Good morning, and thank you all for joining the interim results live question and answer session for Genus plc for the half year ended 31st of December, 2021, which will be hosted by Stephen Wilson, Chief Executive, and Alison Henriksen, CFO. If you'd like to ask a question, please use the Raise Hand function at the bottom of your screen. Once you have been selected to ask a question, you'll be promoted to a panelist. Please remember to then turn on your video and unmute yourself. Please raise your hand now if you would like to ask a question. We will now take our first question from Charles Hall of Peel Hunt. Charles, you are now a panelist. Please unmute yourself and go ahead. Thank you. Morning, Stephen. Morning, Alison. Hi. You obviously put a bit of information on Russia in your prepared talk, but given the news today, do you want to just provide a bit more color on the operations you've got there and how things might pan out as you see them at the moment? Thank you, Charles. Let me take that question first. Let me start also just by welcoming everyone to the question and answer session. We do have business in both Russia and Ukraine. In Russia, we have a very successful PIC business there, which is a market leader in the pig industry in Russia. We also have a growing ABS business in Russia. We have around about 50 employees in total in Russia. In Ukraine, we have an ABS business, which has been growing very nicely, and we have a team of about eight people in Ukraine. In terms of how we operate in those countries, the porcine supply chain is, you know, largely located in Russia. You know, we built up that supply chain over time, and we do import semen into both Russia and the Ukraine from the U.S., from the U.K., as you might expect. That's how we serve the marketplace. In terms of the scale of those businesses, you know, think about it in operating profit terms, for the group as a whole, they'd be a little bit more than 10% of our operating profit across those businesses. I think in terms of your question about how do we see things evolving in the future, you know, I think that's very difficult for us to speculate on at this point. Yeah. Understandable. Switching over to China, you obviously provided a lot more information on your Chinese operations, and I think the key thing was that you're not currently changing your views in terms of the long-term prospects, and you're continuing to invest in that market. Do your customers have the same opinion? Obviously, there a lot of them will be seeing pretty severe losses at the moment. Are they changing their views? How do you see that situation between what you're thinking and what your customers are thinking? Yeah. I think the customers, you know, are balancing, as you might expect, the view of a terrific long-term opportunity. They see the need to continue the technification of the industry, the continued need to improve biosecurity there. They're balancing that with short-term pressures, in terms of, you know, red ink on the financial statements every month. So, you know, I think that's a natural tension. When there's a lot of red ink, you tend to focus on the short term. Obviously, you've been moving down the royalty model in China. Does the current situation change your view about the validity of progressing on the royalty model, or is the customer base robust enough to continue down that line? No, it doesn't change our view. In fact, I think if anything, you know, it would encourage us to continue to go further in terms of the royalty model. Now, there's a variety of ways in which we charge royalty, and in China, as we introduced it initially, I'd say we were relatively cautious in the approach that we took. You know, I think one of the things we can look at as we go further down the line here is, you know, should we, you know, change the basis of the royalty, more towards wean pig fees, for example, than sow use fees. There's a variety of things we can do, but certainly, we will continue to progress towards royalty as a way of doing business in China. Excellent. Thanks very much, Stephen. Thank you, Charles. We will now take our next question from Alastair Campbell. Alastair, you are now a panelist. Please unmute yourself and go ahead. Great. Thanks so much, and hi, team. Just two questions, maybe, one for Stephen. Beef and dairy, it looks like there's increasing acceptance of the value you're creating with your genetics in terms of beef and dairy, particularly in the U.S. I wonder if you can just run through how you're aiming to capture more of your fair share of the value that's being created by the genetics there. And then a question for Alison. Obviously, CapEx stepping up significantly. You're investing obviously in things like the elite genetics facilities and also supply chain. How should we think about CapEx evolving this year, and when should that maybe begin to moderate? Thanks. Yeah. Alistair, thanks for the question. Yeah, I think we're very pleased with the way that we see the market accepting beef and dairy, and specifically starting to recognize that NuEra Genetics really make a difference. In terms of, you know, what we've always said is, in terms of how we capture more value there, it's really important that we've pulled together the supply chain end to end. Because the true value realization of those superior genetics come through the life cycle of the animal, actually all the way through to the slaughter plant. I think the situation that we outlined in the presentation with this large U.S. dairy that I cited. I think that's a very good example of what we need to do to capture more value. We were able to there work with a very large U.S. beef feeder who had seen the value of the NuEra Genetics coming through their system and wanted more of them. They needed a reliable supply. We were able to then link up with this U.S. dairy switch them to using NuEra beef genetics. We had none of that business before. You know, they then put together a supply chain, so they get dedicated supply end-to-end traceability. In fact, the commercial model that we've adopted with that customer actually has premium pricing associated with it through a per calf fee. We actually change the basis in which we contract with that customer to you know better align the incentives and to allow us to capture more value. I think that's the kind of model of what we need to continue to push into the marketplace. To answer your question, Alistair, about the CapEx. We've spent a bit over GBP 27 million in the first half, and we'll spend a similar amount in the second half. That was always our plan. A good portion of that has gone towards Atlas, our new nucleus or elite facility in Canada, which should be completed later in the year. We've already actually had some animals arrive there. We've also well down the road with our Leeds facility. There, there's one more barn we want to build there. This is our peak year in terms of CapEx. We expect to spend less in FY 2023. Not sure exactly how much less yet, but I think it's fair to say in the region of at least GBP 10 million less. There is going to be other demand, if you like, for CapEx spend, particularly around production for IntelliGen as we continue to grow. Those big AI-facility investments were within this year. Thank you, Miss. Thank you. Thank you. That's great. Thanks so much. Thank you, Alistair. We will now take our next question from Max Herman. Max, you are now a panelist. Please unmute yourself, turn your video on, and go ahead. Hi, guys. Thanks very much for taking my questions. Just really on China, just to try and dive a little bit more in depth into the balance between supply and demand. Clearly, there's been a mismatch, which has led to the pricing now going below the production costs. You're experiencing the impact of the suppliers cutting their supply in order to try and get that balance. I wonder if you could give us any more kind of color in you know, how you monitor changes to that and how we can get some sort of better feel for when we might be able to see a change or that market becoming more in line. Are there past examples of this? We've obviously seen prices below 15 renminbi, you know, before the African swine fever back in 2018. Just trying any help you can give there. Maybe I'll follow up with a second question after that. Okay. Let me maybe take a first crack at that. Thanks for the questions. Look, I'd love to give everyone a really clear set of metrics that says, you know, here's the way you find the answer to what's gonna happen in the Chinese pig market. You know, it's really difficult to get solid data other than what is the price being paid for animals as they go to the slaughterhouses. We've spent a lot of time talking to many people about what exactly is the sow herd, for example, across the country. Estimates show that the sow herd has come down, but there seems in our opinion to be a mismatch between what we see happening in the top 50 producers, where we have more direct evidence through our contacts with producers and where we've seen a 20% reduction among the top 50, compared with data from a variety of sources around what is happening to the Chinese sow herd in total. It would suggest that the rest of the industry has not reduced their sow herd at all, and we find that, you know, really problematic as a data point. You know, what do we do internally? I think we spend a lot of time talking to our customers, and looking at, what are they doing with their farming operations. We try and keep tabs across the broader top 50 industry. We watch carefully what's happening to price. Ultimately, I think the best indicator that those of us not in China can have is what happens to price. Right. Okay. I think if I could follow that up, I think before you've mentioned that, there's about a 12-month, perhaps lag, just from the breeding perspective, where you cut, you know, the farmer cuts, you know, the breeding of their, of new piglets, then, you know, that impact takes about 12 months to take effect. I guess it would be interesting to know when you first started to see, you know, the reduction in demand for your products. I mean, we saw it probably in November when you gave the trading update, but you'd already seen the price in September when you talked about the fact that your by-product supply was. You were getting lower prices for. Have we been seeing reduction in supply or breeding way back in September, and therefore it's 12 months from there? Or is it? I'm just trying to understand where we might be expecting supply to reduce significantly. It's a good question. I think if you look at when did we first start to see the impact, it was actually starting over the summer last year. If you just put a 12-month clock on it, you would expect supply to start to tighten as we hit summer this year. Now, you know, I just think that past cycles because of the change of the industry, which has changed quite substantially, may not be a strictly accurate guide as to what happens this time around. There's just a lot more technified industry since then. Yeah, if you were putting that 12-month clock on it, you would be looking at summer of this year. Right. Just my follow-up question was just on market share. Obviously, this is being felt by, you know, all the pig genetics companies. I wondered how your market share has evolved in the large producers. I think you said you had about 6% share of the China market genetics back in September timeframe. I wondered how that's evolved over the last sort of five, six months. Yeah. Again, it's tricky to measure, particularly on a short-term basis, but our view based on all the calculations that we've done is that we're at least maintaining and possibly growing share at the moment. Okay, great. Thanks very much. Thank you, Max. We will now take our next question from Damian McNeela. Damian is now being promoted to a panelist. Damian, please remember to unmute yourself and turn your video on. Yeah, that's a good start. Morning, Stephen. Morning, Alison. DM, just a couple from me, please. So on the China customer, given the fact that they're sort of facing into such losses, is there any sort of financial risk attached to your customers that sort of could impact future performance in that region? That's the first question. The second question is around sort of we've seen a couple of deals this year so far, Sergal and then Olymel. Specifically on Olymel, was that a competitive process? I.e., were there other people interested in that? Just more broadly, is the pipeline for more of those deals building, and should we sort of be factoring in slightly more of those as we over the next couple of years, please? Maybe, Alison, you take the first Sure. I'll take the second then. Yeah, sure. I mean, there's no doubt that our customers are feeling the financial impacts of the decline in trading in their businesses. Interestingly, they are all still in existence, even if their- Yeah. Their operations have declined. The business that we are doing with them, they are paying us on terms. I think maybe it's two customers where we extended payment terms by a month or two, but that's it. Yeah. It's an interesting situation because I guess if this was in the West, we would expect some of these producers to have gone out of business. But they've been able to carry their debt and deal with the situation. Do you feel relatively relaxed as you can be, given how they're sort of managing the situation? Well, you know, I can only go by what we've experienced so far and so far, you know, we've seen, you know, I guess. The relationships with our customers have continued to be very strong. They still value our service and product, albeit at lower volume. You know, at the moment, we've got no indication to worry about whether we're going to lose customers because of their financial situation. Okay. Very clear. I think, you know, I think the other thing I would say about China is the industry is so important to the Chinese government. Yeah. We, you know, we are aware that the government wants to support the industry. We are aware that grants are available for producers. I'm not aware of any of our customers specifically receiving a grant. There seems to be, you know, overarching support for the industry which must be helpful. Yeah. Okay. Thank you. Maybe I can take the second question there. The question was around Olymel. Firstly, you know, a little bit of background here. We're really pleased with this transaction. Olymel is a growing, a very important part of the pig industry in Canada. You know, we regard as a, you know, very strategic relationship that we've been able to secure here. In terms of the way this transaction unfolded, we did actually have an exclusive discussion with them. Okay To arrive at this arrangement. However, I think it's fair to say that, you know, if we'd not been able to reach terms, then they probably would've, you know, entered into discussions with some of our competitors. You may say, "Well, why did they come and have an exclusive discussion with PIC first?" The background here is that, you know, Olymel is one of these large integrated producers. It grew originally out of a co-op, actually, in the Quebec region of Canada, but it's since, you know, become very much a national player, has expanded its operations. Part of those expansions, you know, actually involved them acquiring companies, which were using PIC genetics. They had, you know, the opportunity to see some of our genetics in their system alongside their own internal program. You know, I think the fact then that they chose to come and have an exclusive discussion with PIC about, you know, taking on the genetic improvement of the Alpha Genes program, you know, probably speaks for itself in terms of what they were seeing. Yeah. You asked then a follow-up question as to, well, are there more things like this that could be coming down the track? Look, we're always looking at ways in which we can further our business in foresight. You know, so we very actively engage in any opportunities that we see there, and you've seen us do that on a pretty consistent basis over the years if you can go back all the way to Genetiporc to see how we have done that. You can expect we're gonna continue to follow that path. Okay. Yeah. Very clear. Thank you, Stephen. Thank you, Damian. We will now take our next question from Jens Lindqvist. I will now promote you to a panelist. Please remember to unmute yourself and turn your video on, and please go ahead. There we go. Apologies for the technical issue. A couple of questions if I may. First of all, given how difficult the market backdrop and, you know, with pricing pressure in China, are your partners in that region still committed to and excited about this gene-edited pigs opportunity? You know, we've been expecting China to be the launch market, but are producers still willing to invest in developing, marketing, and distributing a premium priced product? Secondly, your exposure in terms of exports to China. I understand that Brazil prices have weakened slightly recently, but is this a contagion that could spread to other markets? Finally, if you could give us some color on how inflation is affecting you more broadly, perhaps in particular energy costs in your own facilities, please. Thank you. Maybe I'll take the first pieces of those and then ask Alison to comment on inflation. If I look at the situation then that you've really been talking about in terms of China and the spread of what you call contagion. Look, China is importing less pork meat into the country. That has impacted a number of markets around the world. We highlighted that Brazil was affected in January. If you look at Europe, particularly some markets like Germany, which had been exporting a lot of pork to China, that was really closed off with ASF appearing in Germany. Many markets in Europe have been feeling the pinch quite hard around exports to China, and prices have suffered as a result of that. You've seen reductions in the pig industry in Europe on a pretty widespread basis. I think that's, you know, that's the reality. You know, we aim to have a business model here based on our royalty model, which is very well penetrated across these markets of riding through these cycles. Thank you. In terms of the inflation, yes, we are seeing some inflation in energy, obviously, utilities, some transport costs as well have gone up. We are, you know, seeking to also recover a good portion of that through pricing. Yes, we have some exposure, but not a huge degree. I guess we have to see what happens with wages, and like every company, we're reviewing what wage inflation we might have to manage in the future. Yeah. Can I just check, did I answer all the points in your first question? Well, almost. I guess I was curious about if you can give any more colors on the gene-edited project in China, and to what extent your partners are still excited about that opportunity. Sorry. I missed that. The answer to that is very easy. Yes, our partner BCA is still incredibly committed to this. Okay. Thank you. Thank you, Jens. We've had several questions submitted from Anand Date from HSBC, which I'll read out for you now. First, what have you learned in aquaculture thus far? Any need to do more now? When might you need germ plasm? Let me address that. I think we're enjoying getting to know the folks at Xelect, where we made a minority investment a few months ago. You know, it's been great learning from them a little bit about the industry. It's also been super hooking them up with our R&D team, and we found a number of areas where that collaboration is you know, bearing fruit. We're pleased with how that's developing. We don't have anything further to say on the matter at this time. The second question is, market share gains in the U.S. with PIC800 are quite remarkable. What's the ceiling to your market share with the customer? I think that's pretty straightforward, Anand. The ceiling is 100%. It's tough to go above that. We do have quite a few customers where we do have 100% of their business. Obviously, some very large systems, they like to have, you know, a few different genetics in there and keep you know, keep a little bit of a dual supply policy in certain areas for a variety of reasons. But you know, our marketing teams and our approach is very much, we like to earn the right to have 100% of a customer's business. Thirdly, why has your Canadian partner decided to outsource now? Is there increased incidents of outsourcing? Yeah. I think there has been a trend, Anand, away from internal programs, certainly in the North American marketplace. This would be a continuation of that. I think, when Smithfield took the decision to stop their maternal program, they still have a terminal internal program, but when they took the decision to stop their maternal program, that certainly, I think, caused a few others to you know just stop and think and re-look at whether they really doing the best thing by continuing to pursue an internal program. There are still some internal programs in other parts of the world, but you know it's all about you win that business eventually by being the best at genetic improvement and demonstrating superior value. That's what we aim to do. Our last question from Anand: In ABS, the sexing deal with the Indian government, what's the scope of that, please? I.e., what sort of volumes are we talking about? And is it fair to say that unit pricing in India remains very low, such that the profit contribution is still relatively meager? Yeah. Yes, it's an exciting contract for us. We're really pleased to have won it. It really provides great growth opportunities in the future. But in terms of what we can see at the moment, we think there's potential there for 700,000 units through that contract. You're right, Anand, the pricing is lower than other countries. But the growth potential is significant. I would say, you know, our business in India has grown to be, you know, a multimillion-pound contributor to our business. Before we were able to introduce sexing technology into the marketplace, it was, you know, perhaps tens of thousands in a good year, a couple of hundred thousand. It's been a material change for us. Thanks for those questions, Anand. We have a follow-up question from Charles Hall. Charles is now a panelist. Please go ahead. Thanks. Stephen, one of the slides you put up was about the increase in the supply chain and talking about an 80% increase over a four-year period, and quite a lot of that is still to come through. A very significant investment in capacity. Since then, I think your MPs have grown 25%. Suggest you're going to have a significant headroom. Am I looking at that the right way, or is there some sort of nuances to think about? I think there are a few other nuances around this. You know, there are several motivations here. When we think about the supply chain, you have to think about it in layers. The layer that we're talking about in the presentation is what we call our elite farm network. This is all the genetics where we're effectively running genetic improvement in parallel at the very highest level. Then these farms feed you know, around about another 500 farms around the world, which is what we call the multiplication layer, where we're multiplying up genes to then provide to customers. That multiplication layer won't quite be at the elite- Yep. Network layer. Now, what we're seeking to do here in terms of expanding the elite network is actually about threefold things. Firstly, as we dramatically increase the population size across all these farms, then that helps us to drive genetic improvement faster, because we're able to then select the very best animals from all of this network and ensure that we're cross-pollinating those genes across the network. As you look at the equation of what drives delta G genetic improvement, population size is one of the key determinants. The first step is this helps us drive genetic improvement. The second step is clearly it increases our ability to supply to the market, but that diversity of spreading it around the world also increases resilience in terms of sources of supply, so that you know, potentially in the future, we could be looking at exporting genes from Brazil, say. We put some elite genetics into the Hermitage facilities in Ireland, so we can now be thinking of Ireland as an export destination to the rest of the world. I think this aspect of spreading the risk is both a disease resilience, but also you know, geopolitical resilience. Yep. Let's say around where the genetics are located. I think there are several motivations. It does, of course, give us significant additional capacity to further grow the business as well. Our plans reflect the fact that we do expect to grow the business substantially. Just one more question. You mentioned digital mapping in the presentation. Is that just another addition to the tools in your toolkit, or is this something that you see as potentially a bit more of a game changer and a bit of a differentiation between you and your peers? I think I'd be overstating it to call it a game changer, but I think it's indicative of how we continually seek to improve and go faster. There are some traits which are important traits and becoming more important, which have traditionally been quite hard to measure. Behavior. Mm-hmm. Right? Now, do the animals fight each other, or do they play nicely together, right? This has traditionally been quite hard. How do you scientifically measure that? Well, now with this camera technology and digital mapping, you know, we're able to put scores on that and start to look at can we determine some genetic linkages here? Similarly, you know, leg strength, gait, how does the animal walk? Is it gonna get lameness problems? You know, traditionally, that was a visual scoring system looking at the animal. Now, with this digital mapping technology, you're getting, you know, a much stronger way of analyzing and determining what is good, what is bad, and then putting that into the equation. I would say, look, it just shows that we're relentlessly going down the path of thinking about how do we do better in the future. What level is this? Is it just in your genetic nucleus herds, or does it go into the multipliers or into customers? Fundamentally, we're talking about genetic improvement, so it's in this elite nucleus network that we've been talking about. Got it. Thanks. We will now move to our next question from Alastair Campbell. Alastair is now being promoted to a panelist. Alastair, please go ahead. Oh, hi there. Just one last follow-up from me. Stephen, this morning you referenced Japan when you were talking about the acceptance of gene editing and some recent changes there in terms of some fish approvals. Just 'cause I don't really know, so just try to put that in perspective. Can you maybe give us some perspective on Japan as a global pig market and what position PIC would have in that market? Thanks. Yeah. I don't have the statistics to hand on, you know, exactly how big the Japanese pig market is, but pork is a pretty well-consumed protein in Japan. We work there through a franchise partner that we've had a very long-standing relationship with, and, you know, we work very well with them, so we have a good market position in Japan through that collaboration. Japan, I think from a gene editing perspective, has really been very open to introducing that technology into their markets. As we highlighted in the presentation, they've recently approved two gene-edited fish products for sale in the marketplace. You know, we would expect them to be relatively receptive, for example, to a PRRS-resistant pig. Thank you. Thank you, Alistair. We have one last question from Anand Date from HSBC. If we think about the genetic improvement index, RBGS lifted the curve materially. Acquiring germ plasm gives you little bumps as it's incorporated into your existing germ plasm. What else can be done to lift or bump that curve? When would you expect reproductive biology to kick in? Is there any other science that could similarly lift the curve? Thank you. Okay, let's see if I've been taught my genetics correctly. Delta G, what are the components of delta G? We already talked about population size as being important, then that's multiplied by selection intensity. You know, if you've got 1,000 animals, do you select the best 10 or do you select the best 100, right? The more intensively you select, the faster you drive genetic improvement. It's impacted multiplied by selection accuracy. Can you pick the animals you really want in an accurate way? It's divided by generation interval. Those are basically the variables you're playing with. You know, we seek to work on all of those. For example, you know, on generation interval in bovine, you know, we look very. We've worked very well over the last several years on getting our young bulls to produce semen at younger ages. We've used more IVF technology to, you know, be able to get oocytes from young heifers at an earlier age. You know, that helps to shrink generation interval. We talked about population size, we talked about, you know, selection intensity. In terms of accuracy, then, you know, something like this development that we've illustrated on using digital phenotyping, that's helping selection accuracy 'cause you're getting better data, which is gonna be more indicative of true performance or the true phenotype. Those are all the areas we work on. We actually think very hard about each of those elements across each of our species, on a continual basis, and seek to improve it. You know, the last part of your question around reproductive biology, there isn't too much I can say at this point other than to say that, you know, we're very pleased with the work that we see going on in that team. Reproductive biology is clearly one of the areas that could be quite impactful, particularly from a generation interval, also potentially from a selection accuracy perspective. Thank you. We have no further questions on the webinar. If I could hand back to Stephen and Alison for any additional or closing remarks. Thank you very much, Rosie. Thank you to everyone for joining and for watching the Q&A and also participating in looking at the results webcast that we made. Thank you for joining, and we look forward to engaging with investors and others over the coming days.