially equal with the other parties, no significant judgements are required. The Group's share of profit after tax in its equity-accounted investees for the year was £10.5m (2022: £5.2m). The carrying value of the investments is reconciled as follows: | | 2022 £m | 2022 £m | | --- | --- | --- | | Balance at 1 July | 41.2 | 34.1 | | Share of post-tax retained profits of joint ventures and associates | 10.5 | 5.2 | | Additions | 1.0 | 2.2 | | Long-term loan investment | 1.9 | - | | Dividends received from Agroceres – PIC Genética de Suinos Ltda (Brazil) | (2.4) | (3.1) | | Dividends received from Societá Agricola GENEETIC S.r.l (Italy) | (0.2) | (0.1) | | Effect of other movements including exchange rates | 1.5 | 2.9 | | Balance at 30 June | 53.5 | 41.2 | The additions in the year solely relate to cash injections made to Inner Mongolia Haoxiang Pig Breeding Co. Ltd. to fund their operation. There are no significant restrictions on the ability of the joint ventures and associates to transfer funds to the Parent, other than those imposed by the Companies Act 2006 or equivalent government rules within the joint venture's jurisdiction. Related-party transactions with joint ventures and associates | | Transaction value | | Balance outstanding | | | --- | --- | --- | --- | --- | | | 2022 £m | 2022 £m | 2022 £m | 2022 £m | | Sale of goods and services to joint ventures and associates | - | - | - | 0.3 | | Purchase of goods and services from joint ventures and associates | 4.1 | 6.5 | - | - | All outstanding balances with joint ventures and associates are priced on an arm's length basis and are to be settled in cash within six months of the reporting date. None of the balances are secured. Summary financial information for equity-accounted investees, adjusted for the Group's percentage ownership, is shown on the following page. FINANCIAL STATEMENTS 154 GENUS PLC / ANNUAL REPORT 2023 # NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED # FOR THE YEAR ENDED 30 JUNE 2023 18. EQUITY-ACCOUNTED INVESTEES CONTINUED Joint ventures and associates – year ended 30 June 2023 | Net assets | Ownership | Cash and cash equivalent £m | Other current assets £m | Non-current assets £m | Biological assets £m | Total assets £m | Current liabilities £m | Total liabilities £m | Net assets £m | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Agricores – PIC Genética de Suínos Ltda (Brazil) | 49% | 3.1 | 10.9 | 40.2 | 9.8 | 64.0 | (19.5) | (19.5) | 44.5 | | Inner Mongolia Haoxiang Pig Breeding Co. Ltd. (China) | 49% | 0.2 | 1.0 | 5.0 | (0.1) | 6.1 | (0.2) | (5.1) | 1.0 | | Chitale Genus ABS (India) Private Limited (India) | 50% | 0.3 | 1.0 | - | 0.2 | 1.5 | - | (0.1) | 1.4 | | Avicenter Mellevang A/S Yontan Xinyongxiang Technology Co., Ltd (China) | 49% | - | - | - | - | - | - | - | - | | Kelect Limited (United Kingdom) | 49% | 2.0 | 1.4 | 0.7 | (0.3) | 3.8 | (0.3) | (0.3) | 3.5 | | Societa Agricola GENEETIC S.r.l. (Italy) | 39% | 0.1 | 0.2 | 2.3 | - | 2.6 | (0.1) | (0.1) | 2.5 | | Societa Agricola GENEETIC Service S.r.l. (Italy) | 33% | 0.1 | 0.6 | - | 0.4 | 1.1 | (0.6) | (0.6) | 0.5 | | | 33% | - | - | - | 0.1 | 0.1 | - | - | 0.1 | | Net assets | | 5.8 | 15.1 | 48.2 | 10.1 | 79.2 | (20.7) | (25.7) | 53.5 | 1 Classified as an associate. All other investments are classified as joint ventures | Income Statement | Ownership | Revenue £m | Net 000-01 valuation movement on biological assets £m | Expenses £m | Operating profit / (loss) £m | Taxation £m | Profit / (loss) after tax £m | | --- | --- | --- | --- | --- | --- | --- | --- | | Agricores – PIC Genética de Suínos Ltda (Brazil) | 49% | 38.8 | 2.5 | (25.7) | 15.6 | (3.9) | 11.7 | | Inner Mongolia Haoxiang Pig Breeding Co. Ltd. (China) | 49% | 1.8 | 1.1 | (4.4) | (1.5) | - | (1.5) | | Yontan Xinyongxiang Technology Co., Ltd (China) | 49% | 5.2 | - | (5.3) | (0.1) | - | (0.1) | | Chitale Genus ABS (India) Private Limited (India) | 50% | 0.5 | - | (0.3) | 0.2 | - | 0.2 | | Avicenter Mellevang A/S | 49% | - | - | - | - | - | - | | Kelect Limited (United Kingdom) | 39% | 0.7 | - | (0.6) | 0.1 | - | 0.1 | | Societa Agricola GENEETIC S.r.l. (Italy) | 33% | 1.0 | - | (0.9) | 0.1 | - | 0.1 | | Societa Agricola GENEETIC Service S.r.l. (Italy) | 33% | 0.1 | - | (0.1) | - | - | - | | Profit / (loss) | | 48.1 | 3.6 | (37.5) | 14.4 | (3.9) | 10.5 | 1 Classified as an associate. All other investments are classified as joint ventures Joint ventures and associates have a December year end, except Chitale Genus ABS (India) Private Limited, which has a March year end, and Kelect Limited, which has a June year end. Where the year end differs from the year of the Group this is due to local regulatory requirements. FINANCIAL STATEMENTS 155 GENUS PLC / ANNUAL REPORT 2023 # 18. EQUITY-ACCOUNTED INVESTIES CONTINUED Joint ventures and associates – year ended 30 June 2022 | Net assets | Ownership | Cash and cash equivalent £m | Other current assets £m | Non-current assets £m | Biological assets £m | Total assets £m | Current liabilities £m | Total liabilities £m | Net assets / liabilities £m | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Agraseries – PIC Genético de Suinos Ltda (Brasil) | 49% | 0.2 | 17.6 | 23.6 | 6.9 | 48.3 | (15.2) | (15.2) | 33.1 | | Inner Mongolia Haoxiang Pig Breeding Co. Ltd. (China)^{1} | 49% | – | 0.4 | 1.4 | (1.2) | 0.6 | (0.8) | (0.8) | (0.2) | | Chitole Genus ABS (India) Private Limited (India) | 50% | 0.3 | 0.3 | 1.1 | – | 1.7 | (0.1) | (0.4) | 1.3 | | Adscenter Mallevang A/S^{1} | 49% | – | – | – | – | – | – | – | – | | Yamian Kinyangeang Technology Co., Ltd (China)^{1} | 49% | 2.7 | 1.3 | 0.8 | (0.5) | 4.3 | (0.3) | (0.3) | 4.0 | | Xellect Limited (United Kingdom)^{1} | 39% | 0.1 | 0.2 | 2.2 | – | 2.5 | (0.1) | (0.1) | 2.4 | | Società Agricola GENEETIC S.r.l. (Italy)^{1} | 33% | – | 0.6 | 0.4 | – | 1.0 | (0.4) | (0.4) | 0.6 | | Società Agricola GENEETIC Service S.r.l. (Italy)^{1} | 33% | – | – | – | – | – | – | – | – | | Net assets | | 3.3 | 20.4 | 29.5 | 5.2 | 58.4 | (16.9) | (17.2) | 41.2 | 1. Classified as an associate. All other investments are classified as joint ventures. | Income Statement | Ownership | Revenue £m | Net US $'s valuation statement on biological assets £m | Expenses £m | Operating profit / loss £m | Taxation £m | Profit / loss after tax £m | | --- | --- | --- | --- | --- | --- | --- | --- | | Agraseries – PIC Genético de Suinos Ltda (Brasil) | 49% | 31.6 | (0.7) | (21.7) | 9.2 | (2.6) | 6.6 | | Inner Mongolia Haoxiang Pig Breeding Co. Ltd. (China)^{1} | 49% | – | (1.2) | (1.0) | (2.2) | – | (2.2) | | Yamian Kinyangeang Technology Co., Ltd (China)^{1} | 49% | 5.5 | 0.5 | (5.6) | 0.4 | – | 0.4 | | Chitole Genus ABS (India) Private Limited (India) | 50% | 0.3 | – | (0.2) | 0.1 | – | 0.1 | | Adscenter Mallevang A/S^{1} | 49% | – | – | – | – | – | – | | Xellect Limited (United Kingdom)^{1} | 39% | 0.6 | – | (0.5) | 0.1 | – | 0.1 | | Società Agricola GENEETIC S.r.l. (Italy)^{1} | 33% | 1.9 | – | (1.7) | 0.2 | – | 0.2 | | Società Agricola GENEETIC Service S.r.l. (Italy)^{1} | 33% | – | – | – | – | – | – | | Profit / (loss) | | 39.9 | (1.4) | (30.7) | 7.8 | (2.6) | 5.2 | 1. Classified as an associate. All other investments are classified as joint ventures. # 19. OTHER INVESTMENTS We hold a number of unlisted and listed investments, mainly comprising shares in listed entity National Milk Records plc ('NMR'). # Accounting policies Financial assets at fair value through other comprehensive income ('FVOCI') comprise equity securities which are not held for trading, and which the Group has irrevocably elected at initial recognition to recognise as FVOCI. The Group considers this classification relevant as these are strategic investments. Financial assets at FVOCI are adjusted to the fair value of the asset at the balance sheet date, with any gain or loss being recognised in other comprehensive income and held as part of other reserves. On disposal any gain or loss is recognised in other comprehensive income. At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through income statement, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through income statement are expensed in the Income Statement. FINANCIAL STATEMENTS 156 GENUS PLC / ANNUAL REPORT 2023 # NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED # FOR THE YEAR ENDED 30 JUNE 2023 # 19. OTHER INVESTMENTS CONTINUED Other investments may include equity investments (where the Group does not have control, joint control or significant influence in the investee), short-term deposits with banks and other investments with original maturities of more than three months. Any dividends received are recognised in the Income Statement. | Investments carried at fair value | 2023 £m | 2022 £m | | --- | --- | --- | | Listed equity shares – Caribou Biosciences, Inc. | 0.4 | 4.4 | | Unlisted equity shares – Dairy LLC (BovSync) | 2.4 | 2.2 | | Listed equity shares – NMR | 4.4 | 2.1 | | Unlisted equity shares – Other | 1.6 | 1.5 | | Other investments | 8.8 | 10.2 | Caribou Biosciences Inc shares are measured at fair value using the valuation basis of a Level 1 classification. Caribou shares are publicly traded on the NASDAQ. We hold a strategic non-controlling interest in BovSync, a herd management software company. The investment is measured at fair value and the valuation basis of a Level 3 classification. NMR ordinary shares were acquired as part of the NMR pension agreement, and are measured at fair value. The valuation basis is Level 1 classification, where fair value techniques are quoted (unadjusted) prices in active markets for identical assets and liabilities. Other unlisted equity investments primarily consist of strategic non-controlling interests in bovine technology companies, which are measured at fair value and the valuation basis is Level 3 classification, where fair value techniques use inputs which have a significant effect on the recorded fair value and are not based on observable market data. # 20. INVENTORIES Our inventory primarily consists of bovine semen, raw materials and ancillary products. # Accounting policies Inventory (excluding biological assets' harvest) is stated at the lower of cost and net realisable value. Cost is determined on the basis of weighted average costs and comprises direct materials and, where appropriate, direct labour costs and those overheads that have been incurred in bringing the inventories to their present location and condition. For our biological assets accounting policies, see note 16. | | 2023 £m | 2022 £m | | --- | --- | --- | | Biological assets' harvest classed as inventories | 22.7 | 20.9 | | Raw materials and consumables | 3.9 | 3.6 | | Goods held for resale | 34.7 | 26.4 | | Inventories | 61.3 | 50.9 | # 21. TRADE AND OTHER RECEIVABLES Our trade and other receivables mainly consist of amounts owed to us by customers and amounts we pay to our suppliers in advance. # Accounting policies We state trade and other receivables at their amortised cost less any impairment losses. | | 2023 £m | 2022 £m | | --- | --- | --- | | Trade receivables (restated) | 95.4 | 95.7 | | Less expected credit loss allowance | (3.9) | (4.3) | | Trade receivables net of impairment | 91.5 | 91.4 | | Other debtors | 8.1 | 10.7 | | Prepayments | 7.7 | 8.5 | | Contract assets (restated) (note 24) | 22.4 | 17.3 | | Other taxes and social security | 2.4 | 1.6 | | Current trade and other receivables | 132.1 | 129.5 | | Other debtors | 3.0 | 3.7 | | Contract assets (note 24) | 5.2 | 4.9 | | Non-current other receivables | 8.2 | 8.6 | | Trade and other receivables | 140.3 | 138.1 | 1. See note 2 for details of the prior period requirement FINANCIAL STATEMENTS 157 GENUS PLC / ANNUAL REPORT 2023 # 21. TRADE AND OTHER RECEIVABLES CONTINUED # Trade receivables The average credit period our customers take on the sales of goods is 48 days (2022 (restated) 1: 56 days). We do not charge interest on receivables for the first 30 days from the date of the invoice. The Group always measures the loss allowance for trade receivables at an amount equal to lifetime expected credit losses (ECLs). The ECLs on trade receivables are estimated using a provision matrix by reference to post default experience of the debtor and an analysis of the debtor's current financial position, adjusted for factors that are specific to the general economic conditions of the industry and country in which the debtor operates and an assessment of both the current and the forecast direction of conditions at the reporting date. The Group writes off a trade receivable when there is information indicating that the debtor is in severe financial difficulty and there is no realistic prospect of recovery, such as when the debtor has been placed under liquidation or has entered into bankruptcy proceedings. The Group recognises ECLs with reference to the following matrix, in accordance with the simplified approach permitted in IFRS 9. There has been no change in the estimation techniques during the current reporting period. A component of the calculation is the risk premium of the countries in which our customers operate. The risk premiums are updated on each reporting date, to reflect changes in the global economy. | | | North America | Latin America | EMEA | Asia | | --- | --- | --- | --- | --- | --- | | 2023 | Risk premium (%) | 1.0% | 5.6% | 3.1% | 2.6% | | | Trade receivables (£m) | 19.8 | 23.6 | 34.5 | 17.5 | | 2022 | Risk premium (%) | 1.0% | 5.1% | 3.5% | 3.7% | | | Trade receivables (£m) (restated*) | 23.2 | 22.3 | 37.6 | 12.6 | The following table shows the movement in lifetime ECLs that has been recognised for trade receivables, in accordance with the simplified approach set out in IFRS 9. | | 2022 £m | 2022 £m | | --- | --- | --- | | Balance at the start of the year | 4.3 | 5.0 | | Change in loss allowance due to new trade and other receivables originated net of those derecognised due to settlement | 3.4 | 2.3 | | Amounts written off as uncollectable | - | - | | Impairment losses reversed | (3.9) | (3.2) | | Effect of movements in exchange rates | 0.1 | 0.2 | | Balance at the end of the year | 3.9 | 4.3 | The aging of trade receivables is presented below: | Days past due | Trade receivables | | Trade receivables net of impairment | | | --- | --- | --- | --- | --- | | | 2022 £m | 2022 £m | 2022 £m | 2022 £m | | Not yet due | 69.3 | 72.1 | 67.1 | 69.7 | | 0-30 days | 13.2 | 11.7 | 12.8 | 11.4 | | 31-90 days | 8.1 | 7.4 | 7.7 | 7.2 | | 91-180 days | 3.7 | 3.0 | 3.1 | 2.5 | | Over 180 days | 1.1 | 1.5 | 0.8 | 0.6 | | | 95.4 | 95.7 | 91.5 | 91.4 | No customer represents more than 5% of the total balance of trade receivables (2022: no more than 5%). The Directors consider that the carrying amount of trade and other receivables approximates their fair value. Trade and other receivables denominated in currencies other than Sterling comprise £42.3m denominated in US Dollars (2022: £44.1m), £15.5m denominated in Euros (2022: £13.3m) and £49.8m denominated in other currencies (2022: £49.7m). # Other debtors Included in other debtors is an amount of £2.3m (2022: £3.5m) which comprises security deposits held over farms being constructed. FINANCIAL STATEMENTS ### 158 GENUS PLC / ANNUAL REPORT 2023 ### NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED ### FOR THE YEAR ENDED 30 JUNE 2023 FINANCIAL STATEMENTS 22. CASH AND CASH EQUIVALENTS We hold cash and bank deposits which have a maturity of three months or less, to enable us to meet our short-term liquidity requirements. Accounting policies Cash and cash equivalents comprise cash balances. Bank overdrafts that are repayable on demand form an integral part of our cash management and are included in interest-bearing loans and borrowings less than one year. 2023 £m 2022 £m Cash at bank and in hand 36.3 38.8 The carrying amount of these assets approximates to their fair value. The credit quality of cash and cash equivalents can be assessed by reference to external credit ratings of the counterparty where the account or deposit is placed. Counterparties with external credit ratings 2023 £m 2022 £m A to AA- 25.8 24.1 BBB- to BBB 8.0 8.0 B- to BB+ 1.1 1.9 CCC to CCC- 0.6 0.3 No ratings 0.8 4.5 Cash at bank and in hand 36.3 38.8 Within our cash and cash equivalents there is a cash balance of £3.1m (2022: £4.5m) in our Russian entities of which £0.8m (2022: £0.2m) is not currently available to be used by the Group due to being received from and held in sanctioned banks. 23. TRADE AND OTHER PAYABLES Our trade and other payables mainly consist of amounts we owe to our suppliers that have been invoiced or are accrued. They also include taxes and social security amounts due in relation to our role as an employer. Accounting policies Trade payables are not interest bearing and are stated at their nominal value. 2023 £m 2022 £m Trade payables 34.8 36.0 Other payables 11.6 8.2 Accrued expenses 58.1 61.4 Contract liabilities (note 24) 9.8 10.1 Other taxes and social security 7.7 9.0 Current trade and other payables 122.0 124.7 Contract liabilities (note 24) – 0.2 Non-current trade and other payables – 0.2 The average credit period taken for trade purchases is 32 days (2022: 39 days). Other payables include an amount of £7.5m (2022: £5.1m) being repayable on demand with a third-party business partner. Payables denominated in currencies other than Sterling comprise £52.9m denominated in US Dollars (2022: £55.9m), £14.9m denominated in Euros (2022: £11.8m) and £30.3m denominated in other currencies (2022: £33.7m). The carrying values of these liabilities are a reasonable approximation of their fair values. 24. CONTRACT BALANCES Accounting policy A contract asset is recognised when the Group’s right to consideration is conditional on something other than the passage of time, for example the completion of future performance obligations under the terms of the contract with the customer. In some instances, the Group receives payments from customers based on a billing schedule, as established in the contract, which may not match the pattern of performance under the contract. Where payment is received ahead of performance a contract liability will be created, and where performance obligations are satisfied ahead of billing, then a contract asset will be recognised. 159 GENUS PLC / ANNUAL REPORT 2023 # 24. CONTRACT BALANCES CONTINUED | | 2022 £m | (revised) 2022 £m | | --- | --- | --- | | Current contract assets (restated) | 22.4 | 17.3 | | Non-current contract assets | 5.2 | 4.9 | | Contract assets (note 21) | 27.6 | 22.2 | | Current contract liabilities | (9.8) | (10.1) | | Non-current contract liabilities | - | (0.2) | | Contract liabilities (note 23) | (9.8) | (10.3) | | | (revised) Contract assets £m | Contract liabilities £m | | --- | --- | --- | | Balance at 1 July 2021 | 16.2 | (12.0) | | Increases as a result of performance in advance of billing | (19.0) | - | | Transfers to receivables during the year | (153.3) | - | | Increases as a result of billing ahead of performance | - | (80.8) | | Decreases as a result of revenue recognised in the year | - | 83.4 | | Effect of movements in exchange rates | 0.3 | (0.9) | | Balance at 30 June 2022 | 22.2 | (10.3) | | Increases as a result of performance in advance of billing | 175.5 | - | | Transfers to receivables during the year | (169.2) | - | | Increases as a result of billing ahead of performance | - | (63.8) | | Decreases as a result of revenue recognised in the year | - | 63.6 | | Effect of movements in exchange rates | (0.9) | 0.7 | | Balance at 30 June 2023 | 27.6 | (9.8) | 1 See note 2 to details of the (see below) restatement In some cases, the Group receives payments from customers based on a billing schedule, as established in our contracts. The contract assets relate to revenue recognised for performance in advance of scheduled billing and have increased, as the Group has provided more services ahead of the agreed payment schedules for certain contracts. The contract liability relates to payments received in advance of performance under contract and varies based on performance under these contracts. The transaction price allocated to partially unsatisfied performance obligations at 30 June 2023 is £15.0m (2022: £12.1m). It is expected that the Group will recognise this revenue over the next six years. # 25. PROVISIONS A provision is a liability recorded in the Group Balance Sheet, where there is uncertainty over the timing or amount that will be paid, and is therefore estimated. The main provisions we hold relate to litigation damages, legal provisions, customer claims and share forfeiture. # Accounting policies We recognise a provision in the Balance Sheet when an event results in the Group having a current legal or constructive obligation, and it is probable that we will have to settle the obligation through an outflow of economic benefits. If the effect is material, we discount provisions to their present value. | | ST litigation £m | Share forfeiture £m | Other provisions £m | Total £m | | --- | --- | --- | --- | --- | | Balance at 1 July 2021 | 9.4 | 0.3 | 2.7 | 12.4 | | Additional provision in the year | - | 0.2 | 0.5 | 0.7 | | Utilisation of provision | (0.4) | - | (0.1) | (0.5) | | Release of provision | (0.1) | - | (0.1) | (0.2) | | Effect of movement in exchange rates | 1.2 | - | 0.3 | 1.5 | | Balance at 30 June 2022 | 10.1 | 0.5 | 3.3 | 13.9 | | Additional provision in the year | 0.1 | - | 0.5 | 0.6 | | Utilisation of provision | (0.1) | - | (1.1) | (1.2) | | Release of provision | - | (0.2) | (0.4) | (0.6) | | Effect of movement in exchange rates | (0.4) | - | (0.2) | (0.6) | | Balance at 30 June 2023 | 9.7 | 0.3 | 2.1 | 12.1 | FINANCIAL STATEMENTS 160 GENUS PLC / ANNUAL REPORT 2023 # NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 30 JUNE 2023 # 25. PROVISIONS CONTINUED | | 2022 £m | 2022 £m | | --- | --- | --- | | Current | 1.8 | 1.9 | | Non-current | 10.3 | 12.0 | | | 12.1 | 13.9 | ST litigation relates specifically to our litigation only with Sexing Technologies, as described in note 7. The share forfeiture provision of £0.3m relates to potential claims that could be made by untraded members over the next three years, relating to the resale proceeds of shares that were identified during the prior year as being forfeited. Other provisions mainly relate to legal provisions (excluding ST litigation) and customers' claims. The timing and cash flows associated with the majority of legal claims are expected to be less than one year. However, for some legal claims the timing of cash flows may be long term in nature and are disclosed as such. # 26. FINANCIAL INSTRUMENTS This note details our treasury management and financial risk management objectives and policies, as well as the Group's exposure and sensitivity to credit, liquidity, interest and foreign exchange rate risk, and the policies in place to monitor and manage these risks. # Financial risk management objectives The Group's corporate treasury function provides services to the business, coordinates our access to domestic and international financial markets, and monitors and manages the financial risks relating to the Group's operations, through internal risk reports that analyse exposures by degree and magnitude of risks. These risks include market risk (including currency risk, fair value interest rate risk and price risk), credit risk, liquidity risk and cash flow interest rate risk. We seek to minimise the effects of these risks by hedging them using derivative financial instruments. Our use of financial derivatives is governed by policies approved by the Board of Directors, which provide written principles on foreign exchange risk, interest rate risk, credit risk, the use of financial derivatives and non-derivative financial instruments, and the investment of excess liquidity. The Board of Directors regularly reviews our compliance with policies and exposure limits. The Group does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes. Key financial risks and exposures are monitored through a monthly report to the Board of Directors, together with an annual Board review of corporate treasury matters. # Financial risk The principal financial risks our activities expose us to are the risks of changes in foreign currency exchange rates, interest rates and commodity prices. We use derivative financial instruments to manage our exposure to interest rate, foreign currency and commodity price risks, including: - forward foreign exchange contracts, to hedge the exchange rate risk arising on the sale of goods and purchase of supplies in foreign currencies; - interest rate swaps, to mitigate the risk of rising interest rates; and - forward commodity contracts, to hedge commodity price risk. # Accounting policies # Financial instruments Financial assets and liabilities in respect of financial instruments are recognised on the Group Balance Sheet when the Group becomes a party to the instrument's contractual provisions. # Financial liabilities and equity instruments Financial liabilities and equity instruments issued by the Group are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument. An equity instrument is any contract that provides a residual interest in the Group's assets after deducting all of its liabilities and includes no obligation to deliver cash or other financial assets. The accounting policies adopted for specific financial liabilities and equity instruments are set out below. # Put option arrangements over non-controlling interest The potential cash payments related to put options issued by the Group over the equity of subsidiary companies are accounted for as financial liabilities. The amount that may become payable under the option on exercise is initially recognised at present value within financial liabilities, with a corresponding charge directly to equity. The charge to equity is recognised separately as written put options over non-controlling interest, adjacent to non-controlling interest in the net assets of consolidated subsidiaries. Such options are subsequently measured at amortised cost, using the effective interest rate method, in order to accrete the liability up to the amount payable under the option at the date at which it first becomes exercisable. The charge arising is recorded as a financing cost. If the option expires unexercised, the liability is derecognised, with a corresponding adjustment to equity. # Derivative financial instruments Derivatives are recognised initially at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at each reporting date. The resulting gain or loss is recognised in the Income Statement immediately, unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in the Income Statement depends on the nature of the hedge relationship. FINANCIAL STATEMENTS ### 161 GENUS PLC / ANNUAL REPORT 2023 26. FINANCIAL INSTRUMENTS CONTINUED FINANCIAL STATEMENTS A derivative with a positive fair value is recognised as a financial asset whereas a derivative with a negative fair value is recognised as a financial liability. Derivatives are not offset in the financial statements, unless the Group has both a legally enforceable right and intention to offset. A derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the instrument is more than 12 months and it is not due to be realised or settled within 12 months. Other derivatives are presented as current assets or current liabilities. The fair value of interest rate swaps is the estimated amount that we would receive or pay to terminate the swap at the balance sheet date, taking into account current interest rates and the creditworthiness of the swap counterparties. The fair values of forward exchange contracts and forward commodity contracts are their quoted market price at the balance sheet date, which is the present value of the quoted forward price. Hedging activities The Group designates certain derivatives as hedging instruments in respect of foreign exchange risk, interest rate risk and commodity risk in fair value hedges, cash flow hedges, or hedges of net investments in foreign operations. At the inception of the hedge relationship, the Group documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Group documents whether the hedging instrument is effective in offsetting changes in fair values or cash flows of the hedged item attributable to the hedged risk, which is when the hedging relationship meets all of the following hedge effectiveness requirements: • there is an economic relationship between the hedged item and the hedging instrument; • the effect of credit risk does not dominate the value changes that result from that economic relationship; and • the hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the Group actually hedges and the quantity of the hedging instrument that the Group actually uses to hedge that quantity of hedged item. If a hedging relationship ceases to meet the hedge effectiveness requirement relating to the hedge ratio but the risk management objective for that designated hedging relationship remains the same, the Group adjusts the hedge ratio of the hedging relationship (i.e. rebalances the hedge) so that it meets the qualifying criteria again. The Group designates the full change in the fair value of a forward contract (i.e. including the forward elements) as the hedging instrument for all of its hedging relationships involving forward contracts. The Group designates only the intrinsic value of option contracts as a hedged item, i.e. excluding the time value of the option. The changes in the fair value of the aligned time value of the option are recognised in Other Comprehensive Income and accumulated in the cost of hedging reserve. If the hedged item is transaction related, the time value is reclassified to the Income Statement when the hedged item affects the Income Statement. If the hedged item is time-period related, then the amount accumulated in the cost of hedging reserve is reclassified to the Income Statement on a rational basis, applying straight-line amortisation. Those reclassified amounts are recognised in the Income Statement in the same line as the hedged item. If the hedged item is a non-financial item, then the amount accumulated in the cost of hedging reserve is removed directly from equity and included in the initial carrying amount of the recognised non-financial item. Furthermore, if the Group expects that some or all of the loss accumulated in the cost of hedging reserve will not be recovered in the future, that amount is immediately reclassified to the Income Statement. Cash flow hedges The effective portion of changes in the fair value of derivatives and other qualifying hedging instruments that are designated and qualify as cash flow hedges is recognised in Other Comprehensive Income and accumulated under the heading of cash flow hedging reserve, and limited to the cumulative change in fair value of the hedged item from inception of the hedge. The gain or loss relating to the ineffective portion is recognised immediately in the Income Statement and is included in the ‘other gains and losses’ line item. Amounts previously recognised in Other Comprehensive Income and accumulated in equity are reclassified to the Income Statement in the periods when the hedged item affects the Income Statement, in the same line as the recognised hedged item. However, when the hedged forecast transaction results in the recognition of a non-financial asset or a non-financial liability, the gains and losses previously recognised in other comprehensive income and accumulated in equity are removed from equity and included in the initial measurement of the cost of the non-financial asset or non-financial liability. This transfer does not affect Other Comprehensive Income. Furthermore, if the Group expects that some or all of the loss accumulated in the cash flow hedging reserve will not be recovered in the future, that amount is immediately reclassified to the Income Statement. The Group discontinues hedge accounting only when the hedging relationship (or a part thereof) ceases to meet the qualifying criteria (after rebalancing, if applicable). This includes instances when the hedging instrument expires or is sold, terminated or exercised. The discontinuation is accounted for prospectively. Any gain or loss recognised in Other Comprehensive Income and accumulated in cash flow hedge reserve at that time remains in equity and is reclassified to the Income Statement when the forecast transaction occurs. When a forecast transaction is no longer expected to occur, the gain or loss accumulated in the cash flow hedge reserve is reclassified immediately to the Income Statement. Under interest rate swap contracts, the Group agrees to exchange the difference between fixed and floating rate interest amounts calculated on agreed notional principal amounts. Such contracts enable the Group to mitigate the risk of changing interest rates on the fair value of issued fixed-rate debt held and the cash flow exposures on the issued variable-rate debt held. The fair value of interest rate swaps at the reporting date is determined by discounting the future cash flows using the yield curves at the reporting date and the credit risk inherent in the contract. The average interest rate is based on the outstanding balances at the end of the financial year. 162 GENUS PLC / ANNUAL REPORT 2023 # NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED ## 26. FINANCIAL INSTRUMENTS CONTINUED If the critical terms of the interest rate swap contracts and their corresponding hedged items are the same, the Group performs a qualitative assessment of effectiveness and it is expected that the value of the interest rate swap contracts and the value of the corresponding hedged items will systematically change in opposite directions, in response to movements in the underlying interest rates. The main source of hedge ineffectiveness in these hedge relationships is the effect of the counterparty and the Group's own credit risk on the fair value of the interest rate swap contracts, which is not reflected in the fair value of the hedged item attributable to the change in interest rates. No other sources of ineffectiveness emerged from these hedging relationships. ### Net investment hedges Hedges of net investments in foreign operations are accounted for similarly to cash flow hedges. Any gain or loss on the foreign currency forward contracts relating to the effective portion of the hedge is recognised in Other Comprehensive Income and accumulated in the foreign currency translation reserve. The gain or loss relating to the ineffective portion is recognised immediately in the Income Statement, and is included in the 'other gains and losses' line item. Gains and losses on the hedging instrument accumulated in the foreign currency translation reserve are reclassified to the Income Statement on the disposal or partial disposal of the foreign operation. We only apply net investment hedge accounting in the Group Financial Statements. ### Other gains and losses Included with other gains and losses is a £2.7m gain on the mark to market valuation ('MTM') in relation to £60m of SONIA interest rate swaps executed in April 2023. Whilst the interest rate swaps are a perfect commercial hedge of a similar amount of our GBP borrowings for at least a three-year period, as the executing banks have a written option at the three-year point to unilaterally terminate the swaps at no cost, the transaction does not qualify for hedge accounting treatment. Accordingly the MTM gain on the valuation of these swaps as at 30 June 2023 is recognised in the Group Income Statement. | | 2023 £m | 2022 £m | | --- | --- | --- | | Gain on derivative | 2.7 | – | | Other gains and losses | 2.7 | – | ### Capital risk management The Group manages its capital to ensure that Group entities can continue as going concerns, while maximising the return to shareholders by optimising our debt and equity balance. The Group's capital structure consists of debt, which includes the borrowings disclosed in note 27, cash and cash equivalents, and equity attributable to equity holders of the Parent, comprising issued capital, reserves and retained earnings, as disclosed in note 31. ### Gearing ratio The Group keeps its capital structure under review and monitors it monthly to ensure the gearing ratio remains below 60%. The Group is not subject to externally imposed capital requirements. The gearing ratio at the year end was as follows: | | 2023 £m | 2022 £m | | --- | --- | --- | | Debt (see note 27) | 232.1 | 223.8 | | Cash and cash equivalents (see note 22) | (36.3) | (38.8) | | Net debt (see note 32) | 195.8 | 185.0 | | Equity | 567.2 | 572.1 | | Net debt to equity ratio | 35% | 32% | Debt is defined as long and short-term borrowings, including lease obligations as detailed in note 27. Equity includes all capital and reserves of the Group attributable to equity holders of the Parent. FINANCIAL STATEMENTS 163 GENUS PLC / ANNUAL REPORT 2023 # 26. FINANCIAL INSTRUMENTS CONTINUED # Categories of financial instruments We have categorised financial instruments held at valuation into a three-level fair value hierarchy, based on the priority of the inputs to the valuation technique in accordance with IFRS 13. The hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure fair value fall within different levels of the hierarchy, we base the category level on the lowest priority level input that is significant to the fair value measurement of the instrument in its entirety. We have estimated the fair values of the Group's outstanding interest rate swaps by calculating the present value of future cash flows, using appropriate market discount rates, representing Level 2 fair value measurements as defined by IFRS 13. | | 2023 Carrying value | | | | 2022 Carrying value | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Level 1 £m | Level 2 £m | Level 3 £m | Total £m | Level 1 £m | Level 2 £m | Level 3 £m | Total £m | | Financial assets | | | | | | | | | | Other investments | 4.8 | - | 4.0 | 8.8 | 6.5 | - | 3.7 | 10.2 | | Trade receivables and other debtors, excluding prepayments | - | 132.6 | - | 132.6 | - | 129.6 | - | 129.6 | | Cash and cash equivalents | - | 36.3 | - | 36.3 | - | 38.8 | - | 38.8 | | Derivative instruments in non- designated hedge accounting relationships | - | 0.8 | - | 0.8 | - | 1.0 | - | 1.0 | | Derivative instruments in designated hedge accounting relationships | - | 5.6 | - | 5.6 | - | 2.2 | - | 2.2 | | | 4.8 | 175.3 | 4.0 | 184.1 | 6.5 | 171.6 | 3.7 | 181.8 | | Financial liabilities | | | | | | | | | | Trade and other payables, excluding other taxes and social security (see note 23) | - | (114.3) | - | (114.3) | - | (115.9) | - | (115.9) | | Loans and overdrafts (see note 27) | - | (200.2) | - | (200.2) | - | (189.2) | - | (189.2) | | Leasing obligations (see note 28) | - | (31.9) | - | (31.9) | - | (34.6) | - | (34.6) | | Derivative instruments in non-designated hedge accounting relationships | - | (0.9) | - | (0.9) | - | (0.9) | - | (0.9) | | Derivative instruments in designated hedge accounting relationships | - | - | - | - | - | (0.3) | - | (0.3) | | Put option over non-controlling interest | - | (7.1) | - | (7.1) | - | (7.0) | - | (7.0) | | Deferred consideration (see note 38) | - | - | (0.6) | (0.6) | - | - | (1.5) | (1.5) | | | - | (354.4) | (0.6) | (355.0) | - | (347.9) | (1.5) | (349.4) | # Foreign currency risk management We undertake transactions denominated in foreign currencies. The carrying amounts of the Group's foreign currency denominated monetary assets and monetary liabilities (excluding short-term amounts related to our ongoing trade, recognised as trade receivables and trade payables) at the reporting date were as follows: | | Unit/Day | | Assets | | | --- | --- | --- | --- | --- | | | 2023 £m | 2022 £m | 2023 £m | 2022 £m | | US Dollar | (87.7) | (88.0) | 3.5 | 2.2 | | Euro | (30.5) | (11.3) | 0.7 | (1.5) | | Canadian Dollar | (0.1) | (0.4) | - | - | FINANCIAL STATEMENTS ![img-7.jpeg](img-7.jpeg) 164 GENUS PLC / ANNUAL REPORT 2023 # NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED # FOR THE YEAR ENDED 30 JUNE 2023 # 26. FINANCIAL INSTRUMENTS CONTINUED # Foreign currency Income Statement sensitivity analysis The Group is mainly exposed to movements in the US Dollar, Euro, Brazilian Real, Mexican Peso, Chinese Yuan and Russian Rouble exchange rates. The following table details the Group's profit sensitivity to a 10% and 20% increase and decrease in Sterling against these currencies. 10% is the sensitivity rate used when reporting foreign currency risk internally to key management and represents our assessment of a significant change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation of the period end for a 10% or 20% change in foreign currency rates. It includes external loans, as well as loans to foreign operations within the Group where the loan is denominated in a currency other than the lender or borrower's currency. A positive number below indicates an increase in profit when Sterling weakens against the relevant currency. A strengthening of Sterling against the relevant currency would produce an equal but opposite reduction in profit, and the balances below would be negative. | | 20% currency movement | | 10% currency movement | | | --- | --- | --- | --- | --- | | | 2023 £m | 2022 £m | 2023 £m | 2022 £m | | Euro | 3.2 | 2.8 | 1.6 | 1.4 | | US Dollar | 1.5 | 1.2 | 0.7 | 0.6 | | Brazilian Real | 3.0 | 2.7 | 1.5 | 1.3 | | Mexican Peso | 3.9 | 3.1 | 2.0 | 1.5 | | Chinese Yuan | 3.2 | 2.3 | 1.6 | 1.2 | | Russian Rouble | 2.1 | 1.5 | 1.1 | 0.7 | # Forward foreign exchange contracts The Group's policy is to enter into forward foreign exchange contracts, to cover specific foreign currency payments and receipts. The following table details the forward foreign currency contracts outstanding as at the year end: | | Average exchange rate | | Foreign currency | Contract value | | Fair value | | | --- | --- | --- | --- | --- | --- | --- | --- | | | 2023 | 2022 | | 2023 £m | 2022 £m | 2023 £m | 2022 £m | | Outstanding contracts | | | | | | | | | Buy CHF | 0.88 | 1.18 | CHF | 0.5 | 0.9 | - | - | | Sell CNY | 9.02 | 8.24 | CNY | 0.3 | 1.2 | - | - | | Buy AUD | 1.91 | 1.16 | AUD | 2.3 | 1.8 | - | - | | Buy PHP | 70.39 | 67.01 | PHP | - | 0.3 | - | - | | Buy EUR | 1.16 | 0.86 | EUR | 6.6 | 7.2 | - | - | | Buy MXN | 22.03 | 24.74 | MXN | 14.7 | 2.9 | 0.2 | 0.1 | | Buy USD | 1.26 | 1.23 | USD | 3.4 | 1.1 | 0.2 | (0.1) | | Sell BRL | 6.17 | - | BRL | 0.2 | - | - | - | | Sell INR | 102.79 | - | INR | 0.3 | - | - | - | | Sell CAD | 1.67 | - | CAD | 0.1 | - | - | - | | Buy CHF/Sell EUR | - | 1.01 | CHF | - | 3.4 | - | - | | Buy USD/Sell UAH | 37.84 | 33.06 | UAH | 0.7 | 0.3 | - | - | | Buy USD/Sell BRL | 4.94 | 4.90 | BRL | 3.0 | 1.8 | (0.2) | 0.1 | | Buy USD/Sell CNY | 7.19 | 6.69 | CNY | 2.9 | 3.7 | - | - | | Buy PHP/Sell USD | 55.57 | 53.53 | PHP | 7.1 | 7.4 | - | (0.2) | | Buy CAD/Sell USD | - | 1.29 | CAD | - | 0.4 | - | - | | Buy USD/Sell CAD | 1.33 | - | CAD | 6.8 | - | (0.1) | - | | Buy USD/Sell EUR | 1.10 | 1.06 | EUR | 0.1 | 0.3 | - | - | | Buy USD/Sell RUB | - | 56.85 | RUB | - | 1.2 | - | (0.1) | | Buy USD/Sell INR | 82.49 | 78.76 | INR | 4.0 | 1.3 | - | - | | Buy USD/Sell ZAR | 18.44 | 16.09 | ZAR | 0.4 | 3.4 | - | - | | Buy USD/Sell ARS | - | 129.69 | ARS | - | 0.3 | - | - | | Buy MXN/Sell USD | 17.31 | - | MXN | 0.2 | - | - | - | | | | | | | | 0.1 | (0.2) | # Interest rate risk management The Group is exposed to interest rate risk, as Group entitles borrow funds at both fixed and floating interest rates. We manage this risk centrally, by maintaining an appropriate mix between fixed and floating rate borrowings, using interest rate swaps. We regularly review our hedging activities, to align with our interest rate views and defined risk appetite, thereby ensuring we apply optimal hedging strategies to minimise the adverse impact of fluctuations in interest expense through different interest rate cycles. The Group's exposures to interest rates on financial assets and financial liabilities are detailed in the liquidity risk management section of this note. FINANCIAL STATEMENTS 165 GENUS PLC / ANNUAL REPORT 2023 # 26. FINANCIAL INSTRUMENTS CONTINUED # Interest rate sensitivity analysis We have determined the sensitivity analyses below, based on the Group's exposure to interest rates for both derivatives and non-derivative instruments, at the balance sheet date. For floating rate liabilities, we prepared the analysis assuming the liability outstanding at the balance sheet date was outstanding for the whole year. A 1.0 percentage point increase or decrease is used when reporting interest rate risk internally to key management and is our assessment of a significant change in interest rates. If interest rates had been 1.0 percentage point higher or lower and all other variables were held constant, the Group's profit would have decreased or increased by £1.6m (2022: decrease/increase by £1.8m). This impact is smaller than would otherwise be the case, due to our fixed-rate hedging. # Interest rate swap contracts Under interest rate swap contracts, the Group agrees to exchange the difference between fixed and floating-rate interest amounts, calculated on agreed national principal amounts. These contracts enable us to mitigate the risk of changing interest rates on the cash flow exposures on the variable-rate debt we hold. We determine the fair value of interest rate swaps at the reporting date by discounting the future cash flows, using the yield curves at the reporting date and the credit risk inherent in the contract. This fair value is disclosed on the following pages. The average interest rate is based on the outstanding balances at the end of the financial year. # Cash flow hedges The following table details the national principal amounts and remaining terms of interest rate swap contracts outstanding, as at the reporting date: | | Average contract fixed interest rate | | National principal amount | | Fair value | | | --- | --- | --- | --- | --- | --- | --- | | | 2023 % | 2022 % | 2023 £m | 2022 £m | 2023 £m | 2022 £m | | Outstanding receive floating pay fixed contracts | | | | | | | | USD interest rate swaps | | | | | | | | One to five years | 3.43 | 3.32 | 66.9 | 37.0 | 1.3 | (0.3) | | EUR interest rate swaps | | | | | | | | One to five years | 0.36 | 0.36 | 21.4 | 21.5 | 1.2 | 0.6 | | GBP interest rate swaps | | | | | | | | One to five years | 3.45 | - | 60.0 | - | 2.8 | - | The interest rate swaps settle on a quarterly basis. The corresponding floating rate on the interest rate swaps is three months. We settle the difference between the fixed and floating interest rate on a net basis. Interest rate swap contracts that exchange floating-rate interest amounts for fixed-rate interest amounts are designated as cash flow hedges, to reduce our cash flow exposure resulting from variable interest rates on borrowings. The interest rate swaps and the interest payments on the loan occur simultaneously and we recognise the amount deferred in equity in the Income Statement, over the period that the floating rate interest payments on debt affect the Income Statement. # Commodity hedges The Group hedges both feed and slaughter exposures using Chicago Mercantile Exchange loan hog, corn and soybean meal commodity futures contracts. | Commodity hedge | Average price | | National principal amount | | Fair value | | | --- | --- | --- | --- | --- | --- | --- | | | 2023 USD | 2022 USD | 2023 £m | 2022 £m | 2023 £m | 2022 £m | | Open commodity contracts as at June | | | | | | | | Lean hog | 0.97 | 0.92 | 8.5 | 10.2 | 0.6 | (0.1) | | Corn | 5.68 | 6.87 | (6.4) | (4.9) | (0.6) | 0.1 | | Soybean meal | 402 | 390 | (4.6) | (3.0) | (0.1) | 0.1 | | | | | (2.5) | 2.3 | (0.1) | 0.1 | # Net investment hedges The Group's Net Investment Policy is to hedge up to 90% of the net investment value of its wholly owned subsidiaries in a particular currency. At the beginning of the year the Group had a net investment hedge designating the first EUR 12.5 million of the net assets of Pig Improvement Company España S.A. as a hedged item, using EUR 12.5 million of borrowings. On 31 May 2023, the Group designated a further EUR 3 million of the net assets of Pig Improvement Company España S.A. as a hedged item, using EUR 3 million of borrowings as an additional net investment hedge. In February 2022, the Group entered into a second net investment hedge designating the first EUR 25 million Net Assets of its subsidiary Fyfield Holland BV as the hedged item in a net investment hedge using USD 28m of borrowings converted to a EUR 25m liability, using a cross currency swap as the related hedging instrument. On 28 November 2022, USD 14.1m EUR 12.5m of the cross currency swap was closed out and replaced in the net investment hedge designation by a new EUR 12.5 million borrowing, maintaining the existing hedge amount. On 31 May 2023, the Group designated a further EUR 7 million of the net assets of Fyfield Holland BV as a hedged item using EUR 7 million of borrowings as an additional net investment hedge. In summary, as at 30 June 2023 the Group has designated EUR 15.5m (GBP £13.4m) of the net assets of its subsidiary Pig Improvement Company España S.A. and EUR 32m (GBP £27.6m) of the net assets of its subsidiary Fyfield Holland B.V. as net investment hedges. These Net Investment Hedges represent 69% of the Group's Euro net assets as at this date. FINANCIAL STATEMENTS 166 GENUS PLC / ANNUAL REPORT 2023 # NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED # FOR THE YEAR ENDED 30 JUNE 2023 26. FINANCIAL INSTRUMENTS CONTINUED The table below shows a reconciliation of the gains or loss deferred in equity: | | 2023 £m | 2022 £m | | --- | --- | --- | | Loss at the start of the year | (0.8) | (0.0) | | Effective (losses)/gains recognised in equity in period | 0.3 | (0.7) | | Balance carried forward in equity as effective losses | (0.5) | (0.8) | # Credit risk management Credit risk is the risk that a counterparty will default on its contractual obligations, resulting in financial loss to the Group. We have a policy of only dealing with creditworthy counterparties. We regularly monitor our exposure and the credit ratings of our counterparties, and the aggregate value of transactions concluded is spread amongst approved counterparties. Credit exposure on financial instruments is controlled by counterparty limits that the Board reviews and approves annually. Trade receivables consist of a large number of customers, spread across diverse industries and geographical areas. We carry out ongoing credit evaluation of the financial condition of accounts receivable. # Liquidity risk management The Board of Directors has ultimate responsibility for managing liquidity risk. We manage this risk by maintaining adequate reserves and banking facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities. # Liquidity and interest risk tables For non-derivative financial liabilities, see notes 27, 28 and 38. The following table details the Group's remaining contractual maturity for its non-derivative financial liabilities, excluding trade payables and other creditors which are short term and, as disclosed in note 23, have an average credit period of 32 days (2022: 39 days). We have drawn up the table based on the undiscounted cash flows of financial liabilities, using the earliest date on which we can be required to pay. The table includes both interest and principal cash flows. | | Weighted average effective interest rate % | Less than 1 month £m | 1-3 months £m | 3 months- 1 year £m | 1-5 years £m | 5+ years £m | Total £m | | --- | --- | --- | --- | --- | --- | --- | --- | | 2023 | | | | | | | | | Loans and borrowings | 5.48 | 6.6 | 1.7 | 9.4 | 197.9 | - | 215.6 | | Lease liabilities | 3.74 | 1.0 | 2.5 | 7.3 | 20.2 | 3.7 | 34.7 | | Deferred consideration | - | - | - | - | 0.6 | - | 0.6 | | Variable interest rate instruments | 5.23 | 7.6 | 4.2 | 16.7 | 218.7 | 3.7 | 250.9 | | 2022 | | | | | | | | | Loans and borrowings | 2.31 | 8.4 | 1.2 | 4.6 | 183.0 | - | 197.2 | | Lease liabilities | 2.91 | 1.0 | 3.0 | 6.8 | 20.7 | 6.1 | 37.6 | | Deferred consideration | - | - | - | - | 0.5 | - | 0.5 | | Variable interest rate instruments | 2.41 | 9.4 | 4.2 | 11.4 | 204.2 | 6.1 | 235.3 | The following table details the Group's expected maturity for other non-derivative financial assets, excluding trade receivables and other debtors. We have drawn up this table based on the undiscounted contractual maturities of the assets, including interest we will earn on them, except where we expect the cash flow to occur in a different period. | | Weighted average effective interest rate % | Less than 1 month £m | 1-3 months £m | 3 months- 1 year £m | 1-5 years £m | 5+ years £m | Total £m | | --- | --- | --- | --- | --- | --- | --- | --- | | 2023 | | | | | | | | | Variable interest rate instruments | 0.42 | 36.3 | - | - | - | - | 36.3 | | 2022 | | | | | | | | | Variable interest rate instruments | 1.12 | 38.8 | - | - | - | - | 38.8 | The Group has financing facilities with a total unused amount of £118.3m (2022: £77.8m) at the balance sheet date. We expect to meet our other obligations from operating cash flows and the proceeds of maturing financial assets. We expect to reduce the debt to equity ratio, as borrowings decrease through repayment from operating cash flows. FINANCIAL STATEMENTS 167 GENUS PLC / ANNUAL REPORT 2023 # 26. FINANCIAL INSTRUMENTS CONTINUED The following table details the Group's liquidity analysis for its derivative financial instruments. We have drawn up the table based on the undiscounted net cash outflows on derivative instruments that settle on a net basis and the undiscounted gross outflows on derivatives that require gross settlement. When the amount payable or receivable is not fixed, we have determined the amount disclosed by reference to the projected interest and foreign currency rates, as illustrated by the yield curves at the reporting date. | | Less than 1 month £m | 1-3 months £m | 3 months- 1 year £m | 1-5 years £m | 5+ years £m | Total £m | | --- | --- | --- | --- | --- | --- | --- | | **2023** | | | | | | | | Foreign exchange contracts | 0.1 | - | - | - | - | 0.1 | | Commodity swaps | - | - | (0.1) | - | - | (0.1) | | Interest rate swaps | 0.2 | 0.5 | 2.6 | 2.3 | - | 5.6 | | **2022** | | | | | | | | Foreign exchange contracts | (0.2) | - | - | - | - | (0.2) | | Commodity swaps | - | - | (0.1) | - | - | 0.1 | | Interest rate swaps | - | 0.1 | 0.2 | 0.1 | - | 0.4 | Commodity swaps and interest rate swaps are always settled on a net basis. Foreign exchange contracts can be settled on a net or gross basis; the net cash flows presented in the table above reflect an inflow of £110.6m and outflow of £110.5m (2022: inflow of £73.7m and outflow of £73.9m). # 27. LOANS AND BORROWINGS The Group's borrowing for funding and liquidity purposes comes from a range of committed bank facilities. # Interest-bearing loans and borrowings We initially recognise interest-bearing loans and borrowings at their fair value, less attributable transaction costs. After this initial recognition, we state them at amortised cost and recognise any difference between the cost and redemption value in the Income Statement over the borrowings' expected life, on an effective interest rate basis. The carrying values of these liabilities are a reasonable approximation of their fair values. | | 2023 £m | 2022 £m | | --- | --- | --- | | **Non-current liabilities** | | | | Unsecured bank loans | 196.0 | 182.1 | | Obligations under leases | 21.9 | 24.5 | | | 217.9 | 206.6 | | **Current liabilities** | | | | Unsecured bank loans and overdrafts | 4.2 | 7.1 | | Obligations under leases | 10.0 | 10.1 | | | 14.2 | 17.2 | | **Total interest-bearing liabilities** | 232.1 | 223.8 | # Terms and debt repayment schedule | Terms and conditions of outstanding loans and overdrafts were as follows: | | | | | | --- | --- | --- | --- | --- | | | Currency | 2023 Interest rate | 2022 £m | 2022 £m | | Revolving credit facility and overdraft | GBP | 6.8% | 91.6 | 95.9 | | Revolving credit facility, term loan and overdraft | USD | 6.9% | 78.0 | 77.3 | | Revolving credit facility and overdraft | EUR | 5.0% | 30.1 | 10.8 | | Obligations under leases | USD | 3.7% | 31.9 | 34.6 | | Other unsecured bank borrowings | Other | 5.7% | 0.5 | 5.2 | | **Total interest-bearing liabilities** | | | 232.1 | 223.8 | The above revolving credit facilities are unsecured. Information about the Group's exposure to interest rate and foreign currency risks is shown in note 26. FINANCIAL STATEMENTS 168 GENUS PLC / ANNUAL REPORT 2023 # NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 30 JUNE 2023 # 27. LOANS AND BORROWINGS CONTINUED | Loans and borrowings (excluding losses) comprise amounts falling due: | 2022 £m | 2022 £m | | --- | --- | --- | | In one year or less or on demand | 5.3 | 8.0 | | In more than one year but not more than two years | – | – | | In more than two years but not more than five years | 196.0 | 182.3 | | | 201.3 | 190.3 | | Less: unamortised issue costs | (1.1) | (1.1) | | | 200.2 | 189.2 | | **Current liabilities** | **(4.2)** | **(7.5)** | | **Non-current liabilities** | **196.0** | **182.1** | At the balance sheet date, the Company's credit facilities comprised a £170m multi-currency revolving credit facility ('RCF'), a USD 150 million RCF and a USD 20 million bond and guarantee facility. The original term of the facility was for three years to 24 August 2023. On 24 August 2021 and 26 August 2022, the Company and its lenders extended the maturity date of the total facilities to 24 August 2024 and 24 August 2025 respectively. The Company's credit facility also includes an uncommitted £100m accordion option, £60m of which was exercised in August 2022 to increase the facilities to their current size, leaving a remaining unsecured accordion facility of £40m, which can be requested on a maximum of two further occasions over the lifetime of the facility to fund the Group's business development plans. As part of its interest rate hedging strategy, the Company has entered into interest rate swaps to hedge variable interest rates. At the balance sheet date, bank loans and overdrafts include borrowings of USD 85m fixed at 3.48%, borrowings of £60m fixed at 3.45%, borrowings of EUR 12.5m fixed at 0.37%, and borrowings of USD 13.9m, swapped via a cross currency swap into EUR 12.5m, fixed at 0.36%, excluding applicable bank margins. Approximately 76% of total facility borrowings are covered by these interest rate swaps as at 30 June 2023. # 28. OBLIGATIONS UNDER LEASES A lease is a commitment to make a payment in the future, primarily in relation to property, plant and machinery and motor vehicles. # Accounting policies In accordance with IFRS 16, we recognise as an expense any payments made in respect of short-term leases (those with a term of less than 12 months) and leases for low-value items, on a straight-line basis over the life of the lease. For all other leases we recognise a liability at the date at which the leased asset is made available for use, and a corresponding right-of-use asset is recognised and depreciated over the term of the lease (see note 17). Lease liabilities are measured at the present value of the future lease payments, excluding any payments relating to non-lease components. Future lease payments include fixed payments, in-substance fixed payments, and variable lease payments that are based on an index or a rate, less any lease incentives receivable. Lease liabilities also take into account amounts payable under residual value guarantees and payments to exercise options, to the extent that it is reasonably certain that such payments will be made. The payments are discounted at the rate implicit in the lease or, where that cannot be measured, at an incremental/borrowing rate. We remeasure the lease liability (and make a corresponding adjustment to the related right-of-use asset) whenever: - The lease term has changed or there is a change in the assessment of the exercise of a purchase option, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate. - The lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value, in which cases the lease liability is remeasured by discounting the revised lease payments using the initial discount rate (unless the lease payments change is due to a change in a floating interest rate, in which case a revised discount rate is used). - A lease contract is modified, and the lease modification is not accounted for as a separate lease, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate. The Group did not make any such adjustments during the periods presented. The changes in the lease liabilities are as follows: | | 2023 £m | 2022 £m | | --- | --- | --- | | Balance at the start of the year | 34.6 | 28.3 | | Leases entered into during the year | 10.4 | 15.7 | | Leases terminated early | (0.7) | (0.3) | | Payments made | (12.3) | (12.4) | | Interest | 1.2 | 1.1 | | Effect of movements in exchange rates | (1.3) | 2.2 | | **Balance at the end of the year** | **31.9** | **34.6** | | Current | 10.0 | 10.1 | | Non-current | 21.9 | 24.5 | | | **31.9** | **34.6** | At 30 June 2023, the Group is committed to £nil (2022: £0.1m) for short-term leases. FINANCIAL STATEMENTS 169 GENUS PLC / ANNUAL REPORT 2023 # 28. OBLIGATIONS UNDER LEASES CONTINUED We have drawn up the table based on the undiscounted cash flows of the obligations under leases, using the earliest date on which we can be required to pay: | | 2022 £m | 2022 £m | | --- | --- | --- | | FY23 | - | 10.8 | | FY24 | 10.8 | 8.2 | | FY25 | 8.2 | 5.7 | | FY26 | 5.9 | 4.1 | | FY27 | 3.9 | 2.7 | | FY28 | 2.2 | 2.0 | | FY29 | 1.6 | 1.8 | | FY30 | 1.1 | 1.2 | | After FY31 | 1.0 | 1.1 | | | 34.7 | 37.6 | | Presented as: | | | | Current | 10.8 | 10.8 | | Non-current | 23.9 | 26.8 | | | 34.7 | 37.6 | Lease obligations denominated in currencies other than Sterling comprise £15.3m denominated in US Dollars (2022: £16.0m), £3.5m denominated in Euros (2022: £4.0m) and £9.4m denominated in other currencies (2022: £10.8m). # 29. RETIREMENT BENEFIT OBLIGATIONS The Group operates a number of defined contribution and defined benefit pension schemes, covering many of its employees. The principal funds are the Milk Pension Fund (MPF) and the Diligently Pension Fund (DPF) in the UK, which are defined benefit schemes. The assets of these funds are held separately from the Group's assets, are administered by trustees and managed professionally. # Accounting policies # Defined contribution pension schemes A number of our employees are members of defined contribution pension schemes. We charge contributions to the Income Statement as they become payable under the scheme rules. We show differences between the contributions payable and the amount we have paid as either accruals or prepayments in the Balance Sheet. The schemes' assets are held separately from the Group's assets. # Defined benefit pension schemes The Group operates defined benefit pension schemes for some of its employees. These schemes are closed to new members and to further accrual. We calculate our net obligation separately for each scheme, by estimating the amount of future benefit that employees have earned, in return for their service to date. We discount that benefit to determine its present value and deduct the fair value of the plan's assets (at bid price). The liability discount rate we use is the market yield at the balance sheet date on high-quality corporate bonds, with terms to maturity approximating our pension liabilities. Qualified actuaries perform the calculations, using the projected unit method. We recognise actuarial gains and losses in equity in the period in which they occur, through the Group Statement of Comprehensive Income. Actuarial gains and losses include the difference between the expected and actual return on scheme assets and experience gains and losses on scheme liabilities. Genus and the other participating employers are jointly and severally liable for the MPF's obligations. We account for our section of the scheme and our share of any orphan assets and liabilities, and provide for any amounts we believe we will have to pay under our joint and several liability. The joint and several liability also means we have a contingent liability for the scheme's obligations that we have not accounted for. Under the joint and several liability, we initially recognise any changes in our share of orphan assets and liabilities in the Income Statement. After this initial recognition, any actuarial gains and losses on the orphan assets and liabilities are recognised directly in equity through the Group Statement of Changes in Equity, in the period in which they occur. During the year, the DPF defined benefit pension scheme purchased annuities in order to hedge longevity risk for pensioners within the scheme. As permitted by IAS 91, the Group has opted to recognise the difference between the fair value of the plan assets and the cost of the policy as an actuarial loss in Other Comprehensive Income. We measure the fair value our qualifying insurance policy assets to be the deemed present value of the related obligation. FINANCIAL STATEMENTS 170 GENUS PLC / ANNUAL REPORT 2023 # NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 30 JUNE 2023 29. RETIREMENT BENEFIT OBLIGATIONS CONTINUED Retirement benefit obligations The financial positions of the defined benefit schemes, as recorded in accordance with IAS 19 and IFRIC 14, are aggregated for disclosure purposes. The liability/(asset) split by principal scheme is set out below. | | 2023 £m | 2022 £m | | --- | --- | --- | | The Milk Pension Fund – Genus's share | – | – | | The Diligerty Pension Fund | – | – | | National Pig Development Pension Fund | (0.2) | 0.1 | | Post-retirement healthcare | 0.5 | 0.6 | | Other unfunded schemes | 6.6 | 7.6 | | **Overall net pension liability** | **6.9** | **8.3** | Overall, we expect to pay £0.9m (2022: £1.0m) in contributions to defined benefit plans in the 2024 financial year. The defined benefit plans are administered by trustee boards that are legally separated from the Group. The trustee board of each pension fund consists of representatives who are employees, former employees or are independent from the Company. The boards of the pension funds are required by law to act in the best interest of the plan participants and are responsible for setting certain policies, such as investment and contribution policies, and for the governance of the fund. The defined benefit pension schemes expose the Group to actuarial risks such as greater than expected longevity of members, lower than expected return on investments and higher than expected inflation, which may increase the plans' liabilities or reduce the value of their assets. UK pensions are regulated by The Pensions Regulator, a non-departmental public body established under the Pensions Act 2004 and sponsored by the Department for Work and Pensions, operating within a legal regulatory framework set by the UK Parliament. The Pensions Regulator has statutory objectives set out in legislation, which include promoting and improving understanding of the good administration of work-based pensions, protecting member benefits and regulating occupational defined benefit and contribution schemes. The Pensions Regulator's statutory objectives and regulatory powers are described on its website at www.thepensionsregulator.gov.uk. All defined benefit schemes are registered as an occupational pension plan with HMRC and are subject to UK legislation and oversight from The Pensions Regulator. UK legislation requires that pension schemes are funded prudently and valued at least every three years. Separate valuations are required for each scheme. Within 15 months of each valuation date, the plan trustees and the Group must agree any contributions required to ensure that the plan is fully funded over time, on a suitably prudent measure. Funding plans are individually agreed with the respective trustees for each of the Group's defined benefit pension schemes, taking into account local regulatory requirements. The Milk Pension Fund ('MPF') The MPF was previously operated by the Milk Marketing Board and was also open to staff working for Milk Marque Ltd (the principal employer, now known as Community Foods Group Limited), National Milk Records plc, First Milk Ltd, haulers associated to First Milk Ltd, Dairy Farmers of Britain Ltd (which went into receivership in June 2009 and Milk Link Ltd). We have accounted for our section of the scheme and our share of any orphan assets and liabilities, which together represent approximately 86% of the MPF (2022: 86%). Although the MPF is managed on a sectionalised basis, it is a 'last man standing scheme', which means that all participating employers are jointly and severally liable for all of the fund's liabilities. With effect from 30 June 2013, Genus's remaining active members ceased accruing benefits in the fund and become deferred pensioners. The most recent actuarial triennial valuation of the MPF was at 31 March 2021 and was carried out by qualified actuaries. The valuation has been agreed by the trustees. The principal actuarial assumptions adopted in the 2021 valuation were that: - investment returns on existing assets would exceed fixed-interest gilt yields by 1.6% per annum until 31 March 2030, then by 0.5% per annum thereafter; - Consumer Price Index (CPI) price inflation is expected to be 0.7% per annum lower than Retail Price Index (RPI) price inflation until 31 March 2030, then less 0.1% per annum thereafter; and - pensions in payment and pensions in deferment would increase in future in line with CPI price inflation, subject to various minimum and maximum increases. At 31 March 2021, the market value of the fund's assets was £470m. This represented approximately 103% of the value of the uninsured liabilities, which were £480m at that date. FINANCIAL STATEMENTS 171 GENUS PLC / ANNUAL REPORT 2023 # 29. RETIREMENT BENEFIT OBLIGATIONS CONTINUED The surplus in the fund as a whole, by reference to the 31 March 2021 valuation, was £12m (of which Genus's national share was £10m). Reflecting the improvement in the funding position, with effect from 1 September 2021 no deficit repair contributions are payable but funding the scheme's operating expenses of £1.1m per annum were agreed, rising thereafter by 3.4% per annum until 30 September 2026. The disclosures required under IAS 19 have been calculated by an independent actuary, based on accurate calculations carried out as at 31 March 2021 and updated to 30 June 2023. At 30 June 2023, the MPF was in an overall net pension asset position of £34.6m (2022: £71.4m). However, the Company does not have the unilateral right to this surplus and therefore in line with IFRIC 14, the recognition of this asset is restricted. # Dailgety Pension Fund ('DPF') The most recent actuarial valuation of the DPF was at 31 March 2021 and was carried out by qualified actuaries. The principal actuarial assumptions adopted in the 2021 valuation were that: - Investment returns on existing assets are gilt yields less 0.35% per annum; - CPI price inflation is expected to be 0.7% per annum lower than RPI price inflation until 2030, then utilising the RPI curve from 2030 onwards; and - pensions in payment and pensions in deferment would increase in future in line with CPI price inflation, subject to various minimum and maximum increases. The market value of the available assets at 31 March 2021 was £938m. The value of those assets represented approximately 100% of the value of the uninsured liabilities, which were £937m at 31 March 2021. Under the funding agreement, the Company will not have to make deficit repair contributions. The disclosures required under IAS 19 have been calculated by an independent actuary, based on accurate calculations carried out as at 31 March 2021 and updated to 30 June 2023. At 30 June 2023, the DPF, which includes a £20.5m separate reserve held against future unknown liabilities materialising, was in an overall net pension asset position of £5.7m (2022: £6.6m). However, the Company does not have the unilateral right to this surplus and therefore in line with IFRIC 14, the recognition of this asset is restricted. The primary bulk annuity policy was secured with an insurance company in July 1991, which matched the benefit entitlement of almost all of the fund's current and deferred pension liabilities at that time. The value of the policy and related liabilities at 30 June 2023 was £463m (2022: £528m). We do not have any legal rights to any surplus relating to these bulk annuity policies. # National Pig Development Company Pension Fund ('NPD') The Group operates a closed defined benefit scheme for a small number of former employees of the National Pig Development Company Limited. The total market value of scheme assets and liabilities at 30 June 2023, under the provisions of IAS 19, were £5.0m (2022: £5.4m) and £4.8m (2022: £5.5m), respectively. The most recent actuarial triennial valuation of the NPD was at 30 June 2020 and was carried out by qualified actuaries. The valuation has been agreed by the trustees. The principal actuarial assumptions adopted in the 2020 valuation were that: - Investment returns on existing assets are gilt yields less 0.35% per annum; - CPI price inflation is expected to be 0.5% per annum lower than RPI price inflation; and - pensions in payment and pensions in deferment would increase in future in line with CPI price inflation, subject to various minimum and maximum increases. The market value of the available assets at 30 June 2020 was £6.1m. The value of those assets represented approximately 68% of the value of the uninsured liabilities, which were £9.0m at 30 June 2020. Under the trustee prepared schedule of contributions, Genus is required to make deficit repair contributions of £500,000 per annum commencing 1 July 2021. The disclosures required under IAS 19 have been calculated by an independent actuary, based on accurate calculations carried out as at 30 June 2020 and updated to 30 June 2023. # Other unfunded schemes When the Group acquired Sygen International plc in 2005, it also acquired three unfunded defined benefit schemes and an unfunded retirement health benefit plan, which it now operates for the benefit of the previous Group's senior employees and Executives. # Unfunded defined benefits schemes The scheme liabilities for the three unfunded defined benefit schemes amounted to £4.6m (2022: £6.1m), based on IAS 19's methods and assumptions. This amount is included within pension liabilities in the Group Balance Sheet. It also operates several unfunded defined benefits which amounted to £2.0m (2022: £1.6m). Interest on pension scheme liabilities amounted to £0.2m (2022: £0.2m). The disclosures required under IAS 19 have been calculated by an independent actuary, using the principal assumptions used to calculate the scheme liabilities as for the defined benefit schemes. FINANCIAL STATEMENTS 172 GENUS PLC / ANNUAL REPORT 2023 # NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED # FOR THE YEAR ENDED 30 JUNE 2023 # 29. RETIREMENT BENEFIT OBLIGATIONS CONTINUED # Post-retirement healthcare The scheme liabilities for the unfunded retirement health benefit plan amounted to £0.5m (2022: £0.6m), based on IAS 19's methods and assumptions. This amount is included within retirement benefit obligations in the Group Balance Sheet. Interest on plan liabilities amounted to £ml (2022: £ml). The principal assumptions used to calculate the plan liabilities were that the discount rate would be 5.25% (2022: 3.90%) and that the long-term rate of medical expense inflation would be 7.05% (2022: 6.90%). Aggregated position of defined benefit schemes | | 2023 £m | 2022 £m | | --- | --- | --- | | Present value of funded obligations (includes Genus's 86% share of MFF (2022: 86%)) | 746.8 | 857.6 | | Present value of unfunded obligations | 7.4 | 8.4 | | Total present value of obligations | 754.2 | 866.0 | | Fair value of plan assets (includes Genus's 86% share of MFF (2022: 86%)) | (787.6) | (936.3) | | Restricted recognition of asset (MFF and DPF) | 40.3 | 78.6 | | Recognition of additional liability (MFF) | - | - | | Recognised liability for defined benefit obligations | 6.9 | 8.3 | Each of the defined benefit schemes manages risks through a variety of methods and strategies, including equity protection, to limit the downside risk of falls in equity markets, as well as inflation and interest rate hedging. By funding its defined benefits schemes, the Group is exposed to the risk that the cost of meeting its obligations is higher than anticipated. This could occur for several reasons, for example: - Investment returns on the schemes' assets may be lower than anticipated, especially if falls in asset values are not matched by similar falls in the value of the schemes' liabilities. - The level of price inflation may be higher than that assumed, resulting in higher payments from the schemes. - Scheme members may live longer than assumed, for example due to advances in healthcare. Members may also exercise (or not exercise) options in a way that leads to increases in the schemes' liabilities, for example through early retirement or commutation of pension for cash. - Legislative changes could also lead to an increase in the schemes' liabilities. # Aggregated position of defined benefit schemes The fair value of the total plan assets at the end of the reporting period for each category is as follows: | | Level 1 £m | Level 2 £m | Level 3 £m | 2023 £m | Level 1 £m | Level 2 £m | Level 3 £m | 2022 £m | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Equities | - | 16.3 | - | 16.3 | - | 28.1 | - | 28.1 | | Diversified growth funds | - | 46.1 | - | 46.1 | - | 59.5 | - | 59.5 | | Liability driven investments | - | 108.4 | - | 108.4 | - | 122.3 | - | 122.3 | | Gifts and corporate bonds | - | 73.0 | - | 73.0 | - | 100.5 | - | 100.5 | | Cash | 1.6 | 3.6 | - | 5.2 | 4.3 | 4.3 | - | 8.6 | | Property | 2.4 | - | 22.8 | 25.3 | 2.7 | - | 35.4 | 38.1 | | Direct lending | - | 2.9 | 34.3 | 37.2 | - | 2.5 | 32.8 | 35.3 | | Bulk annuity policy | - | - | 476.1 | 476.1 | - | - | 543.9 | 543.9 | | | 4.0 | 250.3 | 533.2 | 787.6 | 7.0 | 317.2 | 612.1 | 936.3 | # Note: Level 1: valued using unadjusted quoted prices in active markets for identical financial instruments. Level 2: valued using techniques based on information that can be obtained from observable market data. Level 3: valued using techniques incorporating information other than observable market data. Movement in the liability for defined benefit obligations | | 2023 £m | 2022 £m | | --- | --- | --- | | Liability for defined benefit obligations at the start of the year (including the bulk annuity policy (DPF)) | 866.0 | 1,106.6 | | Benefits paid by the plans | (56.3) | (55.7) | | Current service costs and interest | 32.6 | 20.7 | | Actuarial (gains)/losses recognised on fund liabilities arising from changes in demographic assumptions | (15.2) | 7.0 | | Actuarial (gains) recognised on fund liabilities arising from changes in financial assumptions | (104.0) | (220.3) | | Actuarial losses recognised on fund liabilities arising from experience (other) | 31.0 | 6.1 | | Past service cost | - | 0.4 | | Exchange rate adjustment | 0.1 | 0.9 | | Liability for defined benefit obligations at the end of year | 754.2 | 866.0 | FINANCIAL STATEMENTS 173 GENUS PLC / ANNUAL REPORT 2023 29. RETIREMENT BENEFIT OBLIGATIONS CONTINUED | Movement in plan assets | | | | --- | --- | --- | | | 2022 £m | 2021 £m | | Fair value of plan assets at the start of the year (including the bulk annuity policy (DPE)) | 936.3 | 1,147.2 | | Administration expenses | (0.7) | (0.4) | | Contributions paid into the plans | 1.5 | 3.5 | | Benefits paid by the plans | (56.3) | (55.7) | | Interest income on plan assets | 35.4 | 21.3 | | Actuarial losses recognised in equity | (128.6) | (179.6) | | Fair value of plan assets at the end of the year | 787.6 | 936.3 | | Aggregated position of defined benefit schemes | | | | Summary of movements in Group deficit during the year | | | | | 2022 £m | 2021 £m | | Deficit in schemes at the start of the year | (8.3) | (17.1) | | Administration expenses | (0.7) | (0.4) | | Exceptional cost | - | (0.4) | | Contributions paid into the plans | 1.5 | 3.5 | | Net pension finance cost | (0.2) | (0.2) | | Actuarial (losses)/gains recognised during the year | (40.4) | 27.3 | | Movement in restriction of assets | 38.3 | (69.8) | | Release of additional liability | 3.0 | 43.7 | | Exchange rate adjustment | (0.1) | (0.9) | | Deficit in schemes at the end of the year | (6.9) | (8.3) | | Amounts recognised in the Group Income Statement | | | | | 2022 £m | 2021 £m | | Administrative expenses | 0.7 | 0.4 | | Interest obligation | 32.6 | 20.7 | | Interest income on plan assets | (35.4) | (21.3) | | Interest on additional liability | 3.0 | 0.8 | | Exceptional cost | - | 0.4 | | | 0.9 | 1.0 | | The expense is recognised in the following line items in the Group Income Statement | | | | | 2022 £m | 2021 £m | | Administrative expenses | 0.7 | 0.4 | | Exceptional cost | - | 0.4 | | Net finance charge | 0.2 | 0.2 | | | 0.9 | 1.0 | | Actuarial losses/(gains) recognised in the Group Statement of Comprehensive Income | | | | | 2022 £m | 2021 £m | | Cumulative loss at the start of the year | 60.0 | 60.3 | | Actuarial losses/(gains) recognised during the year | 40.4 | (27.3) | | Movement in restriction of assets | (38.3) | 69.8 | | Release of additional liability | (3.0) | (43.7) | | Exchange rate adjustment | 0.1 | 0.9 | | Cumulative loss at the end of the year | 59.2 | 60.0 | FINANCIAL STATEMENTS ### 174 GENUS PLC / ANNUAL REPORT 2023 ### NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED ### FOR THE YEAR ENDED 30 JUNE 2023 29. RETIREMENT BENEFIT OBLIGATIONS CONTINUED FINANCIAL STATEMENTS Actuarial assumptions and sensitivity analysis Principal actuarial assumptions (expressed as weighted averages) are: 2023 2022 Discount rate 5.25% 3.90% Consumer Price Index 2.65% 2.40% Retail Price Index 3.05% 2.90% The mortality assumptions used are consistent with those recommended by the schemes’ actuaries and reflect the latest available tables, adjusted for the experience of the scheme where appropriate. For 2023, the mortality tables used are 100% of the S3PMA (males)/S3PFA_M (females) all lives tables, with birth year and CMI 2022 projections with parameters of Sk=7.0 and A=0.5% and weighting parameters of w2020=0%, w2021=0% and w2022=25%, subject to a long-term rate of improvement of 1.50% per annum for males and females and for 2022, the mortality tables used are 100% of the S3PMA (males)/S3PFA_M (females) all lives tables, with birth year and 2021 CMI projections with a smoothing parameter of Sk=7.0 and A=0.5%, subject to a long-term rate of improvement of 1.5% per annum for males and females. Aggregated position of defined benefit schemes The following table shows the assumptions used for all schemes and illustrates the life expectancy of an average member retiring at age 65 at the balance sheet date and a member reaching age 65 in 20 years’ time. 2023 Years 2022 Years Retiring at balance sheet date at age 65 Male 22.1 22.6 Female 24.0 24.4 Retiring at age 65 in 20 years’ time Male 23.7 24.2 Female 25.8 26.2 Duration of benefit obligations 2023 Years 2022 Years Weighted average duration of the defined benefit obligations 10.1 11.4 Weighted average duration of the defined benefit obligations, excluding defined benefit obligations backed by purchased annuities 12.4 14.3 Sensitivity analysis Measurement of the Group’s defined benefit obligation is sensitive to changes in certain key assumptions. The sensitivity analysis below shows how a reasonably possible increase or decrease in a particular assumption would, in isolation, result in an increase or decrease in the present value of the defined benefit obligation as at 30 June 2023. We have included additional sensitivity analysis, which excludes the value of our defined benefit obligations backed by purchased annuities, as the asset value is the deemed present value of obligations, with no movement to the overall scheme deficits. Given recent market volatility due to the impact of COVID-19 and the conflict in Ukraine, we continue to use a sensitivity analysis of 0.5%. Discount rate Rate of inflation Life expectancy Decrease by 0.5% £m Increase by 0.5% £m Decrease by 0.5% £m Increase by 0.5% £m Decrease by 1 year £m Increase by 1 year £m Increase/(decrease) in present value of defined obligation 44.1 (41.7) (35.3) 30.6 (28.5) 28.5 Excluding purchased annuity obligations increase/(decrease) in present value of defined obligation 16.3 (15.4) (13.0) 11.3 (10.5) 10.5 The sensitivity analysis may not be representative of an actual change in the defined benefit obligation, as it is unlikely that changes in assumptions would occur in isolation from one another. The sensitivities assume the funds’ assets remain unchanged. However, in practice changes in interest rates and inflation will also affect the value of the funds’ assets. The funds’ investment strategy is to hold matching assets with values that move in line with the liabilities of the fund, to protect against changes in interest rates and inflation. This sensitivity analysis has been prepared using the same method adopted when adjusting results of the latest funding valuation to the balance sheet date. This is the same approach adopted in previous periods. The history of experience adjustment is as follows: 2023 £m 2022 £m 2021 £m 2020 £m 2019 £m Present value of the defined benefit obligation 754.2 866.0 1,106.6 1,169.3 1,179.5 Fair value of plan assets (787.6) (936.3) (1,147.2) (1,182.5) (1,201.1) Restrict recognition of asset and recognition of additional liability 40.3 78.6 51.7 31.3 45.8 Deficit in the plans 6.9 8.3 11.1 18.1 24.2 Experience adjustments arising on plan liabilities (%) 17.2 21.0 2.1 1.8 4.8 Experience adjustments arising on plan assets (%) 16.3 19.3 2.4 1.6 2.5 175 GENUS PLC / ANNUAL REPORT 2023 # 30. SHARE-BASED PAYMENTS We have a number of share plans used to award shares to Directors and senior management as part of their remuneration. To record the cost of these, a change is recognised over the vesting period in the Group Income Statement, based on the fair value of the award on the date of grant. # Accounting policies We recognise the fair value of share awards and options granted as an employee expense, with a corresponding increase in equity. We measure the fair value at the grant date and spread it over the vesting period of each option. We use a binomial valuation model to measure the fair value of options and a Black-Scholes valuation model to measure the fair value of share awards. We adjust the amount we recognise as an expense, to reflect the estimated performance against non-market related conditions and the number of share awards and options that actually vest at the end of the vesting period. The Group recognised a total share-based payment expense of £6.0m (2022: £3.7m), including National Insurance contributions credit of £0.4m (2022: £0.1m charge). # Share awards There were 821,681 conditional share awards outstanding at 30 June 2023. These conditional shares were awarded to Executive Directors and senior management under the 2014 and 2019 Performance Share Plans. In accordance with the plan's terms, participants have received a conditional annual award of shares or nil cost option awards, which will normally vest after three years, with the proportion of the award vesting depending on growth in the Group's adjusted earnings per share. Further details of the plan's performance conditions are given in the Directors' Remuneration Report. During the year ended 30 June 2023: - 409,595 awards were granted on 14 September 2022, 28 September 2022, 10 October 2022, 11 November 2022 and 12 December 2022 with an aggregate fair value of £10,565,000. The fair value of services received in return for share awards granted is based on the fair value of share awards granted, measured using a Black-Scholes valuation model. At the date of grant, the fair value of a share awarded was £25.79, based on an expected dividend yield of 1.51%. - 126,935 awards in total were granted on 2 May 2023, with an aggregate fair value of £3,346,000. The fair value of services received in return for share awards granted is based on the fair value of share awards granted, measured using a Black-Scholes valuation model. At the date of grant, the aggregate fair value of a share awarded was £26.36, based on an expected dividend yield of 1.16%. | | Number of awards 2022 | Number of awards 2022 | | --- | --- | --- | | Outstanding at the start of year | 560,511 | 665,522 | | Exercised during the year | (137,998) | (205,010) | | Forfeited during the year | (137,362) | (31,819) | | Granted during the year | 536,530 | 137,818 | | Outstanding at 30 June | 821,681 | 560,511 | | Exercisable at 30 June | 13,764 | 17,605 | # Bonus and restricted stock share awards In addition to the outstanding share awards above, there were 48,728 bonus and restricted stock share awards outstanding at 30 June 2023. The bonus shares were awarded to Executive Directors and senior management as part of the compulsory deferred bonus, and restricted stock share awards were granted to senior management in connection with recruitment. In accordance with the awards' terms, participants have received a conditional annual bonus award of shares or nil cost option awards, which will normally vest between one and three years after award, providing the participant is employed by the Group at that time. In the year ended 30 June 2023, 8,153 bonus share awards were granted on 14 September 2022, with an aggregate fair value of £209,000. | | Number of awards 2022 | Number of awards 2022 | | --- | --- | --- | | Outstanding at the start of year | 61,313 | 72,466 | | Exercised during the year | (20,738) | (29,340) | | Forfeited during the year | - | - | | Granted during the year | 8,153 | 18,192 | | Outstanding at 30 June | 48,728 | 61,313 | | Exercisable at 30 June | - | - | FINANCIAL STATEMENTS ### 176 GENUS PLC / ANNUAL REPORT 2023 ### NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED ### FOR THE YEAR ENDED 30 JUNE 2023 30. SHARE-BASED PAYMENTS CONTINUED Share options On 12 August 2004, the Group established a share option programme that entitles key management and other senior employees to purchase shares in the Company. Further grants on similar terms were offered to these employee groups as set out below. The terms and conditions of the grants are as set out below. All options are to be settled by physical delivery of shares and meet the criteria for being treated as equity settled. Employees entitled Grant date Number of instruments Vesting conditions Option exercise price Contractual life of options 2004 Company share plan 26 September 2013 3,884 Exercisable 1,413.00p 10 years Total share options 3,884 Share options The number and weighted average exercise prices of share options are as follows: | Weighted | | | | Weighted | | | | | --- | --- | --- | --- | --- | --- | --- | --- | | average | | | | average | | | | | exercise | | Number of | | exercise | | Number of | | | | price | options | | | price | | options | | | 2023 | | 2023 | | 2022 | | 2022 | Outstanding at the start of year 1,400p 11,430 1,331p 32,633 Forfeited during the year 1,413p (1,975) 1,374p (2,755) Share appreciation rights effected during the year 1,386p (2,618) 1,312p (6,328) Exercised during the year 1,387p (2,953) 1,265p (12,120) Outstanding at 30 June 1,413p 3,884 1,400p 11,430 Exercisable at 30 June 1,413p 3,884 1,400P 11,430 FINANCIAL STATEMENTS The options at 30 June 2023 had a weighted average remaining contractual life of 0.2 years (2022: 1.1 years). No share options were granted during the year (2022: nil). The weighted average share price at the date of exercise during the year was £29.56p (2022: £44.18p). 31. CAPITAL AND RESERVES Called up share capital is the number of shares in issue at their par value. A number of shares were issued in the year, in relation the employee share schemes. Accounting policies Equity instruments issued by the Group are recorded at the amounts of the proceeds received, net of direct issuance costs. O wn shares We include the transactions, assets and liabilities of the Group-sponsored Qualifying Employee Share Ownership Trust (‘QUEST’) in the Group Financial Statements. In particular, the trust’s purchases of the Company’s shares are deducted from shareholders’ funds until they vest unconditionally with employees. Share capital 2023 Number 2022 Number 2023 £m 2022 £m Issued and fully paid Ordinary shares of 10 pence 66,027,210 65,773,620 6.6 6.6 There is no authorised share capital limit. The holders of ordinary shares are entitled to receive dividends, as declared from time to time. The movement in share capital for the period was as follows: 2023 Number 2022 Number 2023 £m 2022 £m Issued under the Executive Share Option Plan 2,953 12,120 – – Issued to Employee Benefit Trust 250,000 – – – Issued to Genus plc Share Incentive Plan 637 – – – 253,590 12,120 – – Shares issued under the Executive Share Option Plan were issued at option prices as follows: 2023 Number 2023 Option price 2022 Number 2022 Option price Executive Share Option Plan – – 2,837 977.83p 983 1334.00p 7,027 1334.00p 1,970 1413.00p 2,256 1413.00p 2,953 12,120 177 GENUS PLC / ANNUAL REPORT 2023 # **31. CAPITAL AND RESERVES** CONTINUED # **Reserve for own shares** The Company's shares are held by a QUEST, which is an employee benefit trust established to facilitate the operation of our long-term incentive scheme for senior management. The reserve amount represents the deduction in arriving at shareholders' funds for the consideration the trust paid for the Company's shares, which had not vested unconditionally at the balance sheet date. The number and market value of the ordinary shares held by the Employee Benefit Trust and the QUEST were: | | 2023 Number | 2022 Number | 2023 £m | 2022 £m | | --- | --- | --- | --- | --- | | Shares allocated but not vested | 375,998 | 280,803 | 8.1 | 7.1 | | Unallocated shares | 92,334 | 92,334 | 2.0 | 2.3 | | | **468,332** | **373,137** | **10.1** | **9.4** | The shares have a nominal value of £46,833 (2022: £37,314). # **Translation reserve** The translation reserve comprises all foreign currency differences arising from translating the financial statements of our foreign operations. The Group uses foreign currency denominated borrowings of £41.0m (2022: £32.3m) as a hedge against the translation exposure on the Group's net investment in overseas companies. Where the hedge is fully effective at hedging the variability in the net assets of such companies caused by changes in exchange rates, the changes in value of the borrowings are recognised in the Consolidated Statement of Comprehensive Income and accumulated in the hedging and translation reserves. The ineffective part of any change in value caused by changes in exchange rates is recognised in the Consolidated Income Statement. # **Hedging reserve** The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments, net of taxation. # **Hedging and translation reserves** | | Hedging reserve £m | Translation reserve £m | | --- | --- | --- | | **Balance at 30 June 2021** | – | (71) | | Exchange differences on translation of overseas operations | – | 67.2 | | Gain recognised on net investment hedges | – | (0.7) | | Loss recognised on cash flow hedges – interest rate swaps and cross currency swaps | 19 | – | | Income tax related to net losses recognised in other comprehensive income | (0.5) | (7.7) | | **Balance at 30 June 2022** | **1.4** | **50.9** | | Exchange differences on translation of overseas operations | – | (27.5) | | Gain recognised on net investment hedges | – | – | | Loss recognised on cash flow hedges – interest rate swaps and cross currency swaps | 0.8 | – | | Income tax related to net losses recognised in other comprehensive income | (0.2) | 3.3 | | **Balance at 30 June 2023** | **2.0** | **26.7** | FINANCIAL STATEMENTS ![img-8.jpeg](img-8.jpeg) 178 GENUS PLC / ANNUAL REPORT 2023 # NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED # FOR THE YEAR ENDED 30 JUNE 2023 32. NOTES TO THE CASH FLOW STATEMENT | | 2022 £m | 2022 £m | | --- | --- | --- | | Profit for the year | 31.8 | 36.7 | | Adjustment for: | | | | Net (A$) 41 valuation movement on biological assets | 16.9 | 5.4 | | Amortisation of acquired intangible assets | 7.7 | 8.3 | | Share-based payment expense | 6.0 | 3.7 | | Share of profit of joint ventures and associates | (10.5) | (5.2) | | Other gains and losses | (2.7) | - | | Finance costs (net) | 14.3 | 6.2 | | Income tax expense | 7.6 | 11.7 | | Exceptional items (net) | 3.5 | 2.0 | | Adjusted operating profit from continuing operations | 74.6 | 68.8 | | Depreciation of property, plant and equipment | 30.2 | 26.4 | | Loss on disposal of plant and equipment | 0.1 | 0.4 | | Amortisation and impairment of intangible assets | 5.7 | 4.3 | | Adjusted earnings before interest, tax, depreciation and amortisation | 110.6 | 99.9 | | Cash impact of exceptional items relating to operating activities | (7.1) | 1.1 | | Other movements in biological assets and harvested produce | (11.1) | (9.0) | | Decrease in provisions | (1.0) | - | | Additional pension contributions in excess of pension charge | (0.6) | (3.1) | | Other | 0.2 | 0.2 | | Operating cash flows before movement in working capital | 91.0 | 79.0 | | Increase in inventories | (9.6) | (6.1) | | Increase in receivables | (9.3) | (18.1) | | Increase in payables | 6.6 | 2.2 | | Cash generated by operations | 78.7 | 56.6 | | Interest received | 0.1 | 0.4 | | Interest and other finance costs paid | (10.7) | (4.0) | | Interest on leased assets | (1.2) | (1.1) | | Cash flow from derivative financial instruments | 1.3 | (0.1) | | Income taxes paid | (17.8) | (17.5) | | Net cash from operating activities | 50.4 | 34.3 | Analysis of net debt Total changes in liabilities due to financing activities are as follows: | | At 1 July 2022 £m | Net cash flows £m | Foreign exchange £m | Other non-cash movements £m | At 30 June 2023 £m | | --- | --- | --- | --- | --- | --- | | Cash and cash equivalents (see note 22) | 38.8 | 1.3 | (3.8) | - | 36.3 | | Interest-bearing loans – current (see note 27) | (7.1) | 3.8 | 0.2 | (1.1) | (4.2) | | Lease liabilities – current (see note 28) | (10.1) | 11.1 | 0.5 | (11.5) | (10.0) | | | (17.2) | 14.9 | 0.7 | (12.6) | (14.2) | | Interest-bearing loans – non-current (see note 27) | (182.1) | (17.8) | 3.9 | - | (186.0) | | Lease liabilities – non-current (see note 28) | (24.5) | - | 0.8 | 1.8 | (21.9) | | | (206.6) | (17.8) | 4.7 | 1.8 | (217.9) | | Total debt financing | (223.8) | (2.9) | 5.4 | (10.8) | (232.1) | | Net debt | (185.0) | (1.6) | 1.6 | (10.8) | (195.8) | Included within non-cash movements is £9.7m in relation to net new leases and £1.1m in the unwinding of debt issue costs. FINANCIAL STATEMENTS ### 179 GENUS PLC / ANNUAL REPORT 2023 32. NOTES TO THE CASH FLOW STATEMENT CONTINUED Other | At 1 July | | | Net | Foreign | | non-cash | | At 30 June | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | 2021 | cash flows | | exchange | | movements | | | 2022 | | | £m | | £m | | £m | | £m | | £m | Cash and cash equivalents (see note 22) 46.0 (11.0) 3.8 – 38.8 Interest-bearing loans – current (see note 27) (13.9) 8.9 (1.2) (0.9) (7.1) Lease liabilities – current (see note 28) (9.0) 11.3 (0.7) (11.7) (10.1) (22.9) 20.2 (1.9) (12.6) (17.2) Interest-bearing loans – non-current (see note 27) (109.4) (63.1) (9.6) – (182.1) Lease liabilities – non-current (see note 28) (19.3) – (1.6) (3.6) (24.5) (128.7) (63.1) (11.2) (3.6) (206.6) Total debt financing (151.6) (42.9) (13.1) (16.2) (223.8) Net debt (105.6) (53.9) (9.3) (16.2) (185.0) Included within non-cash movements is £15.3m in relation to net new leases and £0.9m in the unwinding of debt issue costs. FINANCIAL STATEMENTS 33. OPERATING LEASES Accounting policies For short-term leases (those with a term of less than 12 months) and low-value items, we charge the rentals payable to the Income Statement on a straight-line basis over the lease term. The Company has elected not to apply IFRS 16 to contracts where the right-of-use asset would be recognised as an intangible asset (e.g. software licences) . Total of future minimum lease payments under non-cancellable operating leases which expire: 2023 £m 2022 £m In less than one year 1.2 – Between one and five years 1.2 – In more than five years – – 2.4 – 34. CAPITAL AND OTHER COMMITMENTS At 30 June 2023, outstanding contracted capital expenditure amounted to £nil (2022: £nil). 35. CONTINGENCIES AND BANK GUARANTEES Contingent liabilities are potential future cash outflows, where the likelihood of payments is considered more than remote but is not considered probable or cannot be measured reliably. Assessing the amount of liabilities that are not probable is highly judgemental. The retirement benefit obligations referred to in note 29 include obligations relating to the MPF defined benefit scheme. Genus, together with other participating employers, is joint and severally liable for the scheme’s obligations. Genus has accounted for its section and its share of any orphan assets and liabilities, collectively representing approximately 86% (2022: 86%) of the MPF. As a result of the joint and several liability, Genus has a contingent liability for the scheme’s obligations that it has not accounted for. The total deficit of the MPF from the most recent triennial valuation can be found in note 29. As described in note 7, the Group is involved in ongoing litigation proceedings and investigations with ST that are at various legal stages. The Group makes a provision for amounts to the extent where an outflow of economic benefit is probable and can be reliably estimated. However, there are specific claims identified in the litigation where the Group considers the outcome of the claim is not probable and will not result in the outflow of economic benefit. The Group’s future tax charge and effective tax rate could be affected by factors such as countries reforming their tax legislation to implement the OECD’s BEPS recommendations and by European Commission initiatives including state aid investigations. Further information can be found in note 11. At 30 June 2023, we had entered into bank guarantees totalling £12.6m (2022: £20.2m). 180 GENUS PLC / ANNUAL REPORT 2023 # NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED # FOR THE YEAR ENDED 30 JUNE 2023 # 36. DIRECTORS AND KEY MANAGEMENT COMPENSATION In accordance with IAS 24 'Related Party Disclosures', key management personnel are those having authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly. Key management personnel comprise the Directors and the other members of GELT. | | 2023 £m | 2022 £m | | --- | --- | --- | | Salaries and short-term employee benefits | 5.4 | 4.9 | | Post-employment benefits | 0.2 | 0.2 | | Share-based payment expense | 3.0 | 1.2 | | | 8.6 | 6.3 | # Directors Further details of Directors' compensation are included in the Directors' Remuneration Report. # Other transactions with key management personnel Other than remuneration, there were no transactions with key management personnel. # 37. GROUP ENTITIES In accordance with section 409 of the Companies Act 2006, a list of subsidiaries and joint ventures and associates as at 30 June 2023 is set out below. All subsidiary undertakings are subsidiary undertakings of their immediate parent undertaking(s), unless otherwise indicated. # Nature of business # Bovine | Name of undertaking | Registered address | Country of incorporation | Direct/Indirect Group interest | Share class | % of share capital voting rights liability Group companies | | --- | --- | --- | --- | --- | --- | | ABS (Beijing) International Trade Co., Ltd. | 81608, Lucky Tower, East 5, 3rd Ring Road, Chaoyang District, Beijing, 100027, China | China | Indirect | No Par Value Common Stock | 100% | | ABS Argentina S.A. | A. Castellanos 169, 00801 Esperanza, Santa Fe, Argentina | Argentina | Direct | ARSI Ordinary | 100% | | ABS Chile Limitada | Avenida del Parque #A61 office #601, Huechuraba, Santiago, Chile | Chile | Direct | CLP1 Common Stock | 100% | | ABS Genetics South Africa (Pty) Ltd | Prestige Park Block 8, Unit No. 58, Pastorale Street, Durbanville Industrial Park, Durbanville, 7550, South Africa | South Africa | Indirect | ZARI Ordinary | 100% | | ABS Global (Canada) Inc. | 1525 Floradale Road, Elmira ONN 38 221, Canada | Canada | Indirect | CADI Ordinary | 100% | | ABS Global, Inc. | 1525 River Road, De Forest W 535 52, United States | United States | Indirect | USD001 Common | 100% | | ABS Italia S.r.l. | Via Bastida nr. 6, loc. Cavatigiana, 26020, Cremona, Italy | Italy | Indirect | €1 Quota | 100% | | ABS México, S.A. de C.V. | Kansas No. 2028, Quintas Campestre, 31214, Chihuahua, Chih., México | Mexico | Direct | MXN10 Class 1 MXN10 Class 2 | 100% | | ABS Polska Sp. z o.o. | Szołtowno 22A, 82-300 Granowo Górno, Poland | Poland | Indirect | PLN1,000 Ordinary | 100% | | Bosec SASU | 69 Chemin des Moiteurs, PA du Charpenoy, 69210, Lentils, France | France | Indirect | €10 Ordinary | 100% | | Chitale Genus ABS (India) Private Limited | Gat No 29, Bramha Facility, Burungwadi Near Bhilawadi Railway Station, Taluka Palas, Maharashtra, Sangli, 416303, India | India | Indirect | INR100 Ordinary | 50% | | De Novo Genetics LLC | 1286 Oriole Drive, New Albin IA 52163, United States | United States | Indirect | No Par Value LLC Units | 5% | | Genus ABS (NZ) Limited | Generate Accounting Group Limited, Level 2, 22 Dundonald Street, Eden Terrace, Auckland, 1021, New Zealand | New Zealand | Indirect | NZ01 Ordinary | 100% | | Genus ABS Colombia SAS | Avenida Carrera 70, No. 105 - 111, Bogota, Colombia | Colombia | Indirect | CDP10,000 Ordinary | 100% | FINANCIAL STATEMENTS ### 181 GENUS PLC / ANNUAL REPORT 2023 37. GROUP ENTITIES CONTINUED Nature of business Bovine FINANCIAL STATEMENTS Name of undertaking Registered address Country of incorporation Direct/ indirect Group interest Share class % of share capital/ voting rights held by Group companies Genus ABS Netherlands B.V. Hoogoorddreef 15, Amsterdam, 1101BA, Netherlands Netherlands Indirect EUR1 Ordinary 100% Genus Australia Pty Ltd 15 Scholar drive, Bundoora VIC 3063, Australia Australia Indirect AUD1.388 Ordinary 100% Genus Breeding India Private Limited 5th FLOOR, C WING, ETERNIA PREMISES CO-OP SOC, NEAR DA UNIT NO 505, 506, DAGDI BUNGLOW, WAKDEWADI,Maharashtra, Pune, 411005, India India Indirect INR1 Ordinary 100% Genus Breeding Limited (01192037) 2 Matrix House, Basing View, Basingstoke, Hampshire, RG21 4DZ, United Kingdom UK Direct £1 Ordinary 100% ‘Genus Ukraine’ LLC Pidlisna str., 1, KYIV 03164, Ukraine Ukraine Indirect No Par Value Common Stock 100% JBI Genetics LLC 130 North Kelsey Street, Visalia CA 93291, United States United States Indirect No Par Value Common Stock 100% LLC Genus ABS Rus Zheleznodorozhnaya Street, House 51, Letter Zh, Premises 2, 300062, Tula, Russian Federation Russia Indirect RUB1 Ordinary 100% Millwood Products Ltd (08662101) 2 Matrix House, Basing View, Basingstoke, Hampshire, RG21 4DZ, United Kingdom United Kingdom Indirect £1 Ordinary 100% Pecplan ABS Imp. e Exp. Ltda. Rod. BR 050 Km 196 + 150metros, Zona Rural, Delta, MG – 38108-000, Brazil Brazil Indirect BRL1 Ordinary 100% St Jacobs Animal Breeding Corp. 1525 River Road, De Forest WI 53532, United States United States Indirect No Par Value Common 100% Zitery S.A. Maximo Tajes 7189, Uruguay Uruguay Indirect No Par Value Common 100% Nature of business Porcine Name of undertaking Registered address Country of incorporation Direct/ indirect Group interest Share class % of share capital/voting rights held by Group companies Agroceres PIC Genética de Suínos Ltda Rua 1 JN, n˚ 1411, Sala 16 – Jardim Novo, Rio Claro/SP – CEP, 13.502-741, Brazil Brazil Indirect BRL1 Ordinary 49% 1 Agroceres PIC Suínos Ltda Rua 1 JN, n˚ 1411, Sala 17 – Jardim Novo, Rio Claro/SP – CEP, 13.502-741, Brazil Brazil Indirect BRL1 Ordinary 49% 1 GENEETIC Service S.R.L. Viale Europa 71, 32100, Belluno, Italy Italy Indirect €1 Ordinary 33% 1 Inner Mongolia Genus Biotechnology Co., Ltd 3rd Floor, Building A-15 North, Intelligent Manufacturing Industrial Park, Inner Mongolia, Helinger New Area, China China Indirect CNY1 Ordinary 100% Inner Mongolia Haoxiang Pig Breeding Co. Ltd Jintang Village, Jinding Town, Zhidan County, Yan An Municipality, Shaanxi Province, China China Indirect No Par Value Common 49% 1 Liao Ning PIC Agriculture Science and Technology Co., Ltd Gunzigou Village, Gao Guan Town, Benxi County, Benxi City, Liaoning Province, China China Indirect CNY1 Ordinary 100% PIC (Shanghai) Agriculture Science and Technology Company Limited Room 702-5, No. 719 Shen Gui Road, Min Hang District, Shangha, China China Indirect No Par Value Common 100% PIC (Zhangjiagang) Pig Improvement Co., Ltd. Office 1210, International Finance Tower, 20 Jingang Road, Zhangjiagang Bonded Zone, Zhangjiagang City, Jiangsu Province, China China Indirect USD1 Ordinary 100% PIC Andina SpA Avenida del Parque #4161 office #601, Huechuraba, Santiago, Chile Chile Indirect CLP1 Ordinary 100% ### 182 GENUS PLC / ANNUAL REPORT 2023 ### NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED ### FOR THE YEAR ENDED 30 JUNE 2023 37. GROUP ENTITIES CONTINUED Nature of business Porcine FINANCIAL STATEMENTS Name of undertaking Registered address Country of incorporation Direct/ indirect Group interest Share class % of share capital/voting rights held by Group companies PIC Ankang Agriculture Science and Technology Co., Ltd. Shishubian village, Hanbin District, Shaanxi Province, Ankang, China China Indirect CNY1 Ordinary 100% PIC Canada Ltd. Borden Ladner Gervais LLP, 1900-520, 3rd Avenue, S.W., Calgary, Alberta T2P OR3, Canada Canada Indirect CAD1 Ordinary 100% PIC France SA 69 Chemin des Molières, 69210, Lentilly, France France Indirect €17 Ordinary 100% PIC Genetics Designated Activity Company Riverside One, Sir John Rogerson’s Quay, Dublin 2, Ireland Ireland Indirect €1.27 Ordinary €1.27 Redeemable preference shares 100% PIC Genetics LLC 79 Narodnyy Boulevard, 308000, Belgorod, Russian Federation Russia Indirect RUB1 Ordinary 100% Pig Improvement Company de México, S. de R.L. de C.V. Wenceslao de la Barquera No.7, Col. Villas del Sur, 76040 Queretaro, Queretaro, Mexico Mexico Indirect No Par Value Common Stock 100% PIG Improvement Company Deutschland GmbH Jathostraße 11a, D-30163 Hannover, Germany Germany Indirect No Par Value Common Stock 100% Pig Improvement Company España, S.A. C/Pau Vila, 22 2 0 puerta 6, 08174 Sant Cugat del Valles, Barcelona, Spain Spain Indirect €25 Ordinary 100% Pig Improvement Company UK Limited (00716304) 2 Matrix House, Basing View, Basingstoke, Hampshire, RG21 4DZ, United Kingdom UK Indirect £0.10 Ordinary 100% PIC Italia S.r.l. Strada dei Loggi 22, 06135, Ponte San Giovanni, Perugia, Italy Italy Indirect €1 Ordinary 85% PIC Philippines, Inc. Unit 2101-2103 and 2203, Jollibee Plaza, F. Ortigas, Jr. Rd., Ortigas Center, Pasig City, 1605, Philippines Philippines Indirect PHP100 Ordinary 100% PIC USA, Inc. 100 BlueGrass Commons Blvd, Suite 2200, Hendersonville, TN 37075, United States United States Indirect USD1 Ordinary 100% RenOVAte Biosciences, Inc. 6874 Caravan Ct, Columbia MD 21044, United States United States Direct USD0.001 Series Seed Preferred 33% 1 Reprodutores PIC, Lda Av. Eng. Duarte Pacheo, Amoreiras, Torre 2 – 14 0 A, 1070-102 Lisboa, Portugal Portugal Indirect No Par Value Common Stock 100% Società Agricola GENEETIC S.R.L. Via Marche n. 2, 42122, Reggion Emilia, Italy Italy Indirect €1 Ordinary 33% 1 Shaanxi PIC Pig Improvement Co., Ltd. 12105, 21st floor, Yun tian Building, 12 Feng Cheng Second Street, Xian Economic Development District, Xian City, Shaanxi Province, China China Indirect No Par Value Common Stock 100% Yan’an Xinyongxiang Agriculture Technology Co., Ltd. Jintang Village, Jianjun Town Zhidan County, Yan An Municipality, in Shaanxi Province, China China Indirect No Par Value Common Stock 49% 1 Nature of business Other Name of undertaking Registered address Country of incorporation Direct/ indirect Group interest Share class % of share capital/voting rights held by Group companies Accounting & Managerial Services S. de R.L. de C.V. Kansas No. 2028, Quintas Campestre, 31214, Chihuahua,Chih., Mexico Mexico Indirect MXN1 Class 1 96% ABS International, Inc. 1525 River Road, De Forest WI 53532, United States United States Indirect USD1 Ordinary 100% 183 GENUS PLC / ANNUAL REPORT 2023 37. GROUP ENTITIES CONTINUED Nature of business Other | Name of undertaking | Registered address | Country of incorporation | Direct/Indirect Group Interest | Share class | % of share capital voting rights held by Group companies | | --- | --- | --- | --- | --- | --- | | ABS Pecipian Ltda. | Raid BR 050 Km 196 + 150metres, Zona Rural, Delta; MG - SBGB-000, Brazil | Brazil | Direct | BRLI Ordinary | 100% | | Agence Spillers N.V. | Place Saint-Lambert 1h, 1200 Woluwe-Saint-Lambert, Belgium | Belgium | Indirect | No Par Value Common Stock | 100% | | Brazilian Holdings Limited (004790449) | Matrix House, Basing View, Basingstoke, Hampshire, RG21 4DZ, United Kingdom | UK | Indirect | £1 Ordinary | 100% | | Brazilian Properties Limited | Matrix House, Basing View, Basingstoke, Hampshire, RG21 4DZ, United Kingdom | UK | Direct | £1 Ordinary | 100% | | Busby Participações Ltda. | Av. Leopoldino de Oliveira, 4.113, Sala 303, Centro, CEP: 38010-0103, UBERABA-MG | Brazil | Indirect | BRLI Ordinary | 100% | | Cannavarro Participações Ltda. | Av. Leopoldino de Oliveira, 4.113, Sala 303, Centro, CEP: 38010-0103, UBERABA-MG | Brazil | Indirect | BRLI Ordinary | 100% | | Dalco Exportadora Ltda. | Av. Leopoldino de Oliveira, 4113 - Sala 303, Uberaba, Minas Gerais, CEP 38010-000, Brazil | Brazil | Indirect | BRLI Ordinary | 100% | | Dalgety Pension Trust Limited | Matrix House, Basing View, Basingstoke, Hampshire, RG21 4DZ, United Kingdom | UK | Indirect | £1 Ordinary | 100% | | Fyfield GPE Limited (010264759) | Matrix House, Basing View, Basingstoke, Hampshire, RG21 4DZ, United Kingdom | UK | Indirect | £1 Ordinary | 100% | | Fyfield Diamant | Matrix House, Basing View, Basingstoke, Hampshire, RG21 4DZ, United Kingdom | UK | Indirect | £1 Ordinary | 100% | | Fyfield Holland B.V. | Matrix House, Basing View, Basingstoke, Hampshire, RG21 4DZ, United Kingdom | Netherlands | Indirect | NLG100 Ordinary | 100% | | Fyfield Ireland Limited | Riverside One, Sir John Rogerson's Quay, Dublin 2, Ireland | Ireland | Indirect | £1.25 'A' Ordinary £1.25 'B' Ordinary | 100% | | Genus Investments Limited (020285117) | Matrix House, Basing View, Basingstoke, Hampshire, RG21 4DZ, United Kingdom | UK | Direct | £1 Ordinary | 100% | | Genus Quest Trustees Limited | Matrix House, Basing View, Basingstoke, Hampshire, RG21 4DZ, United Kingdom | UK | Direct | £1 Ordinary | 100% | | Genus R&D, Inc. | 1525 River Road, De Forest W1S3532, United States | United States | Indirect | US$0.01 Common | 100% | | Genus Trustees Limited | Matrix House, Basing View, Basingstoke, Hampshire, RG21 4DZ, United Kingdom | UK | Direct | £1 Ordinary | 100% | | GIL Finance S.b.r.l. | 121 Avenue de la Forencene, L - 1571, Luxembourg | Luxembourg | Indirect | USD1 Ordinary | 100% | | PIC De Brasil Empreendimentos e Participações Ltda. | Rua 1, JN, no. 1471, Sala 15, Jardim Nova, Rio Claro, Estado De São Paulo, CEP 13.502.741, Brazil | Brazil | Indirect | BRL0.01 Ordinary | 100% | | PIC Fyfield Limited (001097791) | Matrix House, Basing View, Basingstoke, Hampshire, RG21 4DZ, United Kingdom | UK | Indirect | £1 Ordinary | 100% | | Pig Improvement Company Overseas Limited (015838116) | Matrix House, Basing View, Basingstoke, Hampshire, RG21 4DZ, United Kingdom | UK | Indirect | £1 Ordinary | 100% | | Pigtales Limited (007237621) | Matrix House, Basing View, Basingstoke, Hampshire, RG21 4DZ, United Kingdom | UK | Indirect | £1 Ordinary | 100% | | Primar International Limited (030045621) | Matrix House, Basing View, Basingstoke, Hampshire, RG21 4DZ, United Kingdom | UK | Direct | £1 Ordinary | 100% | | Skogluno Participações Ltda | Av. Leopoldino de Oliveira, 4.113, Sala 303, Centro, CEP: 38010-0103, UBERABA-MG | Brazil | Indirect | BRLI Ordinary | 100% | | Spillers Limited | Matrix House, Basing View, Basingstoke, Hampshire, RG21 4DZ, United Kingdom | UK | Indirect | £0.25 Ordinary | 100% | | Spillers Overseas Limited (000697231) | Matrix House, Basing View, Basingstoke, Hampshire, RG21 4DZ, United Kingdom | UK | Indirect | £0.25 Ordinary | 100% | FINANCIAL STATEMENTS 184 GENUS PLC / ANNUAL REPORT 2023 # NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED # FOR THE YEAR ENDED 30 JUNE 2023 37. GROUP ENTITIES CONTINUED Nature of business Other | Name of undertaking | Registered address | Country of incorporation | Direct/Indirect Group interest | Share class | % of share capital/rating right/held by Group companies | | --- | --- | --- | --- | --- | --- | | Sugen, Inc. | 100 BlueGrass Commons Blvd, Suite 2200, Hendersonville, TN 37075 United States | United States | Indirect | USD1 Common | 100% | | Sugen International Limited (032758FA) | Matrix House, Basing View, Basingstoke, Hampshire, RG21 4DE, United Kingdom | UK | Direct | £0.10 Ordinary | 100% | | Sugen Investimentos Ltda. | Av. Leopoldino de Oliveira, 4113 – Salo 303, Uberaba, Minas Gerais, CEP 38010-000, Brazil | Brazil | Indirect | BRL0.63 Ordinary | 100% | | Uccafé SA | c/o Cabinet Mayor, avocats, Rue Jean-Gabriel Eynard 6, 1205 Genève | Switzerland | Indirect | CHF1,000 Ordinary | 100% | | Kelect Limited | Horizon House, Abbey Walk, St Andrews, Fife, Scotland, KY9 7AB | UK | Indirect | £0.001 Ordinary | 39% | 1 Associated undertakings including joint venture interests 2 UK subsidiaries taking advantage of the audit exemption within section 4.7(a) of the Companies Act 2006 # 38. DEFERRED CONSIDERATION # Accounting policies We recognise deferred consideration on the Balance Sheet when a business combination contains a contractual clause that defers a portion of the purchase price. When the consideration transferred by the Group in a business combination includes a contingent consideration arrangement, the contingent consideration is measured at its acquisition date fair value and included as part of the consideration transferred in a business combination. Changes in fair value of the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with corresponding adjustments against goodwill. Measurement period adjustments are adjustments that arise from additional information obtained during the 'measurement period' (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date. Subsequent contingent consideration fair value remeasurements that do not qualify as measurement period adjustments are recognised in the Income Statement. Contingent deferred consideration is measured at fair value and the valuation basis is Level 3 classification, where fair value techniques use inputs which have a significant effect on the recorded fair value that are not based on observable market data. | | Contingent deferred consideration £m | Deferred consideration £m | Total £m | | --- | --- | --- | --- | | Balance at 1 July 2021 | 1.7 | 0.4 | 2.7 | | Business combination | 0.1 | 0.2 | 0.3 | | Payment of consideration | (0.6) | (0.4) | (0.0) | | Transfer | (0.8) | 0.8 | - | | Effect of movement in exchange rates | 0.1 | - | 0.1 | | Balance at 30 June 2022 | 0.5 | 1.0 | 1.5 | | Business combination | - | - | - | | Payment of consideration | - | (0.8) | (0.8) | | Transfer | - | - | - | | Effect of movement in exchange rates | (0.1) | - | (0.1) | | Balance at 30 June 2023 | 0.4 | 0.2 | 0.6 | | Current | - | - | - | | Non-current | 0.4 | 0.2 | 0.6 | | Balance at 30 June 2023 | 0.4 | 0.2 | 0.6 | | Current | - | 0.8 | 0.8 | | Non-current | 0.5 | 0.2 | 0.7 | | Balance at 30 June 2022 | 0.5 | 1.0 | 1.5 | FINANCIAL STATEMENTS 185 GENUS PLC / ANNUAL REPORT 2023 # 38. DEFERRED CONSIDERATION CONTINUED The balance at 30 June 2023 relates to the following transactions: | | Fiscal year of transaction | Contingent deferred consideration £m | Deferred consideration £m | Total £m | | --- | --- | --- | --- | --- | | Dairy LLC (also known as BoxSync) | 2019 | 0.4 | – | 0.4 | | T.A.C. – Laboratório de Reprodução Animal Ltda. | 2022 | – | 0.2 | 0.2 | | **Balance at 30 June 2023** | | **0.4** | **0.2** | **0.6** | # 39. NON-CONTROLLING INTEREST | | 2022 £m | 2022 £m | | --- | --- | --- | | Non-controlling interest | (2.2) | (0.7) | | Put option over non-controlling interest at inception | (5.5) | (5.7) | | **Total non-controlling interest** | **(7.7)** | **(6.4)** | Summarised financial information in respect of each of the Group's subsidiaries that has a material non-controlling interest is set out below before intra-Group eliminations. | | De Novo Generico LLC £m | PIC Italia S.r.l. £m | 2022 £m | | --- | --- | --- | --- | | Revenue | 4.1 | 5.1 | 9.2 | | Expenses | (7.4) | (4.6) | (12.0) | | **Total comprehensive (expense)/income for the year** | **(3.3)** | **0.5** | **(2.8)** | | Total comprehensive (expense)/income attributable to owners of the Company | (1.7) | 0.4 | (1.3) | | Total comprehensive (expense)/income attributable to the non-controlling interest | (1.6) | 0.1 | (1.5) | | Biological assets | 15.6 | – | 15.6 | | Current assets | – | 1.7 | 1.7 | | Other non-current assets | 0.8 | 1.4 | 2.2 | | Current liabilities | (22.9) | (2.0) | (24.9) | | **Net (liabilities)/assets** | **(6.5)** | **1.1** | **(5.4)** | | Equity attributable to owners of the Company | 4.1 | (0.9) | 3.2 | | **Non-controlling interest** | **(2.4)** | **0.2** | **(2.2)** | Dividends of £0.1m were paid to non-controlling interests (2022: £0.1m). | | De Novo Generico LLC £m | PIC Italia S.r.l. £m | 2022 £m | | --- | --- | --- | --- | | Revenue | 3.7 | 3.4 | 7.1 | | Expenses | (12.6) | (2.6) | (15.2) | | **Total comprehensive (expense)/income for the year** | **(8.9)** | **0.8** | **(8.1)** | | Total comprehensive (expense)/income attributable to owners of the Company | (4.5) | 0.6 | (3.9) | | Total comprehensive (expense)/income attributable to the non-controlling interest | (4.4) | 0.2 | (4.2) | | Biological assets | 15.2 | – | 15.2 | | Current assets | 0.9 | 1.0 | 1.9 | | Other non-current assets | 0.8 | 2.3 | 3.1 | | Current liabilities | (19.6) | (1.8) | (21.4) | | **Net (liabilities)/assets** | **(2.7)** | **1.5** | **(1.2)** | | Equity attributable to owners of the Company | 1.8 | (1.3) | 0.5 | | **Non-controlling interest** | **(0.9)** | **0.2** | **(0.7)** | FINANCIAL STATEMENTS ![img-9.jpeg](img-9.jpeg) ### 186 GENUS PLC / ANNUAL REPORT 2023 ### NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED ### FOR THE YEAR ENDED 30 JUNE 2023 FINANCIAL STATEMENTS 40. RELATED-PARTY TRANSACTIONS Bomaz, Inc. and Bogz Dairy, LLC, are well-recognised breeders in the industry, and are related parties to the Group as these entities are under the control of relatives of Nate Zwald, our ABS Dairy COO. We transact with Bomaz, Inc. and Bogz Dairy, LLC as part of our bull product development effort, under a variety of contracts and agreements. Payments in 2023 amounted to £1.3m (2022: £1.3m). As at 30 June 2023, the balance owing to these entities was £0.1m (2022: £nil). All amounts were settled in cash. These related-party transactions were made on terms equivalent to those that prevail in arm’s length transactions. 187 GENUS PLC / ANNUAL REPORT 2023 # PARENT COMPANY BALANCE SHEET AS AT 30 JUNE 2023 | | Note | 2022 £m | 2021 £m | | --- | --- | --- | --- | | **Non-current assets** | | | | | Intangible assets | C3 | 11.8 | 9.6 | | Property, plant and equipment | C4 | 0.9 | 0.9 | | Investments in subsidiaries | C5 | 319.4 | 345.5 | | Other investments | C6 | 4.4 | 2.1 | | Other receivables | C7 | 70.9 | 74.0 | | Derivative financial asset | C15 | 4.9 | 2.2 | | Deferred tax asset | C8 | 6.8 | 2.9 | | | | 419.1 | 437.2 | | **Current assets** | | | | | Other receivables | C7 | 103.3 | 69.3 | | Cash and cash equivalents | | 1.3 | 19 | | | | 104.6 | 71.2 | | **Current liabilities** | | | | | Current payables | C9 | (59.0) | (65.0) | | Provisions | C11 | (0.3) | (0.4) | | | | (59.3) | (65.4) | | **Net current assets** | | **45.3** | **5.8** | | **Total assets less current liabilities** | | **464.4** | **443.0** | | **Non-current liabilities** | | | | | Non-current payables | C10 | (196.6) | (183.3) | | Provisions | C11 | (0.1) | (0.3) | | | | (196.7) | (183.6) | | **Net assets** | | **267.7** | **259.4** | | **Equity** | | | | | Called up share capital | C16 | 6.6 | 6.6 | | Share premium account | | 179.1 | 179.1 | | Own shares | | (0.1) | (0.1) | | Retained earnings | | 80.3 | 73.5 | | Hedging reserve | | 1.8 | 0.3 | | **Total equity** | | **267.7** | **259.4** | The Company recognised profit for the year of £20.1m (2022: £31.3m profit). The Financial Statements were approved and authorised for issue by the Board of Directors on 6 September 2023. Signed on behalf of the Board of Directors. Jorgen Kokke Chief Executive Alison Henriksen Chief Financial Officer Company number: 02972325 FINANCIAL STATEMENTS 188 GENUS PLC / ANNUAL REPORT 2023 # PARENT COMPANY STATEMENT OF CHANGES IN EQUITY # FOR THE YEAR ENDED 30 JUNE 2023 | | Called up share capital £m | Share premium account £m | Own shares £m | Retained earnings £m | Hedging reserve £m | Total equity £m | | --- | --- | --- | --- | --- | --- | --- | | Balance at 1 July 2021 | 6.6 | 1791 | (0.1) | 60.2 | - | 245.8 | | Fair value of movement on cash flow hedges, net of tax | - | - | - | - | 0.3 | 0.3 | | Actuarial gain on retirement benefits obligations, net of tax | - | - | - | 2.8 | - | 2.8 | | Movement on pension asset recognition restriction, net of tax | - | - | - | (2.8) | - | (2.8) | | Other comprehensive income for the year | - | - | - | - | 0.3 | 0.3 | | Total profit for the financial year | - | - | - | 31.3 | - | 31.3 | | Total comprehensive income for the financial year | - | - | - | 31.3 | 0.3 | 31.6 | | Dividends paid | - | - | - | (20.9) | - | (20.9) | | Share-based payment expense, net of tax | - | - | - | 2.9 | - | 2.9 | | Balance at 30 June 2022 | 6.6 | 1791 | (0.1) | 73.5 | 0.3 | 259.4 | | Fair value of movement on cash flow hedges, net of tax | - | - | - | - | 1.5 | 1.5 | | Gain on equity instruments measured at fair value, net of tax | - | - | - | 1.2 | - | 1.2 | | Actuarial loss on retirement benefits obligations, net of tax | - | - | - | (3.6) | - | (3.6) | | Movement on pension asset recognition restriction, net of tax | - | - | - | 3.6 | - | 3.6 | | Other comprehensive income for the year | - | - | - | 1.2 | 1.5 | 2.7 | | Total profit for the financial year | - | - | - | 20.1 | - | 20.1 | | Total comprehensive income for the financial year | - | - | - | 21.3 | 1.5 | 22.8 | | Dividends paid | - | - | - | (21.0) | - | (21.0) | | Share-based payment expense, net of tax | - | - | - | 6.5 | - | 6.5 | | Balance at 30 June 2023 | 6.6 | 1791 | (0.1) | 80.3 | 1.8 | 267.7 | For information on dividends see note 13, cash flow hedges see note 26 and share-based payment expense see note 30. FINANCIAL STATEMENTS ### 189 GENUS PLC / ANNUAL REPORT 2023 ### NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS ### FOR THE YEAR ENDED 30 JUNE 2023 C1. ACCOUNTING INFORMATION AND POLICIES Basis of preparation The Parent Company Financial Statements have been prepared in accordance with Financial Reporting Standard 101 ‘Reduced Disclosure Framework’ (‘FRS 101’) and the Companies Act 2006 (the ‘Act’). FRS 101 sets out a reduced disclosure framework for a ‘qualifying entity’ as defined in the standard, which addresses the financial reporting requirements and disclosure exemptions in the individual financial statements of qualifying entities that otherwise apply the recognition, measurement and disclosure requirements of the Companies Act 2006. The Group Financial Statements have also been prepared in accordance with International Financial Reporting Standards as issued by the IASB. The Company Financial Statements have been prepared using the historical cost convention, as modified by the revaluation of certain financial assets and financial liabilities and in accordance with the Act. The Financial Statements have been prepared on a going concern basis, as set out in note 2 of the Consolidated Financial Statements of Genus plc. The accounting policies set out below and stated in the relevant notes have been applied consistently to all periods presented in these Financial Statements. The Company has taken advantage of the disclosure exemptions available under FRS 101 in relation to share-based payments, business combinations, financial instruments, presentation of comparative information in respect of certain assets, presentation of a cash flow statement, standards issued not yet effective, impairment of assets and related-party transactions. Where required, equivalent disclosures are given in the Consolidated Financial Statements of Genus plc. As permitted by section 408 of the Act, the Company has not presented its own Income Statement in this Annual Report. The functional currency of the Company is Sterling. Critical accounting judgements and key sources of estimation uncertainty Preparing company financial statements in conformity with FRS 101 requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the balance sheet date and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised, if the revision affects only that period, or in the period of the revision and future periods, if the revision affects both current and future periods. Management has not identified any critical accounting judgements or key sources of estimation uncertainty. Significant accounting policies applied in the current reporting period that relate to the Financial Statements as a whole This section sets out our significant accounting policies that relate to the Financial Statements as a whole. Where an accounting policy is generally applicable to a specific note to the Financial Statements, the policy has been described in that note. Other income and deferred income FINANCIAL STATEMENTS The Company has entered into a strategic collaboration with Beijing Capital Agribusiness (‘BCA’) under which BCA will establish and fund a collaboration specific entity (‘BCA Future Bio-Tech’) which will use Genus’s intellectual property and know-how to pursue the PRRSv resistance regulatory and development work in China. Genus will receive consideration after meeting certain milestones in the development programme. Each milestone is considered to be either a separate performance obligation, or a set of groups of separate performance obligations, under this agreement and are unbundled in the contractual arrangement as if they are distinct from one another. We assess each separate performance obligation relating to the milestone payments, and upon completion of those performance obligations recognise the fair value of amounts earned in other income. Some performance obligations, such as the transfer of know-how, are recognised at a point in time whereas others, such as the provision of technical services, are recognised over time. We recognise any received but unearned consideration as deferred income. We will apply the same accounting policy to any other comparable agreements. Pensions A number of our employees are members of defined contribution pension schemes. We charge contributions to profit and loss as they become payable under the schemes’ rules. We show differences between the contributions payable and the amounts actually paid as either accruals or prepayments in the Balance Sheet. The schemes’ assets are held separately from those of the Company. Certain former employees of the Company are members of one of the Group’s defined benefit pension schemes, details of which are given in note 29 to the Group Financial Statements. The schemes are all multi-employer defined benefit schemes, whose assets and liabilities are held independently from the Group but within their sponsored Group company. Taxation We provide for current tax, including UK corporation tax and foreign tax, at the amounts we expect to pay or recover, using the tax rates and the laws enacted or substantively enacted at the balance sheet date. Foreign currencies We record transactions in foreign currencies at the rate ruling at the transaction date. We retranslate monetary assets and liabilities denominated in foreign currencies at the prevailing rate of exchange at the balance sheet date. All differences are taken to the Income Statement. ### 190 GENUS PLC / ANNUAL REPORT 2023 ### NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS CONTINUED ### FOR THE YEAR ENDED 30 JUNE 2023 C1. ACCOUNTING INFORMATION AND POLICIES CONTINUED Own shares The Company has adopted FRS 101, which requires us to recognise the assets and liabilities associated with the Company’s investment in its own shares in the Company’s Financial Statements, where there is de facto control of the assets and liabilities. The Company’s own shares held by a Qualifying Employee Share Ownership Trust remain deducted from shareholders’ funds until they vest unconditionally with employees. Employee share schemes The Company’s Executive Directors and Chief Operating Officers receive part of their remuneration in the form of share awards, which vest upon meeting performance criteria over a three-year period. We measure the cost of these awards by reference to the shares’ fair value at the award date. At the end of each financial reporting period, we estimate the extent to which the performance criteria will be met at the end of three years and record an appropriate charge in the profit and loss account, together with a corresponding credit to profit and loss reserves. Changes in estimates of the number of shares vesting may result in charges or credits to the profit and loss account in subsequent periods. Share-based payments We have implemented the generally accepted accounting principle for accounting for share-based payments with subsidiary undertakings under FRS 101, whereby the Company has granted rights to its shares to employees of its subsidiary undertakings under an equity-settled arrangement, and the subsidiaries have not reimbursed the Company for these rights. Under this arrangement, the Company treats the share-based payment recognised in the subsidiary’s financial statements as a cost of investment in the subsidiary and credits equity with an equal amount. Derivative financial instruments and hedging Our activities expose us primarily to the financial risks of changes in foreign currency exchange rates and interest rates. We use interest rate swaps to hedge interest rate risk. We also use forward foreign currency contracts, implemented through a medium- FINANCIAL STATEMENTS term US Dollar cross-currency borrowing and related interest rate swap, to hedge exposure to translation risk associated with US Dollar net assets of subsidiaries. Forward foreign currency contracts do not qualify for hedge accounting in the Parent Company Financial Statements, as the hedged item is not in its Balance Sheet. Our use of financial derivative instruments is governed by the Group’s policies, which are approved by the Board of Directors. The notes to the Group Financial Statements include information about the Group’s financial risks and their management, and its use of financial instruments and their impact on the Group’s risk profile, performance and financial condition. The fair value of the US Dollar and interest rate swaps is the estimated amount that we would receive or pay to terminate the swap at the balance sheet date, taking into account current interest rates and the creditworthiness of the swap counterparties. The fair value of forward exchange contracts is their quoted market price at the balance sheet date, which is the present value of the quoted forward price. Cash flow hedges The effective portion of changes in the fair value of derivatives and other qualifying hedging instruments that are designated and qualify as cash flow hedges is recognised in Other Comprehensive Income and accumulated under the heading of cash flow hedging reserve, and limited to the cumulative change in fair value of the hedged item from inception of the hedge. The gain or loss relating to the ineffective portion is recognised immediately in the Income Statement, and is included in the ‘other gains and losses’ line item. Amounts previously recognised in Other Comprehensive Income and accumulated in equity are reclassified to the Income Statement in the periods when the hedged item affects the Income Statement, in the same line as the recognised hedged item. However, when the hedged forecast transaction results in the recognition of a non-financial asset or a non-financial liability, the gains and losses previously recognised in Other Comprehensive Income and accumulated in equity are removed from equity and included in the initial measurement of the cost of the non-financial asset or non-financial liability. This transfer does not affect Other Comprehensive Income. Furthermore, if the Company expects that some or all of the loss accumulated in the cash flow hedging reserve will not be recovered in the future, that amount is immediately reclassified to the Income Statement. The Company discontinues hedge accounting only when the hedging relationship (or a part thereof) ceases to meet the qualifying criteria (after rebalancing, if applicable). This includes instances when the hedging instrument expires or is sold, terminated or exercised. The discontinuation is accounted for prospectively. Any gain or loss recognised in Other Comprehensive Income and accumulated in cash flow hedge reserve at that time remains in equity and is reclassified to the Income Statement when the forecast transaction occurs. When a forecast transaction is no longer expected to occur, the gain or loss accumulated in the cash flow hedge reserve is reclassified immediately to the Income Statement. Under interest rate swap contracts, the Company agrees to exchange the difference between fixed and floating rate interest amounts calculated on agreed notional principal amounts. Such contracts enable the Company to mitigate the risk of changing interest rates on the fair value of issued fixed-rate debt held and the cash flow exposures on the issued variable-rate debt held. The fair value of interest rate swaps at the reporting date is determined by discounting the future cash flows using the yield curves at the reporting date and the credit risk inherent in the contract. The average interest rate is based on the outstanding balances at the end of the financial year. 191 GENUS PLC / ANNUAL REPORT 2023 # C1. ACCOUNTING INFORMATION AND POLICIES CONTINUED As the critical terms of the interest rate swap contracts and their corresponding hedged items are the same, the Company performs a qualitative assessment of effectiveness and it is expected that the value of the interest rate swap contracts and the value of the corresponding hedged items will systematically change in opposite directions, in response to movements in the underlying interest rates. The main source of hedge ineffectiveness in these hedge relationships is the effect of the counterparty and the Company's own credit risk on the fair value of the interest rate swap contracts, which is not reflected in the fair value of the hedged item attributable to the change in interest rates. No other sources of ineffectiveness emerged from these hedging relationships. # C2. EMPLOYEES Staff costs including Directors' remuneration during the year amounted to: | | 2022 £m | 2022 £m | | --- | --- | --- | | Wages and salaries | 7.4 | 9.0 | | Social security costs | 0.7 | 1.1 | | Pension costs | 0.2 | 0.2 | | Share-based payment expense | 2.2 | 1.4 | | | 10.5 | 11.7 | The Directors' Remuneration Report sets out details of the Directors' remuneration, pensions and share options. The average monthly number of employees including Directors during the year was as follows: | | 2022 Number | 2022 Number | | --- | --- | --- | | Administration | 45 | 44 | # C3. INTANGIBLE ASSETS # Accounting policies Patents, licences and software are stated at acquisition cost less accumulated amortisation. The amortisation period is determined by reference to expected useful life, which is reviewed at least annually. Amortisation is charged to the Income Statement on a straight-line basis over the estimated useful life. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. See note 15 for useful economic life. We do not amortise assets under construction. | | Software £m | Patents and licences £m | Assets under construction £m | Total £m | | --- | --- | --- | --- | --- | | Cost | | | | | | Balance at 1 July 2021 | 7.1 | 3.7 | 1.1 | 11.9 | | Additions | - | - | 3.9 | 3.9 | | Transfers | 2.3 | - | (2.3) | - | | Balance at 30 June 2022 and 1 July 2022 | 9.4 | 3.7 | 2.7 | 15.8 | | Additions | - | - | 3.3 | 3.3 | | Transfers | 3.7 | - | (3.7) | - | | Balance at 30 June 2023 | 13.1 | 3.7 | 2.3 | 19.1 | | Amortisation | | | | | | Balance at 1 July 2021 | 1.7 | 3.7 | - | 5.4 | | Amortisation for the year | 0.8 | - | - | 0.8 | | Balance at 30 June 2022 and 1 July 2022 | 2.5 | 3.7 | - | 6.2 | | Amortisation for the year | 1.1 | - | - | 1.1 | | Balance at 30 June 2023 | 3.6 | 3.7 | - | 7.3 | | Carrying amounts | | | | | | At 30 June 2023 | 9.5 | - | 2.3 | 11.8 | | At 30 June 2022 | 6.9 | - | 2.7 | 9.6 | | At 30 June 2021 | 5.4 | - | 1.1 | 6.5 | Included within the software class of assets is ER5m (2022: £6.9m) and included in assets in the course of construction is £2.3m (2022: £2.7m) that relate to the ongoing development costs of GenusOne, our single global enterprise system. FINANCIAL STATEMENTS 192 GENUS PLC / ANNUAL REPORT 2023 # **NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 30 JUNE 2023** # **C4. PROPERTY, PLANT AND EQUIPMENT** # **Accounting policies** We state property, plant and equipment at cost, together with any incidental acquisition expenses, or at their latest valuation, less depreciation and any provision for impairment. We calculate depreciation on a straight-line basis, to write the assets down to their estimated residual values over their estimated useful lives. The rates of annual depreciation on tangible fixed assets are as follows: - Leasehold improvements period of lease We review the carrying value of fixed assets for impairment, if events or changes in circumstances indicate that the carrying value may not be recoverable. # **Right-of-use assets** Right-of-use assets are measured initially at cost based on the value of the associated lease liability, adjusted for any payments made before inception, initial direct costs and an estimate of the dismantling, removal and restoration costs required in the terms of the lease. Subsequent to initial recognition, we record an interest charge in respect of the lease liability. The related right-of-use asset is depreciated over the term of the lease or, if shorter, the useful economic life (UEL) of the leased asset. The lease term shall include the period of an extension option where it is reasonably certain that the option will be exercised. Where the lease contains a purchase option, the asset is written-off over the useful life of the asset when it is reasonably certain that the purchase option will be exercised. | | Leasehold improvements £m | Equipment £m | Owned assets £m | Right-of-use leased buildings £m | Total £m | | --- | --- | --- | --- | --- | --- | | **Cost** | | | | | | | Balance at 1 July 2022 | 0.5 | 0.3 | 0.8 | 1.0 | 1.8 | | Additions | - | - | - | 0.2 | 0.2 | | **Balance at 30 June 2023** | **0.5** | **0.3** | **0.8** | **1.2** | **2.0** | | **Depreciation** | | | | | | | Balance at 1 July 2022 | 0.3 | 0.3 | 0.6 | 0.3 | 0.9 | | Depreciation for the year | - | - | - | 0.2 | 0.2 | | **Balance at 30 June 2023** | **0.3** | **0.3** | **0.6** | **0.5** | **1.1** | | **Carrying amounts** | | | | | | | **At 30 June 2023** | **0.2** | **-** | **0.2** | **0.7** | **0.9** | | At 30 June 2022 | 0.2 | - | 0.2 | 0.7 | 0.9 | # **C5. INVESTMENTS IN SUBSIDIARIES** # **Accounting policies** Shares in subsidiary undertakings are stated at cost less any provision for impairment. The Company assesses investments for impairment whenever events or changes in circumstances indicate that the carrying value of an investment may not be recoverable. If any such indication of impairment exists, then we estimate the recoverable amount. If the recoverable amount of the cash-generating unit is less than the value of the investment, it is considered to be impaired and we write it down to its recoverable amount. An impairment loss is recognised immediately in the profit and loss account. | | Shares in subsidiary undertakings £m | | --- | --- | | **Cost** | | | Balance at 1 July 2022 | 563.6 | | Additions | 5.7 | | Disposals | (21.4) | | **Balance at 30 June 2023** | **527.9** | | **Provision for impairment** | | | Balance at 1 July 2022 | 198.1 | | Provided during the year | 10.4 | | **Balance at 30 June 2023** | **208.5** | | **Carrying amounts** | | | **At 30 June 2023** | **219.4** | | At 30 June 2022 | 345.5 | Additions relate to increasing our investments in Genus Investments Limited and ABS Argentina S.A. FINANCIAL STATEMENTS 193 GENUS PLC / ANNUAL REPORT 2023 # **C5. INVESTMENTS IN SUBSIDIARIES CONTINUED** The Company considers the relationship between its invested capital and the carrying value of its investments, among other factors, when reviewing for indicators of impairment. As at 30 June 2023, the net investment in five of the Company's subsidiary undertakings exceeded the Company's share of the net assets. Each of these subsidiaries are denominated in Latin American currencies, all of which have seen significant weakening against Sterling during the year ended 30 June 2023. For each of these undertakings, the recoverable value has been estimated using the Board-approved Strategic Plan. There were no indicators of impairment for the Company's other subsidiary undertakings. The key assumptions for the value in use calculation are those regarding the discount rate, growth rates and expected trading performance. Management estimates discount rates that reflect current market assessments of the time value of money and the risks specific to the Group. The pre-tax discount rates are derived from the Group's post-tax weighted average cost of capital ('WACC'), which has been calculated using the capital asset pricing model, the inputs of which include a country risk-free rate, equity risk premium, Group size premium and a risk adjustment (beta). This equates to a pre-tax discount rate of 11.2% (2022: 11.2%). Cash flows beyond the five-year period are extrapolated using a long-term growth rate of 2.5% (2022: 2.5%). During the year, £7.8m was provided against the investment held in ABS Argentina S.A. and £2.6m against the investment held in ABS Peoplan Ltda. to reflect a reduction in the net assets of those companies and expected future trading performance. # **Principal subsidiary undertakings** The Company's principal subsidiaries and their main activities are given in note 37 to the Group Financial Statements. # **C6. OTHER INVESTMENTS** # **Accounting policies** Listed equity investments are stated at fair value. | | 2022 £m | 2022 £m | | --- | --- | --- | | Listed investment – NMR | 4.4 | 2.1 | NMR ordinary shares were acquired as part of the NMR pension agreement, and are measured at fair value. The valuation basis is Level 1 classification, where fair value techniques are quoted (unadjusted) prices in active markets for identical assets and liabilities. # **C7. OTHER RECEIVABLES** # **Accounting policies** We state other receivables at their amortised cost less any impairment losses. | | 2022 £m | 2022 £m | | --- | --- | --- | | **Amounts due within one year** | | | | Amounts owed by Group undertakings | 97.1 | 61.8 | | Corporation tax recoverable | 1.7 | 1.6 | | Prepayments | 1.5 | 2.0 | | Other receivables | 1.5 | 2.0 | | Deferred taxation | – | 0.9 | | Derivative financial asset | 1.5 | 1.0 | | | **103.3** | **69.3** | | **Amounts due after one year** | | | | Amounts owed by Group undertakings | 70.9 | 74.0 | | | **70.9** | **74.0** | At the balance sheet date, the total amounts owed by Group undertakings were £168.0m (2022: £135.8m). The carrying amount of these assets approximates their fair value. Of the amounts owed by Group undertakings, £163.6m (2022: £133.5m) is interest-bearing and any interest charged is at current market rates. FINANCIAL STATEMENTS ![img-10.jpeg](img-10.jpeg) ### 194 GENUS PLC / ANNUAL REPORT 2023 ### NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS CONTINUED ### FOR THE YEAR ENDED 30 JUNE 2023 C8. DEFERRED TAXATION Accounting policies We recognise deferred taxation in respect of all timing differences that have originated but not reversed at the balance sheet date, where transactions or events that result in an obligation to pay more tax in future or a right to pay less tax in future have occurred at the balance sheet date. We only recognise deferred taxation assets if we consider it more likely than not that we will have suitable profits from which we can deduct the future reversal of the underlying timing differences. Timing differences are differences arising between the Company’s taxable profits and its results as stated in the Financial Statements, and which are capable of reversing in one or more subsequent periods. We only recognise deferred taxation in respect of the future remittance of retained earnings of overseas subsidiaries to the extent that, at the balance sheet date, dividends have been accrued as receivable. We measure deferred taxation on a non-discounted basis, at the tax rates we expect to apply in the periods in which we expect the timing differences to reverse, based on tax rates and laws enacted or substantively enacted at the balance sheet date. 2023 2022 £m £m Deferred tax asset due within one year – 0.9 Deferred tax asset due after more than one year 6.8 2.9 6.8 3.8 The movements in deferred taxation are as follows: | | | 2023 | 2022 | | --- | --- | --- | --- | | | | £m | £m | | FINANCIAL STATEMENTS | At the start of the year 3.8 4.2 | | | Recognised in the Income Statement 4.3 0.6 Recognised in equity (1.3) (1.0) At the end of the year 6.8 3.8 The amounts provided are as follows: 2023 2022 £m £m Share-based payment expense 1.0 1.1 Other timing differences 5.0 1.6 Losses 0.8 1.1 6.8 3.8 At the balance sheet date, the Company had unused tax losses available for offset against future profits, with a potential tax benefit of £0.8m (2022: £1.1m). We have recognised a deferred tax asset in respect of this benefit, as we expect these losses to be offset against future profits of the UK tax group in the near term. C9. CURRENT PAYABLES Accounting policies Trade payables are not interest bearing and are stated at their nominal value. 2023 2022 Note £m £m Bank loans and overdrafts C12 4.2 7.1 Trade payables 1.2 1.7 Other payables 0.4 0.7 Amounts owed to Group undertakings 48.2 51.9 Accruals 3.4 2.5 Deferred income 0.5 0.1 Obligations under leases C13 0.2 0.1 Derivative financial liabilities C15 0.9 0.9 59.0 65.0 Included within amounts owed to Group undertakings are amounts of £24.2m (2022: £26.2m) which are unsecured, repayable on demand and any interest charged is at current market rates. There are no outstanding contributions due to defined contribution pension schemes for the benefit of the employees (2022: £nil). 195 GENUS PLC / ANNUAL REPORT 2023 # C10. NON-CURRENT PAYABLES | | Note | 2022 £m | 2021 £m | | --- | --- | --- | --- | | Bank loans and overdrafts | C12 | 196.0 | 182.1 | | Obligations under leases | C13 | 0.6 | 0.5 | | Derivative financial liabilities | C15 | – | 0.3 | | Deferred income | | – | 0.4 | | | | **196.6** | **183.3** | # C11. PROVISIONS | | 2022 £m | 2021 £m | | --- | --- | --- | | Provisions due within one year | 0.3 | 0.4 | | Provisions after more than one year | 0.1 | 0.3 | | | **0.4** | **0.7** | The provisions primarily consist of a share forfeiture provision of £0.3m, which relates to potential claims that could be made by untraced members over a period of three years, relating to the resale proceeds of shares that were identified during prior years as being forfeited (see note 25). # C12. LOANS AND BORROWINGS # Accounting policies We initially state debt at the amount of the net proceeds, after deducting issue costs. The carrying amount is increased by the finance cost in respect of the accounting period and reduced by payments made in the period. We charge the finance costs of debt to the profit and loss account over the debt term, at a constant rate on the carrying value of the debt to which they relate. | | 2022 £m | 2021 £m | | --- | --- | --- | | **Loans and borrowings comprise amounts falling due:** | | | | In one year or less or on demand | 5.3 | 8.0 | | In more than one year but not more than two years | – | – | | In more than two years but not more than five years | **196.0** | **182.3** | | | **201.3** | **190.3** | | Less: unamortised issue costs | (1.1) | (1.1) | | | **200.2** | **189.2** | | **Amounts falling due within one year** | **(4.2)** | **(7.1)** | | **Amounts falling due after more than one year** | **196.0** | **182.1** | At the balance sheet date, the Company's credit facilities comprised a £190m multi-currency revolving credit facility ('RCF'), a USD 150 million RCF and a USD 20 million bond and guarantee facility. The original term of the facility was for three years to 24 August 2023. On 24 August 2021 and 28 August 2022, the Company and its lenders extended the maturity date of the total facilities to 24 August 2024 and 24 August 2025 respectively. The Company's credit facility also includes an uncommitted £100m accordion option, £60m of which was exercised in August 2022 to increase the facilities to their current size, leaving a remaining unsecured accordion facility of £40m, which can be requested on a maximum of two further occasions over the lifetime of the facility to fund the Group's business development plans. As part of its interest rate hedging strategy, the Company has entered into interest rate swaps to hedge variable interest rates. At the balance sheet date, bank loan and overdrafts include borrowings of USD85m fixed at 3.48%, borrowings of £60m fixed at 3.45%, borrowings of EUR12.5m fixed at 0.37%, and borrowings of USD 13.9m, swapped via a cross currency swap into EUR12.5m, fixed at 0.36%, excluding applicable bank margins. Approximately 76% of total Facility Borrowings are covered by these interest rate swaps as at 30 June 2023. # Terms and debt repayment schedule The terms and conditions of outstanding loans and overdrafts were as follows: | | Currency | Interest rate | 2022 £m | 2021 £m | | --- | --- | --- | --- | --- | | RCF and overdraft | GBP | 6.4% | 91.6 | 95.9 | | RCF, term loan and overdraft | USD | 6.9% | 78.0 | 77.3 | | RCF and overdraft | EUR | 5.0% | 30.1 | 10.8 | | Other unsecured bank borrowings | Other | 5.7% | 0.5 | 5.2 | | **Total interest-bearing liabilities** | | | **200.2** | **189.2** | The above RCFs are unsecured. FINANCIAL STATEMENTS 196 GENUS PLC / ANNUAL REPORT 2023 # NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS CONTINUED # FOR THE YEAR ENDED 30 JUNE 2023 # C13. OBLIGATIONS UNDER LEASES A lease is a commitment to make a payment in the future, primarily in relation to property, plant and machinery and motor vehicles. # Accounting policies In accordance with IFRS 16, we recognise as an expense any payments made in respect of short-term leases (those with a term of less than 12 months) and for low-value items on a straight-line basis over the life of the lease. For all other leases we recognise a liability at the date at which the leased asset is made available for use, and a corresponding right-of-use asset is recognised and depreciated over the term of the lease (see note C4). Lease liabilities are measured at the present value of the future lease payments, excluding any payments relating to non-lease components. Future lease payments include fixed payments, in-substance fixed payments, and variable lease payments that are based on an index or a rate, less any lease incentives receivable. Lease liabilities also take into account amounts payable under residual value guarantees and payments to exercise options, to the extent that it is reasonably certain that such payments will be made. The payments are discounted at the rate implicit in the lease or, where that cannot be measured, at an incremental borrowing rate. We remeasure the lease liability (and make a corresponding adjustment to the related right-of-use asset) whenever: - The lease term has changed or there is a change in the assessment of the exercise of a purchase option, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate. - The lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value, in which cases the lease liability is remeasured by discounting the revised lease payments using the initial discount rate (unless the lease payments change is due to a change in a floating interest rate, in which case a revised discount rate is used). - A lease contract is modified, and the lease modification is not accounted for as a separate lease, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate. The Company did not make any such adjustments during the periods presented. The changes in the lease liabilities are as follows: | | 2023 £m | 2022 £m | | --- | --- | --- | | Balance at the start of the year | 0.6 | 0.8 | | Payments made | (0.1) | (0.2) | | Leases entered into during the year | 0.3 | - | | Balance at the end of the year | 0.8 | 0.6 | In accordance with the reduced disclosure exemptions included in FRS 101, a maturity analysis has not been presented. The maturity analysis of the Group's lease obligations is included in note 28 to the Group Financial Statements. # C14. OPERATING LEASES # Accounting policies For short-term leases (those with a term of less than 12 months) and low-value items, we charge the rentals payable to the Income Statement on a straight-line basis over the lease term. The Company has elected not to apply IFRS 16 to contracts where the right-of-use asset would be recognised as an intangible asset (e.g. software licences). Total of future minimum lease payments under non-cancellable operating leases which expire: | | 2023 £m | 2022 £m | | --- | --- | --- | | In less than one year | 1.2 | - | | Between one and five years | 1.2 | - | | In more than five years | - | - | | | 2.4 | - | Operating lease rentals charged in the year: | | 2023 £m | 2022 £m | | --- | --- | --- | | Other | 1.2 | 0.8 | # C15. DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS Additional disclosures on financial instruments can be found in note 26 to the Group Financial Statements. FINANCIAL STATEMENTS 197 GENUS PLC / ANNUAL REPORT 2023 # C16. CAPITAL AND RESERVES | Share capital | | | | | | --- | --- | --- | --- | --- | | | 2023 Number | 2022 Number | 2023 £m | 2022 £m | | Issued and fully paid | | | | | | Ordinary shares of 10 perice | 66,027,210 | 65,773,620 | 6.6 | 6.6 | There is no authorised share capital limit. The holders of ordinary shares are entitled to receive dividends, as declared from time to time. The movement in share capital for the period was as follows: | | 2023 Number | 2022 Number | 2023 £m | 2022 £m | | --- | --- | --- | --- | --- | | Issued under the Executive Share Option Plan | 2,953 | 12,120 | - | - | | Issued to Employee Benefit Trust | 250,000 | - | - | - | | Issued to Genus plc Share incentive Plan | 637 | - | - | - | | | 253,590 | 12,120 | - | - | Shares issued under the Executive Share Option Plan were issued at option prices as follows: | | 2023 | | 2022 | | | --- | --- | --- | --- | --- | | | Number | Option price | Number | Option Price | | Executive Share Option Plan | - | - | 2,837 | 977.83p | | | 983 | 1334.00p | 7,027 | 1334.00p | | | 1,970 | 1413.00p | 2,256 | 1413.00p | | | 2,953 | | 12,120 | | # Reserve for own shares The Company's shares are held by a QUEST, which is an employee benefit trust established to facilitate the operation of our long-term incentive scheme for senior management. The reserve amount represents the deduction in arriving at shareholders' funds for the consideration the trust paid for the Company's shares, which had not vested unconditionally at the balance sheet date. The number and market value of the ordinary shares held by the Employee Benefit Trust and the QUEST were: | | 2023 Number | 2022 Number | 2023 £m | 2022 £m | | --- | --- | --- | --- | --- | | Shares allocated but not vested | 375,998 | 280,803 | 8.1 | 7.1 | | Unallocated shares | 92,334 | 92,334 | 2.0 | 2.3 | | | 468,332 | 373,137 | 10.1 | 9.4 | The shares have a nominal value of £46,833 (2022: £37,314). # Hedging reserve The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments net of taxation – see note 26. # C17. RELATED PARTY TRANSACTIONS The Company is exempt under FRS 101 from disclosing transactions with other members of the Group. # C18. CAPITAL AND OTHER COMMITMENTS At 30 June 2023, outstanding contracted capital expenditure amounted to £nil (2022: £nil). FINANCIAL STATEMENTS 198 GENUS PLC / ANNUAL REPORT 2023 # **NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 30 JUNE 2023** # **C19. PENSIONS, GUARANTEES AND CONTINGENCIES** The NMR pension assigned to Genus plc under the Flexible Apportionment Agreement, recorded an actuarial loss of £4.8m, which has decreased the asset restriction made in previous years. As the Company does not have unilateral right to this surplus, as required in accordance with IFRIC 14 it is restricted to £nil. For additional information on the MPF pension scheme, of which NMR was one of the participating employers, please see note 29. The retirement benefit obligations referred to in note 29 to the Group Financial Statements include obligations relating to the MPF defined benefit scheme. Genus, together with other participating employers, is joint and severally liable for the scheme's obligations. Genus has accounted for its section and its share of any orphan assets and liabilities, collectively representing approximately 865 (2022: 86%) of the MPF. As a result of the joint and several liability, Genus has a contingent liability for the scheme's obligations that it has not accounted for. The total deficit of the MPF scheme from the most recent triennial valuation can be found in note 29. Certain UK subsidiaries, which are detailed in note 37 to the Group Financial Statements, will take advantage of the audit exemption set out within section 4/9A of the Companies Act 2006 for the year ended 30 June 2023. The Company has given a statutory guarantee over all of the liabilities held by those UK subsidiaries for the year ended 30 June 2023. The Company has assessed the probability of loss under the guarantee as remote. At 30 June 2023, the Company had entered into bank guarantees totalling £10.3m (2022: £15.8m). FINANCIAL STATEMENTS 199 GENUS PLC / ANNUAL REPORT 2023 # FIVE-YEAR RECORD – CONSOLIDATED RESULTS The information included in the five-year record below is in accordance with IFRS as adopted for use under the Companies Act 2006. | Financial results | 2023 £m | 2022 £m | 2021 £m | 2020 £m | 2019 £m | | --- | --- | --- | --- | --- | --- | | Revenue from continuing operations | 689.7 | 593.4 | 574.3 | 551.4 | 488.5 | | Adjusted operating profit from continuing operations^{1} | 74.6 | 68.8 | 76.9 | 60.1 | 51.8 | | Adjusted operating profit including joint ventures and associates^{1} | 85.8 | 77.7 | 89.8 | 70.8 | 59.0 | | Adjusted profit before tax^{1} | 71.5 | 71.5 | 84.8 | 65.8 | 55.1 | | Basic adjusted earnings per share^{1} | 84.8p | 82.3p | 100.9p | 77.3p | 63.8p | | Diluted adjusted earnings per share^{1} | 84.2p | 82.3p | 100.1p | 76.7p | 61.7p | | Operating profit from continuing operations | 40.5 | 49.4 | 47.7 | 42.4 | 2.8 | | Profit before tax from continuing operations | 39.4 | 48.4 | 55.8 | 46.3 | 4.0 | | Profit after tax from continuing operations | 31.8 | 36.7 | 46.8 | 35.7 | 0.8 | | Net profit attributable to owners of the Company | 33.3 | 40.9 | 47.3 | 35.3 | 1.9 | | Basic earnings per share | 50.8p | 62.5p | 72.6p | 54.4p | 3.0p | | Diluted earnings per share | 50.5p | 62.2p | 72.0p | 54.0p | 2.9p | | Net assets | 567.2 | 572.1 | 496.6 | 494.5 | 479.0 | | Net debt | 195.8 | 185.0 | 105.6 | 102.6 | 79.6 | 1 Adjusted operating profit, adjusted profit before tax and adjusted basic and diluted earnings per share are before net IAS 47 valuation movement on biological assets, amortisation of acquired intangible assets, share-based payment expense, exceptional items and other gains and losses ADDITIONAL INFORMATION ### 200 GENUS PLC / ANNUAL REPORT 2023 ### ALTERNATIVE PERFORMANCE MEASURES GLOSSARY The Group tracks a number of The Group believes that these APMs, which These APMs should be viewed as APMs in managing its business, which are not considered to be a substitute supplemental to, but not as a substitute are not defined or specified under the for or superior to IFRS measures, provide for, measures presented in the requirements of IFRS because they stakeholders with additional helpful consolidated financial information relating exclude amounts that are included in, information on the performance of the to the Group, which are prepared in or include amounts that are excluded business. These APMs are consistent accordance with IFRS. The Group believes from, the most directly comparable with how the business performance that these APMs are useful indicators of its measure calculated and presented in is planned and reported within the performance. However, they may not be accordance with IFRS, or are calculated internal management reporting to comparable to similarly-titled measures using financial measures that are not the Board and GELT. Some of these reported by other companies, due to calculated in accordance with IFRS. APMs are also used for the purpose differences in the way they are calculated. of setting remuneration targets. The key APMs that the Group uses include: Alternative Performance Calculation methodology and closest equivalent IFRS measure Reasons why we believe the Measures (where applicable) APMs are useful ### Income Statement measures | Adjusted operating profit | Adjusted operating profit is operating profit with the net IAS 41 | Allows the comparison of underlying | | --- | --- | --- | | exc JVs | valuation movement on biological assets, amortisation of | financial performance by excluding | | | acquired intangible assets, share-based payment expense | the impacts of exceptional items and | | | and exceptional items added back and excludes JV and | is a performance indicator against | | | associate results. | which short-term and long-term | incentive outcomes for our senior 1 Closest equivalent IFRS measure: Operating profit executives are measured: • net IAS 41 valuation movements ADDITIONAL INFORMATION See reconciliation on page 203. on biological assets – these movements can be materially volatile and do not directly correlate to the underlying trading | Adjusted operating profit | Including adjusted operating profit from JV and associate results. | performance in the period. | | --- | --- | --- | | inc JVs | | Furthermore, the movement is | | | See reconciliation on page 203. | non-cash related and many | assumptions used in the valuation model are based on projections rather than current trading; | Adjusted operating profit | Including adjusted operating profit from JV and associate results | • amortisation of acquired intangible | | --- | --- | --- | | inc JVs exc gene editing | but excluding gene editing costs. | assets – excluding this improves the | | costs | | comparability between acquired | | | See reconciliation on page 203. | and organically grown operations, | as the latter cannot recognise internally generated intangible assets. Adjusting for amortisation | Adjusted operating profit | Adjusted operating profit including JV less adjusted effective tax. | provides a more consistent basis for | | --- | --- | --- | | inc JVs after tax | | comparison between the two but | | | See reconciliation on page 203. | it is also a measure excluded from | our managements remuneration assessment, as well as our | Adjusted profit inc JVs | Adjusted operating profit including JVs less net finance costs. | debt agreements and banking | | --- | --- | --- | | before tax | | covenants. It is also one requested | | | See reconciliation on page 203. | and used by our investor group to | evaluate our performance.; • share-based payments – this Adjusted profit inc JVs Adjusted profit including JVs before tax less adjusted expense is considered to be after tax effective tax. relatively volatile and not fully reflective of the current period See reconciliation on page 203. trading, as the performance criteria are based on EPS performance over a three-year period and include estimates of future performance; and • exceptional items – these are items which due to either their size or their nature are excluded, to improve the understanding of the Group’s underlying performance. ### 201 GENUS PLC / ANNUAL REPORT 2023 Alternative Performance Calculation methodology and closest equivalent IFRS measure Reasons why we believe the Measures (where applicable) APMs are useful Adjusted effective Total income tax charge for the Group excluding the tax impact Provides an underlying tax rate to tax rate of adjusting items, divided by the adjusted operating profit. allow comparability of underlying financial performance, by excluding Closest equivalent IFRS measure: Effective tax rate the impacts of net IAS 41 valuation movement on biological assets, See reconciliation on page 204. amortisation of acquired intangible assets, share-based payment expense and exceptional items. Adjusted basic earnings Adjusted profit after tax profit divided by the weighted basic On a per share basis, this allows the per share average number of shares. comparability of underlying financial performance by excluding the Closest equivalent IFRS measure: Earnings per share impacts of adjusting items. See calculation on page 204. Adjusted diluted earnings Underlying attributable profit divided by the diluted weighted per share basic average number of shares. Closest equivalent IFRS measure: Diluted earnings per share See calculation on page 204. Adjusted earnings cover Adjusted earnings per share divided by the expected dividend The Board’s dividend policy targets for the year. adjusted earning cover to be between 2.5–3 times. See calculation on page 204. Adjusted EBITDA – This is adjusted operating profit, adding back cash received This APM is presented because it is calculated in accordance from our JVs, depreciation of property, plant and equipment, used in calculating our ratio of net with the definitions used depreciation of the historical cost of biological assets, debt to EBITDA and our interest cover, in our financing facilities operational amortisation (i.e. excluding amortisation of which we report to our banks to acquired intangibles) and deducting the amount attributable ensure compliance with our to minority interest. bank covenants. ADDITIONAL INFORMATION 1 Closest equivalent IFRS measure: Operating profit See reconciliation on page 204. Adjusted operating Adjusted operating profit (including JVs) divided by revenue. Allows for the comparability of margin underlying financial performance by excluding the impacts of Adjusted operating Adjusted operating profit divided by revenue. exceptional items. margin (exc JVs) Constant currency basis The Group reports certain financial measures, on both a reported The Group’s business operates in and constant currency basis and retranslates the current year’s multiple countries worldwide and its results at the average actual exchange rates used in the previous trading results are translated back financial year. into the Group’s functional currency of Sterling. This measure eliminates the effects of exchange rate fluctuations when comparing year-on-year reported results. ### Balance Sheet measures Net debt Net debt is gross debt, made up of unsecured bank loans and This allows the Group to monitor its overdrafts and obligations under finance leases, with a deduction levels of debt. for cash and cash equivalents. See reconciliation on page 205. | Net debt – calculated in | Net debt excluding the impact of adopting IFRS 16 and adding | This is a key metric that we report to | | --- | --- | --- | | accordance with the | back guarantees and deferred purchase arrangements. | our banks to ensure compliance with | | definitions used in our | | our bank covenants. | | financing facilities | See reconciliation on page 205. | | ### 202 GENUS PLC / ANNUAL REPORT 2023 ### ALTERNATIVE PERFORMANCE MEASURES GLOSSARY CONTINUED Alternative Performance Calculation methodology and closest equivalent IFRS measure Reasons why we believe the Measures (where applicable) APMs are useful ### Cash flow measures Cash conversion Cash generated by operations as a percentage of adjusted This is used to measure how operating profit excluding JVs. much operating cash flow we are generating and how efficient we are See calculation on page 206. at converting our operating profit into cash. Free cash flow Cash generated by the Group before debt repayments, Shows the cash retained by the Group acquisitions and investments, dividends and proceeds from in the year. share issues. Closest IFRS measure: Net cash flow from operating activities See reconciliation on page 206. ### Other measures Interest cover The ratio of adjusted net finance costs, calculated in accordance This APM is used to understand our with the definitions used in our financing facilities, is net finance ability to meet our interest payments costs with a deduction for pension interest, interest from adopting and is also a key metric that we report IFRS 16, unwinding of discount on put options and amortisation of to our banks to ensure compliance refinancing fees, to adjusted EBITDA. with our bank covenants. Closest equivalent IFRS components for the ratio: The equivalent ADDITIONAL INFORMATION IFRS components are finance costs, finance income and operating profit See calculation and reconciliation on page 206. Ratio of net debt to The ratio of net debt, calculated in accordance with the This APM is used as a measurement of adjusted EBITDA definitions used in our financing facilities, is gross debt, made up our leverage and is also a key metric of unsecured bank loans and overdrafts and obligations under that we report to our banks to ensure finance leases, with a deduction for cash and cash equivalents compliance with our bank covenants. and adding back amounts related to guarantees and deferred purchase arrangements, to adjusted EBITDA. Closest equivalent IFRS components for the ratio: The equivalent IFRS components are gross debt, cash and cash equivalents and operating profit See calculation on page 206. Return on adjusted The Group’s return on adjusted invested capital is measured on This APM is used to measure our invested capital the basis of adjusted operating profit including JVs after tax, ability to efficiently invest our which is operating profit with the pre-tax share of profits from JVs capital and gives us a sense of and associates, net IAS 41 valuation movement on biological how well we are using our resources assets, amortisation of acquired intangible assets, share-based to generate returns. payment expense and exceptional items added back, net of amounts attributable to non-controlling interest and tax. The adjusted operating profit including JVs after tax is divided by adjusted invested capital, which is the equity attributable to owners of the Company adding back net debt, pension liability net of related deferred tax and deducting biological assets (less historical cost) and goodwill, net of related deferred tax. Closest equivalent IFRS components for the ratio: Return on invested capital See calculation and reconciliation on page 207. 1 Operating profit is not defined per IFRS. It is presented in the Group Income Statement and is shown as profit before tax, finance income/costs and share of post-tax profit of JVs and associates retained 203 GENUS PLC / ANNUAL REPORT 2023 # THE TABLES BELOW RECONCILE THE CLOSEST EQUIVALENT IFRS MEASURE TO THE APM OR OUTLINE THE CALCULATION OF THE APM # INCOME STATEMENT MEASURES Adjusted operating profit exc JVs Adjusted operating profit inc JVs Adjusted operating profit inc JVs and exc gene editing costs | | 2022 | | 2022 | | | | --- | --- | --- | --- | --- | --- | | | £m | £m | £m | £m | Reference | | **Operating profit** | | **40.5** | | **49.4** | Group Income Statement | | Add book: | | | | | | | Net IAS 41 valuation movement on biological assets | 16.9 | | 5.4 | | Group Income Statement | | Amortisation of acquired intangible assets | 7.7 | | 8.3 | | Group Income Statement | | Share-based payment expense | 6.0 | | 3.7 | | Group Income Statement | | Exceptional items | 3.5 | | 2.0 | | Group Income Statement | | **Adjusted operating profit exc JVs** | | **74.6** | | **68.8** | Group Income Statement | | Amounts attributable to non-controlling interest | | 0.4 | | (0.3) | Group Income Statement | | Operating profit from JVs and associates | 10.5 | | 5.2 | | Group Income Statement | | Tax on JVs and associates | 3.9 | | 2.6 | | Note 11 – Income tax expense | | Net IAS 41 valuation movement | (3.6) | | 1.4 | | Note 18 – Equity-accounted investors | | Adjusted operating profit from JVs | | 10.8 | | 9.2 | | | **Adjusted operating profit inc JVs** | | **85.8** | | **77.7** | | | Gene editing costs | | 14.3 | | 7.9 | Note 5 – Segmental information | | **Adjusted operating profit inc JVs and exc gene editing costs** | | **100.1** | | **85.6** | | | **Adjusted operating profit inc JVs after tax** | | | | | | | | | **2023** | | **2023** | | | | | **£m** | | **£m** | Reference | | **Adjusted operating profit inc JVs** | | **85.8** | | **77.7** | See APM | | Effective Tax Rate | 22.2% | | 24.3% | | Note 12 – Earnings per share | | Adjusted tax | | (19.0) | | (18.0) | No direct reference | | **Adjusted operating profit inc JVs after tax** | | **66.8** | | **58.8** | | | **Adjusted profit inc JVs before tax** | | | | | | | **Adjusted profit inc JVs after tax** | | | | | | | | | **2023** | | **2023** | | | | | **£m** | | **£m** | Reference | | **Adjusted operating profit inc JVs** | | **85.8** | | **77.7** | See APM | | Less net finance costs | | (14.3) | | (14.2) | Note 10 – Net finance costs | | **Adjusted profit inc JVs before tax** | | **71.5** | | **71.5** | | | Adjusted tax | | (15.9) | | (17.4) | Note 12 – Earnings per share | | **Adjusted profit inc JVs after tax** | | **55.6** | | **54.1** | | ADDITIONAL INFORMATION ![img-11.jpeg](img-11.jpeg) 204 GENUS PLC / ANNUAL REPORT 2023 # ALTERNATIVE PERFORMANCE MEASURES GLOSSARY CONTINUED | Adjusted effective tax Em/rate | | | | | | | --- | --- | --- | --- | --- | --- | | | 2023 | | 2022 | | | | | £m | % | £m | % | Reference | | **Adjusted effective tax Em/rate** | **15.9** | **22.2** | **17.4** | **24.3** | Note 12 – Earnings per share | | Exceptional items | (0.9) | (25.7) | (0.8) | (40.0) | Note 12 – Earnings per share | | Share-based payment expense | (0.8) | (14.5) | (0.5) | (13.5) | Note 12 – Earnings per share | | Other gains and losses | 0.7 | 25.0 | – | – | Note 12 – Earnings per share | | Amortisation of acquired intangible assets | (1.9) | (24.7) | (3.3) | (39.8) | Note 12 – Earnings per share | | Net IAS 41 valuation movement on biological assets | (0.5) | (8.8) | 1.5 | 27.8 | Note 12 – Earnings per share | | **Effective tax Em/rate** | **11.5** | **26.6** | **14.3** | **28.0** | Note 11 – Taxation and deferred taxation | | **Adjusted basic earnings per share** | | | | | | | | | 2023 | | 2022 | Reference | | **Adjusted profit inc JVs after tax (£m)** | | **55.6** | | **54.1** | See APM | | Weighted average number of ordinary shares (000s) | | 65,557 | | 65,395 | Note 12 – Earnings per share | | **Adjusted basic earnings per share (pence)** | | **84.8** | | **82.7** | | | **Adjusted diluted earnings per share** | | | | | | | | | 2023 | | 2022 | Reference | | **Adjusted profit inc JVs after tax (£m)** | | **55.6** | | **54.1** | See APM | | Weighted average number of diluted ordinary shares (000s) | | 65,998 | | 65,714 | Note 12 – Earnings per share | | **Adjusted diluted earnings per share (pence)** | | **84.2** | | **82.3** | | | **Adjusted earnings cover** | | | | | | | | | 2023 | | 2022 | Reference | | | | pence | times | pence | times | | **Adjusted earnings per share** | | **84.8** | | **82.7** | See APM | | **Dividend for the year** | | **32.0** | | **32.0** | Note 13 – Dividends | | **Adjusted earnings cover** | | **2.7** | | **2.6** | | | **Adjusted EBITDA – as calculated under our financing facilities** | | | | | | | | | 2023 | | 2022 | Reference | | | | £m | £m | £m | Reference | | **Operating profit** | | **40.5** | | **49.4** | Group Income Statement | | Add back: | | | | | | | Net IAS 41 valuation movement on biological assets | 16.9 | | 5.4 | | Group Income Statement | | Amortisation of acquired intangible assets | 7.7 | | 8.3 | | Group Income Statement | | Share-based payment expense | 6.0 | | 3.7 | | Group Income Statement | | Exceptional items | 3.5 | | 2.0 | | Group Income Statement | | Adjusted operating profit exc JVs | 74.6 | | 68.8 | | Group Income Statement | | Adjust for: | | | | | | | Cash received from JVs (dividend and loan investment) | 0.7 | | 3.2 | | Group Statement of Cash Flows | | Depreciation: property, plant and equipment | 30.2 | | 26.4 | | Note 17 – Property, plant and equipment | | Operational lease payments | (12.3) | | (12.4) | | Note 28 – Obligations under leases | | Depreciation: historical cost of biological assets | 13.4 | | 10.7 | | See Financial Review | | Amortisation and impairment (excluding separately identifiable acquired intangible assets) | 5.7 | | 4.3 | | Note 15 – Intangible assets | | Amounts attributable to non-controlling interest | 0.4 | | (0.3) | | Group Income Statement | | **Adjusted EBITDA – as calculated under our financing facilities** | | **112.7** | | **100.7** | | ADDITIONAL INFORMATION 205 GENUS PLC / ANNUAL REPORT 2023 # BALANCE SHEET MEASURES Net debt Net debt as calculated under our financing facilities | | 2022 | | 2021 | | Reference | | --- | --- | --- | --- | --- | --- | | | £m | £m | £m | £m | | | Current unsecured bank loans and overdrafts | 4.2 | | 7.1 | | | | Non-current unsecured bank loans and overdrafts | 196.0 | | 182.1 | | | | Unsecured bank loans and overdrafts | | 200.2 | | 189.2 | Group Balance Sheet | | Current obligations under finance leases | 10.0 | | 10.1 | | | | Non-current obligations under finance leases | 21.9 | | 24.5 | | | | Obligations under finance leases | | 31.9 | | 34.6 | Group Balance Sheet | | Total debt financing | | 232.1 | | 223.8 | Note 32 – Notes to the cash flow statement | | Deduct: | | | | | | | Cash and cash equivalents | | (36.3) | | (38.8) | Group Balance Sheet | | Net debt | | 195.8 | | 185.0 | | | Deduct: | | | | | | | Lower of obligations under finance leases or £30m | | (30.0) | | (30.0) | | | Add back: | | | | | | | Guarantees | | 12.6 | | 20.2 | Note 35 – Contingencies and bank guarantees | | Cash not available | | 0.8 | | – | Note 22 – Cash and cash equivalents | | Net debt – as calculated under our financing facilities | | 179.2 | | 175.2 | | ADDITIONAL INFORMATION 206 GENUS PLC / ANNUAL REPORT 2023 # ALTERNATIVE PERFORMANCE MEASURES GLOSSARY CONTINUED CASH FLOW MEASURES Cash conversion | | 2022 | | 2023 | | | | --- | --- | --- | --- | --- | --- | | | £m | £m | £m | £m | Reference | | Cash generated by operations | | 78.7 | | 56.6 | Note 32 – Notes to the cash flow statement | | Operating profit | 40.5 | | 49.4 | | Group Income Statement | | Add: book | | | | | | | Net IAS 40 valuation movement on biological assets | 16.9 | | 5.4 | | Group Income Statement | | Amortisation of acquired intangible assets | 7.7 | | 8.3 | | Group Income Statement | | Share-based payment expense | 6.0 | | 3.7 | | Group Income Statement | | Exceptional items | 3.5 | | 2.0 | | Group Income Statement | | Adjusted operating profit exc JVs | | 74.6 | | 68.8 | Group Income Statement | | Cash conversion (%) | | 100% | | 82% | | Free cash flow | | 2022 | | 2023 | | | | --- | --- | --- | --- | --- | --- | | | £m | £m | £m | £m | Reference | | Cash generated by operations | | 78.7 | | 56.6 | Note 32 – Notes to the cash flow statement | | Net interest and tax paid | | (28.3) | | (23.3) | Note 32 – Notes to the cash flow statement | | Capital expenditure | | (35.2) | | (50.9) | Group Statement of Cash Flows | | Dividends received from JV and associates | | 2.6 | | 3.2 | Group Statement of Cash Flows | | Joint venture and associate loan investment | | (1.9) | | – | Group Statement of Cash Flows | | Proceeds from sale of property, plant and equipment | | 2.4 | | – | Group Statement of Cash Flows | | Dividend to non-controlling interest | | (0.1) | | (0.1) | Group Statement of Cash Flows | Free cash flow | OTHER MEASURES | | | | | | --- | --- | --- | --- | --- | | Interest cover | | | | | | | 2022 | | 2023 | | | | £m | Times | £m | Times Reference | | Finance costs | 15.4 | | 6.6 | Group Income Statement | | Finance income | (1.1) | | (0.4) | Group Income Statement | | Net finance costs | 14.3 | | 6.2 | Note 10 – Net finance costs | | Deduct: | | | | | | Pension interest | (0.2) | | (0.2) | Note 10 – Net finance costs | | Interest on lease liabilities | (1.2) | | (1.1) | Note 10 – Net finance costs | | Unwinding discount on put options | (0.3) | | (0.2) | Note 10 – Net finance costs | | Amortisation of refinancing fees | (1.1) | | (0.9) | Note 10 – Net finance costs | | Adjusted net finance costs | 11.5 | | 3.8 | | | Adjusted EBITDA – as calculated under our financing facilities | 112.7 | | 100.7 | See APM | | Interest cover | | 10 | | 27 | Ratio of net debt to adjusted EBITDA | | 2022 | | 2023 | | | | --- | --- | --- | --- | --- | --- | | | £m | Times | £m | Times | Reference | | Net debt – as calculated under our financing facilities | 179.2 | | 175.2 | | See APM | | Adjusted EBITDA – as calculated under our financing facilities | 112.7 | | 100.7 | | See APM | | Ratio of net debt to EBITDA | | 1.6 | | 1.7 | | ADDITIONAL INFORMATION 207 GENUS PLC / ANNUAL REPORT 2023 | Return on adjusted invested capital | | | | | | --- | --- | --- | --- | --- | | | 2021 | | 2022 | | | | £m | % | £m | % Reference | | Adjusted operating profit inc JVs after tax | 66.8 | | 58.8 | See AIPM | | Equity attributable to owners of the Company | 574.9 | | 578.5 | Group Balance Sheet | | Add back: | | | | | | Net debt | 195.8 | | 185.0 | Note 32 - Notes to the cash flow statement | | Pension liability | 6.9 | | 8.3 | Group Balance Sheet | | Related deferred tax | (1.2) | | (1.3) | Note 11 - Taxation and deferred taxation | | Adjust for: | | | | | | Biological assets - carrying value | (342.0) | | (366.8) | Note 16 - Biological assets | | Biological assets' harvest classed as inventories | (22.7) | | (20.9) | Note 20 - Inventories | | Biological assets - historic cost | 83.4 | | 77.2 | See Financial Review | | Goodwill | (107.8) | | (110.0) | Group Balance Sheet | | Related deferred tax | 67.7 | | 73.0 | Note 11 - Taxation and deferred taxation | | Adjusted invested capital | 455.0 | | 422.0 | | | Return on adjusted invested capital | | 14.7% | | 13.9% | | Return on invested capital | | | | | | | 2021 | | 2022 | | | | £m | % | £m | % Reference | | Return on adjusted invested capital | | 14.7% | | 13.9% See AIPM | | Adjusted operating profit inc JVs after tax | 66.8 | | 58.8 | See AIPM | | Tax rate | 19.0 | 22.2% | 18.9 | 24.3% Note 12 - Earnings per share | | Adjusted operating profit inc JVs | 85.8 | | 77.7 | Group Income Statement | | Adjusted operating profit attributable to non-controlling interest | (0.4) | | 0.3 | Group Income Statement | | Pre-tax share of profits from JVs exc net IAS 41 valuation movement | (10.8) | | (19.2) | Group Income Statement | | Adjusted operating profit exc JVs | 74.6 | | 68.8 | Group Income Statement | | Fair value movement on biological assets | (16.9) | | (5.4) | Group Income Statement | | Amortisation of acquired intangibles | (7.7) | | (8.3) | Group Income Statement | | Share-based payment expense | (6.0) | | (3.7) | Group Income Statement | | Exceptional items | (3.5) | | (2.0) | Group Income Statement | | Share of post-tax profit of JVs | 10.5 | | 5.2 | Group Income Statement | | Other gains and losses | 2.7 | | - | Group Income Statement | | Finance costs | (14.3) | | (6.2) | Group Income Statement | | Profit before tax | 39.4 | | 48.4 | Group Income Statement | | Tax | (7.6) | | (11.7) | Group Income Statement | | Profit | 31.8 | | 36.7 | Group Income Statement | | Equity attributable to owners of the Company | 574.9 | | 578.5 | Group Balance Sheet | | Return on invested capital | | 5.5% | | 6.3% | ADDITIONAL INFORMATION ### 208 GENUS PLC / ANNUAL REPORT 2023 ### GLOSSARY AGM – Annual General Meeting. GMS – ABS’s Genetic Management PQA – Pork Quality Assurance. System, which creates a genetic solution Artificial insemination (‘AI’) – Using semen tailored to each individual dairy producer Progeny tested – Elite animals whose collected from a bull or boar to impregnate to obtain improved herd genetics. genetic value as a parent has been tested a cow or sow when in estrus. Artificial and validated through the performance insemination allows a genetically superior Grandparent – The relationship of a of their offspring. male to be used to mate with many more breeding pig to the generation of terminal females than would be possible with market pigs. A grandparent produces PRRSv – Porcine Reproductive and natural mating. parents, who in turn produce the Respiratory Syndrome Virus. commercial generation of terminal pigs. ASF – African Swine Fever. PSP – Performance Share Plan. Group – Genus plc and its subsidiary Biosecurity – The precautions taken to companies. PTAB – Patent Trial and Appeal Board reduce the chance of transmitting disease before the US Patent and Trademarks agents from one livestock operation In vitro fertilisation (‘IVF’) – The fertilisation Office. to another. of an oocyte with semen (outside an animal) in a laboratory for transfer into R&D – Research and development. Boar – A male pig. a surrogate. RMS – ABS’s Reproductive Management BRD – Bovine Respiratory Disease, Index/Indices – A formula incorporating System, which is a systematic approach to a complex, bacterial and viral infection economically important traits for ranking maximising pregnancy production and its that causes lung disease in cattle the genetic potential of animals as parents contribution to herd profitability. (particularly calves) and is often fatal. of the next generation. RPI – Retail Price Index. | CPI – Consumer Price Index. | Integrated pork producer – Producers of | | | --- | --- | --- | | | pork typically involved in raising animals | RWD – ABS’s Real World Data System of | | CRISPR-Cas 9 – Technology which | to slaughter weight all the way through to | observed performance data from many | ADDITIONAL INFORMATION accurately targets and cuts DNA to packaged and/or branded pork products. dairy herds. produce precise and controllable changes to the genome. IntelliGen – The technology platform Russian Sanctions – legislation introduced used to process sexed bovine semen by the UK, EU or US (as appropriate) DSBP – Deferred Share Bonus Plan. for ABS and third-party customers and which impose financial, trade, transport, commercialised by ABS globally as Sexcel. immigration or other sanctions for the EPS – Earnings per share. purposes of encouraging Russia to cease IP – Intellectual property. actions which destabilise Ukraine, or Farrow – When a sow gives birth to piglets. undermine or threaten the territorial IPR – Inter Partes Review before the US integrity, sovereignty or independence GELT – Genus Executive Leadership Team. Patent and Trademarks Office. of Ukraine. Gender skew – The ability to influence JV – Joint venture. Sexcel – The ABS brand of sexed bovine the proportion of offspring being of genetics produced using IntelliGen. a particular sex. Line – Multiple animals that have been mated together in a closed breeding Sire – The male parent of an animal. Genetic gain – The change of the population. Pure lines can have their origins genetic make up of a particular animal in one founding breed or in several breeds. Sire line – The male line selected for traits population in response to having selected desirable for the market. parents that excelled genetically for Market pig equivalents (‘MPE’) – Refers to important traits. a standardised measure of our customers’ Sow – A female pig which has given birth production of slaughter animals that at least once. Genetic lag – The amount of time required contain our genetics with genes from each to disseminate genetic gain from a nucleus of the sow and boar counting for half of Straw – A narrow tube used to package herd to the commercial customer. the animal. frozen bull semen. Genetic nucleus – A specialised pig herd, Multiplier – A producer whose farm Stud – Locations where bulls or boars where Genus PIC keeps its pure lines. Pigs contains grandparent sows. The are housed and their semen collected, are genetically tested at the nucleus to farm crosses together two lines of evaluated, diluted into multiple doses/ select the best animals to produce the grandparents, multiplying the number straws and packaged, ready for shipping next generation. of genetically improved parents that to farms. are available for sale. Genomic bull – A bull which has been Terminal boars – The male pig that is used assessed through genomic testing. This Net Present Value (NPV) – a financial tool to mate with a parent female to produce a typically refers to bulls which have not that helps to assess future value in today’s terminal pig. been progeny-tested. terms. NPV is calculated with an assumed discount rate over a given amount of time Trait – A measurable characteristic that Genomically tested – An animal that has and the calculation considers the amount may be a target for genetic selection. been DNA profiled. and timing of the free cash flows. TransitionRight – Genus ABS’s patent- Genomics – The study of the genome, NuEra – The ABS beef breeding pending genetic selection tool to help which is the DNA sequence of programme and index designed to drive prevent multiple post calving metabolic an animal’s chromosomes. the customer’s genetic improvement and disorders that occur during transition. deliver total system profitability for the Gilt – A young female pig, which has not beef supply chain. Unit – A straw of frozen bull semen or yet given birth. tube/bag of fresh boar semen sold to a customer. ### 209 GENUS PLC / ANNUAL REPORT 2023 ### ADVISERS | SECRETARY AND REGISTERED OFFICE | SOLICITOR | | --- | --- | | Dan Hartley | Herbert Smith Freehills LLP | | Matrix House | Exchange House | | Basing View | Primrose Street | | Basingstoke | London EC2A 2EG | Hampshire RG21 4DZ Registered Number 02972325 BANKERS Barclays Bank PLC FINANCIAL ADVISER 2nd Floor | HSBC Bank plc | 90–92 High Street | | --- | --- | | 8 Canada Square | Crawley | | Canary Wharf | West Sussex RH10 1BP | London E14 5HQ COMPANY REGISTRAR AUDITOR Equiniti Limited | Deloitte LLP | Aspect House | | --- | --- | | Abbots House | Spencer Road | | Abbey Street | Lancing | | Reading RG1 3BD | West Sussex BN99 6DA | Telephone: +44 (0) 371 384 2290 STOCKBROKERS Please use the country code when calling from outside the UK Peel Hunt Lines open 8:30am to 5:30pm (UK time), 100 Liverpool Street Monday to Friday (excluding public London EC2M 2AT holidays in England and Wales). You can also contact Equiniti by using the Liberum Capital Limited Relay UK website at www.relayuk.bt.com Ropemaker Place Level 12 Please see www.help.shareview.co.uk for 25 Ropemaker Street additional information London EC2Y 9LY HSBC Bank plc 8 Canada Square Canary Wharf London E14 5HQ ADDITIONAL INFORMATION ### GENUS PLC / ANNUAL REPORT 2023 GENUS PLC Matrix House, Basing View, Basingstoke, Hampshire RG21 4DZ T: +44 (0)1256 347100 F: +44 (0)1256 477385 www.genusplc.com ### GENUS PLC / ANNUAL REPORT 2023 GENUS PLC Matrix House, Basing View, Basingstoke, Hampshire RG21 4DZ T: +44 (0)1256 347100 F: +44 (0)1256 477385 www.genusplc.com