Benchmark Holdings Plc - Trading Update and Investor Meetings

Benchmark Holdings plc

 

Trading update, fixed income investor meetings and notice of results

 

Benchmark, the aquaculture health, nutrition and genetics business today provides the following trading update and announces that it has mandated DNB Markets ("DNB") to arrange a series of fixed income investor meetings in connection with the refinancing  of its existing $90m credit facility.

 

Trading update for H1 2019 and outlook

·    Good performance with 25% increase in adjusted EBITDA on revenues ahead by 3.4%

·    Progress towards the commercialisation of the Company's next generation sea lice treatment and disease resistant shrimp

·    Implementation of structural efficiencies underway leading to streamlining of production in Asia and of the lumpfish operations

Benchmark delivered a good performance in the first half of the year with growth in revenues, and an increase in the adjusted EBITDA margin, resulting in strong adjusted EBITDA growth. Revenue of £78.3m was 3.4% ahead of H1 last year driven by growth in Genetics, Animal Health, and Knowledge Services, which more than offset lower revenues in Advanced Nutrition as a result of weakness in the global shrimp market.

Adjusted EBITDA of £7.5m was 23% ahead of H1 2018 reflecting the contribution of higher value products, an increase in the value of biological assets as a result of growing sales and increasing capacity at the Company's new land based salmon egg facility in Norway, as well as ongoing cost control. Adjusted EBITDA margin for the period grew to 10% (H1 2018: 8%).  Net debt at 31 March 2019 was £65.5m.

The Company delivered against the strategic milestones set for the period, including further trials of its next generation sea lice treatment and establishing a supply chain for the roll-out of the Company's disease resistant shrimp in Asia, where trials continue to show significant commercial potential. Post period end the Company inaugurated its new state of the art, land based, salmon egg production facility in Norway.

The Company's programme of structural and operational efficiencies is underway to reallocate capital, reduce costs, grow margins, prioritise R&D spend, and exit from non-core activities. During the period the Company streamlined its Advanced Nutrition production facilities in Asia resulting in the sale of a site, and its lumpfish operations which resulted in closure of one of its sites. Options for the Company's companion animal products are still being evaluated, with the most likely outcome being the establishment of a commercialisation partnership.

As announced on 29 May 2019, the change of control at AquaChile, our genetics JV partner, has resulted in an opportunity for the Company to take control of a breeding genetics facility currently owned by the JV and to pursue an independent strategy. It is envisaged that Benchmark's original equity investment will be returned to Benchmark and that this will be reinvested in the Company's genetics business in Chile in the coming years, leaving the Company well placed to continue to build a strong local presence in this important market.

Outlook

 

Conditions in the Company's core markets are mixed with salmon benefitting from growing demand and stable prices, while in the shrimp and sea bass/bream markets, a temporary overstocking has resulted in depressed prices and a decrease in production levels amongst our customers. This volatility is not unusual in our markets and we are monitoring it closely.

 

The Company is making significant progress in the implementation of its programme of structural efficiencies,  and overall, we expect the Group to deliver broadly in line with market expectations for the full year.

 

Refinancing of credit facility

·    Proposed structure provides increased flexibility and headroom through issue of a listed Nordic bond underwritten by DNB and a revolving credit facility (RCF)

·    Opportunity to access a sector specialist investor base in the Nordic region, with globally recognised public markets for aquaculture

The Company has mandated DNB Markets to arrange a series of fixed income investor meetings in connection with the refinancing of its existing $90m credit facility. A NOK 850m (USD $95m equivalent), 4-year senior secured floating rate listed bond issue, may follow subject to inter alia market conditions. It is envisaged that the refinancing will also include a $15m RCF to be provided by DNB Bank ASA. The bond is being underwritten by DNB Bank ASA.

The purpose of the refinancing is to provide the Company with additional covenant flexibility and headroom to operate efficiently and continue to support the roll-out of its priority products including its next generation sea lice treatment and disease resistant shrimp while it concludes its programme of efficiencies.

In connection with the meetings Benchmark will present the following headline financial figures for H1 2019 and for the 12 months to 31 March 2019.

£m

H1 2019

H1 2018

LTM 20193

 

FY 2018

Revenue

78.3

75.7

154.0

 

151.5

Adjusted EBITDA1                     

7.5

6.0

18.5

 

17.0

Loans and borrowings

(89.4)

(63.2)

(89.4)

 

(79.8)

Cash and cash equivalents

23.8

21.9

23.8

 

24.1

Net Debt2

(65.5)

(41.3)

(65.5)

 

(55.7)

Share based payments

0.8

0.9

1.4

 

1.5

 

 

 

 

 

 

Expensed R&D costs

5.6

5.6

12.0

 

12.0

Capitalised Development costs

2.9

2.2

8.1

 

7.3

PPE additions

3.7

12.9

15.9

 

25.1

Intangible additions

3.1

2.3

8.4

 

7.5

 

 

 

 

 

 

(1)       Adjusted EBITDA is earnings before interest, tax, depreciation, amortisation, exceptional items and acquisition related expenditure

 

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

 

 

 

 

(3)       LTM 2019- is the last 12 months - ie 12 months ended 31 March 2019

 

 

 

 

 

Segmental Revenue - £m

H1 2019

H1 2018

LTM 2019

 

FY 2018

Animal Health

7.2

4.1

19.2

 

16.2

Genetics

22.6

21.0

37.4

 

35.8

Advanced Animal Nutrition

40.9

44.1

82.6

 

85.7

All other segments

8.3

7.5

16.6

 

15.8

Corporate

3.6

2.3

6.6

 

5.3

Inter-segment sales

(4.3)

(3.2)

(8.3)

 

(7.3)

Total

78.3

75.7

154.0

 

151.5

 

 

 

 

 

 

 

 

 

 

 

 

Segmental Adjusted EBITdA - £m

H1 2019

H1 2018

LTM 2019

 

FY 2018

Animal Health

(6.1)

(7.9)

(9.2)

 

(11.0)

Genetics

4.9

2.9

9.9

 

7.9

Advanced Animal Nutrition

9.6

11.3

19.9

 

21.6

All other segments

0.7

0.4

0.5

 

0.2

Corporate

(1.6)

(0.6)

(2.8)

 

(1.8)

Inter-segments sales

-

-

0.1

 

0.1

Total

7.5

6.0

18.5

 

17.0

 

 

 

 

 

 

 

 Malcolm Pye, CEO, commented

 

"The Company delivered a solid first half performance which places us well to refinance our existing credit facilities. The increased flexibility will allow the Company to operate more efficiently and support the roll-out of products which are showing large potential and encouraging levels of interest from our customers.

 

The Nordic capital markets are globally recognised as the leading public markets for aquaculture drawing a community of specialist investors and analysts which the proposed refinancing will allow us to access.

We remain focused on delivering efficiencies which will further drive margins and allocate capital to our priority areas of growth"