22 February 2022

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

(3 months ended 31 December 2021)

Excellent Q1 results with strong growth in revenues and Adjusted EBITDA

Building momentum following strong FY21 performance

In compliance with the terms of the Company's senior secured bond which requires it to publish quarterly financial information, Benchmark, the aquaculture biotechnology business, announces its unaudited results for the 3 months ended 31 December 2021 (the "period"). All Q1 FY22 and Q1 FY21 figures quoted in this announcement are based on unaudited accounts.                   

Highlights - Strong growth in revenues and Adjusted EBITDA; good performance in all business areas

·    Group revenues 38% ahead of the prior year (+38% CER) with good growth in all three business areas:

o  Advanced Nutrition - revenues 26% above Q1 FY21 (+28% CER) building upon the strong FY21 performance

o  Genetics - revenues 20% above Q1 FY21 (+18% CER) driven by higher harvest income, as well as higher salmon egg revenues 

o  Health - revenues 347% above Q1 FY21 (+348% CER) reflecting sales of Ectosan^â Vet and CleanTreat^â (launched in August 2021)

·    Adjusted EBITDA of £7.4m, 145% ahead of Q1 FY22, with all business areas EBITDA profitable 

·    Adjusted EBITDA margin increased from 10.4% to 18.6%

·    Operating loss halved, however net loss increased due to negative £4.9m non-cash movement in net finance costs (Q1 FY21 had benefitted from £2.5m forex gain and £2.3m revaluation of hedging instrument associated with NOK bond)

·    Net debt reduced to £64.3m at 31 December 2021 (30 September 2021: £80.9m) following equity raise in November 2021; Net debt excluding lease liabilities £43.1m (30 September 2021: £56.9m)

·    Cash of £50.6m and Liquidity (cash and available facility) of £61.6m as at 21 February 2022

**  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 including acquisition related expenditure.

(2) Adjusted Operating Profit is operating loss before exceptional items including acquisition related items and amortisation of intangible assets excluding development costs

(3) Net debt is cash and cash equivalents less loans and borrowings

Business Area Summary

**  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 including acquisition related expenditure.

Operational highlights                        

·    Advanced Nutrition

o  Patrick Waty named new Head of Advanced Nutrition bringing extensive commercial and industry expertise to business area 

o  Continued to strengthen our commercial footprint, enhancing our distributor network and commercial team

o  Obtained ISO 14001:2015 certification for main facility in Thailand

o  Benchmark's Frippak China Aquatic Feed named "Favourite Brand"

·    Genetics

o  First deliveries of salmon eggs from new incubation centre in Iceland showing excellent quality, enhancing our ability to serve all production systems including land-based farming

o  Good progress in the roll-out of SPR shrimp, winning new customers, import licence to India obtained and gaining commercial traction

o  Appointment of Professor Ross Houston, leading aquaculture genetics scientist, as Director of Innovation, Genetics

·    Health

o  Both CleanTreat® systems in operation from last part of quarter onwards and treatments showing excellent results in line with our expectations

o  Order recently placed for third CleanTreat® system 

o  Collaboration with key customers on optimising future configuration initiated 

o  Progress in trials to obtain extension of Marketing Authorisation for Ectosan^âVet and CleanTreat^â in Norway

o  Ectosan^â Vet patent grant approved providing 20-year protection

·    One Benchmark integration - continued to integrate Group functions to realise synergies, leverage capabilities and enhance customer proposition

·    Sustainability - by working with our suppliers the soy beans used in our feeds are sustainably certified

·    Consideration of a listing in Oslo is ongoing  

Current trading and outlook

·    Following the good performance in Q1 we are trading in line with FY22 expectations

·    Positive market environment across our core species

·    Well positioned to reach sustainable profitability and deliver growth, supported by leading market positions in all business areas, a focused strategy and well embedded financial discipline

Trond Williksen, CEO commented

"Benchmark has delivered an excellent Q1 performance, reporting a 38% annual growth in revenue and 145% increase in Adjusted EBITDA.  This reflects an excellent performance in Advanced Nutrition, continued good performance in Genetics and the benefit of revenues from the recently launched Ectosan^â Vet and CleanTreat^â in our Health business area. 

"We are performing in line with market expectations for the full year, with building momentum in our commercial, operating and financial performance in all business areas. The positive market environment in our core species, our leading market positions, together with our focused strategy and financial discipline positions the Group well to reach profitability and deliver growth."

Details of analyst / investor call today

There will be a call at 9:00am UK time today for analysts and investors. To register for the call please contact MHP Communications on +44 (0)20 3128 8990  or by email on [email protected] 

Enquiries

Katie Hunt, Reg Hoare, Charlie Protheroe                                                   [email protected]

About Benchmark 

Benchmark's mission is to enable aquaculture producers to improve their sustainability and profitability.

We bring together biology and technology to develop innovative products which improve yield, quality, and animal health and welfare for our customers. We do this by improving the genetic make-up, health and nutrition of their stock - from broodstock and hatchery through to nursery and grow out.

Benchmark has a broad portfolio of products and solutions, including salmon eggs, live feed (artemia), diets and probiotics and sea lice treatments. Find out more at www.benchmarkplc.com
 

Management Report

The Group delivered an excellent performance in the quarter reporting a 38% growth in revenue and 145% growth in Adjusted EBITDA. These strong results reflect an excellent performance in Advanced Nutrition, continued good performance in Genetics and the benefit of early revenues from the recently launched Ectosan^â Vet and CleanTreat^â in our Health business area.  The Group's performance is particularly pleasing in the context of the logistics challenges and increased transportation costs affecting industries worldwide. Conditions in our core markets have improved and are positive with a solid, growing salmon sector, recovery in the global shrimp markets and stability in the sea bass and sea bream market. 

Operating costs in Q1 FY22 were £9.9m, 7% above the prior year as a result of increased activity, but significantly below our revenue growth demonstrating the operational leverage in our business.  R&D expenses at £1.6m were broadly in line with the comparative quarter (Q1 FY21: £1.7m).  Total R&D investment including capitalised development costs was £2.3m (Q1 FY21: £2.8m) reflecting the lower level of capitalised development costs following the launch of Ectosan® Vet and CleanTreat® in Q4 FY21.

Adjusted EBITDA for the quarter was £7.4m, +145% up from £3.0m in Q1 FY21 as a result of higher revenues, ongoing financial discipline and operational improvements across the Group.  Importantly our Adjusted EBITDA margin increased to 18.6% (Q1 FY21: 10.4%).   Depreciation and amortisation in the quarter increased significantly from the comparative period last year to £8.9m (Q1 FY21: £5.7m) due to both the depreciation of the leased vessels used in the CleanTreat® operation and the commencement of amortisation of the capitalised Ectosan® Vet and CleanTreat® development costs following the launch at the end of FY21.  These higher costs were more than offset by the better Adjusted EBITDA and as a result, the Group reported a significant improvement in its operating result, reducing the operating loss to £1.5m in the period (Q1 FY21: operating loss of £3.3m).

Although Operating Loss halved, the Loss before tax, and Loss for the period, increased due to a negative £4.9m non-cash movement in net finance costs (Q1 FY21 benefitted from £2.5m forex gain and £2.3m revaluation of hedging instrument associated with NOK bond).

Advanced Nutrition

Advanced Nutrition delivered excellent results in the quarter building on a strong performance in FY21 with revenues up 26% and Adjusted EBITDA increasing more than four-fold. As the shrimp markets recover post COVID-19 we are profiting from our leading market position, an enhanced commercial function and new digital tools.  Overall, we are emerging from the pandemic in a stronger position.

Revenue in the quarter was £19.1m (Q1 FY21: £15.1m) with good growth across all product areas - Artemia (+23%), Diets (+31%) and Health (+13%).  By region the Americas were up 41%, Asia +45% and Europe +1%. 

Adjusted EBITDA was £4.3m (Q1 FY21: £1.0m). The increase in Adjusted EBITDA reflects higher sales and gross profit margin and ongoing cost discipline. As a result, adjusted EBITDA margin increased from 6.5% to 22.7%.

The shrimp markets continued to recover in the period which together with the strategic focus on our commercial organisation contributed to our strong performance.  Examples of our commercial focus and success include receiving an Aquatic Feed Favourite Brand Award in China for one of our lead products, Frippak, expanding our network of distributors in Latin America and developing new digital tools in local languages to better serve our Asian and Latin American markets. The most recent Artemia harvest was below recent record years which, together with increased sales, will allow us to reach normal inventory levels over time.

During the period we obtained ISO 14001 Environmental Management System certification for our facility in Thailand. This is an important milestone in our sustainability programme. We are also evaluating greener energy alternatives for our facility in Thailand as we work towards our Net Zero targets.

Genetics

Genetics performed well in the period with revenues of £15.2m, 20% above the prior year (Q1 FY21: £12.6m) driven by higher harvest revenues from our broodstock licence in Salten, where we sell surplus broodstock as harvested fish, as well as higher revenues from salmon eggs and SPR shrimp.

Adjusted EBITDA for Q1 FY22 of £3.3m was 16% lower than prior year (Q1 FY21: £3.9m) as a result of adverse fair value movements in biological assets and an increase in operating costs as operations normalise post COVID-19. Excluding the reduction in fair value of biological assets of £0.1m (Q1 FY21 £1.3m uplift), Adjusted EBITDA was £3.4m, 29% above the prior year (Q1 FY21: £2.6m).

We continued to make strategic progress during the period, with the first deliveries of salmon eggs from the new incubation centre in Iceland as planned.  In Chile, we continued the operational ramp up of our facilities to enable us to deliver a steady supply to the market, and we obtained organic certification for our salmon eggs. While still in the early phase of commercialisation entering an established market, we are growing sales in line with our expectations and building our customer base.

In SPR shrimp we are gaining commercial traction. Sales of breeders in the first quarter were 245% ahead of last year, in line with our commercial roll-out plan. During the quarter we also obtained an import license in India and secured our first customers in this important market. 

We are delighted to have appointed Professor Ross Houston as Director of Innovation, Genetics. Professor Houston has an international reputation where his work includes the discovery of a genetic marker associated with resistance to Infectious Pancreatic Necrosis and he leads several high-profile aquaculture research projects focussing on the application of genomics and genome editing technologies.

Health

Revenues in Q1 FY22 of £5.8m were significantly above the prior year (Q1 FY21: £1.3m) due to sales from Ectosan® Vet and CleanTreat® following the launch in Q4 FY21, together with slightly higher sales of Salmosan. Adjusted EBITDA was a profit of £0.5m (Q1 FY21: loss of £1.1m) as a result of the higher revenues.  £1.0m of the revenue in the period (Q1 FY21: £nil) derived from recharged vessel and fuel costs associated with the Ectosan® Vet/CleanTreat® operations.

We have two CleanTreat® systems in operation and treatments continue to show excellent results with efficacy above 99% and good operational efficiency. Delivery of treatments post period end slowed down as anticipated due to seasonal adverse weather conditions. Post period end we have placed an order for our third CleanTreat® system, and we are working closely with customers to optimise the future configuration of the system.

We are making progress in the trials to obtain extension of Marketing Authorisation for Ectosan® Vet and CleanTreat® in Norway is continuing as planned.  In the period, the patent for Ectosan® Vet was approved and granted giving 20 year protection.

Depreciation and Amortisation

Depreciation and amortisation charges increased from £5.7m to £8.9m in the period as a result of the depreciation associated with the CleanTreat® infrastructure and the commencement of the amortisation of the development costs associated with Ectosan® Vet and CleanTreat®. 

Finance costs, cashflow and net debt

Net finance cost for the quarter of £2.2m is significantly higher than the prior year (Q1 FY21: credit of £2.7m), with the increase as a result of minimal revaluation movements on financial instruments (£nil) and forex movements (£0.2m loss) compared to much larger movements in the prior year (Q1 FY21: £2.3m gain and £2.5m gain respectively).  Interest charges (including interest expense on right-of-use assets) of £2.2m are broadly in line with the prior year (Q1 FY21: £2.1m).

The Group reported a cash inflow of £13.4m in the quarter, driven by an equity raise of £20m (net proceeds) completed in November 2021.  This, added to a net cash inflow from operating activities of £1.1m was partially offset by cash outflow from capex of £2.6m (including £0.6m of capitalised R&D) and with tangible fixed asset additions primarily related to investments in Genetics and cash outflow in financing activities (finance charges and repayment of lease liabilities) of £4.6m.  Net debt including lease liabilities at the quarter end was £64.3m (30 September 2021: £80.9m).  Liquidity at the end of the period was £63.8m providing £53.8m of headroom against our minimum liquidity covenant. Net debt excluding lease liabilities was £43.1m (30 September 2021: £56.9m).

Outlook

The Group is performing in line with market expectations for the full year, with continuing good performance and revenue visibility in Genetics and Advanced Nutrition, and Health starting to benefit from the Ectosan® Vet and CleanTreat® revenue stream. The roll-out of Ectosan Vet and CleanTreat is progressing as expected, reflecting the anticipated challenges caused by the winter weather. Conditions and outlook in our markets are positive with solid salmon markets and the shrimp market showing recovery.

With a streamlined Group and leading market positions in each of our business areas, as well as building commercial, operating and financial momentum, we are well positioned to build on our FY21 track record and continue to deliver improved performance, profitability and growth.