Earnings call: Genus plc faces profit dip amid strategic shifts

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Earnings call: Genus plc faces profit dip amid strategic shifts
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In a recent earnings call, Genus plc (GNS.L) CEO Jorgen Kokke detailed the company's interim financial results for FY 2024, noting a downturn in profits despite strategic initiatives aimed at long-term growth. The company reported a 5% drop in revenue to £334 million and a 31% decrease in adjusted profit before tax to £29.2 million.

Despite challenging market conditions, particularly in China, the company has made strides in growing market share and advancing its product pipeline, including the expected FDA approval of its PRP in fiscal 2025. Genus plc is also implementing a value acceleration program in its bovine business, targeting £10 million in annual cost savings, and has completed a strategic R&D review to focus on key projects.

Key Takeaways

  • Genus plc reported a 5% decrease in revenue and a 31% decrease in adjusted profit before tax.
  • The company's PIC ex-China business grew by gaining market share, while China operations faced challenges.
  • FDA accepted submissions for the company's PRP, with approval expected in fiscal 2025.
  • A value acceleration program aims to drive greater value from bovine with £10 million annual cost savings.
  • Strategic R&D review led to the discontinuation of certain projects.
  • PIC profits in Latin America grew 1%, while a loss in Argentina and a 50% profit decline in PIC Asia impacted overall performance.
  • ABS operating profit decreased by 15%, with cost-saving measures expected to save £5 million in the second half of the year.
  • The balance sheet remains solid, with leverage at 2.1 times and net debt at £250 million.
  • The interim dividend is maintained at £0.103 per share.
  • The updated profit guidance for FY 2024 is at least £58 million.

Company Outlook

  • Genus plc expects challenging market conditions to continue but remains confident in its strategic actions and future growth opportunities.
  • The company anticipates solid growth from PIC North America and Europe in the second half of FY 2024.
  • An updated profit guidance for FY 2024 is set at a minimum of £58 million in adjusted profit before tax.

Bearish Highlights

  • Profits were adversely affected by hyperinflation in Argentina, resulting in a £1 million loss.
  • The pig market in China remains weak due to economic challenges and a slow recovery.
  • ABS experienced a 15% decrease in operating profit due to lower volumes.

Bullish Highlights

  • Genus has signed new royalty customers in China and is repositioning towards royalty.
  • The company's genetics have shown advantages in trials.
  • Positive outcomes are expected in Canada, Japan, and Mexico in 2025, with a US commercial launch anticipated in 2026.

Misses

  • The company faced a significant decline in profits, with a 31% decrease in adjusted profit before tax.
  • PIC's profits decreased by 10% due to lower revenues and higher costs in China.
  • ABS' profits decreased by 15% due to lower volumes.

Q&A Highlights

  • Jim Low will join the company as the leader of ABS from April 15.
  • Genus is optimizing resource deployment and integrating supply chains to improve efficiency.
  • The company is committed to pricing excellence, especially for high-value services and differentiated products.

Genus plc's interim results reflect a period of transition, with the company taking decisive actions to navigate a challenging global market while laying the groundwork for future growth. The company's leadership remains focused on strategic priorities to enhance long-term profitability and shareholder value.

Full transcript - Genus (GNSI) Q2 2024:

Jorgen Kokke: Good morning, everyone, and thank you for joining us today. I am Jorgen Kokke, and I am the CEO of Genus plc. Today, we'll be reviewing our FY 2024 Interim Results covering the six months period to December 2023. I will start off by giving an overview of our markets over the period and the actions we are taking on our strategic priorities. Alison will then take you through the half year financials, before turning it back to me to provide more details on the progress we are making on each of our strategic priorities and the outlook for the remainder of the fiscal year. In November at our Capital Markets Day, I shared our four strategic priorities. These remain our focus and we are accelerating their delivery. Our first priority is that we continue to grow porcine with more stable growth from China. Here, I want to remind you of the resiliency of our PIC ex-China business, which continues to grow through gaining market share despite challenging market conditions. In China, despite these conditions, we're making commercial progress winning new royalty customers in the first half and we even have signed more new customers in January of 2024 as well. Our second priority is successful commercial delivery of PRP, the PRRSv gene edit. Since our trading update last week, the FDA has notified us that it has accepted our phenotypic and our genotypic durability submissions. This is great news and it demonstrates the progress we are making. Our engagement with the FDA has shifted to post-approval compliance, which is also very encouraging. We are now expecting FDA approval in fiscal year 2025. Our commercialization plans are on track and unchanged. Our third priority is to drive greater value from bovine. We have initiated a comprehensive value acceleration program, which I will take you through later in the presentation. We have already taken actions that will result in £10 million of annualized cost savings. I'd like to be clear that value acceleration is not only about cost reduction. At its core, value acceleration is about commercial excellence and ensuring we deploy our resources in a manner that generates attractive returns for ABS. Last but not least, is R&D. We have completed a strategic review of our activities to ensure that all projects align to our strategy, have a compelling commercial opportunity, are deliverable and lead to a portfolio that is balanced overall. This has resulted in some projects being discontinued. As a result of the review, I'm confident there will be more commercial success to come following in the footsteps of intelligent and PRP and enabled by the fantastic talent in our R&D team. Moving then to our first half financial headlines. In the challenging market context, our revenue in the period decreased 5% in actual currency to £334 million and adjusted profit before tax decreased 31% to £29.2 million in actual currency. The Board is proposing an unchanged interim dividend of £0.103 per share. It is important to understand the drivers of our performance, and Alison will walk you through this. But first, I wanted to provide more color around our markets. Starting firstly with porcine. On this slide, we set out the landscape that our customers are facing in the different regions and the corresponding impact on our business. Firstly, in PIC North America, it's a difficult environment for our customers who are suffering their worst losses since the financial crisis in 2008, 2010. Against this backdrop, our North America business has continued to grow constant currency adjusted operating profit, which is a testament to the resiliency of the royalty model. Europe was the standout region. Producers are making money against this backdrop, our European business performed very well. Asia continues to be a challenge. Chinese PIC prices remained weak and producers operated at significant losses. However, the commercial enhancements we've made in China are starting to bear fruit with a number of royalty customer wins in the first half. But it remains a challenging market for now. While China is, of course, the biggest market in Asia by some distance, it's notable that Asia ex-China was able to grow operating profit. Let's now move to bovine. The market backdrop was really challenging in most of our major markets, led by weak global milk prices. We took significant action in the first half and we will be taking further actions in the second half of the year. Let me just comment on Asia briefly. Performance varied by country. In China after four years of strong growth, low milk prices led to a rapid and severe contraction in the Chinese dairy herd. Our business suffered from significant reduction in both conventional and sexed volumes, whereas we enjoyed growth in other parts of Asia, notably India and Thailand, the scale of the decrease in China meant ABS Asia adjusted operating profit was significantly lower year-on-year in constant currency. With that overview of our markets, let me now hand over to Alison to take you through our financial performance in the half.

Alison Henriksen: Thank you, Jorgen. Good morning everyone. Before I talk to you about our financial performance, I want to highlight to you an R&D reporting change that we're making with this set of results. As many of you will know, we previously separated our R&D costs into four areas; porcine product development, bovine product development, gene editing and other R&D. We've determined that reporting product development within the business divisions better aligns the costs and opportunities of doing business with our businesses. Hence, we will now be reporting porcine and bovine product development within PICs and ABS' results. Similarly, PRP commercialization costs are better reported now in PIC. Thus, what will remain within R&D is gene editing in relation to other traits and our other R&D activities. This is how we report going forward and all figures quoted in this presentation are derived using this new reporting structure. But I would like to stress that this change has no impact on group adjusted profit. Now, this slide we always show shows our volume growth across porcine and bovine. The chart illustrates the impact of market challenges that Jorgen commented on earlier. In porcine, aggregate volume growth was 2%. Excluding China, PIC volume growth was a robust 3%. This is lower than the last few years, particularly impacted by lower growth in North America and I'll talk a bit more about that later. Bovine volumes were more stark, falling 6% against the comparable period last year. And actually, the last time the business saw a decline in volume was back in 2016 when there were comparable market challenges. ABS China was particularly challenging, as Jorgen noted, there was a rapid double-digit contraction in the dairy herd and that was due to oversupply and weak consumer demand, which really impacted our business there. Excluding ABS China, bovine volumes decreased 2%. Here, you can see our adjusted profit performance. Adjusted profit before tax fell 26% in constant currency and 31% in actual currency. Profits from PIC decreased 10% in constant currency with North America, Latin America, and Europe, growing their profits, but PIC China profits decreased £6 million, and you can see the scale of the PIC China decrease on the chart to the right of the slide, which shows our group adjusted operating profit. Profits from ABS decreased 15% in constant currency with only Latin America delivering profit growth. Significant action has been taken and will be taken in the future to structurally improve global profitability at ABS and I'll go through that in much more detail later in the presentation. R&D costs reduced 8% in constant currency as we actively managed our expenditure. And overall, our adjusted operating profit margin fell 240 basis points to 11.4%. The key drivers were ABS' volume declines and the impact of China performance on both our businesses. The chart on this slide shows a year-on-year bridge for profit before tax. And it's important to note that EBITDA, excluding China, grew £4.6 million or 10% year-on-year in constant currency. The combined impact of China on PIC and ABS however, was a £5.6 million reduction in EBITDA. Each business saw its China EBITDA fall by the same amount of £2.8 million. As Jorgen flagged earlier, the market environment for both our businesses is challenging at the moment, albeit the medium-term opportunity is undiminished. One of our strategic priorities is to deliver more stable growth in China, and we are exploring a number of options in this regard. Depreciation and amortization costs increased £4.5 million year-on-year, mainly driven by two new PIC farm leases in China to the Ankang and the LuoDian farms. Joint venture income decreased £2.2 million with lower profits in Brazil and China. And FX was a further £2.7 million headwind in the period. At current exchange rates, we'd expect a headwind of approximately £6 million for the full year. The other sizable cost increase was net finance costs, which increased £2.6 million compared to the prior period, predominantly reflecting higher average interest rates over the period. And for the full year, we expect net finance cost to be approximately £17 million to £18 million. Now, let's look at the divisions in detail, starting with PIC. Adjusted operating profit decreased 10% in constant currency on revenues that were down 1%. Margin decreased 180 basis points. 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 £3.6 million or 5% year-on-year. This is a slower rate of growth than prior periods and really reflects less expansion by customers in North America and slower growth from Latin America due to challenges in Argentina, and Europe really was the standout performer. Growth in our regions ex-China, however, was not enough to offset a £6 million decrease in PIC China's profits. And this really was a function of lower revenues and byproduct recovery of supply chain costs as well as higher absolute supply chain costs from the absorption of LuoDian farm. This farm was -- is strategically located for us and we have taken it on from our Chinese partner, BCA. Product development costs were £3.4 million higher year-on-year, reflecting expansion into Atlas (NYSE: ATCO ), our new nucleus farm and repopulation of Aurora. Both these farms are in North America. And as expected, PRP commercialization costs were £1.4 million higher as we expand our supply chain and market acceptance activity. This next slide then presents our normal walk around the world for PIC. PIC in North America grew constant currency profits 1% on royalty revenue growth of 2%. This is a lower rate of growth than in the recent past. However, we're expecting stronger profit growth from North America in the second half, and that reflects further growth in royalties as PIC gains more market share. In Latin America, profits also grew 1%. Here, strong underlying growth in Andina was offset by the impact of Argentina, where hyperinflation impacted Agroceres profit by about £1 million. Europe, as I said, was a standout region, growing profits 26% on royalty revenue growth of 13% as further market share was also gained there and we expect solid growth in the second half from that region. As we flagged, Asia was the challenge with China being the major impact on performance. Ex-China, profits grew 5%. But the impact of PIC China took PIC Asia's profits down 50% year-on-year. But across PIC as a whole, royalty revenue grew 2%. And if you take China out of that, 5%. And we continue to believe royalty revenue is the best indicator of PIC's performance potential. Moving now to ABS, you can see that adjusted operating profit decreased 15% in constant currency, and the margin fell 110 basis points. The key driver, being lower volumes. The chart to the right of the slide illustrates the challenge across the business. The trading regions ex-China saw profits decreased £1.8 million year-on-year in constant currency, whilst China alone decreased profits £2.7 million year-on-year. These figures have been supported by the initial benefits from our value acceleration program. IntelliGen delivered strong growth, up £2.5 million, albeit this was not enough to offset weakness in the rest of the business. So our actions to rationalize production and extract cost efficiencies delivered £1.3 million of savings in the first half. And we expect further £5 million of savings in the second half of this year. For FY 2025, this will mean £10 million of annualized savings or on an incremental year-on-year benefit of £3.7 million and our conviction on the savings is very high since the actions to deliver them have already been taken. But we haven't finished. Going forward, we have identified further opportunities to structurally improve ABS' profitability. And these are being pursued in the second half, and we will deliver additional benefits in FY 2025. There's more work we have to do before we can confirm the financial impact, but Jorgen will talk more about our approach in his presentation. We have so far recognized restructuring costs of £2.9 million in the first half, relating to these changes in ABS and I would expect further restructuring costs to be recognized in the second half of this year. The next slide shows our regional performance in ABS. And I'd firstly draw your attention to adjusted operating profit where we show a 15% decrease in constant currency. Regionally, we saw profits decrease in North America, Europe, and Asia. North American volumes decreased 6%, although sexed volumes were up 4%. Significant price and cost action limited the operating profit decline to 2%. And whilst the volume trend was disappointing, strategic progress continues to be made, increasing the number of customers that have long-term gene advanced contracts. In Latin America, volumes decreased 7% with sexed volumes up 11% and beef volumes down 7%. Profits improved 4% year-on-year, predominantly because of cost action taken in our Brazilian embryo business. Europe reported robust volume growth of 4%, with sexed volumes up 13%, and beef volumes were also up 3%. However, profits decreased 6%, and this is because IntelliGen profits were lower against a higher prior year compare due to the timing of IntelliGen upgrades to third-party machines in that year. Service cost recovery actions in the U.K. contributed to a 15% improvement in adjusted operating profit in that country and has served as a pilot and encourages us that there are further opportunities elsewhere in the group with the value acceleration program we're undertaking. In Asia, volumes decreased 12% with sexed volumes down 14%. China was the main driver here. Elsewhere, IntelliGen performed very well with strong profit growth in India, and we won new business in Thailand. But across ABS as a whole, volumes fell 6%, with sexed volumes up 2% and beef volumes down 5%. The lower rate of sexed volume growth was particularly noticeable. And having launched Sexcel around seven years ago in more mature markets such as the U.S. and U.K., there is evidence to suggest that growth in sexed usage is slowing because producers are already reasonably high adopters of the technology. And there remains significant potential for sexed volumes to grow globally. However, this is another reason why we must vigorously pursue our bovine value acceleration program and look to structurally improve the profitability of the business. Let's now move to R&D and product development. Our R&D spend decreased to £11.3 million or 3.4% of revenue in the half. Following the restatement that I explained earlier, this now constitutes other gene editing in relation to other traits and other R&D investment in reproductive biology, genome science and bioinformatics. As Jorgen will detail later, we have completed a strategic review of our R&D activities. That strategic review has resulted in annual savings of £5 million in FY 2025, and we expect to incur restructuring costs in relation to these changes in the second half of this year of approximately £1 million. 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 facility. We expect porcine product development cost to remain flat as a percentage of PIC revenue going forward. Meanwhile, in bovine, you can see that our product development costs have been relatively stable percentage of ABS revenue. And again, we expect those costs to remain flat as a percentage of ABS revenue going forward. Moving to our statutory income statement. As you -- many of you know, we consistently measure and report adjusted results as we think these give a better view of our group's underlying performance. Our statutory results are affected by a number of non-cash items, which are detailed on this slide. Our IAS 41 valuation movement in the half was relatively small, £2.6 million increase and that compares with a £17 million decrease in the prior year. Exceptionals were higher at £7.5 million, which is primarily litigation legal costs and the ABS restructuring costs I mentioned before. Since the half year, in January this year, we were able to settle all our outstanding U.S. and New Zealand litigation disputes with ST for a $20 million cash payment spread over 18 months. This removes significant uncertainty around ongoing legal costs and commercial risk. And we expect to take an exceptional charge of approximately £5 million in the second half in relation to this settlement as we will offset provisions we have on our balance sheet against the settlement amount. As flagged previously, net finance costs rose £2.8 million on the prior year, which was a function of higher interest rates. So, overall, our statutory profit before tax was £14.3 million, which is close to the £15 million we reported last year. Moving then to free cash flow. You'll see that our cash conversion in the half was 69%, which is better than last year's 62%. We saw a £3.3 million free cash outflow in the period, which was the same as last year. And you can see on the bridge on the right-hand side, the moving parts. EBITDA was £5.3 million lower, but more than offset by better working capital management, and this was particularly in relation to inventories. The movement in biological assets of £7.2 million includes £5 million from the purchase of LuoDian farm assets, which is a one-time cash outflow. For the full year, the movement will be in the region of £15 million. But in FY 2025, the outflow for biological assets will reduce to around £8 million to £10 million. Higher exceptional costs and other operating cash flows and higher interest and tax were offset by cash inflows from joint venture income. And regarding the ST litigation settlement I mentioned just now, that $20 million will be paid over time, and we expect future cash exceptional costs of £3.9 million in the second half of this year, a further £7.9 million in FY 2025, and £3.9 million in FY 2026. Capital expenditure was £14.4 million in the half, and we continue to expect approximately £30 million of CapEx spend in the full year and a further reduction of £10 million in CapEx in FY 2025. I just want to remind you that our first half is always seasonally weaker for free cash generation and we expect to hit our cash conversion target of at least 90% for the full year. Lastly, I just want to talk about our balance sheet, which remains solid. Our leverage at December 2023 was 2.1 times, and we expect this to be similar at the end of our fiscal year. Net debt rose to £250 million from £196 million at July. And that's predominantly because of £14 million of dividend payments and also the recognition of capitalized leases, which under IFRS 16 are treated as debt, and they came to £37 million. These leases relate to the two additional farms I've mentioned in China for Ankang and LuoDian. At December 2023, we had £89 million of headroom against our facilities, and these facilities don't mature until August 2025. So, given our solid financial position and the Board's confidence in our business, we are proposing to maintain our interim dividend at £0.103 per share. 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 the year.

Jorgen Kokke: Thank you, Alison. I'd now like to update you further on the strategic priorities that I outlined at our November Capital Markets Day and also highlighted earlier in the presentation. Let's review them in more detail. Firstly, on porcine, excluding China. Despite the challenging environment for many of our customers, we continue to grow profits and our strategically important royalty revenues. We have invested in market-leading genetics, the broadest industry supply chain, and the best teams to service our customers. The element I wanted to highlight on this slide is how demonstrably resilient PIC's royalty model is. The chart on the left shows U.S. pork producer profitability data from Iowa State University. It shows that U.S. pork producers are in the midst of the worst period of financial losses in the last 20 years. Against this backdrop, PIC North America delivered remarkable resilience. Constant currency adjusted operating profit grew 2%. This performance highlights the strength and stability of the PIC business model outside of China. Moving then to PIC China. As I was able to see with my own eyes during a trip to China in January, the operating environment continues to be very tough. We've talked in the past about a pig to corn ratio of 6 as being about breakeven for producers. The industry has been operating below this level for over a year now. We believe the cause is twofold: demand being weaker due to the challenges in the Chinese economy, and excess supply exiting the market very slowly. The result is that pig producers have been operating at significant losses now for some time. This continues to hold back producer confidence and delays restockings. You can see from the chart in the middle that our volumes in China continue to be subdued. That being said, I wanted to point to the green shoots that our enhanced commercial focus is bringing. In the first half, we signed new royalty customers, several of whom are top 30 producers in China. In January, we also signed more new royalty customers. So, our pivot to focusing on royalty coupled with regional cross-pollination of sales best practices into China is working. What's more? Our genetics continue to prove their worth. The chart on the right shows data from a recent trial at a large Chinese producer. It shows that PIC genetics shown by the columns in pink, deliver meaningful economic advantage relative to competitor genetics shown in blue. In summary, we have the genetics, the supply chain, and the team to succeed in China. We're repositioning towards royalty, but it will take time to yield financial results. The market is still depressed, but we're poised to capitalize as and when it recovers. The opportunity in China remains very significant. And given the success of the relationship with our local partner, BCA, we are jointly exploring ways to accelerate our collaboration going forward. Let's now talk about our PRRSv resistant pig. This remains the most exciting prospect for Genus over the medium term. Our submissions and relationship with the FDA have continued to develop. We continue to work collaboratively, recognizing that PRP is the first commercial scale, gene-edited animal product to go through FDA's regulatory process. Since our trading update last week, both the phenotypic and genotypic durability submissions have been accepted by the FDA. Our progress is undoubtedly continuing. What's new is that we have recently been working with the FDA on post product approval compliance and monitoring. We'd always expected that we would need to submit data to the FDA post product approval. Our discussions have confirmed that the requested data is exactly as we expected. However, the new information from these discussions relates to procedures and protocols around collection, collation and data hygiene. The FDA wants to validate our operating practices around how tissue samples are collected, how they are shipped to our genomics lab in Wisconsin, how we are testing for the PRRSv gene edit, how we're logging this data, and what -- all the trail there is around this data and any changes that are made. The requirement for this validation process had not been previously communicated. We expect this validation process to take several months, and this is the reason why we now expect FDA approval in fiscal 2025. FDA inspectors will also audit our PRP facilities in the coming months. The goal is to ensure that our production standards meet the quality we described in our submissions to the FDA. We're encouraged by the increased dialogue around compliance requirements post product approval. This reinforces our conviction that FDA approval will be forthcoming. Moving then to the wider regulatory and commercialization timeline. You can see the shift in our projected FDA approval to fiscal 2025. At the time of November Capital Markets Day, we noted that approvals or positive determinations in Canada, Japan and Mexico, were necessary for successful PRP commercialization in the U.S. And this continues to be the case and we still expect positive outcomes in these jurisdictions in calendar 2025. As a result, our timetable for PRP commercial launch in the U.S. is unchanged and expected in calendar 2026. The financial projections for the U.S. launch that we laid out at the November Capital Markets Day are also unchanged. It is important to note, though, that these are projections and subject to change based on the decisions and questions from the various regulatory bodies around the world. Let's now move to the actions we're taking in bovine. I'd like to stress that these actions would have been taken regardless of the market environment. I clearly see the need to improve ABS' structural profitability. That being said, the market weakness we've seen in the first half accelerates the need for change. We've called this project the ABS Value Acceleration Program. Its goal is to improve margin, ROIC and cash generation through commercial excellence and data-driven optimization of resource deployment. I'm personally involved in the project and believe ABS offers significant upside. There are four broad actions that underpin the value acceleration program, and they are enabled by data now available from Genus One. Firstly, we've changed our organization structure to integrate dairy, beef, and IntelliGen. All of these businesses will now report into a single Chief Operating Officer. We have simultaneously refreshed senior leadership, and I'm pleased to announce that Jim Low will be joining the company to lead ABS from April 15. Jim will be joining us from Glanbia plc where he was the Global Chief Commercial Officer for Glanbia's Nutritional Solutions business. Jim is a proven leader that can drive transformative change, and he will embed commercial excellence in ABS. Secondly, we're optimizing our resource deployment. We're using data to deploy our resources in a most efficient manner. This means allocating salespeople and service teams to progressive customers where there is a significant market share upside and good returns. This also means allocating our differentiated products to regions and customers where we know we can get a superior return. As you know, ABS has a large cost to serve and extracting more leverage from this is meaningful. Thirdly, we're integrating our supply chains. Previously, ABS and IntelliGen managed their supply chain separately. There's an opportunity to drive greater efficiency and stand up a more effective sales and operational planning function. This should improve cost and inventory management going forward. Lastly, we're committed to embed pricing excellence. This is particularly relevant where we offer high-value service offerings or differentiated products. We must recover more of these costs via better pricing or by tying these services to longer term, whole of herd genetic contracts. I'd like to stress that these initiatives are incremental to the £10 million annualized cost savings that we have already actioned. We think the scope for improving ABS structural profitability is substantial, and we will provide more detail as we progress through the program. Lastly, let me update you on our R&D platform. Genus has an enviable track record of innovation, IntelliGen and PRP are just two of the headline products. We have really talented teams, and I'm confident there's more to come from our innovation pipeline going forward. We have just completed a strategic review of our R&D activities and portfolio in the last few months. The goal was to ensure that all projects align to our strategy, have a compelling commercial opportunity, are deliverable and lead to a portfolio that is balanced overall. A number of projects have been discontinued, where they did not meet our criteria. Through this review, we've sharpened our focus on key projects. And in addition, we're looking to improve our innovation processes and governance. I continue to be excited by our R&D pipeline and the positive impact it will have on our future growth. Let me conclude by summing up and looking forward. We expect challenging conditions to persist in several of our markets and most notably in China. We've taken significant action to improve structural profitability at ABS, and there's more to come. We have completed a strategic review of our R&D activities to sharpen focus on the most compelling and deliverable opportunities that fit with our strategy. We're winning new royalty customers with PIC in China through our enhanced commercial focus. And we're making good progress with our PRP regulatory submissions with FDA approval expected in fiscal year 2025. Our commercialization plans are on track. For the second half of fiscal 2024, we expect solid growth from PIC North America and Europe year-on-year as we continue to gain market share. Our actions in ABS will mean performance is better in the second half, even though we expect markets to remain challenging. In the near-term, our updated profit guidance is for fiscal year 2024 adjusted profit before tax to be at least £58 million. That concludes our interim results presentation for fiscal 2024. Thank you for joining us.

End of Q&A:

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