Q4 Results

29 November 2023

Benchmark Holdings plc

("Benchmark", the "Company" or the "Group")

Q4 Results

(3 months ended 30 September 2023)

Good operational performance and positive outlook in all business areas

Results affected by market factors in the period

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 3 months ended 30 September 2023 (the "period"). All Q4 FY23 and Q4 FY22 figures quoted in this announcement are based on unaudited accounts.

This morning the Company published its full year audited results for the 12 months ended 30 September 2023 which can be found on https://www.benchmarkplc.com/investors

Q4 FY23 Financial highlights 

· Revenues from continuing operations of £36.6m, 14% below the prior year (-7% CER):

· Genetics - strong performance in salmon egg sales against an exceptionally strong Q4 FY22 which benefitted from supply constraints in the market; revenues were 6% below Q4 FY22 (+2% CER)

· Advanced Nutrition - strong performance against a backdrop of challenging conditions in the global shrimp markets; revenues were 9% below the prior year (-3% CER)

· Health - revenues were 53% below Q4 FY22 (-50% CER) reflecting a delay in the peak season for sea lice treatments in Norway; the Company has experienced an increase in Ectosan® Vet and CleanTreat® sales post period-end

· Adjusted EBITDA from continuing operations excluding fair value movements from biological assets £9.2m (Q4 FY22: £10.2m)

· Adjusted EBITDA margin from continuing operations excluding fair value movements marginally increased to 25% (Q4 FY22: 24%)

· Cash and cash equivalents of £29.3m and available liquidity of £41.5m as at 27th November

Operational highlights

· Launch of first AI-enabled tool, Snapp-Art which enables customers to count and qualify Artemia accurately and efficiently, contributing to customer productivity

· Integration of salmon activities under the leadership of Geir Olav Meningen, Head of Genetics, and integration and reorganisation of shrimp activities under the leadership of Patrick Waty, Head of Advanced Nutrition. This is an important strategic step which creates significant opportunities for commercial synergies and efficiencies

· Obtained MSC (Marine Stewardship Council) certification for the Artemia harvested from the Great Salt Lakes

· Divestment of tilapia breeding business; maintaining our presence in tilapia genetics through Genetics Services

Current trading and outlook - positive momentum trading in-line with management expectations

· Good start to the year and positive momentum in all business areas

· Good visibility of revenues in salmon genetics

· Early indications of improvement in the shrimp markets

· Increase in sea lice treatments post period end with good capacity utilisation of CleanTreat®; expect normal seasonality

· Continue to strengthen our unique position in an industry that is structurally growing driven by megatrends

* 2022 figures have been restated to reflect changes to the ongoing continuing business during the year following the disposal of the tilapia business

** 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 and disposal related expenditure.

(2) Adjusted Operating Profit is operating loss before exceptional items including acquisition and disposal 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 (continuing operations)*

* 2022 figures have been restated to reflect changes to the ongoing continuing business during the year following the disposal of the tilapia business

** 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 and disposal related expenditure.

Enquiries

Katie Hunt, Reg Hoare [email protected]

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

Q4 FY23 financial results were soft compared to the prior year but overall the Group performed well, maintaining momentum and commercial focus, and is well positioned for the year ahead. In Advanced Nutrition, prevailing conditions in the shrimp markets continued to impact demand for our products and revenues in the period. In Health we experienced low activity for Ectosan® Vet and CleanTreat® treatments with customers delaying use of our solution compared to last year, as they assessed the severity of sea lice in their farms. Post period-end we have seen increased use. Performance in Genetics was solid but comparatively behind Q4 FY22 which benefitted from bumper demand for our salmon eggs as a result of supply constraints in the market. Together, these factors led to Group revenues from continuing operations of £36.6m, 14% behind the prior year (-7% CER).

Despite high inflationary pressure, operating costs in Q4 FY23 were £10.9m, 17% below the prior year (Q4 FY22: £13.1m) due to the timing of some of the variable costs in the year and ongoing cost control. Furthermore, Q4 FY23 has seen the benefit of some of the restructuring of our cost base in Health and Advanced Nutrition. Further details are given in the business area narrative below. R&D expenses were £1.6m, 20% below the prior year driven by a reduction in Genetics R&D in the period.

Adjusted EBITDA from continuing operations for the quarter was £7.4m, 21% below the prior year (Q4 FY22: £9.4m) primarily as a result of lower sales, partially offset by a reduction in operating costs. Excluding fair value movements from biological assets, Adjusted EBITDA from continuing operations was £9.2m, 10% below the prior year. Our Adjusted EBITDA margin excluding fair value movements was 25%, marginally ahead of the prior year.

Advanced Nutrition

Q4 FY23 revenues in Advanced Nutrition were £17.1m, 9% behind the prior year (Q4 FY22: £18.9m) (-3% CER) due to weak shrimp markets as set out above. By product segment, revenue from Diets was £8.0m (Q4 FY22: £8.5m) followed by Artemia £7.0m (Q4 FY22: £8.2m) and Health £2.1m (Q4 FY22: £2.4m).

Adjusted EBITDA of £3.5m was 26% lower than the prior year (Q4 FY22: £4.7m) primarily due to lower sales, lower infringement fees and higher bad debt provisions. Operating costs of £5.9m were 5% down Q4 FY22 (up 2% CER). R&D expenses totalled £0.7m (Q4 FY22: £0.6m). The Adjusted EBITDA margin was 20% (Q4 FY22: 25%).

Despite the comparatively soft performance against last year, the continued commercial focus and efficiencies implemented in FY23 mean that our Advanced Nutrition business will emerge stronger from a period of weakness in the shrimp market. We have further strengthened our market position and continued to innovate as evidenced by the launch of our first AI-enabled tool. Our dedicated technical support team in our local markets which help our customers optimise the use of our products has been instrumental to our commercial effort and will help drive future growth.

Genetics

Revenues from continuing operations in the period were £16.9m, 6% behind prior year (Q4 FY22: £18.0m) (+2% CER). While salmon egg volume of 84 million was 8 million lower than the prior year, this represents a strong performance against an exceptional Q4 FY22 when we experienced very high demand due a supply shortage in the market. Harvest revenues were £1.8m higher than the prior year driven by higher volumes harvested in the quarter. Shrimp revenues at £0.3m were £0.4m behind prior year (Q4 FY22: £0.7m) as we continue to work on the development of the next generation of products.

Adjusted EBITDA from continuing operations was £5.4m, 11% lower than the prior year (Q4 FY22: £6.1m) primarily due to lower sales. However, adjusted EBITDA from continuing operations excluding the fair value movements from biological assets was £7.2m, 4% ahead of the prior year (Q4 FY22: £6.9m). As a result, the Adjusted EBITDA margin excluding biological asset movements increased to 43% (Q4 FY22: 38%).

By species, despite lower egg sales, salmon delivered an excellent performance with Adjusted EBITDA of £6.3m (Q4 FY22: £6.7m) and after fair value movements of £8.1m (Q4 FY22: 7.6m). In shrimp, lower revenues led to a higher Adjusted EBITDA loss of £0.9m (Q4 FY22: loss of £0.6m) and tilapia, now discontinued, delivered an Adjusted EBITDA loss before exceptional items of £0.3m (Q4 FY22: loss of £0.7m).

Health

Performance in Health was affected by low levels of sea lice treatments in the period which impacted revenues and resulted in low capacity utilisation of our CleanTreat® infrastructure. Revenues were £2.6m (Q4 FY22: £5.6m). Adjusted EBITDA in the period was a loss of £0.9m (Q4 FY22: £0.6m). Post period end we have experienced increased demand for Ectosan® Vet and CleanTreat® and we have good visibility for Q1 FY24. Beyond Q1 FY24 we expect normal seasonality. Operating costs were 23% below the prior year at £1.4m (Q4 FY22: £1.8m) partially as a result of efficiencies resulting from the integration of the salmon activities across Health and Genetics. R&D expenses were flat against the prior year at £0.1m. Costs associated with the leases of the vessels for the CleanTreat® units amounted to £1.9m.

Sales of Salmosan® Vet in the period were £1.0m, 34% behind prior year (Q4 FY22: £1.6m). The drop is driven by the timing of orders in one of our key markets while the rest of the regions reported growth in the period.

Finance costs, cashflow and net debt

Net finance cost for the quarter of £5.0m are in line with the prior year (Q4 FY22: £5.0m). Movements in the quarter in the fair value of our financial instruments taken out to hedge our external borrowings caused a charge of £1.6m, (Q4 FY22: £5.3m). Interest charges for the period of £3.0m (Q4 FY22: £4.2m) reflected higher interest charges being more than offset by lower amortisation of deferred financing costs and a one-off fee for early settlement upon refinancing in Q4 FY22. These lower finance costs were offset by foreign exchange movements which led to a foreign exchange loss of £0.2m compared to a gain of £5.4m in Q4 FY22.

Positive operating cashflows from strong trading in the quarter and tight cost control left the Group with cash balances of £36.5m at the end of the period (Q4 FY22: £36.4m). This left net debt at the quarter end at £65.5m (Q4 FY22: £73.7m). Net debt excluding lease liabilities was £45.6m (Q4 FY22: £47.5m). 

Outlook

We have had a good start to the year and there is good momentum in the business. We have good visibility of sales in Genetics at normalised levels following the supply shortage experienced Q1 FY23. In Advanced Nutrition we are seeing early signs of recovery in the shrimp markets which we expect will contribute positively from Q2 FY24 onwards. Our CleanTreat® units are currently operating at a good capacity utilisation and we expect this to be reflected in Q1 FY24. We expect normal seasonality with low treatment volumes in the second half. We are considering actions to optimise our operations and cashflow during the transition to an integrated customer solution. The continued integration and streamlining of the Group will enable us to further leverage the Group capabilities and drive efficiencies contributing to a positive outlook for the year ahead.

Looking into the future, we are uniquely positioned in an industry that is structurally growing. With a clear strategy addressing the main aquaculture species, we have significant opportunity to deliver growth and shareholder returns. We will continue the development of the Group and ongoing consideration of our strategy to realise the value inherent in our business for the benefit of all our stakeholders.

1 EBITDA - Earnings before interest, tax, depreciation, amortisation, and impairment

2 Adjusted EBITDA - EBITDA before exceptional items including acquisition related items

* 2022 numbers have been restated to reflect certain operations of the Group that have been classified as discontinued operations during the period in line with IFRS 5

* Total comprehensive income for the period relating to discontinued operations for Q4 2023 includes the loss of £4,333,000 (Q4 2022: £715,000) and foreign exchange gain of £51,000 (Q4 2022: £547,000). FY23 includes the loss of £5,505,000 (2022: £1,800,000) and foreign exchange loss of £122,000 (2022: gain of £617,000).

The accompanying notes are an integral part of this consolidated financial information.

The accompanying notes are an integral part of this consolidated financial information.

*Other reserves in this statement is an aggregation of capital redemption reserve and foreign exchange reserves

1. Basis of preparation

Benchmark Holdings plc (the 'Company') is a company incorporated and domiciled in the United Kingdom. These consolidated quarterly financial statements as at and for the year ended 30 September 2023 comprises those of the Company and its subsidiaries (together referred to as the 'Group').

These consolidated quarterly financial statements do not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006 and are unaudited. These financial statements do not include all the information required for a complete set of IFRS financial statements. However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Group's financial position and performance since the last annual financial statements. The Group's last annual statutory financial statements as at and for the year ended 30 September 2022 were prepared in accordance with UK adopted international accounting standards in conformity with the requirements of the Companies Act 2006 as it applies to companies reporting under those standards ("Adopted IFRS") and are available from the Company's website at www.benchmarkplc.com.

The prior year comparatives are derived from audited financial information for Benchmark Holdings plc Group as set out in the Annual Report and Accounts for the year ended 30 September 2022 and the unaudited financial information in the Quarterly Financial Report for the year ended 30 September 2022. The comparative figures for the financial year ended 30 September 2022 are not the Company's statutory accounts for that financial year. Those accounts were approved by the Directors on 30 November 2022 and have been delivered to the Registrar of Companies. The audit report received on those accounts was (i) unqualified and (ii) did not include a reference to any matters to which the external auditor drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

Statement of Compliance

These consolidated quarterly financial statements have been prepared in accordance with UK and EU adopted IAS 34 'Interim Financial Reporting'. These financial statements do not include all of the information required for the full annual financial statements and should be read in conjunction with the Group's latest annual consolidated financial statements as at and for the year ended 30 September 2023. These consolidated quarterly financial statements were approved by the Board of Directors on 29 November 2023.

Going concern

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Management Report.

As at 30 September 2023 the Group had net assets of £282.6m (30 September 2022: £323.3m), including cash of £36.5m (30 September 2022: £36.4m) as set out in the consolidated balance sheet. The Group made a loss for the year from continuing operations of £16.1m (year ended 30 September 2022: loss £28.7m), and a loss for the year from discontinued operations of £5.5m (year ended 30 September 2022: loss £1.8m).

As noted in the Management Report, the business has performed steadily during the year, showing resilience to some tough market conditions towards the end of the year. The Directors have reviewed forecasts and cash flow projections for a period of at least 12 months including downside sensitivity assumptions in relation to trading performance across the Group to assess the impact on the Group's trading and cash flow forecasts and on the forecast compliance with the covenants included within the Group's financing arrangements.

In the downside analysis performed, the Directors considered severe but plausible scenarios on the Group's trading and cash flow forecasts, firstly in relation to continued roll out of the Ectosan®Vet and CleanTreat offering. Sensitivities considered included modelling slower ramp up of the commercialisation of Ectosan® Vet and CleanTreat® through delayed roll-out of the revised operating model for the service, together with reductions in expected biomass treated and reduction in short-term treatment capacity. Key downside sensitivities modelled in other areas included assumptions on slower commercialisation of SPR shrimp, slower salmon egg sales growth in Chile and removal of an additional financing opportunity within Genetics, along with sensitivities on sales growth in revenues and pressure on pricing on CIS artemia in Advanced Nutrition. Mitigating measures within the control of management have been identified should they be required in response to these sensitivities, including reductions in areas of discretionary spend, tight control over new hires, deferral of capital projects and temporary hold on R&D for non-imminent products.

The refinancing exercise which commenced in FY22 was completed in Q1 FY23, so that adequate finance facilities are in place, and with financial instruments in place to fix interest rates and opportunities available to mitigate globally high inflation rates, the Group continues to show resilience against current global economic pressures. The Directors are therefore confident that even under all of the above sensitivity analysis, the Group has sufficient liquidity and resources throughout the period under review whilst still maintaining adequate headroom against the borrowing covenants. They therefore remain confident that the Group has adequate resources to continue to meet its liabilities as and when they fall due within the period of 12 months from the date of approval of these financial statements. Based on their assessment, the Directors believe it remains appropriate to prepare the financial statements on a going concern basis.

2. Accounting policies

The accounting policies adopted are consistent with those used in preparing the consolidated financial statements for the financial year ended 30 September 2023.

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total earnings.

Alternative performance measures ('APMs')

The Directors measure the performance of the Group based on a range of financial measures, including measures not recognised by EU-adopted IFRS. These APMs may not be directly comparable with other companies' APMs, and the Directors do not intend these as a substitute for, or superior to, IFRS measures.

Directors have presented the performance measures Adjusted EBITDA, Adjusted Operating Profit, Adjusted Profit Before Tax and Adjusted EBITDA excluding fair value movement on biological assets because they monitor performance at a consolidated level using these and believe that these measures are relevant to an understanding of the Group's financial performance (see note 13). Furthermore, the Directors also refer to current period results using constant currency, which are derived by retranslating current period results using the prior year's foreign exchange rates.

Use of estimates and judgements

The preparation of quarterly financial information requires management to make certain judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual amounts may differ from these estimates.

In preparing these quarterly financial statements the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those applied to the consolidated financial statements for the year ended 30 September 2023.

3. Segment information

Operating segments are reported in a manner consistent with the reports made to the chief operating decision maker. It is considered that the role of chief operating decision maker is performed by the Board of Directors.

The Group operates globally and for management purposes is organised into reportable segments based on the following business areas:

· Genetics - harnesses industry leading salmon breeding technologies combined with state-of-the-art production facilities to provide a range of year-round high genetic merit ova.

· Advanced Nutrition - manufactures and provides technically advanced nutrition and health products to the global aquaculture industry.

· Health - the segment provides health products and services to the global aquaculture market.

In order to reconcile the segmental analysis to the consolidated income statement, corporate and inter-segment sales are also shown. Corporate sales represent revenues earned from recharging certain central costs to the operating business areas, together with unallocated central costs.

Measurement of operating segment profit or loss

Inter-segment sales are priced along the same lines as sales to external customers, with an appropriate discount being applied to encourage use of Group resources at a rate acceptable to local tax authorities. This policy was applied consistently throughout the current and prior period.

3. Segment information (continued)

Reconciliations of segmental information to IFRS measures

4. Revenue

The Group's operations and main revenue streams are those described in its financial statements to 30 September 2023. The Group's revenue is derived from contracts with customers.

Disaggregation of revenue

In the following tables, revenue is disaggregated by primary geographical market and by sales of goods and services. The table includes a reconciliation of the disaggregated revenue with the Group's reportable segments (see note 3).

Sale of goods and provision of services

4. Revenue (continued)

Primary geographical markets

4. Revenue (continued)

Primary geographical markets (continued)