Benchmark Holdings blames tough market for 'disappointing' year
Benchmark Holdings
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16:30 23/04/24
Aquaculture health, nutrition and genetics business Benchmark Holdings updated the market on its trading for the fourth quarter and year ended 30 September on Friday, ahead of its full year results.
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The AIM-traded firm noted that, as it had previously announced, its results for the year were impacted by adverse conditions in the shrimp, and seabass and seabream markets, which significantly affected Advanced Nutrition, its largest division.
Restructuring of the Group started, which accelerated the disposal and discontinuation of non-core activities including businesses in the Knowledge Services division and veterinary services in Animal Health.
Those activities would be excluded from continuing operations in the company's 2019 results, and going forward, the board said.
Progress had also been made towards the commercial launch of its “next generation” sea lice treatment, and its specific pathogen resistant shrimp in Asia.
Looking at the finances, Benchmark said total revenues and adjusted EBITDA, including continuing and discontinued operations, were expected to be in line with current market expectations.
Revenues from continuing operations were expected to be down 3% year-on-year at around £127m, while total revenues including continuing and discontinued operations were down 2% to £148m.
Adjusted EBITDA from continuing operations was set to be in the region of £11m to £12m, down from £19.1m, while total adjusted EBITDA including continuing and discontinued operations was expected to be in the region of £13m to £14m, down from £17.0m.
The company said its adjusted EBITDA had been driven by lower sales in Advanced Nutrition and lower revenues from commercial scale field trials, offset by an increase in sales and margins in Genetics and one-off other income.
Total research and development investment was expected to increase by around 7%, driven by products close to launch and additional investment in Genetics and Advanced Nutrition to maintain the firm’s leadership in its core markets.
Capital expenditure was anticipated to reduce “significantly” to around £12m, from £25.1m, in the prior year, following the completion of the new salmon egg production facility in Norway, returning to a normalised level which included maintenance capex and planned investments to support growth.
Net debt at the year-end was £87.1m, widening from £55.7m, which the board said was the result of its total investment in research and development, and an increase in working capital including that related to the growth in biological assets in the new production facilities.
Free cash flow was an outflow of around £24m, compared to an outflow of £36.1m in the prior year, while the company’s liquidity was £28.6m at year-end, “well within” the covenant threshold.
Impairment of intangible and tangible assets in the financial year was expected to be between £45m and £55m, as a result of a reduction in forecasts in Advanced Nutrition, which the board said was due to a material change in market outlook and the exit from some non-core activities.
“It is disappointing to report a performance which is below that expected at the beginning of the financial year largely due to market conditions in Advanced Nutrition,” said executive chairman Peter George.
“Following the management changes announced in August, the company has accelerated its programme of efficiencies including the disposal and exit from non-core businesses and the implementation of a cost saving plan.
“During the year the Group made good progress towards the launch of product candidate BMK08 which, together with its co-dependant technology ‘CleanTreat’, has the potential to be transformational for the industry, delivering a solution with zero environmental impact to one of the industry's biggest challenges.”
George said the firm was considering the “optimal strategy” to take CleanTreat from trial to commercial scale, given its importance to product candidate BMK08 and its broader industry-wide applications.
“The market has a growing need for solutions that improve the sustainability of food production in aquaculture.
“Benchmark's focus on delivering products and solutions that improve animal health and welfare, and that reduces environmental impact, positions it as a leader in improving sustainability standards in aquaculture.
“While the timing of the recovery in the shrimp, and seabass and seabream markets is uncertain, I remain confident that the actions we are taking and the products we are launching will move the group from its research and development investment phase into commercial profitability.”
At 0845 GMT, shares in Benchmark Holdings were down 9.09% at 45p.