Final Results

RNS Number : 1873D

Benchmark Holdings PLC

27 January 2015

 



27 January 2015

BENCHMARK HOLDINGS PLC

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

PRELIMINARY RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2014

A YEAR OF INVESTING IN MARKET LEADERSHIP POSITIONS FOR FUTURE GROWTH

Benchmark, the international animal health, technical publishing and sustainability science business, announces its Preliminary Results for the year ended 30 September 2014.

Trading performance for the year was in line with market expectations. Investments were made towards delivery of the Group's key strategic objectives, with good progress achieved across all three operating divisions.

Financial Highlights

●     Successful flotation on AIM in December 2013 raising £24.7m (net) of new equity

●     Revenue increased by 28% to £35.4m (2013: £27.5m)     

●     Loss before tax of £1.4m (2013: profit before tax of £4.9m)

●     EBITDA from Trading Activities¹ of £6.6m (2013: £7.4m) as we invest in corporate infrastructure

●     Investment in scientific R&D (including acquired intangibles) up seven-fold to £6.5m (2013: £0.9m)

●     Earnings per Share from Trading Activities² of 3.29p (2013: 5.59p)

●     Basic loss per share of 1.04p (2013: Basic earnings per share of 4.72p)

●     Earnings per share impacted by issue of 43m new shares at IPO

●     Net cash balance of £16.5m at period end (2013: £1.7m)

Operational highlights:

●     Substantial investment into, and progress of,  key strategic investment objectives including:

-     £6.5m investment in scientific research and development

-     Over £20m set aside to expand vaccine manufacturing capabilities at UK sites in Edinburgh and Braintree in response to strong growth seen across vaccines business

-     Increase in headcount of 63 (40%) in the year to 222 and a further 60 since the year end

●     M&A activity increased throughout the period, including the acquisitions of Zoetis's aquaculture vaccine business and Old Pond Publishing, and a development agreement with HypoPet

●     Increased product pipeline from 30 to 47, with an addressable market of £397m, and 3 new products launched in the year

●    Successfully completed a secondary fund raise of £70m, post the period end, with proceeds principally used to fund the acquisition of two leading salmon breeding and genetics companies, SalmoBreed and Stofnfiskur, to create a world leading salmon and aquaculture business.

Alex Hambro, Chairman of Benchmark, said:

"Following the successful IPO in December 2013, which raised net proceeds of £25m, the Company has made notable progress in deploying those funds through significant investment in expanding manufacturing capacity, securing bolt on acquisitions and new product development. All these initiatives were flagged at IPO as being central to our growth strategy.

The largest acquisition in the period was that of aquaculture vaccine assets from Zoetis, which has expanded the Company's new product portfolio and accelerated its development. Acquisitions form a key part of the Group's growth strategy and I am pleased to report that our activity in this area has increased significantly over the last few months, culminating in the dual acquisition of leading salmon breeding and genetics companies, SalmoBreed and Stofnfiskur in December 2014, creating a world-leading salmon and aquaculture business. We are continuing to evaluate a number of further opportunities."

Annual Report and Accounts

The Company's Annual Report and Accounts for the financial year ended 30 September 2014 are available to view on the Company's website at www.benchmarkplc.com and will be posted to shareholders on or around 30 January 2015.

For further information, please contact:
Benchmark Holdings plc	Tel:  [phone]
Malcolm Pye, CEO
Roland Bonney, COO
Mark Plampin, CFO
Cenkos Securities PLC	Tel:  [phone]
Ivonne Cantu / Liz Bowman (NOMAD)
Russell Kerr (Sales)
Tavistock Communications	Tel:  [phone]
Matt Ridsdale / Niall Walsh / Keeley Clarke

Notes to Editors:

Founded in 2000, Benchmark represents a new model in sustainable business development. Over the last decade it has built a profitable group of companies on the economics of a sustainable food chain. The Company is growing in response to a rapidly increasing demand for sustainable food chains, and in particular for seafood, from both mature and emerging markets.

Benchmark is an ethical company with an explicit policy based on the "3E's" definition of a sustainable business - ethics, environment and economics - which guides its strategy and operations.

The Group has four divisions: Animal Health which researches, manufactures and markets medicines and vaccines particularly for aquaculture, Sustainable Science which researches and informs sustainable development in the food industry, Technical Publishing which effects technology transfer through online publishing and education, and Breeding & Genetics which comprises a world-leading Salmon and aquaculture breeding business. Benchmark operates internationally with offices in England, Scotland, Ireland, Norway, Iceland, USA, Brazil, China, Moscow, India, Thailand and Chile,  and, as at 1 January 2015, employs 282 people.

For further information on Benchmark please visit www.bmkholdings.com.

Chairman's Statement

Following the successful IPO in December 2013, which raised net proceeds of £25m, I am delighted to inform you that the Company has made notable progress in deploying those funds through significant investment in expanding manufacturing capacity, securing bolt on acquisitions and new product development. All these initiatives were flagged at IPO as being central to our growth strategy.

The largest acquisition in the period was that of aquaculture vaccine assets from Zoetis, which has expanded the Company's new product portfolio and accelerate its development. Acquisitions form a key part of the Group's growth strategy and I am pleased to report that our activity in this area has increased significantly over the last few months, culminating in the dual acquisition of leading salmon breeding and genetics companies, SalmoBreed and Stofnfiskur in December 2014, creating a world-leading salmon and aquaculture business. We are continuing to evaluate a number of further opportunities.

General Overview

Your company has had a busy and productive year and I am pleased to be able to present this inaugural report and accounts as a public entity.  Benchmark has exacting but achievable strategic ambitions within a substantial global market for animal health products and services.  Whilst there is a long way to go for the business, major steps have been taken since the IPO in December 2013 to deliver these objectives both in terms of the products and services that Benchmark is bringing to market but also in the judicious acquisition of businesses and technologies that complement the Company's existing operations.

The various Executive Director's reports contained further in this document will provide you with detailed explanations of the strategic, operating and financial performance of your company during the year under review and so I will confine myself to reporting on the significant highlights and provide shareholders with an insight into the Company's tactical rationale.

An important component in understanding Benchmark's long term objectives is to note how the Income Statement is divided into Investing Activities and Trading Activities.  The Investing Activities category reflects how the Group's financial resources are devoted to developing and expanding the pipeline of proprietary animal health products and services.  The Trading Activities category reflects how these products and services, once fully developed, are performing in their various markets.  We are committed to investing significant resources to secure the long term trading prospects for the business and, as mentioned later in this report, our pipeline of products currently in development has an estimated revenue potential in excess of £350m.  We will continue to invest significantly in this pipeline over the next few years whilst ensuring that the revenue producing divisions are prudently managed so as to achieve their growth-oriented targets.

Financial overview

Revenue for the period was £35.4m (2013: £27.5m), an increase of 28 per cent.

The principal driver of this growth was sales of the Group's proprietary animal health products, which rose by 22 per cent.  The majority of this increase arose from the inclusion of Salmosan sales in Chile for a full year (2013: 7 months). Salmosan is the Group's market-leading sea lice treatment. The Group's development of sea lice products, to improve on Salmosan's effectiveness, has continued to make progress and should be in a position to impact revenues in the forthcoming financial year.

The Group's earnings are set out in the Consolidated Income Statement.  The Group made an operating loss of £1.2m (2013: operating profit £5.1m) due to an increase in operating costs year on year reflecting the increased scale of Group operations and a significant increase in spend on Investing Activities as outlined below.  Loss per share, both basic and diluted, was 1.04p (2013: basic earnings per share of 4.72p and diluted earnings per share of 4.56p).

EBITDA from Trading Activities (the full reported numbers excluding the costs relating to Investing Activities) fell by 11 per cent to £6.6m (2013: £7.4m), as the increased contribution from Salmosan in Chile was offset by investment in headcount and production infrastructure as the Group gears up for further growth.

Operating costs relating to Trading Activities (excluding amortisation and depreciation) increased by £2.8m to £8.3m (2013: £5.5m), reflecting the Group's organic and acquisitive growth with five acquisitions completed since March 2013.  Group headcount has increased from 159 at the start of the period to 222, primarily in order to deliver the acceleration of our new products pipeline and other planned growth.  Our ability to attract the highest calibre and most talented people from within our sector demonstrates our commitment to investing in the development of our team.

Costs relating to Investment Activities have increased by £5.2m year on year to £6.4m (2013: £1.2m) demonstrating the Group's strategy to invest in the growth of future revenue.  These costs include R&D expenditure of £2.7m (2013: £0.8m), pre-operational expenses for new ventures of £1.6m (2013: £0.2m), acquisition related costs of £0.4m (2013: £0.1m), the exceptional costs of £1.6m relating to the IPO (2013: £0.2m) and exceptional lease termination costs of £0.1m (2013: £nil). R&D expenditure is classified as an Investing Activity as it is one of the Group's key investment objectives. 

On 18 December 2013 the Company was admitted to AIM.  The IPO raised gross proceeds of £27.5m through the issue of 43m new ordinary shares.  Total IPO related costs (including share-based payment schemes) incurred in the period under review amounted to £3.1m.  Of this, £1.6m has been treated as exceptional costs and charged to income with the balance of £1.5m being offset against share premium.

Strategic overview

As outlined in the Company's Admission Document, your company's goal is to become the world-leading aquaculture health specialist and a leading global player in each of our markets.  Our intention is to build a diversified and balanced food sustainability group through investment in four key areas: high-quality scientific R&D; growing a strong business development team; attracting the highest calibre people; and expansion into existing and new business sectors through targeted M&A.

Benchmark has made progress in all these areas across all its divisions since flotation, ranging from an increase in the global work-force of 40 per cent to investment in the establishment of our state-of-the-art vaccine production facilities at the BioCampus near Edinburgh and at our existing vaccine facility in Braintree.

Most importantly, as Malcolm explains in his CEO review below, Benchmark's focused approach to synergistic M&A opportunities resulted both in the acquisition of aquaculture assets from Zoetis during the accounting period, an important step in not only improving the Company's Intellectual Property ('IP') portfolio but also accelerating the R&D pipeline. Furthermore, with the acquisition, post year end, of SalmoBreed and Stofnfiskur, two leading salmon breeding and genetics companies, a new Breeding and Genetics division for the Group was created.

Governance and the Board

In preparation for its listing on AIM during the year, the Company made a number of changes in its corporate governance. Three new Non-executive Directors were appointed (Susan Searle, Basil Brookes and myself as Chairman) joining the three Executive Directors on the Board (Malcolm Pye - CEO, Roland Bonney - COO and Mark Plampin - CFO). Following the IPO the Board established an Audit Committee, a Remuneration Committee and a Nominations Committee.

As Chairman, it has been my primary responsibility to lead the Board and ensure its effectiveness. The Board has had a full schedule of meetings, presentations, training sessions, papers and time spent one-to-one between the Executive Directors and the Non-executive Directors to ensure that the Board functions effectively, stays informed, and knows the business and its people in depth. In addition, my fellow Non-executive Directors and I have conducted site visits around the businesses since our appointment in December 2013. Board meetings have been held at different sites throughout the year to give the Board familiarity with the Group's geographically dispersed operations.

Both Susan Searle and Basil Brookes have worked hard to ensure the Audit and Remuneration functions have been robustly conducted and established.

Employees and sustainability

I have been very impressed with the calibre and commitment of the Company's employees that I have met since taking on my role as Chairman earlier in the year. I would like to thank all our employees for their continued efforts as they focus on executing the Company's strategy and on putting our values into action for the benefit of all our stakeholders.

We are proud to be a leader in running our business in accordance with the three 'E's: Environment, Ethics and Economics which we will describe within the Sustainability section of the 2014 Annual Report.

Outlook

Your Board is pleased that the Company is successfully executing the growth strategy set out at the time of the IPO and is optimistic about the opportunities ahead.   We are enthusiastic about the continued development of the new product pipeline and progress with corporate acquisitions where the Company is evaluating a number of targets. We have been successful in diversifying our revenues away from Salmosan and this, together with the relative resilience that the product has shown to the introduction of generics, puts us in a solid position. The integration of Stofnfiskur and Salmobreed is progressing well with early indications of synergies and growth opportunities materialising as expected.

Chief Executive's Statement

2014 was an outstanding year for Benchmark, beginning with the delivery of a highly successful IPO that is enabling us to unlock the immense potential in the dynamically growing markets in aquaculture, animal health and sustainable food production where we are becoming leading technology providers.

Our overall results for the year demonstrated solid performance in line with market expectations, with growth across the Group driving revenue up 28 per cent on 2013. Notwithstanding the commitment of senior management resource that went into the IPO, the management team has, throughout the year, also made strong progress with the implementation of the Group's overall strategy. This has been a year of significant progress on building the foundations for long-term success.

The Group's core business is in areas where there is a clear and immediate need for rapid development on a global scale. Examples of this are the increase of aquaculture production to replace declining marine and freshwater wild catch, the development of sustainable food production methods to reduce the food industry's considerable impact on the environment, the world wide need for technical knowledge, and the need to replace drugs with preventative medicines like vaccines. These are urgent concerns for humanity which are driving the long-term growth and development of our business and which we believe will continue to be key factors in these major markets.

In summary

The highlights of 2014, set out above demonstrate that the Group is well positioned to deliver long-term growth in revenues and EBITDA.

Our maiden year as a public company has seen the continuation of the fast-paced transformative development for the Group that we anticipated over the last decade. This environment presents the Group with many significant business opportunities. We continued to take advantage of this throughout the year and have made substantial investments in key areas to support our long-term strategy for sustainable growth.

Delivering Group strategy

The Benchmark group works as a 'gear box' to the 'engines of production' that are our core customers in the aquaculture, agriculture and food industries, whereby we provide the mechanisms for improvement through technical development. Our business divisions all support and influence one another, providing added insight and expertise across the breadth of the food chain, and driving efficiency.

Our core areas of focus within this are:

●      Innovating products and technologies driving improved efficiency of production

●      Development of the science and methodologies needed for advancing sustainable production

●      Providing the technology and systems to drive product quality improvement programmes

●      Delivering knowledge, training and education to our industries

Benchmark's overall strategy is to continue to grow the existing business whilst at the same time expanding into areas where the same fundamental biology can be exploited to drive innovation, development and synergies across the Benchmark companies.

At this point in our development, the key components required to ensure that we continue delivering this long-term growth strategy are:

●      Our people - We have to continue to attract and retain the highest calibre people to drive forward our development. We have grown the Benchmark team through the year with strong new recruits.

●      Investing strongly to build leadership capability in scientific research - This has been a very important year as we set out to sharply step up our research capability. We have made some very substantial progress and are pleased with the rapid increase in output that is being achieved.

●      The investment in our people and R&D programmes needs to be matched with investment in the high-quality production facilities and infrastructure needed to support our business development through this period of dynamic growth.  This work is now well underway with major projects progressing across the business.

Group performance

Growth in sales has been positive and our leading products have performed well. The entry of a generic to the market in Norway did not impact sales of our sea lice treatment Salmosan as negatively as predicted, with total sales remaining strong and trading ahead of management forecasts.

We have also seen volume growth across our vaccine business and have commenced significant investment at our UK sites in Edinburgh and Braintree to expand capacity in order to progress contract-manufacturing opportunities and provide the capability to manufacture new products coming out of our own development pipeline in the future.

Overall sales in the animal health business were up 27 per cent and towards the end of the year we had three product launches: Mydiavac®, the first of our own vaccines against Chlamydia in sheep, PondDTox®, an innovative water treatment launched together with Novozymes in the USA for fin-fish aquaculture, and a new contract manufactured cattle vaccine. These are predicted to contribute to further revenue growth in 2015 and demonstrate our ability to bring vaccines and new products to market; an increasing feature of our business going forward.

Our vision for the Technical Publishing business is to be a leading provider of news and commentary in order to create the platform to facilitate knowledge transfer and specialist education to those engaged in the agriculture, aquaculture and food chain industries. Part of our drive to grow this area of the business has been through expansion into new markets including Russia, Latin America and the Companion Animal sector. There is growing demand for these services. Revenues have grown in our Technical Publishing business by 23 per cent as advertising revenues have increased, the distance learning business has grown and technical book sales have also increased partly as a result of the acquisition of Old Pond Publishing in the second half of the year.

Revenues also increased by 46 per cent in the Sustainability Science division, as investment in vaccine trials facilities and new research facilities started to come into operation towards the end of the year. We are seeing growth in demand for our services as a result of increasing recognition by business managers across the globe of the importance of addressing the sustainable production challenges and doing business in a more responsible, socially and environmentally-acceptable way. The 2013 UN Global Compact-Accenture CEO Study on Sustainability reported that 80 per cent of global CEOs see sustainability as the primary route to growth in innovation and leading to competitive advantage in their industries and 93 per cent see it as important to the future of their business.

Transformative acquisitions strategy

Benchmark's strategy is based on long-term investment in high-value, research biology based business in the agri-food sector. This, coupled with a high level of reinvestment and our management team's ability to move quickly to access opportunities in these fast evolving markets, has allowed us to progressively position ourselves as a leader in each of our sectors.

Benchmark recognises that in some situations there is a stronger rationale for acquiring a business or technology than there is for developing that capacity in-house, and we continue to evaluate targeted acquisitions as part of our overall business development strategy. We have built a strong business development team to manage this work and where it is to our advantage we also work with external M&A advisors (Equity Strategies) to support and add additional strength to this strategic development work. In 2014 we successfully integrated five complementary businesses into the Group, adding capacity, expertise, know-how and additional revenue streams across each of our business divisions.

Our most recent acquisitions, completed post the year-end, are transformative and so have been included here for clarity. In December 2014, we successfully secured the purchase of two of the world's leading salmon breeding and genetics companies - Norway-based SalmoBreed and Iceland-based Stofnfiskur, giving Benchmark a unique platform in the genetics and breeding arena from which we can play a key role in shaping the future of the salmon and aquaculture industries.

The acquisitions of SalmoBreed and Stofnfiskur created a fourth business division within the Group, Benchmark Breeding & Genetics, which is expected to become the second largest supplier of salmon eggs and genetic expertise in the world. We believe the new business has great potential and that we can grow it very substantially in the future. This move reflects our continued commitment to the rapidly developing and growing global aquaculture industry and creates the opportunity for further integrated approaches to drive sustainable development together with many new synergies across the Group.

Looking forward

The rising global demand for sustainably produced animal protein will continue to drive growth in the aquaculture, animal health, and sustainable production technology sectors. The outlook for global aquaculture in particular is extremely positive with consumption from farmed stocks overtaking that of wild-caught fish, and fish from farmed stocks now providing more of the world's protein than beef (FAO). The aquaculture industry is ambitious, technology hungry and fast moving and its accelerated growth brings many challenges, the most serious of which is the management of disease. This is an area where we will continue to build our support for the global industry through the provision of integrated solutions, rapid-response on-farm diagnostic and clinical services, the development of new vaccines and medicines and the development of stock with improved genetics selected for greater efficiency and resistance to disease.

We continue to see increased recognition for our focus on the generation of animal vaccines and biologicals as alternatives to antibiotics. In 2014, the correlation between antibiotic use and the rise of increased resistance in humans received widespread attention from international governments and inter-governmental bodies. This was further supported when the UK Government's Longitude Prize 2014 awarded £10m to help solve the problem of global antibiotic resistance. We have set aside substantial funds for investment in developing our product pipeline, infrastructure and capabilities to support this important area and continue to see this as a key focus for the business.

Each of our business divisions is focused on an important area for the future development of our industry sectors and each can be characterized by the strong demand for scientific knowledge and progress. The Group will continue to move rapidly where necessary to access exciting opportunities that both develop and bring to market new innovations, and this will continue to drive the long term dynamic growth and success of the Group.

The Group is at an exciting stage of its development and is very well placed to deliver its ambitious long-term growth plans.

Chief Financial Officer's Review

Our maiden year as a public company has delivered a solid financial performance during a period of significant change.   Key factors driving this are the success of our branded animal health products and the strength in depth of our people.

Key Financials

£000	2014	2013
Total revenue	35,354	27,543
EBITDA from Trading Activities	6,623	7,403
Profit before tax from Trading Activities	5,031	6,021
(Loss)/profit before tax	(1,375)	4,853
EPS from Trading Activities (pence)	3.29	5.59
Basic EPS (pence)	-1.04	4.72

Divisional Analysis	Revenue		EBITDA from Trading Activities		Operating costs from Investing Activities		Operating profit/(loss)
£000	2014	2013	2014	2013	2014	2013	2014	2013
Animal Health	32,981	25,878	10,462	10,243	(4,622)	(1,006)	4,924	8,368
Sustainability Science	3,073	2,099	(1,028)	(285)	(140)	-	(1,439)	(418)
Technical Publishing	2,873	2,343	(272)	107	(52)	-	(515)	(3)
Corporate	833	783	(2,539)	(2,662)	(1,592)	(162)	(4,157)	(2,843)
Inter-segment sales	(4,406)	(3,560)	-	-	-	-	-	-
Total Group	35,354	27,543	6,623	7,403	(6,406)	(1,168)	(1,187)	5,104

Group Results

Group turnover increased by 28% to £35.4m in the year (2013: £27.5m). The principal driver of this strong growth was sales of the Group's own animal health products ("own products"), which rose by 22%.  The majority of this increase arises from the inclusion of Salmosan sales in Chile for a full year (2013: 7 months).  Sales of own products in the final two months of the year were strong with September seeing the highest monthly sales ever for the Group.  Revenue growth in Animal Health was driven by vaccine toll manufacturing, up 10%, and distribution of animal health products ("Factored Products"), up 35%.

Gross profit increased by 16% to £14.8m.  Gross profit percentage was 41.8% (2013 46.4%).  The reduction was principally due to a changing sales mix as the Group delivers its strategy to diversify revenue streams within its chosen markets.  Own product gross profit percentages were maintained at 2013 levels despite competition from a generic sea lice product in both Norway and the UK.

The Group made an operating loss of £1.2m (2013: operating profit £5.1m) due to an increase in operating costs year on year reflecting increased scale of Group's operations and a significant increase in spend on Investment Activities as outlined below.

The Group has chosen to sub-divide its reported figures in the financial statements into Trading Activities and Investing Activities in order to better present the performance of its business.  Trading Activities are those operations which generate earnings in the current period, and Investing Activities are those activities which have no associated income stream in the current period, but which are intended to provide the Group with income generating operations in the future.  Both activities are vital to the continued and future success of the Group.

Trading Activities

EBITDA from Trading Activities of £6.6m was 11% down on the previous year (2013: £7.4m), despite growth in total gross profit arising from the higher turnover. This is due to an increase in operating costs relating to Trading Activities (excluding amortisation and depreciation) of £2.8m to £8.3m (2013: £5.5m), reflecting the increased size of the Group and its strategy to invest in the people and infrastructure required to deliver continued revenue growth.  The Group's strategy to support organic growth with acquisitive growth has seen five acquisitions completed since March 2013.  Group headcount increased from 159 at the start of the period to 220, primarily in order to deliver the acceleration of our new product pipeline and other planned growth.  The Group's ability to attract the highest calibre and most talented people from its sector shows our commitment to investing in the development of our senior management. 

The increase in operating costs also includes higher spend on strategic marketing and legal and professional advice to provide enhanced protection for the intellectual property in the Group's products and services.  In addition, ongoing operating costs specifically related to being a public company amount to c. £0.25m.

Depreciation and amortisation at £1.4m in the year (2013: £1.1m) was higher than in previous years due to the higher tangible and intangible fixed assets balances following the increased investment in the year.

Investing Activities

Investing Activities comprise the following:

	2014	2013
	£000	£000
R&D expenditure	2,690	752
Pre-operational expenses	1,585	154
Acquisition related costs	440	100
Exceptional items:
IPO costs	1,298	162
Share based payment expense arising from IPO	292	-
Lease termination costs	101	-
	6,406	1,168

Research and development expenditure, one of the Group's key investment objectives, is classed as an Investing Activity as it is undertaken to provide growth in future income streams. Expenditure has increased significantly in the year as the Group embarked on its strategy of high quality scientific research and development as outlined in the Admission Document published in December 2013.  This included significant expansion of the new product development team and the recruitment of a Benchmark Vaccines R&D team.

We expect the trend for increased investment in research and development to continue into the future with expansion into marine aquaculture R&D through the acquisition of Viking Fish Farms Limited, the acquisition of intellectual property from Zoetis, the signing of an agreement with HypoPet to bring to market a breakthrough cat allergy vaccine and agreement for a license to use a next-generation aquaculture vaccine technology platform all taking place in the year.

Pre-operational expenses relate to the costs of setting up laboratory facilities in Norway and Thailand. Neither facility was operational in 2014, but significant operating costs were incurred as we demonstrate to regulatory authorities that both facilities meet local requirements. Both facilities will become fully operational during 2015.

Acquisition related costs were incurred in the period in respect of the acquisition of Viking Fish Farms Limited, Aquatic Veterinary Services, Atlantic Veterinary Services Limited, the Zoetis aquaculture assets and the trade and assets of Old Pond Publishing, again reflecting the focus on growth since the IPO.  Costs in the previous year related to the acquisition of Benchmark Vaccines.

Significant non-recurring costs were incurred in relation to the IPO. Total IPO costs amounted to £2.8m, of which £1.3m was treated as exceptional IPO costs and charged to income during the year, with the balance of £1.5m being offset against share premium.

A number of one-off share based payment transactions arose as part of the IPO. The expense for 2014 in relation to these schemes amounted to £0.3m.

Lease termination costs relate to the relocation of Fish Vet Group Norge AS to larger premises in Oslo, Norway.

Finance costs

Net finance costs have fallen in the year due to repayment of term loans and cash balances held on deposit following the IPO. Finance costs include a one-off write off of £0.1m unamortised arrangement fees arising from the early settlement of the term loan.

Taxation

The Group benefited from a tax credit for its UK and overseas operations of £0.1m in the period (2013: tax charge of £0.6m). This is principally as a result of the loss in the year, the tax deduction generated by the exercise of EMI share options at the time of the IPO and a tax credit from expenditure on R&D.

Earnings per share

Basic loss per share was -1.04p (2013: earnings per share 4.72p) and diluted loss per share was -1.04p (2013: diluted earnings per share 4.56p).  The movement year on year has been impacted by reduced earnings in the year as noted above, together with the issue of 43m new shares as part of the IPO exercise.

Earnings per Share from Trading Activities was 3.29p (2013: 5.59p).  Again, the reduction is a result of the impact of lower earnings and the dilutive effect of the higher number of shares in issue.

Dividend

The Company paid a dividend of 0.2p per share (rebased) prior to the IPO (2013: 0.4p per share (rebased)). As stated in the Admission Document, the Company intends in the future to implement a dividend policy taking into consideration the Company's cash flow generation and capital investment opportunities from time to time.  The Board does not recommend payment of a final dividend in respect of the year ended 30 September 2014.

Cash flow and balance sheet

Total cash inflow in the year was £14.8m, primarily from the net proceeds of the IPO (£24.7m), giving closing net cash balances of £16.5m.  Net cash outflow from operating activities was £0.5m.  After adding back the £1.3m IPO related costs, operating activities generated £0.8m of cash.

Net assets have increased by £25.4m to £37.3m (2013: £11.9m), primarily as a result of the net £24.7m raised in the IPO.

Some of the funds raised in the IPO have been used to invest in new businesses, tangible and intangible fixed assets across all of our operating divisions.  The balance sheet includes identifiable intangible assets of £2.0m arising on the acquisitions of intellectual property from Zoetis (£1.7m) and contractual relationships acquired in Vet-Aqua International and Aquatic Veterinary Services (£0.3m), and goodwill of £1.0m arising from the acquisitions of Old Pond Publishing, Viking Fish Farms Limited and Atlantic Veterinary Services Limited.  In addition, a technology licence agreement which was entered into with a third party for a cost of £2m, has been included in intangible assets, with £1.3m of the cost deferred into future periods.  Additions to tangible fixed assets include post acquisition investment in research facilities at Viking Fish Farms Limited, the construction of the new animal health centre at FAI Farms Limited and the development of the new customer suite and offices at Benchmark Vaccines Limited.

Treasury

The Group has established procedures to mitigate financial risk to ensure sufficient liquidity is available to meet foreseeable requirements.  These ensure that finance is secured at minimum cost where required and that cash assets are invested securely and profitably.  The finance function manages the Group's foreign exchange, liquidity and funding, interest rate and credit risks within a framework of policies and guidelines authorised by the Board.

The Group uses simple derivative financial instruments for risk management purposes only.  Group policy prohibits speculative arrangements. Transactions in financial instruments are always matched to an underlying business requirement, such as expected foreign currency revenues and payments. The Group uses derivatives only to manage its foreign currency and interest rate risks arising from underlying business activities.  No such derivatives were outstanding at the year end.

Treasury activities are reported to the Board on a monthly basis within the Group management accounts.

Foreign exchange risk

The Group's reporting currency is pounds Sterling.  Where Group entities operate with a different functional currency, the Group's policy is, where possible, to allow Group entities to settle liabilities denominated in their functional currency with the cash generated from their own operations in that currency.  Where Group entities have liabilities denominated in a currency other than their functional currency (and have insufficient reserves of that currency to settle them), cash already denominated in that currency will, where possible, be transferred from elsewhere within the Group.

Where significant transactions are conducted in currencies other than the functional currencies of the individual entities, exposure to movements in exchange rate is mitigated by the use of simple financial derivative instruments as appropriate.

Liquidity and funding

The Group's finance function is responsible for sourcing and structuring borrowing requirements.  All bank borrowings have been repaid in the year and the Group has sufficient funding facilities to meet its normal funding requirements in the medium term.

Interest rate management

Controls over interest rate exposures are in place and dealings are restricted to those banks with the necessary combination of geographic presence and suitable credit rating.  The Group currently has no bank loans.

Credit risk

The policy followed in managing credit risk permits only minimal exposures, with any surplus funds invested mainly in short term deposits with financial institutions that meet credit criteria approved by the Board.  Specifically, counterparty creditworthiness is determined by reference to credit ratings as defined by the global rating agencies, Fitch, Standard & Poors and Moodys.

1.     EBITDA from Trading Activities excludes costs relating to Investing Activities from reported IFRS numbers. Investing Activities comprise exceptional IPO related costs of £1.6m (2013: £0.2m), exceptional lease termination costs of £0.1m (2013: £nil), acquisition costs of £0.4m (2013: £0.1m), pre-operational expenses for new ventures of £1.6m (2013: £0.2m) and research and development expenditure of £2.7m (2013: £0.8m).

2.     Earnings per Share from Trading Activities excludes costs relating to Investing Activities from reported IFRS numbers. Investing Activities comprise exceptional IPO related costs of £1.6m (2013: £0.2m), exceptional lease termination costs of £0.1m (2013: £nil), acquisition costs of £0.4m (2013: £0.1m), pre-operational expenses for new ventures of £1.6m (2013: £0.2m) research and development expenditure of £2.7m (2013: £0.8m), and related tax credit on the above adjustments of £0.9m (2013: £0.4m).

Consolidated Income Statement (unaudited)
for the year ended 30 September 2014
		Trading Activities1 2014	Investing Activities2 2014	Total 2014	Trading Activities1 2013	Investing Activities2 2013	Total 2013
	Note	£000	£000	£000	£000	£000	£000
Revenue		35,354	-	35,354	27,543	-	27,543
Cost of sales		(20,582)	-	(20,582)	(14,766)	-	(14,766)
Gross profit		14,772	-	14,772	12,777	-	12,777
Other income		101	-	101	111	-	111
Operating costs		(8,250)	(4,715)	(12,965)	(5,485)	(1,006)	(6,491)
Operating costs - Exceptional	4	-	(1,691)	(1,691)	-	(162)	(162)
EBITDA		6,623	(6,406)	217	7,403	(1,168)	6,235
Depreciation	6	(533)	-	(533)	(347)	-	(347)
Amortisation	7	(871)	-	(871)	(784)	-	(784)
Operating (loss) / profit		5,219	(6,406)	(1,187)	6,272	(1,168)	5,104
Finance cost		(248)	-	(248)	(259)	-	(259)
Finance income		60	-	60	8	-	8
(Loss)/profit on ordinary activities before taxation		5,031	(6,406)	(1,375)	6,021	(1,168)	4,853
Tax on (loss)/profit on ordinary activities		(860)	914	54	(937)	377	(560)
(Loss)/profit for the year		4,171	(5,492)	(1,321)	5,084	(791)	4,293
(Loss)/profit for the year attributable to:
-       Owners of the parent		4,177	(5,492)	(1,315)	5,085	(791)	4,294
-       Non-controlling interest		(6)	-	(6)	(1)	-	(1)
		4,171	(5,492)	(1,321)	5,084	(791)	4,293
Basic (loss) / earnings per share (pence)	5	3.29		(1.04)	5.59		4.72
Diluted (loss) / earnings per share (pence)	5	3.23		(1.04)	5.40		4.56

¹ Before items described in footnote 2 below

² Includes exceptional items (costs relating to the IPO and lease termination costs), research and development expenditure, pre-operational expenses for new ventures and costs of acquiring new businesses as set out in note 9.

Consolidated Statement of Comprehensive Income (unaudited)
for the year ended 30 September 2014
			Trading Activities1 2014 £000	Investing Activities2 2014 £000	Total 2014 £000		Trading Activities1 2013 £000		Investing Activities2 2013 £000	Total 2013 £000
(Loss)/profit for the year			4,171	(5,492)	(1,321)		5,084		(791)	4,293
Other comprehensive income/(expense)
Movement on foreign exchange reserve			89	-	89		(5)		-	(5)
Total comprehensive (expense)/ income for the year			4,260	(5,492)	(1,232)		5,079		(791)	4,288
Total comprehensive (expense)/income for the year attributable to:
-       Owners of the parent			4,266	(5,492)	(1,226)		5,080		(791)	4,289
-       Non-controlling interest			(6)	-	(6)		(1)		-	(1)
			4,260	(5,492)	(1,232)		5,079		(791)	4,288

¹ Before items described in footnote 2 below

² Includes exceptional items (costs relating to the IPO and lease termination costs), research and development expenditure, pre-operational expenses for new ventures and costs of acquiring new businesses as set out in note 9

Consolidated Balance Sheet (unaudited)
as at 30 September 2014
			2014		2013
		Note	£000		£000
Assets
Non-current assets
Property, plant and equipment		6	7,242		3,572
Intangible assets		7	7,821		3,674
Trade and other receivables			523		-
Deferred tax assets			339		241
Total non-current assets			15,925		7,487
Current assets
Inventories			4,470		4,203
Agricultural assets			539		507
Trade and other receivables			11,058		6,969
Cash and cash equivalents (excluding bank overdrafts)			16,511		3,250
Total current assets			32,578		14,929
Total assets			48,503		22,416
Liabilities
Current liabilities
Trade and other payables			(8,281)		(5,069)
Loans and borrowings			(115)		(2,244)
Corporation tax liability			(48)		(857)
Provisions			(1,080)		-
Total current liabilities			(9,524)		(8,170)
Non-current liabilities
Loans and borrowings			(96)		(2,199)
Other payables			(1,631)		-
Provisions			-		(135)
Total non-current liabilities			(1,727)		(2,334)
Total liabilities			(11,251)		(10,504)
Net assets			37,252		11,912
Issued capital and reserves attributable to owners of the parent
Share capital		8	137		90
Share premium reserve		8	26,903		693
Capital redemption reserve			5		5
Share based payment reserve			1,106		626
Foreign exchange reserve			74		(15)
Retained earnings			9,017		10,497
Equity attributable to owners of the parent			37,242		11,896
Non-controlling interest			10		16
Total equity and reserves			37,252		11,912

Consolidated Statement of Changes in Equity (unaudited)
for the year ended 30 September 2014
	Share capital	Share premium reserve	Other reserves	Retained earnings		Total attributable to equity holders of parent			Non-controlling interest		Total equity
	£000	£000	£000	£000		£000			£000		£000
At 1 October 2012	92	693	294	6,876		7,955			17		7,972
Comprehensive income for the year*
Profit/(loss) for the year	-	-	-	4,294		4,294			(1)		4,293
Other comprehensive expense	-	-	(5)	-		(5)			-		(5)
Total comprehensive income for the year	-	-	(5)	4,294		4,289			(1)		4,288
Contributions by and distributions to owners*
Dividends	-	-	-	(401)		(401)			-		(401)
Share based payment	-	-	233	-		233			-		233
Deferred tax on share options*	-	-	92	-		92			-		92
Shares purchased for cancellation	(2)	-	2	(272)		(272)			-		(272)
Total contributions by and distributions to owners	(2)	-	327	(673)		(348)			-		(348)
At 30 September 2013	90	693	616	10,497		11,896			16		11,912
Comprehensive income for the year
Loss for the year	-	-	-	(1,315)		(1,315)			(6)		(1,321)
Other comprehensive income	-	-	89	-		89			-		89
Total comprehensive income for the year	-	-	89	(1,315)		(1,226)			(6)		(1,232)
Contributions by and distributions to owners
Dividends	-	-	-	(165)		(165)			-		(165)
IPO costs recognised through equity	-	(1,538)	-	-		(1,538)			-		(1,538)
Acquisition part paid in shares	-	100	-	-		100			-		100
Share based payment	3	-	438	-		441			-		441
Deferred tax on share options	-	-	42	-		42			-		42
IPO share issue	43	27,457	-	-		27,500			-		27,500
Employee shares issued	1	191	-	-		192			-		192
Total contributions by and distributions to owners	47	26,210	480	(165)		26,572			-		26,572
At 30 September 2014	137	26,903	1,185	9,017		37,242			10		37,252
*A total of £92,000 of deferred tax on share options has been reclassified from "comprehensive income for the year" to "contributions by and distributions to owners" in respect of the year ended 30 September 2013
Consolidated Statement of Cash Flows (unaudited)
for the year ended 30 September 2014
					2014			2013
			Note		£000			£000
Cash flows from operating activities
(Loss)/profit before tax					(1,375)			4,853
Adjustments for:
Depreciation of property, plant and equipment			6		533			347
Amortisation of intangible fixed assets			7		871			784
Loss on sale of property, plant and equipment					41			3
Finance income					(60)			(8)
Finance expense					248			259
Share based payment expense					438			233
					696			6,471
Increase in trade and other receivables					(4,272)			(1,483)
Decrease in inventories and agricultural assets					3			254
Increase in trade and other payables					2,903			1,268
Increase / (decrease) in provisions					945			(450)
					275			6,060
Income taxes paid					(812)			(542)
Net cash flows (used in) / from operating activities					(537)			5,518
Investing activities
Acquisition of subsidiaries, net of cash acquired					(2,942)			(280)
Purchases of property, plant and equipment					(3,864)			(1,636)
Purchase of intangibles					(727)			(156)
Interest received					60			-
Net cash flows used in investing activities					(7,473)			(2,072)
Financing activities
Proceeds of IPO share issue					27,500			-
IPO costs recognised through equity					(1,538)			-
Employee share issues					195			-
Purchase of ordinary shares					-			(272)
Proceeds from bank borrowings					-			145
Repayment of bank borrowings					(2,864)			(876)
Interest paid					(248)			(251)
Payments to finance lease creditors					(105)			(42)
Dividends paid to the holders of the parent					(165)			(401)
Net cash flows from / (used in) financing activities					22,775			(1,697)
Net increase in cash and cash equivalents					14,765			1,749 1,749
Cash and cash equivalents at beginning of year					1,746			(3) (3)
Cash and cash equivalents at end of year					16,511			1,746

Notes forming part of the financial statements

for the year ended 30 September 2014

1      Basis of preparation

The results for the year ended 30 September 2014, including comparative financial information, have been prepared in accordance with International Financial Reporting Standards ("IFRS"), and their interpretations adopted by the European Union.

Benchmark Holdings plc ("the Company") has adopted all IFRS in issue and effective for the year.

While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of IFRS, this announcement does not itself contain sufficient information to comply with IFRS. The Company expects to publish full financial statements that comply with IFRS in January 2015.

The financial information set out above does not constitute the Company's statutory accounts for the years ended 30 September 2014 or 2013, but is derived from those accounts. Statutory accounts for 2013 have been delivered to the Registrar of Companies. The auditors have reported on those accounts: their reports were unqualified, did not draw attention to any matters by way of emphasis and did not contain statements under s498 (2) or (3) of the Companies Act 2006. The accounts for 2014 will be delivered following the Company's AGM.

The financial information presented in respect of the year ended 30 September 2014 has been prepared on a basis consistent with that presented in the annual report for the year ended 30 September 2013.

2.   Accounting policies

The accounting policies adopted are consistent with those of the financial year ended 30 September 2013.

Trading Activities and Investing Activities are disclosed and described separately in the interim financial information where it is necessary to do so to provide further understanding of the financial performance of the Group.

The Group has acquired new licences during the period which have been capitalised within intangible assets. The accounting policy in respect of licences will be updated in the financial statements for the year ending 30 September 2014 to reflect the differing asset lives of these newly acquired licences. The useful economic life applied to licences will be adjusted to 6 - 15 years.

Additionally the Group has acquired intellectual property assets during the period which have been capitalised within intangible fixed assets. Such assets will be amortised over a period of up to 20 years.

 

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 three reportable segments as follows:

●      Animal Health Division- provides veterinary services, environmental services, diagnostics and animal health products to global aquaculture and agriculture, and manufactures licenced veterinary vaccines and vaccine components;

●      Sustainability Science Division- provides sustainable food production consultancy, technical consultancy and assurance services.

●      Technical Publishing Division- promotes sustainable food production and ethics through online news and technical publications for the international agriculture and food processing sectors.

Measurement of operating segment profit or loss

The Group separates its operations into Trading Activities and Investing Activities to report segmental performance. These measures are used by management for planning and reporting purposes. These measures are not defined in International Financial Reporting Standards and may not be comparable with similarly described measures used by other companies. Trading and Investing Activities are described further in note 9

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.

Segment assets exclude tax assets and assets used primarily for corporate purposes.  Segment liabilities exclude tax liabilities and loans and borrowings unless directly related to individual segments.

Year ended 30 September 2014				Animal Health	Sustainability Science		Technical Publishing	Corporate		Inter-segment sales	Total
			Notes	£000	£000		£000	£000		£000	£000
Revenue				32,981	3,073		2,873	833		(4,406)	35,354
Cost of sales				(18,548)	(2,339)		(2,438)	(1,210)		3,953	(20,582)
Gross profit/(loss)				14,433	734		435	(377)		(453)	14,772
Other income				-	101		-	-		-	101
Operating costs relating to Trading Activities				(3,971)	(1,863)		(707)	(2,162)		453	(8,250)
EBITDA from Trading Activities				10,462	(1,028)		(272)	(2,539)		-	6,623
Operating costs relating to Investing Activities:
R&D expenditure				(2,690)	-		-	-		-	(2,690)
Pre-operational expenses				(1,585)	-		-	-		-	(1,585)
Acquisition related expenses				(222)	(108)		(12)	(98)		-	(440)
Exceptional items			4	(125)	(32)		(40)	(1,494)		-	(1,691)
EBITDA				5,840	(1,168)		(324)	(4,131)		-	217
Depreciation				(309)	(182)		(16)	(26)		-	(533)
Amortisation				(607)	(89)		(175)	-		-	(871)
Operating profit/(loss)				4,924	(1,439)		(515)	(4,157)		-	(1,187)
Finance expense											(248)
Finance income											60
Group loss before tax											(1,375)

Year  ended 30 September 2013			Animal Health	Sustainability Science	Technical Publishing	Corporate	Inter-segment sales	Total
		Notes	£000	£000	£000	£000	£000	£000
Revenue			25,878	2,099	2,343	783	(3,560)	27,543
Cost of sales			(13,605)	(1,808)	(1,546)	(1,180)	3,373	(14,766)
Gross profit			12,273	291	797	(397)	(187)	12,777
Other income			-	111	-	-	-	111
Operating costs relating to Trading Activities			(2,030)	(687)	(690)	(2,265)	187	(5,485)
EBITDA from Trading Activities			10,243	(285)	107	(2,662)	-	7,403
Operating costs relating to Investing Activities:
R&D expenditure			(752)	-	-	-	-	(752)
Pre-operational expenses			(154)	-	-	-	-	(154)
Acquisition related expenses			(100)	-	-	-	-	(100)
Exceptional items		4	-	-	-	(162)	-	(162)
EBITDA			9,237	(285)	107	(2,824)	-	6,235
Depreciation			(148)	(133)	(47)	(19)	-	(347)
Amortisation			(721)	-	(63)	-	-	(784)
Operating profit/(loss)			8,368	(418)	(3)	(2,843)	-	5,104
Finance expense								(259)
Finance income								8
Group profit before tax								4,853

 

4      Exceptional items

Items that are material because of their size or nature, non-recurring and whose significance is sufficient to warrant separate disclosure and identification within the consolidated financial statements are referred to as exceptional items. The separate reporting of exceptional items helps to provide an understanding of the Group's underlying performance.

		2014	2013
		£000	£000
Exceptional IPO costs		1,298	162
Exceptional share based payment expense arising from IPO		292	-
Lease termination costs		101	-
Total exceptional costs		1,691	162

On 18 December 2013 Benchmark Holdings plc was admitted to trading on AIM. The IPO raised gross proceeds of £27.5 million through the issue of 42,968,750 new ordinary shares. However, significant non-recurring costs were incurred in relation to the IPO and it is deemed necessary to separately identify these costs within the results for year.

Total IPO costs amounted to £2,836,000. Of this, £1,298,000 has been treated as exceptional IPO costs and charged to income during the period, with the balance of £1,538,000 being offset against the share premium account.

A number of one-off share based payment transactions arose as part of the IPO. The expense for the current year in relation to these transactions amounted to £292,000.

5.     Earnings per share

Basic earnings per share is calculated by dividing the profit attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares in issue during the period.

			2014	2013
Net (loss)/profit attributable to equity holders of the parent (£000)			(1,315)	4,294
Weighted average number of shares in issue (thousands)			126,959	91,037
Basic (loss)/earnings per share (pence)			(1.04)	4.72

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. This is done by calculating the number of shares that could have been acquired at fair value (determined as the average market price of the Company's shares since admission to AIM) based on the monetary value of the subscription rights attached to outstanding share options and warrants.

Therefore the Company is required to adjust the earnings per share calculation in relation to the share options that are in issue under the Company's share based incentive schemes as follows:

			2014	2013
Net (loss)/profit attributable to equity holders of the parent (£000)			(1,315)	4,294
Weighted average number of shares in issue (thousands)			126,959	94,084
Diluted basic (loss)/earnings per share (pence)			(1.04)	4.56

A total of 2,250,000 potential ordinary shares have not been included within the calculation of statutory diluted earnings per share for the year (2013: nil) as they are anti-dilutive. However, these potential ordinary shares could dilute earnings per share in the future.

Earnings per share from Trading Activities

Net profit attributable to equity shareholders has been adjusted to exclude exceptional items and other operating costs relating to Investing Activities as disclosed in note 9.

			2014	2013
Profit from Trading Activities attributable to equity holders of the parent (£000)			4,177	5,085
Weighted average number of shares in issue (thousands)			126,959	91,037
Earnings per share from Trading Activities (pence)			3.29	5.59

Diluted earnings per share from Trading Activities were as follows:

			2014	2013
Profit from Trading Activities attributable to equity holders of the parent (£000)			4,177	5,085
Weighted average number of adjusted shares in issue (thousands)			129,209	94,084
Diluted earnings per share from Trading Activities (pence)			3.23	5.40

6.     Property, plant and equipment

Group	Freehold Land and Buildings	Assets in the Course of Construction	Long Term Leasehold Property Improve-ments	Plant and Machinery	E commerce Infra-structure	Office Equipment and Fixtures	Total
	£000	£000	£000	£000	£000	£000	£000
Cost
Balance at 1 October 2012	-	-	945	1,617	238	535	3,335
Additions	700	-	376	535	137	-	1,748
Disposals	-	-	-	(13)	-	-	(13)
Balance at 1 October 2013	700	-	1,321	2,139	375	535	5,070
Additions	28	142	1,264	2,340	8	248	4,030
On acquisition	-	-	30	198	-	-	228
Reclassification	-	-	-	-	(179)	179	-
Exchange differences	-	-	-	(3)	-	(13)	(16)
Disposals	-	-	-	(134)	-	(44)	(178)
Balance at 30 September 2014	728	142	2,615	4,540	204	905	9,134
Accumulated depreciation
Balance at 1 October 2012	-	-	47	839	118	159	1,163
Depreciation charge for the year	-	-	53	166	32	96	347
Disposals	-	-	-	(12)	-	-	(12)
Balance at 1 October 2013	-	-	100	993	150	255	1,498
Depreciation charge for the year	-	-	134	253	37	109	533
Reclassification	-	-	-	-	(42)	42	-
Exchange differences	-	-	-	(2)	-	-	(2)
Disposals	-	-	-	(93)	-	(44)	(137)
Balance at 30 September 2014	-	-	234	1,151	145	362	1,892
Net book value
At 30 September 2014	728	142	2,381	3,389	59	543	7,242
At 30 September 2013	700	-	1,221	1,146	225	280	3,572
At 1 October 2012	-	-	898	778	120	376	2,172

7      Intangible assets

	Websites	Goodwill	Patents and Trademarks	Intellectual Property	Contracts	Licences	Total
	£000	£000	£000	£000	£000	£000	£000
Cost
Balance at 1 October 2012	515	1,419	374	-	1,565	1,194	5,067
Additions - externally acquired	-	270	156	-	-	-	426
Balance at 1 October 2013	515	1,689	530	-	1,565	1,194	5,493
Additions - externally acquired	2	1,012	60	1,678	270	1,996	5,018
Balance at 30 September 2014	517	2,701	590	1,678	1,835	3,190	10,511
Accumulated amortisation and impairment
Balance at 1 October 2012	328	273	374	-	43	17	1,035
Amortisation charge for the year	63	-	-	-	522	199	784
Balance at 1 October 2013	391	273	374	-	565	216	1,819
Amortisation charge for the year	68	-	14	-	522	267	871
Balance at 30 September 2014	459	273	388	-	1,087	483	2,690
Net book value
At 30 September 2014	58	2,428	202	1,678	748	2,707	7,821
At 30 September 2013	124	1,416	156	-	1,000	978	3,674
At 1 October 2012	187	1,146	-	-	1,522	1,177	4,032

 

Additions to goodwill, intellectual property and contracts are detailed in note 10.

 

8   Share capital and share premium
	Share Capital		Share premium
Allotted, called up and fully paid	Number	£000	£000
Ordinary shares of £1 each
Balance at 1 October 2012	91,711	92	693
Shares purchased for cancellation	(1,404)	(2)	-
Balance at 1 October 2013	90,307	90	693
Shares issued as part consideration for acquisition of Viking Fish Farms Ltd	184	-	100
Exercise of share options	1,500	2	-
Balance immediately prior to Admission 18 December 2013	91,991	92	793
Ordinary shares of 0.1 penny each
Conversion of one old Ordinary Share of £1 each into 1,000 new Ordinary Shares of 0.1p each	91,991,000	92	793
Exercise of share options	1,457,000	1	-
Placing shares: 42,968,750 of 0.1p each at 64p per share	42,968,750	43	27,457
Less IPO costs recognised through equity	-	-	(1,538)
Benchmark Share Incentive Plan	560,345	1	191
Balance at 30 September 2014	136,977,095	137	26,903

On 14 October 2013 the Company issued 184 ordinary shares of £1 each at a price of £543.48 per share as consideration for the acquisition of 100 ordinary shares of £1 each in the capital of Viking Fish Farms Limited.

On 21 November 2013, the Company allotted and issued a total of 1,500 ordinary shares of £1 each to 10 employees of the Group relating to share options granted in August 2010.

Immediately prior to Admission to trading on AIM on 18 December 2013, each of the Ordinary Shares of £1 was subdivided into 1,000 shares of 0.1p each.

On 18 December 2013, the Company placed 42,968,750 new shares of 0.1p each at a price of 64p per share. On the same date the Company allotted and issued a total of 1,457,000 Ordinary Shares of 0.1p each to 27 employees of the Group relating to share options granted in June 2012 and August 2013.

On 23 January 2014 the Company issued 560,345 shares of 0.1 pence each in respect of the Benchmark Share Incentive Plan ("SIP"). The SIP shares consist of shares purchased at 64p per share up to a maximum amount of £1,500 each by eligible employees ("Partnership Shares") as well as free matching shares granted subject to certain conditions of the SIP ("Matching Shares").

9.     Trading and Investing Activities

The Group separates its operations into Trading Activities and Investing Activities in order to report the performance of its business. Trading Activities are those operations which generate earnings in the current period. Investing Activities are those activities which have no associated income stream in the current period, but which are intended to provide the Group with income generating operations in future periods. These measures are used by management for planning and reporting purposes and in discussions with and presentations to investment analysts and are defined below. These measures are not defined in International Financial Reporting Standards and may not be comparable with similarly described measures used by other companies.

In arriving at Trading Activities, the following Investing Activities are excluded from reported results:

-       exceptional costs relating to the Company's flotation on AIM

-       costs of acquiring new businesses (Benchmark Vaccines in 2013, Viking Fish Farms Ltd and Atlantic Veterinary Services Ltd in 2014) and costs related to the purchase of Zoetis aquaculture assets and the trade and assets of Old Pond Publishing in 2014

-       one-off lease termination costs

-       pre-operational expenses for new ventures (Fish Vet Group Norge and Fish Vet Group Asia)

-       expenditure on research and development

A reconciliation of reported earnings to earnings from Trading Activities is shown below.

Reconciliation of Reported Earnings to Earnings from Trading Activities - year ended 30 September 2014

		Investing Activities
	Year ended 30 September 2014	Exceptional items	Acquisition  related costs	Pre-operational expenses for new ventures	R&D expenditure	Trading Activities
	£000	£000	£000	£000	£000	£000
Revenue	35,354	-	-	-	-	35,354
Cost of sales	(20,582)	-	-	-	-	(20,582)
Gross profit	14,772	-	-	-	-	14,772
Other income	101	-	-	-	-	101
Operating costs	(12,965)	-	440	1,585	2,690	(8,250)
Operating costs - Exceptional	(1,691)	1,691	-	-	-	-
EBITDA	217	1,691	440	1,585	2,690	6,623
Depreciation	(533)	-	-	-	-	(533)
Amortisation	(871)	-	-	-	-	(871)
Operating (loss)/profit	(1,187)	1,691	440	1,585	2,690	5,219
Finance cost	(248)	-	-	-	-	(248)
Finance income	60	-	-	-	-	60
(Loss)/profit on ordinary activities before taxation	(1,375)	1,691	440	1,585	2,690	5,031
Tax on profit on ordinary activities	54	(50)	(30)	-	(834)	(860)
(Loss)/profit for the period	(1,321)	1,641	410	1,585	1,856	4,171
(Loss)/profit for the period attributable to:
- Owners of the parent	(1,315)	1,641	410	1,585	1,856	4,177
- Non-controlling interest	(6)	-	-	-	-	(6)
	(1,321)	1,641	410	1,585	1,856	4,171
Earnings per share (pence)	(1.04)	1.30	0.32	1.25	1.46	3.29
Weighted average number of shares (millions)	126,959	126,959	126,959	126,959	126,959	126,959

Reconciliation of Reported Earnings to Earnings from Trading Activities - year ended 30 September 2013

		Investing Activities
	Year ended 30 September 2013	Exceptional non-acquisition related items	Exceptional acquisition  related costs	Pre-operational expenses for new ventures	R&D expenditure	Trading Activities
	£000	£000	£000	£000	£000	£000
Revenue	27,543	-	-	-	-	27,543
Cost of sales	(14,766)	-	-	-	-	(14,766)
Gross profit	12,777	-	-	-	-	12,777
Other income	111	-	-	-	-	111
Operating costs	(6,491)	-	100	154	752	(5,485)
Operating costs - Exceptional	(162)	162	-	-	-	-
EBITDA	6,235	162	100	154	752	7,403
Depreciation	(347)	-	-	-	-	(347)
Amortisation	(784)	-	-	-	-	(784)
Operating profit	5,104	162	100	154	752	6,272
Finance cost	(259)	-	-	-	-	(259)
Finance income	8	-	-	-	-	8
Profit on ordinary activities before taxation	4,853	162	100	154	752	6,021
Tax on profit on ordinary activities	(560)	-	(23)	-	(354)	(937)
(Loss)/profit for the period	4,293	162	77	154	398	5,084
(Loss)/profit for the period attributable to:
- Owners of the parent	4,294	162	77	154	398	5,085
- Non-controlling interest	(1)	-	-	-	-	(1)
	4,293	162	77	154	398	5,084
Earnings per share (pence)	4.72	0.18	0.08	0.17	0.44	5.59
Weighted average number of shares (millions)	91,037	91,037	91,037	91,037	91,037	91,037

10.   Business Combinations

Details of the fair value of the consideration paid and assets acquired during the year are shown below:

	Viking Fish Farms Ltd	Atlantic Veterinary Services Ltd	Vet-Aqua Inter-national	Zoetis aquacul-ture assets	Old Pond Publishing	Aquatic Veterinary Services	Allan Environ-mental	Total
	£000	£000	£000	£000	£000	£000	£000	£000
Consideration
Cash	300	167	-	1,852	584	100	-	3,003
Deferred consideration	-	-	333	-		-	75	408
Equity	100	-	-	-	-	-	-	100
Total consideration	400	167	333	1,852	584	100	75	3,511
Fair value of assets acquired
Fixed assets	54	-	-	174	-	-	-	228
Intellectual property (included in intangibles)	-	-	-	1,678	-	-	-	1,678
Contracts	-	-	170	-	-	100	-	270
Inventories	19	-	11	-	272	-	-	302
Debtors	77	11	253	-	-	-	-	341
Cash	42	19	-	-	-	-	-	61
Trade and other creditors	(10)	-	(101)	-	-	-	-	(111)
Tax and social security	(6)	(25)	-	-	-	-	-	(31)
Deferred income	(145)	-	-	-	-	-	-	(145)
Loans	(75)	-	-	-	-	-	-	(75)
Accruals	(2)	(5)	-	-	(12)	-	-	(19)
Total identifiable net assets	(46)	-	333	1,852	260	100	-	2,499
Goodwill	446	167	-	-	324	-	75	1,012

During the year the following business combinations occurred:

●      On 14 October 2013 Benchmark Holdings Limited acquired 100% of the issued share capital of Viking Fish Farms Limited for consideration of £400,000, comprising £300,000 cash and 184 ordinary shares with a fair value of £100,000.  The goodwill arising is attributable to the ability to expand the Group's research and development activities into marine aquaculture.

●      On 9 December 2013 FVG Limited acquired 100% of the issued share capital of Atlantic Veterinary Services Limited, an Irish registered business, for €200,000 cash consideration.  On the same date that it purchased Atlantic Veterinary Services Ltd, FVG Limited entered into a put and call option agreement to purchase a related party, Vet-Aqua International, for a maximum consideration of €400,000, such consideration being dependent upon certain conditions being met. The option can be exercised between 30 June and 31 July 2016. The terms of the agreement indicate that FVG Limited effectively assumed control of Vet Aqua International at the date of signing the agreement by virtue of the fact that it has control over the business relating to inputs, processes and outputs and that any material change can only be effected by FVG Limited's consent. Under IFRS3 (Business Combinations) these facts demonstrate that FVG Limited has had control of Vet-Aqua International since the date the option agreement was signed, and so the results of Vet-Aqua International have been consolidated into the Group from that date.  The goodwill arising on the acquisition of Atlantic Veterinary Services Ltd is attributable to the expansion into a new geographical location.

●      On 17 February 2014 FVG Limited purchased the aquaculture vaccine and development assets from animal health company Zoetis Inc. for US$3m cash consideration. The deal also included the acquisition of a worldwide license to utilise specific Zoetis 'know how' to help drive the future research and development of these aquaculture vaccines.

●      On 1 April 2014 5M Enterprises Limited acquired the trade and assets of Old Pond Publishing for cash consideration of £584,000.  The acquisition sees the Group strengthen its position as a leader in the supply of knowledge transfer, market analysis and e-commerce to the global food chain.  The goodwill arising from the acquisition is attributable to the potential for organic growth from the increased range and scale of the Group's publishing service.

●      On 28 May 2014 FVG Limited acquired the business and assets of Aquatic Veterinary Services for cash consideration of £100,000, all of which related to the value of existing customer contracts. 

●      Allan Environmental Limited acquired the trade and assets of Allan Environmental Solutions during the previous financial year. The earn-out terms included in that agreement have been reassessed and contingent consideration has been increased by £75,000 in this respect.

Entities acquired during the year contributed £1,700,000 to the Group's revenue and reduced Trading EBITDA from Trading Activities by £100,000 for the period. If the acquisitions had taken place at the start of the period, the Group's pro-forma revenue and EBITDA from Trading Activities would have been approximately £35,600,000 and £6,700,000 respectively.

11.   Events after the reporting date

On 18 December 2014 the Company announced that it had acquired the entire issued share capital of SalmoBreed AS ("SalmoBreed") and 89.45 per cent. of the issued share capital of Stofnfiskur HF ("Stofnfiskur") (the "Acquisitions") and that it had placed 82,353,000 new Ordinary Shares in the Company at 85 pence per share ("the Placing"), raising gross proceeds of £70 million to fund the Acquisitions and to increase the vaccine manufacturing capacity of its BioCampus facility in Edinburgh.

SalmoBreed is a leading salmon genetics company founded in 1999 based in Norway. SalmoBreed specialises in identifying and developing genetic material which improves areas such as growth, disease resistance and product quality.

Stofnfiskur is a salmon breeding company founded in Iceland in 1991 which differentiates itself through its ability to supply eggs outside the natural salmon breeding season allowing the salmon farming operations to optimise their efficiency.

The combination of SalmoBreed and Stofnfiskur will create what the Directors believe will be a world leading salmon and aquaculture breeding business and the world's second largest salmon egg producer.  Benchmark Genetics Limited will be formed, creating a fourth business division for the Company.

The consideration for SalmoBreed comprises an initial payment of NOK 205,000,000 (approximately £19.5m) and up to an additional amount of NOK 30,000,000 (approximately £2.9m) under an earn-out over three years upon the satisfaction of certain performance conditions.

The consideration for 89.45 per cent. of Stofnfiskur comprises an upfront payment of approximately £21.8m with up to an additional amount of approximately £9.0m under an earn-out over three years. The Company may seek to purchase additional shares in Stofnfiskur to increase its shareholding.

The fair value of the assets and liabilities acquired in both of these acquisitions has not yet been finalised.

The Company has identified significant synergies between the Acquisitions, which are a complementary fit within the existing Benchmark business as breeding technology is one of the primary drivers of efficient production, disease management and sustainability. The technology used in genetics and breeding also function within the same fundamental biology currently being exploited in the Company's Animal Health and Sustainability Science divisions.

The Acquisitions reflect Benchmark's continued commitment to the aquaculture industry, which now supplies more animal protein to the global market than beef. The Acquisitions also represent a long-term platform to expand into other aquaculture markets such as tilapia, catfish, grouper, sea bass, sea bream and shrimp.

The Company intends to use up to £10m of the Placing proceeds to expand and accelerate the development of its vaccine manufacturing facility in Edinburgh in response to continued growth in its vaccine division, increased requirements to satisfy its pipeline and demand of contract manufacture business and the additional specialist capacity required to manufacture the HypoCat vaccine.

 

END

 

 

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