Benchmark, the aquaculture health, nutrition and genetics business, provides a trading update for its fourth quarter and year ended 30 September 2019 ahead of the publication of its full year results in the week ending 20 December.
The results for the year were impacted by adverse conditions in the shrimp and seabass/seabream markets, which significantly affected Advanced Nutrition, the company’s largest division. Restructuring of the Group commenced, accelerating the disposal and discontinuation of non-core activities which primarily includes businesses in the Knowledge Services division and veterinary services in Animal Health. These activities will be excluded from continuing operations in the Company’s FY19 results and going forward.
Revenues from continuing Operations are expected to be £127m, 3% below prior year. Adjusted EBITDA from Continuing Operations is expected to be in the region of £11m to £12m.
Adjusted EBITDA is 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 R&D investment is expected to increase by 7% driven by products close to launch and additional investment in Genetics and Advanced Nutrition. Capex is expected to reduce significantly to £12m (2018: £25.1m) following completion of the new salmon egg production facility in Norway, returning to a normalised level which includes maintenance capex and planned investments to support growth.
Net debt at the end of the year was £87.1m, as a result of the total investment in R&D (particularly the next generation sea lice treatment), and an increase in working capital including that related to the growth in biological assets (stock of salmon and eggs) in the new production facilities.
Free cash flow was an outflow of £24m, leaving the liquidity at £28.6m at year end, “well within the covenant threshold”, Benchmark stated.
Impairment of intangible and tangible assets in FY19 is expected to be in the range of £45m-£55m as a result of a reduction in forecasts in Advanced Nutrition due to material change in market outlook (impairing INVE) and the exit from some non-core activities.
Benchmark has appointed a new CFO, Septima Maguire, who joined on 11 November, and recruitment of new CEO is “at an advanced stage”.
Restructuring and management changes are expected to result in exceptional charges in FY2019 and FY2020.
Peter George, Executive Chairman commented:
“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. 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 company is 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 reduce environmental impact, positions it as a leader in improving sustainability standards in aquaculture,” he added.
“While the timing of the recovery in the shrimp and seabass/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 R&D investment phase into commercial profitability.”