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Company Profile: Genus

An SRI Expert Brief

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Company Profile: Genus

Introduction

Introduction The EdenTree range of SRI screened ‘Amity’ funds hold over 250 different company stocks and debt instruments across their portfolios. As well as having a strong and compelling investment case, each holding must be researched and approved by the SRI team. Here we profile an interesting UK holding that delivers strongly against our nine positive screens. Genus is a long term holding in the Amity UK Fund. This SRI briefing explores the investment and sustainability case for holding the stock in the Amity Funds, following a recent site visit of the company’s bovine bull stud in Wales by our team.

Genus

Genus

Genus is a global leader in animal genetics and reproduction services, serving the porcine and bovine sectors globally in over 70 countries. It provides farmers with breeding pigs and bull semen used for artificial insemination to help them produce high quality meat or milk through genomic selection and gene editing. Its bovine division collects approximately 17 million doses of semen from its studs each year, while its porcine division owns eleven pure-bred pig lines providing breeding males, females and semen. We were delighted to be invited to Genus’ bull stud in Ruthin, Wales. During our visit we had the opportunity to see the daily operations of its bull stud, animal care, some of its most valuable bulls and a glimpse of the lab.

Genus’ gene editing capabilities have huge potential as it presents an opportunity to tackle common diseases among animals. Porcine Reproductive and Respiratory Syndrome (PRRS) is a highly contagious viral disease for which there is currently no cure. Gene editing allows small changes to be made to a particular protein of an animal’s DNA which is the receptor of a virus. By deactivating or cutting the particular protein, Genus is able to produce pigs that are resistant to the PRRS virus. This does not involve any gene transplanting or genetically modified organisms but focuses on improvements of the animal’s own genome.

Investment Proposition

Investment Proposition

Genus is a global leader in animal genetics and it is favourably positioned in the global artificial insemination market through its strong R&D credentials. This makes it more of a biotech business rather than a breeding farm. In 2015 it announced a scientific breakthrough in the development of disease resistant pigs, which represents a key growth area. China and India are the world’s largest porcine and dairy markets respectively so this presents attractive growth potential for the company.  

Revenues are split between beef and dairy bovine (45%) and porcine (55%) and Genus has a leading position in all sectors with a market share of 24%, 8% and 26% respectively. Tough dairy markets caused a slight drop in revenues for 2016, however over the long term revenues have grown by 13% since 2012. Overall the group generated £388.3 million in revenues in FY2016. Adjusted profit before tax is up 7% compared to the previous year and up 13.7% since 2012 at £49.7 million. 

The share price has performed strongly over the long term. Since IPO in 2000, Genus’ return has been four times the return of the FTSE All Share. The stock currently yields a small but growing dividend of 1.08%.

 

 

 

Strong health and safety performance

Strong health and safety performance As a business that directly manages animals, health and safety is a key risk for the company’s employees. Visiting the site in person has allowed us to experience the company’s high standards. Genus has strong health and safety performance: there have been no accidents at its sites, and the site in Wales has won the company internal Health & Safety award. Disease is another material risk and therefore the company has a strong focus on hygiene. The Ruthin site is secluded from any wildlife, all cars entering the site are washed and staff are required to get changed or to shower before handling different breeds. Frozen straws are kept at the lab for 30 days and animals have blood tests every 28 days - this ensures artificial insemination distributed does not contain any virus. Although the animals are kept indoors they have spacious individual pens to express natural behaviour as well as a “play area” where bulls can let off steam.

The value of an investment can fall as well as rise as a result of market and currency fluctuations, you may not get back the amount originally invested. Past performance should not be seen as a guide to future performance. If you are unsure which investment is most suited to you, the advice of a qualified financial adviser should be sought. EdenTree Investment Management Limited (EdenTree) Reg. No. 2519319. Registered in England at Beaufort House, Brunswick Road, Gloucester, GL1 1JZ, UK. EdenTree is authorised and regulated by the Financial Conduct Authority and is a member of the Investment Association.