Genus PLC (GNS), a leading animal genetics company, reported its preliminary results for the fiscal year ended June 30, 2024, showcasing resilience and strategic advancements despite challenging trading conditions. CEO Jorgen Kokke highlighted the company’s progress in key areas such as the commercialization of its Porcine Reproductive and Respiratory Syndrome (PRRS) Resistant Pig and the growth of its porcine business, particularly in China.
While the company saw a decrease in profits in some areas, it managed to maintain a steady dividend and is expecting significant growth in the upcoming fiscal year.
Key Takeaways
- Genus reported revenue of GBP669 million and an adjusted operating profit of GBP78.1 million for the fiscal year.
- The company’s porcine business, PIC, saw a 2% decrease in profit in constant currency, but demonstrated growth in the second half of the year.
- ABS (Genus’s bovine business) reported a 3% decrease in adjusted operating profit in constant currency, with an improvement in the second half due to the Value Acceleration Program (VAP).
- Genus doubled its royalty customer base in China and expects FDA approval for its gene-edited pig in 2025.
- The company’s strategic priorities include driving growth in porcine, commercializing PRRS Resistant Pig, transforming ABS, and generating returns from R&D investments.
- Genus proposed maintaining a full-year dividend of 32p per share and expects significant profit before tax (PBT) growth in the next fiscal year, despite potential currency headwinds.
Company Outlook
- Genus anticipates solid profit growth from PIC and a return to profit growth for ABS in FY 2025.
- The company is expecting FDA approval for their PRP gene-edited pig in 2025 and has favorable determinations in other jurisdictions.
- Significant PBT growth is expected in constant currency for the next fiscal year, although recent sterling appreciation may pose a currency headwind.
Bearish Highlights
- PIC China’s profits decreased by GBP5.7 million.
- ABS saw a 6% volume decline and a decrease in adjusted operating profit by 3% in constant currency.
- Net debt rose to GBP249 million.
Bullish Highlights
- Trading regions outside of China experienced a 5% growth in profit in constant currency.
- Europe’s profit grew by 13%, showcasing strong performance.
- The VAP is expected to deliver GBP20 million of annualized operating profit improvement over two years.
Misses
- R&D spending decreased to GBP21.8 million, with further savings expected in FY 2025.
- Asia faced difficulties with profits down by 37%, despite improvements in market conditions in the second half.
Q&A Highlights
- Genus discussed the growth of their PIC business, excluding China, and their success in winning new royalty customers.
- The company provided updates on their PRP submissions in various countries and the progress of their VAP for the bovine segment.
- They expect a similar leverage level at June 2025 and have GBP107 million headroom against their facilities, which have been extended to August 2026.
In summary, Genus PLC is navigating a complex market environment with strategic initiatives aimed at driving growth and profitability. The company’s focus on innovation, particularly in gene editing for disease resistance in pigs, is poised to yield regulatory approvals and market expansion. Despite some profit declines, the overall outlook remains positive, with expectations of a strong financial performance in the next fiscal year. Investors and stakeholders will be watching closely as Genus continues to execute its strategic priorities and capitalize on its R&D investments.
InvestingPro Insights
As Genus PLC (GNS) looks to the future with optimism, recent data from InvestingPro provides a clearer picture of the company’s financial health and market position. With a market capitalization of $14.58 million and a robust revenue growth of 26.76% in the last twelve months as of Q4 2023, Genus’s strategic initiatives are reflected in its financial metrics. Despite a challenging trading environment, the company’s gross profit margin stands strong at 50.02%, underscoring its ability to maintain profitability under pressure.
InvestingPro Tips indicate that Genus is expected to see net income growth this year, a testament to its resilience and the potential upside for investors. Additionally, Genus has demonstrated a commitment to shareholder returns, maintaining dividend payments for an impressive 24 consecutive years. These aspects of financial stability and shareholder value are crucial for investors considering the long-term potential of Genus in a volatile market.
For investors seeking a more in-depth analysis, InvestingPro offers additional tips on Genus, providing valuable insights into the company’s earnings multiples and profitability forecasts. With analysts predicting that Genus will be profitable this year and considering the company’s track record of profitability over the last twelve months, the outlook is promising. For further details and a comprehensive list of tips, investors can visit https://www.investing.com/pro/GNS.
Full transcript – None (GENSF) Q3 2024:
Jorgen Kokke: Good morning, everyone. Thank you for joining us. My name is Jorgen Kokke, and I am the CEO of Genus. In this presentation, Alison Henriksen, our CFO, and I will take you through Genus’ preliminary results for the year ended 30 June 2024. In summary, I’d say we achieved considerable progress in structurally strengthening Genus, despite the challenging trading conditions. Let me start with an overview and some of our key financial headlines. Here are my four strategic priorities, which I outlined last year and which have remained unchanged. I’m very pleased with the actions taken to position Genus for profit growth going forward. Firstly, we are driving continued growth in porcine and building a more stable business in China. In FY 2024, PIC, excluding China, continued to grow, particularly in the second half of the year. And it is encouraging to see PIC Europe makes such good market share gains. In China, our commercial strategy to focus on the royalty model has resulted in us winning 13 new royalty customers in the year. This doubles PIC China’s royalty customer base. Increasing the size of our royalty business should improve the predictability of future earnings and decrease volatility over time. Secondly, we need to deliver the successful commercialization of our PRRS Resistant Pig, PRP. Here, we are advancing through the regulatory process with the U.S. FDA as well as in other key markets. In terms of the FDA, we are helping to define a novel post-approval oversight for our PRP gene edit and preparing for the FDA’s visits to our farms. As PRP is the first mainstream gene-edited protein, there is a rigorous, but also somewhat unpredictable process to go through. We are very pleased with the collaboration with the FDA and are expecting approval in calendar year 2025. We also have made submissions to the authorities in Canada and Japan, and our initial dialogue with those authorities has been constructive. In China, a specially designed research facility has been built by our Chinese partner, BCA. I’m delighted to say that our gene-edited animals will be arriving in China next week where they will be used for further local testing. So good progress overall on the PRP front. Our third strategic priority is to transform ABS into a more profitable and growing business. Phase I of our Value Acceleration Programme or simply VAP has already realized GBP7.3 million of benefit in FY 2024 and an annualized run rate of GBP10 million. In Phase II, which is already underway we believe there is a further GBP10 million of annualized operating profit benefit to be realized. Therefore, we expect ABS to achieve strong profit growth in FY 2025. Finally, our last strategic priority, which clearly supports and underpins the other three priorities is to generate attractive returns from our R&D investments. Following a conclusion of our strategic review in February 2024, we now have a sharper focus on the key value creation opportunities that will drive high value commericial outcomes. While we are pursuing exciting opportunities that are still in the discovery phase, our immediate focus and priority is on bringing PRP to the market and leveraging our IntelliGen bovine sexing technology. More to come on all of these priorities later. Turning then to our headline financial performance in fiscal year 2024. As Alison will walk you through, we made significant progress to structurally strengthen Genus despite it being a challenging year. The benefits of VAP in particular, are already being felt and underpin our expectation of ABS’ return to profit growth. Revenue was GBP669 million with adjusted operating profit of GBP78.1 million. The second half was stronger than the first as management actions began to deliver benefits. Adjusted profit before tax of GBP59.8 million was in line with our expectations. And we are recommending maintaining the full year dividend of 32p per share. Looking then at our markets. First, porcine, against a mixed market landscape PIC performed robustly in North America and in Latin America. PIC performed very well in Europe, but had a difficult year in Asia. In North America, producers suffered losses in the first half, but return to profitability, albeit at a low level in the second half. Despite the tough backdrop for PIC’s customers, royalty revenue and adjusted operating profit both grew in the year and at a stronger rate in the second half of the year, demonstrating the resilience and stability that the royalty model provides. In Europe, where we performed well, we gained market share with new customer wins in Spain, in Germany and in Italy, driving a significant increase in royalty revenue growth. As for Asia, it was a challenging year for PIC China because of the continued tough trading environment for our customers. However, over the last five months, Chinese pork producers have, in aggregate, returned profitability. While this is encouraging, given the volatile nature of the Chinese porcine market, we remain cautious as it relates to the outlook. Moving to bovine. It was a challenging environment in every region for different reasons. Low global milk prices, reduced dairy producer profitability and therefore, demand for genetics. While there was some respite from high beef prices in North America and Europe, the large Brazilian beef producers struggled with weak domestic demand. The China dairy market had the most significant downturn, weak consumer demand for dairy products, coinciding with increased supply from prior year farm expansions, very depressed milk prices resulted in significant herd curls by producers. Looking at the trends more broadly, we continue to see a positive mix shift from conventional dairy genetics to sexed and beef on dairy strategies. This plays to our strength and this shift in mix is value accretive to ABS. Before we go to our financial performance, I wanted to take you through some pioneering work we’re doing around sustainability. Firstly, we were very pleased to see that the UN FAO recognized use of improved genetics as one of the best ways for the livestock industry to reduce its environmental footprint. We have now conducted two life cycle assessments for PIC in North America and in Europe. These LCAs are standardized scientific models for assessing the environmental impact of a product, in our case, genetics. Our LCAs have achieved ISO conformance, which further adds to their credibility. PIC’s LCA in North America shows that full program use of PIC genetics delivers a 7.5% reduction in greenhouse gas emissions compared to the industry average. In Europe, the equivalent reduction is 7.7%. These are material decreases. And we are excited to be able to support our customers with achieving their sustainability goals, which are aligned to their economic goals. With that, let me now hand over to Alison, and she will take you through the financial details.
Alison Henriksen: Thank you, Jorgen. Good morning, and thank you for joining us. I’ll now take you through our details of our financial performance in FY 2024. So let’s start with our volume growth across porcine and bovine. The charts illustrate the impact of market challenges that Jorgen commented on earlier. In porcine, aggregate volume was up 3%, both including and excluding China. And this level of volume growth was lower than prior years, predominantly due to more restrained growth in North America where the difficult market circumstances in the past year, impacted customers’ purchases of breeding stock gilt. Bovine volumes were more impacted, falling 6% compared to the prior year. The last time the business saw a decline in volume was 2016 when there were comparable challenges across a number of markets. ABS China was particularly challenging, as Jorgen noted, there was a rapid double-digit contraction in the dairy herd due to oversupply and weak consumer demand, which significantly impacted our business there. And excluding ABS China, bovine volumes decreased 2%. So moving to our adjusted profit performance. In FY 2024, group adjusted operating profit fell 3% in constant currency and 9% in actual currency. However, we had a much stronger second half with adjusted operating profit growing 15% in constant currency and 7% in actual currency, noticeably better than the first half when we reported a 17% decrease in constant currency adjusted operating profit and a 21% decrease in actual currency. PIC’s adjusted operating profit decreased 2% in constant currency for the year. However, the performance in the second half was stronger as expected, achieving adjusted operating profit growth of 9% in constant currency. Excluding China, PIC grew its profit 4%. Profits from ABS decreased 3% in constant currency, which is significantly better than the decline in the first half of 15%. Our VAP initiatives delivered on our expectations for Phase I with GBP7.3 million of benefit realized in the year, with an annualized run rate of GBP10 million. Phase II is underway, and we will go into more detail later in the presentation. R&D costs reduced 9% in constant currency as we began to realize savings from our strategic review, which was concluded in February. And our adjusted operating profit margin fell 70 basis points to 11.7%. The key drivers of this was ABS’ volume decline and the impact of China performance on both our businesses. Now the chart on this slide shows a year-on-year bridge for profit before tax. You can see that EBITDA, excluding China, grew GBP10 million or 12% year-on-year in constant currency. The combined impact of China on PIC and ABS however, was an GBP8.6 million reduction in EBITDA, within which PIC China was GBP2.5 million lower and ABS China was GBP6.1 million lower. Absolute adjusted operating profit from China now represents around 7% of group profits. Depreciation and amortization costs increased GBP4.2 million year-on-year. And that was mainly driven by two new farms that PIC leases in China being Hong Kong and LuoDian. And all of this year-on-year increase occurred in the first half. We’ve now lapped the start-up of both farms and therefore, I expect depreciation and amortization for the company to be approximately GBP40 million in FY 2025. Now back to the chart. The two other material movements year-on-year were net finance costs and FX. Our net finance costs increased GBP3.2 million year-on-year, predominantly reflecting higher average interest rates over the period. And for FY 2025, we expect net interest costs to be broadly similar to FY 2024 levels. Finally, FX was a significant headwind in the year at just over GBP6 million, as we flagged in February. Looking forward, recent sterling appreciation, particularly relative to the Mexican peso and Brazilian real indicates a foreign currency headwind of GBP8 million to GBP9 million in FY 2025, should the current rates continue to persist throughout the year. So let’s now look at the divisions in detail, starting with PIC. Adjusted operating profit decreased 2% in constant currency on revenue, 1% lower. And adjusted operating margin was flat year-on-year at 27%, with the business managing its cost base well. The chart on the right of the slide shows the detail of the key drivers. The trading regions ex-China, that is North America, Latin America and Europe grew constant currency operating profit by GBP8 million or 5% year-on-year. Unfortunately, this growth was largely offset by a GBP5.7 million decrease in PIC China profits. And PRP costs increased GBP2.6 million as we planned, as we ramp up our commercialization activity. This next slide presents our normal walk around the world. And as you look at all the metrics on this page, they are all virtually better than at the end of the first half. Amidst a tough environment for its customers in North America, PIC continued to demonstrate the quality of its products and the resiliency of its model. Constant currency profit grew 5% on royalty revenue growth of 4%. The corresponding figures at the end of the first half were just 1% and 2%. And Europe remained the standout region as it was in the first half with profits growing 13% on royalty revenue growth of 9%. The business gained market share with good growth in Spain, France and Germany. And in Asia, profits were 37% lower albeit this was an improvement from performance in the first half. And whilst it was a very tough year overall, there has been some improvement in the market conditions in the second half. But our customers are remaining cautious and so are we. Our customers in the Philippines struggled with disease challenges, which meant the Asia region, excluding China, also had a difficult year with profits down 5%. But if you look at PIC as a whole, royalty revenue grew 4%, which was an acceleration from 2% in the first half. And excluding China, this was 5%. We continue to believe royalty revenue growth is the best indicator of PIC’s performance. So moving now to ABS. Revenue increased 4% in constant currency despite the volumes decline of 6%, and this was a result of pricing actions and favorable mix. Adjusted operating profit decreased 3% in constant currency and margin decreased 40 basis points. This is materially better than the 15% decrease in adjusted operating profit we saw in the first half. The key driver of the improvement in the second half was VAP with benefits coming through as the volume decline was similar in both halves. The chart to the right of the slide illustrates the challenge across the business. We delivered GBP7.3 million of in-year benefit from that Phase I and IntelliGen also had a good year with profits up GBP3.2 million. However, this was offset by profits from ABS China, decreasing GBP6 million year-on-year. As we said, a function of a very challenging environment and inventory provisions and supply chain impacts of GBP3.1 million, which were primarily caused by sales volumes being lower than expected. FX was a significant GBP4.2 million headwind in the year due to sterling strengthening, particularly in the second half. Looking to FY 2025, the year-on-year profit benefit from VAP I will be around GBP2.7 million. And Phase II of VAP is underway, and we expect it will deliver GBP5 million of profit benefit in the year and a GBP10 million annualized run rate. And Jorgen will talk more about this shortly. The next slide shows our regional performance in ABS. In an environment where it’s difficult to grow volume, North America was able to grow profit by 5% in constant currency. Through improved Sexcel mix, significant VAP I actions and good wins in IntelliGen. In Latin America, mix and VAP were again the major drivers of performance. The team was particularly successful at driving sexed penetration with GENEadvance customers who have multiyear contracts with us, and where success is increasingly measured by genetic game. But it’s also worth noting that Argentine Peso volatility was a significant factor in the region with profits increasing 31% in constant currency, but decreasing 1% in actual currency. Europe achieved 6% profit growth with a robust 4% increase in volumes. Sexed volumes were up 13% and beef volumes were up 3%. VAP again, had a significant impact on lowering costs, and we also had success with new distributor markets. Asia, as we flagged before, was a major challenge with overall volumes down 12% and sexed volumes down 7%. The market continues to be soft, and we expect it will be some time before we see a recovery. But IntelliGen performed very well in the region, with strong profit growth in India and new business won in Thailand. So ABS as a whole, had volumes fall 6% with sexed volumes up 3% as the mix shift to sexed continues. Let’s now move to R&D and product development. I’d just like to remind you that R&D constitutes other gene editing and key R&D investments in reproductive biology, genome science and bioinformatics. Our R&D spend decreased to GBP21.8 million or 3.3% of revenue in the year. We completed our strategic review of R&D in February, and this resulted in savings of GBP2.4 million being realized in the year. And we expect a further GBP2.6 million of savings in FY 2025. And this should result in R&D expenditure as a percentage of revenue falling and remaining below 3% going forward. Porcine product development costs have risen as a percentage of PIC revenue, but this is principally because of PRP commercialization costs and running costs of our new Atlas (NYSE:) facility. We expect porcine product development cost remain flat as a percentage of PIC revenue going forward. Meanwhile, in bovine, we expect bovine product development costs to remain flat as a percentage of ABS revenue going forward too. So moving to our statutory income statement. We consistently measure and report adjusted results as we think these give a better view of the group’s underlying performance. Our statutory results are affected by a number of noncash items, which are detailed on this slide. Our IAS 41 biological assets valuation movement in the year was a GBP23 million decrease compared with GBP16.9 million decrease in the prior year. And this decrease comprised an uplift in porcine, driven by farm stockings and a reduction in bovine, reflecting lower sales volume growth and rationalization of our bull herd. Exceptional expenses were particularly high in FY 2024 at GBP24.6 million, of which GBP10.4 million was related to the settlement of the ST litigation, settled in January and GBP6.7 million was related to restructuring costs and a further GBP7.4 million was related to potential corporate transactions, which are no longer active. So looking forward, we expect P&L exceptionals to decrease to approximately GBP6 million to GBP8 million in FY 2025, of which around GBP4 million will be related to VAP Phase II. Net finance costs were GBP4 million higher year-on-year, which was largely a function of higher interest rates and higher lease liabilities from the new China farms. And our adjusted tax rate was 28.1% in the year compared to 22% in FY 2023. There was a prior year adjusted (ETR) (ph) benefit last year of 6% from the initial recognition of deferred tax assets and respective losses brought forward in the group’s subsidiaries in Australia and France. So in FY 2025, we expect our adjusted tax rate to be between 26% and 28%. So overall, statutory profit before tax was GBP2.4 million compared with GBP31.8 million in the prior year. Before I take you through our cash flows, I wanted to outline a change we’ve made to our cash flow conversion metric. We believe the new measure is more aligned to how cash is managed in our operations. And our new annual target for cash conversion on this basis is at least 70% per annum. The new measure includes all investments in biological assets, capital expenditure and lease liabilities. These are key management levers in managing our cash flows. Joint venture dividends and profits will also be included to ensure that all cash flows from our JVs are included. The new measure excludes provisions, legacy pension contributions and exceptional cash items because these items are nonrecurring in nature. And a full reconciliation between the old metric and the new metric as well as five years of history for both is shown in the appendix. So with that, let me now turn to our cash flow performance in FY 2024. There were four major factors driving our free cash outflow of GBP3.2 million, and that includes lease repayments. You can see EBITDA was fairly similar to last year, which is a strong achievement considering the difficult trading environment and reflects the benefits of that, cost savings in R&D and PIC’s growth outside China. We had lower CapEx of GBP24 million, which was as planned and GBP8.8 million lower than the year before. As we’ve said previously, Genus has made significant CapEx investments over the last few years, and we’re now focused on generating returns from those investments. And we expect CapEx to decrease a little further in FY 2025 to between GBP20 million and GBP23 million. Offsetting the lower CapEx, however, was a GBP10.8 million increase in exceptional cash items to GBP17.9 million. Within this figure, GBP9.6 million was related to ST litigation and the associated settlement that we agreed in January, GBP5.5 million related to restructuring costs and GBP2.3 million related to prospective transactions that are no longer active. As I flagged earlier, we expect our P&L exceptionals to reduce significantly in FY 2025. However, our exceptional cash outflows will still be significant in FY 2025 as we make further ST settlement payments of around GBP8 million, incur further restructuring costs related to that Phase II of GBP4 million and pay costs related to the potential corporate transactions that I mentioned previously of around GBP6 million. And that’s because that activity was at the end of our financial year. Beyond FY 2025, we’d expect cash exceptionals to reduce significantly with just one payment left in relation to the ST settlement of GBP4 million. We also had a GBP10.7 million increase year-on-year in cash interest and tax, which brought our free cash outflow to the GBP3.2 million. Let me lastly talk about our balance sheet, which remains solid. Net debt rose is expected to GBP249 million from GBP196 million at June 2023. As shown on the chart, adjusted operating cash flow of GBP55 million was offset by interest tax and exceptional items. We made GBP21 million of dividend payments in the year and added GBP26 million of newly capitalized leases, which under IFRS 16 are treated as debt. These leases relate to the additional farms I mentioned in China. Our leverage at year-end was 2 times EBITDA as expected and within our target range of 1 times to 2 times. We expect a similar leverage level at June 2025. And our interest cover was a comfortable 8 times. At June 2024, we had headroom of GBP107 million against our facilities, which have been extended to August 2026. So given our solid financial position and the Board’s confidence in our business, we’re proposing to maintain the final dividend consistent with prior year. And just one more thing I wanted to flag to you is that we’ve introduced a new technical guidance slide in the appendix. We outlined expected impacts to our FY 2025 accounts for line items such as depreciation, capital expenditure and the tax rate. And I hope you find that helpful. So with that, let me now turn the presentation back to Jorgen, who will give you much more detail around our strategic progress and our outlook for FY 2025.
Jorgen Kokke: Thank you, Alison. I’ll now take you through our strategy and outlook in more detail. As I outlined earlier, our strategic priorities are unchanged as we are focused on building a stronger and faster-growing business. Let me talk you through each of these in turn. Firstly, I’d like to take a deeper look at PIC, excluding China. In FY 2024, we continue to grow our royalty revenue in every region except Asia. Our 4-year royalty CAGR is now 4% in North America, 14% in Latin America and 7% in Europe. This is a testament to our ability to both grow with existing as well as win new royalty customers. As discussed before, Royalty revenues underpin the stable growth of PIC. For example, the chart on the right-hand side of the page shows U.S. pork producer profitability. It shows the cyclicality of the industry. After sizable losses throughout most of 2022 and 2023, the industry has now returned to profitability, albeit at a low level. We obviously welcome this development for our customers. The key takeaway is that PIC North America’s royalty revenue growth is relatively decoupled from pork producer profit cycles. Let’s move to PIC China. Our goal, of course, is to grow the business, but also to improve its stability. The first chart shows the pig price to corn ratio in China, which is a proxy for pork producer profitability. As I stated earlier, over the last five months, we’ve seen the industry produce profits in aggregate. While this is encouraging, our customers remain cautious and so do we. Moving to the chart in the middle. You can clearly see that fiscal 2024 was a challenging year for PIC China with volumes flat, reflecting the tough operating environment. Against this backdrop, we’ve had success with PIC’s China new commercial strategy, which is aimed at winning new royalty customers, two of PIC’s cornerstone royalty customers are the best-performing companies in terms of efficiency and productivity, which is becoming increasingly known in the Chinese porcine market, and as such, is promotion for PIC genetics. In the first half, we won six new royalty customers, and this momentum continued into the second half when we added further seven customers. To put this in context, PIC China had 13 royalty customers in total at the end of FY 2023. So we’ve doubled the royalty customer count during the year. I also wanted to flag if we had a chart on the right that it typically takes two to four years for royalty revenues from new customers to reach steady state. In FY 2024, 36% of PIC China’s total revenue came from royalties. As a result of the momentum we have we are now increasingly confident in our ability to grow royalty revenues in China going forward. Moving now to PRP. I will discuss the remaining steps to achieve FDA approval. Before I do so, I’d like to highlight how novel this process continues to be, both for us as well as for the FDA. We’ve worked hand-in-hand with the FDA throughout the process to make sure the PRP gene edits and future gene edits can be safely and responsibly be brought to market. Now our progress. During 2024, we have continued to achieve significant milestones, as you can see on the chart. And before the end of the calendar year, we expect to submit the environmental safety report, which is ready for submission and the validation report and durability plan. I’d like to emphasize that our work is now completely focused on post-approval compliance, as we have already proven the efficacy and safety of PRP. Let me now walk you through the remaining steps to approval. Following our submissions we expect the FDA will inspect our two PRP farms and our testing facility. The timing of these site inspections is in the FDA’s control. So it is difficult to predict precisely how long it will take. Our best estimate is that they will take place in the first half of calendar 2025. As you can imagine, we are preparing for the site inspections in advance. This includes liaising extensively with our FDA counterparts to socialize the operation of pig farms with the FDA inspectors ahead of time. After the site visits are complete, there may be findings that need to be addressed. After addressing any such findings, we will then submit a new animal drug application. This step is largely administrative in nature, and we believe it will be the final submission required for FDA approval. Based on the remaining steps, our expectation is that we will receive FDA approval in calendar year 2025. We are encouraged by the good dialogue and working relationship with the FDA and remain positive regarding the outcome. Looking beyond the FDA to other jurisdictions. During the year, we received favorable determinations from both Colombia and Brazil. We have also made PRP submissions in Canada and Japan, and the initial dialogue with both regulators has been encouraging. In Mexico, we have reached out to the new administration to map the regulatory pathway and increased our engagement on the benefits of PRP with the domestic pork production industry who are really interested in this product. Lastly, in China, a specially designed research farm has been built by our Chinese partner, BCA. And our PRPs are arriving into the country as early as next week for testing. So good progress all around. Although I would remind you that the timing of regulatory decisions remain uncertain as this is the first mainstream gene-edited protein product to seek approval. Moving now to bovine and our value acceleration program. We initiated this program during FY 2024 with clear objectives to accelerate growth and improve ABS’ margins, returns and cash generation by embedding commercial and operational excellence and deploying our resources more effectively. We made significant changes to the ABS organization and leadership. We unified dairy, beef and IntelliGen under the leadership of Jim Low, who took up his position in April. I’ve worked with Jim previously, and I’m pleased to say that he is already having a very positive impact on our ABS business. Alongside unified management of Bovine we integrated our supply chains for dairy, beef and IntelliGen to drive efficiency and better demand planning. This has resulted in significant savings and the beginnings of a more robust sales and operational planning process. We have also started implementing stronger pricing governance and value capture in Phase I. As part of this, we’ve analyzed profitability on a customer-by-customer basis to identify profit outliers. Capturing more value has then taken multiple forms from targeted price increases to signing up customers on multiyear contracts, greater customer wallet share and/or adding additional services to our offering. There’s more we need to do here, and we will continue to optimize our processes in VAP Phase II. In addition to this, during Phase II, we will be selectively centralizing certain areas where we can improve efficiency and control. We also expect to realize further benefits from our supply chain integration and optimization of product allocations. In total, VAP will be delivering GBP20 million of cumulative annualized operating profit improvement over the two year period. To put that figure in context, it’s over 6% of ABS’ revenue in FY 2024 and greater than ABS’ total adjusted operating profit in either FY 2023 or FY 2024. Clearly, VAP is a multiyear transformation. And beyond Phase II, we will be exploring opportunities to further address in FY 2026. Before I move to the summary and outlook, I’d like to emphasize that VAP is about driving profit growth and returns by deploying our resources more effectively and it’s not just about cost savings. Let me now lastly turn to Genus’ outlook. FY 2024 was undoubtedly challenging, but we have made significant strategic progress. Looking ahead to FY 2025, underlying market conditions are stable to slowly improving, albeit we remain cautious, particularly in China. We expect solid profit growth from PIC and a return to profit growth for ABS. At the group level, our plans haven’t changed, and we expect significant PBT growth in constant currency, which is in line with the market expectations. I’d flag that recent sterling appreciation indicates a currency headwind of approximately GBP8 million to GBP9 million if currency rates continue. That concludes our presentation of Genus’ FY 2024 results. Thank you very much for your time and interest. We look forward to addressing your questions later this morning.
End of Q&A:
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