28 February 2023
Information within this announcement is deemed by the Company to constitute inside information under the Market Abuse Regulations (EU) No. 596/2014
Benchmark Holdings plc
(“Benchmark”, the “Company” or the “Group”)
Q1 Results
(Three months ended 31 December 2022)
Excellent start to the year with growth in all business areas and significant uplift in Health
In compliance with the terms of the Company’s unsecured Green bond, which requires it to publish quarterly financial information, Benchmark, the aquaculture biotechnology business, announces its unaudited results for the three months ended 31 December 2022 (the “Period”), which constitute the first quarter for the fiscal year (“FY”) 2023. All Q1 FY22 and Q1 FY23 figures quoted in this announcement are based on unaudited accounts.
Financial highlights
Continuation of consistent year-on-year growth in Revenue and Adjusted EBITDA on a rolling twelve month basis
• Q1 FY23 revenues were £54.5m, 36% ahead of the prior year (+29% CER)
o Genetics delivered strong revenue growth 41% above Q1 FY22, driven primarily by higher sales of salmon eggs and harvest revenues
o Advanced Nutrition also reported strong growth with revenues 19% above Q1 FY22, benefitting from continued positive trading and forex movements
o Health reported excellent growth with revenues 80% above Q1 FY22, driven by increased adoption of Ectosan® Vet and CleanTreat® and significantly higher sales of Salmosan® Vet
• Q1 FY23 Adjusted EBITDA excluding fair value movements from biological assets increased 61% (+56% CER) to £12.1m as a result of higher revenues, higher asset utilisation and continued cost discipline
o Notably, Adjusted EBITDA in Health increased substantially to £4.1m in the quarter (Q1 FY22: £0.5m) demonstrating the potential of this business area to deliver good profitability
o Group Adjusted EBITDA margin of 22% excluding fair value movements from biological assets (Q1 FY22:19%)
• Net operating loss of £0.1m (Q1 FY22: £1.5m loss)
• Net loss of -£0.7m significantly reduced from prior year (Q1 FY22: -£5.1m)
• Cash inflow from operating activities of £8.1m (Q1 FY22: inflow £1.1m)
• Cash, liquidity and net debt all improved compared to the year end position:
o Cash of £42.8m and liquidity of £62.8m (cash and available facility)
o Reduced net debt excluding lease liabilities of £37.9m (30 September 2022: £47.5m)
o Includes benefit of net proceeds from the fundraise in December 2022 of £11.6m
Operational highlights
• Advanced Nutrition - continued good performance despite relative softness in the shrimp market
o Growth in all product areas
o Adjusted EBITDA margin in line with prior year at 23% (Q1 FY22: 23%) benefitting from success of new commercial focus, cost discipline and ongoing actions to improve efficiency and asset utilisation offsetting cost inflation
o Continued innovation with pre-launch of new artemia tool which counts hatched Artemia
• Genetics – Continued growth in salmon egg sales with record number of eggs sold
o 118m eggs sold in Q1 FY23 (Q1 FY22: 76m eggs) demonstrating continued success in meeting increased customer demand supported by recent investment in incubation unit in Iceland
o Temporary slowdown in commercialisation of shrimp genetics (SPR shrimp) in order to refine product offering based on customer feedback from first commercial cycle. Expect to relaunch commercial effort in H2
o Post period end, acquisition of remaining 10.52% minority interest in its subsidiary Benchmark Genetics Iceland, ensuring Benchmark receives the full benefit from its successful salmon genetics business in Iceland which represents 50% of the Group’s salmon egg capacity
o Exploring strategic alternatives for tilapia breeding activities
• Health – Significant increase in customer adoption of Ectosan® Vet and CleanTreat®
o Significant growth in customer adoption of Ectosan® Vet and CleanTreat® with repeat orders and new client wins which resulted in improved capacity utilisation and strong profitability
o Progress made towards development of new business model for Ectosan® Vet and CleanTreat® aimed at reducing infrastructure costs and capex
Timing of commercial launch of integrated wellboat projects subject to availability and adoption of new large wellboats by customers
Progress being made around Customer owned PSV’s which represent a viable alternative in the medium to long term
Oslo Børs listing
Progress towards listing on the Oslo Børs, the leading seafood and aquaculture listing venue globally; ongoing shareholder consultation on whether to maintain an AIM listing
Current trading and outlook
• Strong Q1 FY23 performance and continued positive trading post period end. Encouraging outlook for the full year
o Genetics – good visibility of revenues
o Advanced Nutrition – continuing positive performance despite some softness in the shrimp market
o Health – increasing evidence of customer growing adoption of Ectosan® Vet and CleanTreat®
Financial Summary
£m Q1 FY23 Q1 FY22 % AER % CER** FY22
(full year)
Revenue 54.5 40.0 +36% +29% 158.3
Adjusted
Adjusted EBITDA1 11.0 7.4 +48% +44% 31.2
Adj. EBITDA excluding fair value movement in biological asset 12.1 7.5 +61% +56% 29.6
Adjusted Operating Profit2 5.7 2.5 +131% +127% 9.1
Statutory
Operating loss (0.1) (1.5) +92% +86% (7.9)
Profit/(loss) before tax 0.1 (3.7) +103% +114% (23.2)
Loss for the period (0.7) (5.1) +87% +96% (30.5)
Basic loss per share (p) (0.18) (0.79) (4.60)
Net debt3 (61.4) (64.3) (73.7)
Net debt excluding lease liabilities (37.9) (43.1) (47.5)
Business Area summary
£m Q1 FY23 Q1 FY22 % AER % CER** FY22
(full year)
Revenue
Advanced Nutrition 22.7 19.1 +19% +4% 80.3
Genetics 21.4 15.2 +41% +42% 58.0
Health 10.4 5.8 +80% +80% 20.1
Adjusted EBITDA1
Advanced Nutrition 5.3 4.3 +23% +9% 19.0
Genetics 2.6 3.3 -21% -10% 16.0
- Genetics net of fair value movements in biological assets 3.7 3.4 +11% +19% 14.4
Health 4.1 0.5 +643% +635% 0.1
*Constant exchange rate (CER) figures derived by retranslating current year figures using previous year’s foreign exchange rates
(1) Adjusted EBITDA is EBITDA (earnings before interest, tax, depreciation and amortisation and impairment), before exceptional items
(2) Adjusted Operating Profit is operating gain or loss before exceptional items and amortisation of intangible assets excluding development costs
(3) Net debt is cash and cash equivalents less loans and borrowings
Trond Williksen, CEO, commented:
“Benchmark has had an excellent start to the year, again showing a continuation of the consistent growth we have seen in revenues and net operating profit on a twelve month rolling basis. This is the result of a good performance in all our business areas. In particular, it is pleasing to see traction in our Health business driven by significantly higher adoption of our sea lice solutions, contributing to a positive financial performance for the quarter.”
“We are making progress towards our goal of up-listing to the Oslo Børs, the preeminent listing venue for aquaculture and seafood companies globally. This will enable us to increase our visibility with a dedicated group of analysts and investors.”
“We are grateful to our existing shareholders for their support through the years and we are committed to continuing to deliver improved financial performance and strategic progress for the benefit of all our stakeholders.”
Analyst / investor presentation and webcast being held today
Trond Williksen, Chief Executive Officer and Septima Maguire, Chief Financial Officer will host an in-person presentation for analysts and institutional investors today at 9.00 am CET/8.00 am UK time. The presentation will take place at Hotel Continental, Stortingsgata 24/26, 0117 Oslo.
A live webcast of the presentation is available for analysts and investors to join remotely at the following link: https://channel.royalcast.com/hegnarmedia/#!/hegnarmedia/20230228_7
Enquiries
For further information, please contact:
Benchmark Holdings plc benchmark@mphc.com
Trond Williksen, CEO
Septima Maguire, CFO
Ivonne Cantu, Investor Relations
Numis (Broker and NOMAD) Tel: 020 7260 1000
James Black, Freddie Barnfield, Duncan Monteith
MHP Communications Tel: +44(0) 20 3128 8004
Katie Hunt, Reg Hoare, Veronica Farah benchmark@mhpc.com
About Benchmark
Benchmark is a market leading aquaculture biotechnology company. Benchmark’s mission is to drive sustainability in aquaculture by delivering products and solutions in genetics, advanced nutrition and health which improve yield, growth and animal health and welfare.
Through a global footprint in 26 countries and a broad portfolio of products and solutions, Benchmark addresses many of the major aquaculture species – salmon, shrimp, sea bass and sea bream, and tilapia - in all the major aquaculture regions around the world. Find out more at www.benchmarkplc.com
Management Report
The Group delivered excellent performance in the first three months of the year translating into a 36% growth in revenue and 61% growth in Adjusted EBITDA excluding fair value movements from biological assets. Performance was good across all business areas, with each business area reporting improved revenues and Adjusted EBITDA excluding fair value movements from biological assets when compared to the same period last year. On a constant exchange rate basis, Group revenue and Adjusted EBITDA excluding fair value movements were up 29% and 56% respectively.
Other operating costs were £11.8m, a 18% increase from the prior year (Q1 FY22: £9.9m) due to cost inflation and the impact of forex movements. By business area, operating costs increased more significantly in Genetics reflecting the investment in growth vectors including SPR shrimp, tilapia and salmon in Chile. R&D expenses for the Group of £1.6m were in line with the prior year. Total R&D investment including capitalised development costs was £1.6m (Q1 FY22: £2.3m), reflecting commercialisation of SPR shrimp during the previous year for which costs are no longer capitalised.
Adjusted EBITDA (excluding fair value movement from biological assets) was £12.1m (Q1 FY22: £7.5m) driven by higher revenues, increased asset utilisation and ongoing cost control. As a result, the Group achieved an Adjusted EBITDA margin (excluding fair value movement from biological assets) of 22% (Q1 FY22: 19%). Depreciation and amortisation increased 13% from the comparative period last year to £10.1m (Q1 FY22: £8.9m) as a result of investment in the businesses and £0.5m impairment of intangible assets in the Health business area which are no longer being utilised. Exceptional costs incurred in the period of £1.0m (Q1 FY22: £nil) related to costs associated with the listing on Euronext Growth Oslo and preparation for up-listing on the Oslo stock exchange. However, despite these increased costs, the Group reported only a small operating loss of £0.1m, a significant improvement from the £1.5m loss in Q1 FY22.
Net finance income in the period was £0.2m (Q1 FY22: £2.2m expense), with a £2.5m credit relating to the ineffectively hedged portion of the movement in the fair value of derivate instruments and a lower amortisation charge on capitalised borrowing fees of £0.1m (Q1 FY22: £0.3m charge) offsetting the increased interest charges (-£0.3m) following the refinancing exercise.
The Group reported a small profit before tax of £0.1m (Q1 FY22: loss before tax £3.7m); the loss after tax for the period was £0.7m (Q1 FY22: loss after tax £5.1m).
The Group’s improved result translated in a significantly higher net operating cash inflow from operating activities for the period at £8.1m (Q1 FY22: inflow £1.1m). This was after an increase in working capital of £0.8m and tax payments of £1.5m in the period. Net cash used in investing activities was £2.2m (Q1 FY22: £2.6m) of which capex was £1.9m (Q1 FY22: £2.5m). Capex in the period related to investment in Genetics (£1.3m), Nutrition (£0.4m) and in Health (£0.2m). Net cash inflow from financing activities was £2.2m, with net proceeds from the fundraise in December 2022 of £11.6m being offset by £4.4m repayment of debt, £0.6m of capitalised borrowing fees, £2.2m of interest paid and £2.2m of lease payments. Net increase in cash in the quarter was £8.1m to leave the period end cash position at £42.8m and liquidity of £62.8m.
Advanced Nutrition
Advanced Nutrition revenues were £22.7m, up 19% with sales higher in all product areas, also aided by favourable forex rates in the period (revenues increased at CER by 4%). By product area, sales of Artemia were +23%, Diets +10% and Health +27% higher than Q1 FY22. Q1 FY23 Adjusted EBITDA was £5.3m, up by 23% reflecting improved asset utilisation and ongoing cost discipline. Adjusted EBITDA margin was consistent at 23% (Q1 FY22: 23%). Notably, the Company’s good performance in Advanced Nutrition was delivered against a backdrop of soft market conditions entering into FY23 affected by weather conditions in Thailand, the presence of SHIV virus in Indonesia and in Latin America by high fuel costs combined with low farm gate prices.
Our continued growth in Advanced Nutrition revenues is a reflection of our focused commercial effort which brings together our market leading, high performing product portfolio, experienced technical support and a quality oriented, reliable supply chain. We continue to innovate both in our existing range and development of new products and during the period we carried out a pre-launch of our Artemia counter, adding to our suite of Artemia technologies to improve customer experience. Examples of our customer-centric commercial effort in the period include trials of our specialist diets conducted by our global and regional technical experts working together to optimise customer performance in Indonesia, and artemia workshops conducted by our regional technical support and local sales teams aimed at tailoring the use of artemia tools and hatching protocols to individual customer needs.
Genetics
Genetics delivered revenues of £21.4m in Q1 FY23 (Q1 FY22: £15.2m), reflecting a strong growth of 41% (+42% CER). This was driven primarily by sales of salmon eggs and harvest income which increased by 57% and 31%, respectively. Revenues from genetic services, our consulting business were 14% ahead of Q1 FY22. There was a slowdown in the commercial roll-out of the SPR shrimp as we refine our product offering based on customer feedback in our first year of trading. As a result, sales from SPR shrimp were 20% below the prior year.
Adjusted EBITDA for Q1 FY23 (excluding fair value movements of biological assets) was £3.7m, 11% ahead of the prior year (Q1 FY22: £3.4m), and at constant exchange rates, was 19% higher than the prior year. The fair value movements on biological assets in the quarter was a £1.1m reduction in value (Q1 FY22: £0.1m reduction), so Adjusted EBITDA including fair value movements for Q1 FY23 was £2.6m (Q1 FY22: £3.3m).
Post period end the Company announced the retirement of Jan-Emil Johannessen, Head of Benchmark Genetics who will be succeeded by Geir Olav Melingen, currently Commercial Director Salmon at Benchmark, with effect from 1 June 2023. During his tenure Jan-Emil has built a talented and experienced team capable of taking Benchmark Genetics through the next phase of growth. Geir Olav Melingen has extensive experience from leading roles in the aquaculture industry including at MSD, as CEO of Fishguard and CEO of the Bergen Aquarium. He has deep experience in fish health and the salmon industry with a PhD in fish health from the University of Bergen.
Health
Revenues in Q1 FY23 were £10.4m (Q1 FY22: £5.8m) as a result of significantly increased customer uptake and sales of Ectosan® Vet and CleanTreat® and significant growth in Salmosan Vet – our well established sea lice treatment. Revenues from Ectosan® Vet and CleanTreat® were £7.5m of which £1.7m was derived from recharging vessel and fuel costs associated with the Ectosan® Vet and CleanTreat® operations.
Revenues from Salmosan® Vet, our long-established sea lice treatment were £2.9m (Q1 FY22: £1.3m) with significant growth achieved in Canada, Norway and the Faroe Islands. Growth was driven by a variation to the marketing label which supports a longer product exposure, as well as enhanced engagement with customers through our portfolio of sea lice solutions which can be used in combination to address our customers’ sea lice challenge.
The significant increase in revenues resulted in Adjusted EBITDA of £4.1m in the quarter (Q1 FY22: £0.5m) demonstrating the potential of this business area to deliver good profitability.
Operationally we continue to make improvements in the efficiency of the delivery of our Ectosan® Vet and CleanTreat® solution achieving a new record in the speed of water transfer between the treatment wellboat and the CleanTreat® units, a key parameter for our customers. Speed of water transfer is now approximately double what it was at launch.
In the period we made progress towards a new business model for Ectosan® Vet and CleanTreat® aimed at lowering the Company’s exposure to infrastructure costs by lowering capital intensity and capital investment. The Company has established a partnership with leading specialist wellboat equipment provider MMC and ship designer SALT to capture opportunities to integrate its CleanTreat® systems into new wellboats coming to the market. The speed of adoption of a fully integrated solution on wellboats is reliant on the availability and customer adoption of new large wellboats. Customer owned PSV’s/platforms are a viable alternative to large wellboats in the medium to long term.
Oslo Børs uplisting and delisting from AIM
As previously announced at the end of FY22, the Company intends to up-list from Euronext Growth Oslo to the Oslo Børs and we are making progress towards this goal. Oslo is the leading listing venue for aquaculture and seafood companies. There are 27 listed companies in the seafood sector in Oslo while Benchmark is the only pure play aquaculture company listed on the London Stock Exchange. A listing on the Oslo Børs provides natural access to an important pool of specialist investors best equipped to recognise the Company’s added value and growth potential. The Company is conducting a consultation with shareholders on whether to maintain a listing on AIM. The potential up-listing to the Oslo Børs and delisting from AIM are subject to shareholder approval and market conditions.
Current Trading and Outlook
Post period end the Company continues to perform well across all business areas and the outlook for the full year is encouraging. This reflects good visibility of revenues in Genetics, a positive performance in Advanced Nutrition despite soft shrimp markets, and increasing evidence of customer adoption for Ectosan® Vet and CleanTreat® in Health.