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Benchmark Hlgs PLC (BMK)

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Tuesday 25 June, 2019

Benchmark Hlgs PLC

Interim Results

RNS Number : 2669D
Benchmark Holdings PLC
25 June 2019
 

BENCHMARK HOLDINGS PLC

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

Interim results for the six months ended 31 March 2019

Progress towards commercialisation of pipeline products and structural efficiencies

Benchmark (LSE:BMK), the aquaculture health, genetics and advanced nutrition business, announces its interim results for the six months ended 31 March 2019 (the "period").

 

£m

 

H1 2019

 

H1 2018

 

Change %

Constant Currency Change5 %

Adjusted





Revenue

78.3

75.7

3%

2%

Adjusted EBITDA1

7.5

6.0

25%

23%

Adjusted Operating Profit2

2.7

2.9

(7%)

10%

Adjusted Profit Before Tax3

0.7

3.6

(80%)

(86%)

Statutory





Revenue

78.3

75.7

3%

2%

Loss before tax

(8.3)

(5.6)

(48%)

(50%)

(Loss)/Profit for the period

(9.1)

3.6

(353%)

(355%)

Basic (loss)/earnings per share (pence)

(1.71)

0.67

(355%)


Net Debt4

(65.5)

(41.3)

(59%)


 

1 Adjusted EBITDA which reflects underlying profitability, is earnings before interest, tax, depreciation, amortisation, impairment, exceptional items and acquisition related expenditure as shown in the income statement.  

2 Adjusted Operating Profit is operating loss before exceptional items including acquisition related items and amortisation of intangible assets excluding development costs as shown in note 16 to the condensed consolidated financial statements

3 Adjusted profit before tax is earnings before tax, amortisation and impairment of acquired intangibles, exceptional items and acquisition related expenditure as shown in note 16 to the condensed consolidated financial statements 

4 Net debt is cash and cash equivalents less loans and borrowings as shown in note 16 to the condensed consolidated financial statements

5 Constant Currency change reflects the percentage change after retranslating 2019 figures using the same foreign exchange rates experienced in 2018.

 

H1 2019 Highlights:

Adjusted EBITDA growth driven by increased revenues and move towards higher value product mix

·    Revenue increased by 3% to £78.3m (H1 2018 £75.7m) despite challenging conditions in the global shrimp markets, with growth in Genetics, Health and Knowledge Services more than offsetting a drop in advanced nutrition

·    Adjusted EBITDA increased by 25% to £7.5m (H1 2018: £6.0m) reflecting the contribution of higher value products, an increase in the value of biological assets as a result of growing sales and increasing capacity in Norway, and cost control

·    Adjusted EBITDA margin increased to 9.6% (H1 2018: 8.0%)

·    Loss for the period reflects increased depreciation following recent investments and higher finance costs (H1 2018 profit benefitted from one-off deferred tax credit of £9.2m)

·    R&D investment of £8.5m (10.9% of sales) (H1 2018: £7.8m (10.3% of sales)), of which £2.9m was capitalised (H1 2018: £2.2m, 10.3%)6

·    Net debt was £65.5m including £26m ringfenced non-recourse debt to fund the Salten salmon egg facility in Norway

6 Capitalised R&D relates to trials and development work for products which have proven to be commercially viable and are close to launch, with the largest being the Group's next generation sea lice treatment.

Progress towards commercialisation of key products

·    The regulatory process is on track for the market launch of our next generation sea lice treatment. Commercial scale trials continue to show c. 99% efficacy amid growing customer interest

·    Trials in Asia of our disease resistant shrimp continued to show good results for survivability, yield and consistency, demonstrating their commercial potential. Production of broodstock for export commenced at the new facility in Florida

·    Production at new land based salmon egg facility in Salten, Norway ramped up to plan, and commercial opening took place post period end

Delivering on structural and operational efficiency initiatives

·    Streamlined Advanced Nutrition production facilities in Asia resulting in the sale of one site

·    Closure of one of the Company's lumpfish operations

·    Progress in developing alternatives for the commercialisation of companion animal products

Post period-end milestones 

·    Refinanced our USD$90m credit facilities and increased flexibility through the issuance of a four year term, NOK850m (c.USD$95m equivalent) bond listed in Oslo and a USD$15m revolving credit facility

·    Signed a joint venture in Thailand to commence construction of the first multiplication centre for the roll-out of our disease resistant shrimp in Asia

·    Entered into an agreement to dissolve the salmon genetics joint venture with AquaChile.  Decision to take control of a breeding facility owned by the JV to pursue an independent strategy in Chile

Commenting, Malcolm Pye, Chief Executive said:

"We have delivered growth in Adjusted EBITDA and made progress against our strategic priorities despite challenging conditions in the shrimp markets. We continue to implement operational and structural efficiency initiatives and we expect the Group to deliver broadly in line with market expectations for the full year.

"We are starting to see benefits from the investments we have made into a number of areas including our new facility in Salten, Norway. These investments, combined with the successful completion of our refinancing, leaves us well placed to deliver on our five year strategy to drive future growth and profitability."

 

ENDS

A presentation for analysts will be held today at 09.30 at the offices of Numis Securities, London Stock Exchange Building, 10 Paternoster Square, London, EC4M 7LT. To register your interest, please contact [email protected] The presentation will also be accessible via a live conference call for registered participants. To register for the call please contact MHP Communications on +44 (0)20 3128 8226 or by email on [email protected]

This announcement will be available on our website (www.benchmarkplc.com)

For further information, please contact:

Benchmark Holdings plc               

Malcolm Pye, CEO                                          

Tel: 020 3915 1236

Mark Plampin, CFO


Ivonne Cantu, Investor Relations




Numis (Broker and NOMAD)

James Black, Freddie Barnfield, Freddie Naylor-Leyland

Tel: 020 7260 1000



MHP Communications

Tel: 020 3128 8742 

Katie Hunt, Reg Hoare, Alistair de Kare-Silver

[email protected]

 

 

Interim Management Report

Overview

The Group delivered growth in revenue and Adjusted EBITDA despite difficult conditions in the global shrimp and Mediterranean seabass/bream markets. In addition, substantial progress was made against the Group's strategic priorities including its next generation sea lice treatment, its specific pathogen / disease resistant (SPR) shrimp and the prioritised development of its pipeline of products. The Group is implementing a programme of structural and operational efficiencies to reallocate capital towards its key aquaculture opportunities whilst maintaining strict cost control and active management of working capital in order to accelerate the path to profitability and free cashflow generation.

Conditions in our end markets

Global demand for salmon continued to grow in the period resulting in stable prices and a favourable environment for salmon producers and for our products. Global salmon production increased by c.5% during the period with strong growth in demand coming from the US and the Americas, China and South Korea.

In shrimp, the industry experienced low prices as a result of temporary overstocking following a record harvest in 2018. This led our customers to reduce and delay production with an impact on demand for our products.

In the Mediterranean, demand and prices for farmed sea bass and sea bream have been affected by the economic environment in Turkey, the major producing country, which has put pressure on farmers across the Mediterranean.

Trading performance

Genetics

The Company's Genetics division performed well with revenues and Adjusted EBITDA increasing by 8% and 73% to £22.6m and £4.9m respectively. The result was driven by increased volumes in salmon eggs, particularly from the recently launched disease resistant eggs and from an increase in the value of biological assets as a result of growing sales and increasing capacity at the Group's new land based salmon egg facility in Norway.

The division also benefitted from an increase in sales to Chile from Iceland following the launch of Benchmark Genetics Chile (BGC) under our joint venture with AquaChile. In the short period since launch, BGC has achieved market recognition creating a good platform for it to pursue its future independent strategy. Following the agreement with AgroSuper to exit the JV, Benchmark will, in the coming weeks, wholly own a standalone and established breeding facility in Chile where it will continue its work to develop local broodstock with high value genetic traits. In the short term, the Group will continue to export salmon eggs from its operation in Iceland to satisfy demand in Chile as it continues to develop its position in this important market.

The opening of the Group's new state-of-the-art land-based facility in Salten, Norway has been well received by customers and will play an important role in the future growth and development of our genetics business.

Trials of our disease resistant shrimp continued to show good results in Asia and commercial scale trials are underway. During the period we commenced broodstock production at our facility in Florida. We continued to invest in our tilapia genetics programme.

There is significant under-penetration of professional genetics in shrimp and tilapia, and growing recognition of the potential of genetics to improve productivity without any environmental impact or animal welfare concerns.

Advanced Nutrition

As mentioned in our 2018 annual report, the year commenced with challenging conditions in the global shrimp markets which affected sales volumes in Advanced Nutrition. On the supply side, the market environment caused deep discounting of CIS artemia, affecting demand for our higher quality GSL artemia where we maintain a premium positioning. These conditions prevailed through the period resulting in a decrease in sales and Adjusted EBITDA of 7% and 15% to £40.9m and £9.6m respectively mainly driven by a drop in artemia sales; sales of diet products were up by 1% versus H1 2018.

Animal Health

In Animal Health, revenues and Adjusted EBITDA improved by 73% and 23% respectively, reducing the Adjusted EBITDA loss in the division from (£7.9m) in H1 2018 to (£6.1m). The result reflects an increase in sales of Salmosan, our sea lice treatment which performed well in the period, and in toll manufacturing revenues at our vaccine facility in Braintree, where we are increasingly manufacturing vaccines for use in trials of our aqua vaccine programme.

Strategic Progress - 2019 Priorities

In January 2019, at the time of our full year results, we set out our strategic milestones for the year aligned to our five-year strategy. We are pleased to provide an update on progress against these milestones.

1.    Grow in established markets from existing capacity and through partnerships

·    The commercial opening of our state-of-the-art salmon egg facility in Norway took place on time in May 2019 and the ramp-up of production is progressing as planned

·    We launched Benchmark Genetics Chile and are taking ownership of a local breeding facility to continue to build our presence in the market

2.    Commercial delivery of pipeline products

·    We continued with trials in Norway for our next generation sea lice treatment as planned, which have consistently shown c.99% efficacy. Our regulatory approval process is on track

·    Our programme of trials for our sea bass/bream vaccines continued to show good results and we have continued development of our salmon vaccine portfolio

·    Options for the Group's companion animal products are still being evaluated, with the most likely outcome being the establishment of a commercialisation partnership

3.    Focused investment in markets that leverage the Group platform

·    Our shrimp genetics programme leverages our expertise in genetics and our position in the shrimp hatcheries market through Advanced Nutrition. We established a production facility in Florida and are investing to establish multiplication centres in Asia through joint ventures with local partners, starting with Thailand

Financial Review

Group revenue for the period increased by 3.4% to £78.3m (H1 2018: £75.7m) driven by revenue growth in Animal Health, Genetics and all other segments (Knowledge Services) of 73%, 8% and 11% respectively. This was offset partially by revenue falling in Advanced Nutrition by 7%.

Adjusted EBITDA (earnings before interest, tax, depreciation, amortisation, impairment, exceptional items and acquisition related expenditure) which is used by management as the primary measure of financial performance as it provides a more meaningful measure of the underlying performance of the Group, increased to £7.5m (H1 2018: £6.0m). The increase arose principally from increased sales, positive movement in biological assets and a shift in mix towards higher margin products across the business. This was offset by the reduction in contribution from Advanced Nutrition as a result of challenging market conditions and by an increase in operating expenses related to the strengthening of management to ensure delivery of key strategic priorities.

Overall investment in R&D (expensed and capitalised) increased from £7.8m to £8.5m. The increase is a result of an increase in the level of capitalised development costs as the new products progress through the development phase, and expensed R&D was in line with the previous half year.

The Group's operating loss of £6.3m is the same as the prior period. Depreciation and Impairment during the period increased by £1.6m to £4.8m. £0.7m of the increase was a direct result of recent investment in production capacity and £0.6m relates to the closure of one of the Group's lumpfish sites. Loss before taxation increased to £8.3m (H1 2018: £5.6m). The period was impacted by higher net finance costs of £2.0m (H1 2018: net finance income £0.7m) resulting both from increased net debt during the year and from the impact of the foreign exchange gain of £1.6m arising from the revaluation of USD denominated debt in H1 2018; the comparative gain in H1 2019 was £0.1m.

The loss for the period was £9.1m (H1 2018: profit £3.6m).  H1 2018 profit arose from an exceptional tax credit of £9.2m due to a decrease in the tax rates in Belgium from 34% to 25% which reduced the deferred tax liability on the intangible assets from the INVE acquisition.  Loss per share was 1.71p (H1 2018: earnings 0.67p).

Net debt increased to £65.5m (FY 2018: £55.7m; H1 2018: £41.3m). The movement in the half year arose as cashflow from operations of £4.1m was offset by a payment of USD8.75m relating to deferred consideration for the salmon genetics JV in Chile, investments in tangible and intangible capital expenditure of £3.7m and £3.1m respectively, tax payments of £1.2m and interest payments of £2.0m.  Capital additions consisted largely of maintenance capital expenditure spread across the Group and intangible capital expenditure related to capitalised development costs mainly relating to the next generation sea lice treatment programme.

Outlook and Summary

Conditions in the Group's core markets remain mixed with salmon benefitting from growing demand and stable prices, while overstocking in the shrimp market has resulted in depressed prices and a decrease in production levels amongst our customers, affecting demand for our products.

Despite prevailing market conditions, we achieved revenue and Adjusted EBITDA growth in the first half. We will continue to implement operational and structural efficiency initiatives and we expect the Group to deliver broadly in line with market expectations for the full year.

The long term drivers and opportunities in our markets continue to be strong and we have made significant progress in the development of our major products, in the conversion of certain facilities from investment to commercial production phase, and in the implementation of key efficiency initiatives which bring further focus on the opportunities with the greatest potential returns. 

 


Independent Review Report to Benchmark Holdings plc

Conclusion

We have been engaged by the company to review the condensed set of financial statements in the half-yearly report for the six months ended 31 March 2019 which comprises the consolidated income statement, the consolidated statement of comprehensive income, the consolidated balance sheet, the consolidated statement of changes in equity, the consolidated cash flow statement and the related explanatory notes. 

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly report for the six months ended 31 March 2019 is not prepared, in all material respects, in accordance with the recognition and measurement requirements of International Financial Reporting Standards (IFRSs) as adopted by the EU and the AIM Rules

Scope of review 

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK.  A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.  We read the other information contained in the half-yearly report and consider whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. 

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit.  Accordingly, we do not express an audit opinion. 

The impact of uncertainties due to the UK exiting the European Union on our review

Uncertainties related to the effects of Brexit are relevant to understanding our review of the condensed financial statements. Brexit is one of the most significant economic events for the UK, and at the date of this report its effects are subject to unprecedented levels of uncertainty of outcomes, with the full range of possible effects unknown. An interim review cannot be expected to predict the unknowable factors or all possible future implications for a company and this is particularly the case in relation to Brexit.

Directors' responsibilities 

The half-yearly report is the responsibility of, and has been approved by, the directors.  The directors are responsible for preparing the half-yearly report in accordance with the AIM Rules. 

As disclosed in note 2, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the EU.  The directors are responsible for preparing the condensed set of financial statements included in the half-yearly financial report in accordance with the recognition and measurement requirements of IFRSs as adopted by the EU. 

Our responsibility 

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly report based on our review

The purpose of our review work and to whom we owe our responsibilities

This report is made solely to the company in accordance with the terms of our engagement.  Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose.  To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached. 

 

 

Frances Simpson

for and on behalf of KPMG LLP 

Chartered Accountants 

1 Sovereign Square, Sovereign Street, Leeds, LS1 4DA

25 June 2019


Consolidated Income Statement

for the 6 months ended 31 March 2019

 

 

Notes

6 months
ended
31 March 2019
(unaudited)

6 months
ended
31 March 2018
(unaudited)

12 months
ended
30 September 2018
(audited)



£000

£000

£000






Revenue

8

78,251

75,714

151,467

Cost of sales


(40,350)

(41,637)

(77,447)

Gross profit


37,901

34,077

74,020

Research and development costs


(5,619)

(5,621)

(12,040)

Other operating costs


(24,524)

(22,178)

(44,600)

Share of loss of equity-accounted investees, net of tax


(265)

(231)

(362)

Adjusted EBITDA²


7,493

6,047

17,018

Exceptional including acquisition related items

9

-

-

(1,239)

EBITDA¹


7,493

6,047

15,779

Depreciation and impairment

12

(4,778)

(3,148)

(6,841)

Amortisation and impairment

13

(9,003)

(9,153)

(18,002)

Operating loss


(6,288)

(6,254)

(9,064)

Finance cost


(2,451)

(1,069)

(4,927)

Finance income


409

1,730

332

Loss before taxation


(8,330)

(5,593)

(13,659)

Tax on loss

10

(752)

9,164

9,270

(Loss)/profit for the period


(9,082)

3,571

(4,389)






(Loss)/profit for the period attributable to:





- Owners of the parent


(9,528)

3,492

(5,009)

- Non-controlling interest


446

79

620



(9,082)

3,571

(4,389)






Basic (loss)/earnings per share (pence)

11

(1.71)

                0.67

(0.94)






Diluted (loss)/earnings per share (pence)

11

(1.71)

                0.66

(0.94)

 

 

 

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

2 Adjusted EBITDA - EBITDA before exceptional and acquisition related items

 


Consolidated Statement of Comprehensive Income

for the 6 months ended 31 March 2019

 

 


6 months
ended
31 March 2019
(unaudited)

6 months
ended
31 March 2018
(unaudited)

12 months
ended
30 September 2018
(audited)



£000

£000

£000






(Loss)/profit for the period


(9,082)

3,571

(4,389)

Other comprehensive income





Items that are or may be reclassified subsequently to profit or loss





Foreign exchange translation differences


(7,472)

(10,318)

7,624

Cash flow hedges - changes in fair value


(159)

-

-

Cash flow hedges - reclassified to profit or loss


12

-

-

Total comprehensive income for the period


(16,701)

(6,747)

3,235






Total comprehensive income for the period attributable to:





- Owners of the parent


(16,732)

(6,864)

2,546

- Non-controlling interest


31

117

689



(16,701)

(6,747)

3,235

 

 


Consolidated Balance Sheet

as at 31 March 2019

 

 


As at
31 March 2019

As at
31 March 2018

As at
30 September 2018



(unaudited)

(unaudited)

(audited)


Notes

£000

£000

£000

Assets





Non-current assets





Property, plant and equipment

12

94,392

89,961

99,527

Intangible assets

13

315,563

310,723

325,386

Equity-accounted investees


17,022

2,749

17,457

Other investments


34

112

29

Biological and agricultural assets


4,483

4,924

8,502

Trade and other receivables


4,140

-

4,145

Total non-current assets


435,634

408,469

455,046

Current assets





Inventories


21,630

21,618

20,483

Biological and agricultural assets


17,709

13,612

11,892

Trade and other receivables


36,960

32,991

41,337

Cash and cash equivalents


23,832

21,869

24,090

Total current assets


100,131

90,090

97,802

Total assets


535,765

498,559

552,848

Liabilities





Current liabilities





Trade and other payables


(36,081)

(34,133)

(45,680)

Loans and borrowings

14

(1,685)

(558)

(898)

Corporation tax liability


(4,408)

(5,716)

(2,629)

Provisions


(70)

(429)

(70)

Total current liabilities


(42,244)

(40,836)

(49,277)

Non-current liabilities





Loans and borrowings

14

(87,677)

(62,627)

(78,868)

Other payables


(1,202)

(1,232)

(1,219)

Deferred tax


(38,522)

(41,134)

(41,637)

Total non-current liabilities


(127,401)

(104,993)

(121,724)

Total liabilities


(169,645)

(145,829)

(171,001)

Net assets


366,120

352,730

381,847

Issued capital and reserves attributable to owners of the parent





Share capital

3

558

522

557

Additional paid-in capital


358,044

339,431

357,894

Capital redemption reserve


5

5

5

Retained earnings


(36,958)

(20,376)

(28,240)

Hedging reserve


(147)

-

-

Foreign exchange reserve


38,896

28,042

45,953

Equity attributable to owners of the parent


360,398

347,624

376,169

Non-controlling interest


5,722

5,106

5,678

Total equity and reserves


366,120

352,730

381,847

 

 

The notes on the following pages are an integral part of this interim consolidated financial information


Consolidated Statement of Changes in Equity

for the 6 months ended 31 March 2019

 

 

 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

As at 30 September 2017 (audited)

522

339,431

38,403

(24,742)

353,614

4,971

358,585

Comprehensive income for the year








(Loss)/profit for the year

-

-

-

(5,009)

(5,009)

620

(4,389)

Other comprehensive income

-

-

7,555

-

7,555

69

7,624

Total comprehensive income for the year

-

-

7,555

(5,009)

2,546

689

3,235

Contributions by and distributions to owners








Share issue

35

18,463

-

-

18,498

-

18,498

Share based payment

-

-

-

1,511

1,511

-

1,511

Total contributions by and distributions to owners

35

18,463

-

1,511

20,009

-

20,009

Changes in ownership








Acquisition of NCI without a change in control

-

-

-

-

-

18

18

Total changes in ownership interests

-

-

-

-

-

18

18

Total transactions with owners of the Company

35

18,463

-

1,511

20,009

18

20,027

As at 30 September 2018 (audited)

557

357,894

45,958

(28,240)

376,169

5,678

381,847









As at 30 September 2017 (audited)

522

339,431

38,403

(24,742)

353,614

4,971

358,585

Comprehensive income for the period








Profit for the period

-

-

-

3,492

3,492

79

3,571

Other comprehensive income

-

-

(10,356)

-

(10,356)

38

(10,318)

Total comprehensive income for the period

-

-

(10,356)

3,492

(6,864)

117

(6,747)

Contributions by and distributions to owners








Share based payment

-

-

-

874

874

-

874

Total contributions by and distributions to owners

-

-

-

874

874

-

874

Changes in ownership








Acquisition of NCI without a change in control

-

-

-

-

-

18

18

Total changes in ownership interests

-

-

-

-

-

18

18

Total transactions with owners of the Company

-

-

-

874

874

18

892

As at 31 March 2018 (unaudited)

522

339,431

28,047

(20,376)

347,624

5,106

352,730









As at 30 September 2018 (audited)

557

357,894

45,958

(28,240)

376,169

5,678

381,847

Comprehensive income for the period








(Loss)/profit for the period

-

-

-

(9,528)

(9,528)

446

(9,082)

Other comprehensive income

-

-

(7,204)

-

(7,204)

(415)

(7,619)

Total comprehensive income for the period

-

-

(7,204)

(9,528)

(16,732)

31

(16,701)

Contributions by and distributions to owners








Share issue

1

150

-

-

151

-

151

Share based payment

-

-

-

810

810

-

810

Total contributions by and distributions to owners

1

150

-

810

961

-

961

Changes in ownership








Disposal of subsidiary with NCI

-

-

-

-

-

13

13

Total changes in ownership interests

-

-

-

-

-

13

13

Total transactions with owners of the Company

1

150

-

810

961

13

974

As at 31 March 2019 (unaudited)

558

358,044

38,754

(36,958)

360,398

5,722

366,120

 

Other reserves in this statement is an aggregation of Capital redemption reserve, Hedging reserve and Foreign exchange reserve.


Consolidated Statement of Cash Flows

for the 6 months ended 31 March 2019

 

 


6 months
ended
31 March 2019
(unaudited)

6 months
ended
31 March 2018
(unaudited)

12 months
ended
30 September 2018
(audited)


Notes

£000

£000






Cash flows from operating activities





(Loss)/profit for the period


(9,082)

3,571

(4,389)

Adjustments for:





Depreciation and impairment of property, plant and equipment

12

4,778

3,148

6,841

Amortisation and impairment of intangible fixed assets

13

9,003

9,153

18,002

(Gain)/loss on sale of property, plant and equipment


(27)

5

8

Finance income


(409)

(1,730)

(332)

Finance costs


2,451

1,069

2,432

Other adjustments for non-cash items


68

-

(1,931)

Share of profit of equity-accounted investees, net of tax


265

231

362

Foreign exchange losses/(gains)


1,016

(1,314)

2,609

Share based payment expense


810

874

1,511

Tax charge/(credit)

10

752

(9,164)

(9,270)



9,625

5,843

15,843

Decrease/(increase) in trade and other receivables


2,481

4,409

(4,355)

Increase in inventories


(1,548)

(1,819)

(815)

Increase in biological assets


(3,635)

(1,369)

(4,102)

Decrease in trade and other payables


(1,543)

(8,837)

(4,026)

Decrease in provisions


-

(29)

(388)



5,380

(1,802)

2,157

Income taxes paid


(1,245)

(1,119)

(5,898)

Net cash flows from/(used) in operating activities


4,135

(2,921)

(3,741)

Investing activities





Purchase of investments


(6,833)

(377)

(6,356)

Purchase of property, plant and equipment

12

(3,734)

(12,881)

(25,072)

Purchase of intangibles

13

(3,113)

(2,249)

(7,581)

Proceeds from sale of non-current assets


250

131

233

Interest received


178

94

261






Net cash flows used in investing activities


(13,252)

(15,282)

(38,515)






Financing activities





Proceeds of share issues


1

-

18,498

Proceeds from bank or other borrowings


11,035

28,273

41,206

Acquisition of non-controlling interests


-

(32)

(33)

Repayment of bank borrowings


-

(5,840)

(5,815)

Cash advances and loans made to other parties


-

-

(4,076)

Interest and finance charges paid


(2,002)

(896)

(2,442)

Payments to finance lease creditors


(4)

(212)

(218)

Net cash inflow from financing activities


9,030

21,293

47,120

Net (decrease)/increase in cash and cash equivalents


(87)

3,090

4,864

Cash and cash equivalents at beginning of year


24,090

18,779

18,779

Effects of movements in exchange rate on cash held


(171)

-

447

Cash and cash equivalents at end of year


23,832

21,869

24,090


1.     Financial information

 

This announcement does not constitute statutory financial statements within the meaning of the Companies Act 2006 and the interim financial information included within has not been audited.

 

This information has been approved for issue by the Board of Directors of Benchmark Holdings plc, a company domiciled and incorporated in the United Kingdom.

 

Statutory accounts for the year ended 30 September 2018 were approved by the Directors on 24 January 2019 and delivered to the Registrar of Companies. The audit report received on those accounts was unqualified and did not contain any emphasis of matter paragraph nor any statement under Section 498 of the Companies Act 2006.

 

2.     General information and basis of preparation

 

The financial information set out in these interim financial statements for the six months ended 31 March 2019 and the comparative figures for the six months ended 31 March 2018 are unaudited. They have been prepared in accordance with the recognition and measurement requirements of International Financial Reporting Standards (IFRS) and IFRIC interpretations issued by the International Accounting Standards Board (IASB) adopted by the European Union and the AIM Rules. They do not contain all the information required for statutory financial statements and should be read in conjunction with the consolidated financial statements of the Group for the year ended 30 September 2018, which have been prepared in accordance with IFRS as adopted by the European Union.

 

The interim financial statements comprise the financial statements of the Group and its subsidiaries at 31 March 2019. Subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtained control, and continue to be consolidated until the date when such control ceases.

 

The interim financial statements incorporate the results of business combinations using the acquisition method. In the consolidated balance sheet, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date.

 

Non-controlling interests, presented as part of equity, represent the proportion of a subsidiary's profit or loss and net assets that is not held by the Group.  The total comprehensive income or loss of non-wholly owned subsidiaries is attributed to owners of the parent and to the non-controlling interests in proportion to their respective ownership interests.

 

On consolidation, the results of overseas operations are translated into sterling at rates approximating to those ruling when the transactions took place.  All assets and liabilities of overseas operations, including goodwill arising on the acquisition of those operations, are translated at the rate ruling at the reporting date. Exchange differences arising are recognised in other comprehensive income and accumulated in the foreign exchange reserve.

 

Exchange differences recognised in the income statement in the Group entities' separate financial statements on the translation of long-term monetary items forming part of the Group's net investment in the overseas operation concerned are reclassified to other comprehensive income and accumulated in the foreign exchange reserve on consolidation.

 

This is the first set of the Group's financial statements where IFRS 9 and IFRS 15 have been applied. These are described in Note 5.

 

The following adopted IFRSs have been issued but have not been applied by the Group in these financial statements.

IFRS 16 Leases introduces a single, on-balance sheet accounting model for lessees which has an effective date of 1 January 2019. The Group will adopt IFRS 16 on 1 October 2019. 

 

As the Group reported £11.3m of undiscounted operating lease commitments at 30 September 2018, it is anticipated that the new standard will have a significant impact on the Group's reported assets and liabilities. In addition, the implementation of the standard will affect the Consolidated Income Statement and classification of cash flows.  The Group has not yet quantified the potential impact of this standard. A reliable estimate of the effect is dependent on several unresolved issues and will depend on the circumstances at the time of adoption. Work is ongoing to assess the full impact of this standard and this will be provided in the Annual Report for the year ended 30 September 2019. 

 

The adoption of other standards is not expected to have a material effect on the financial statements.

 

A financial review of the business is included in the Chairman's Statement.

3.     Share capital

 

During the 6 months to 31 March 2019, the Company issued a total of 532,536 shares of 0.1p each to certain employees of the Group relating to share options granted in March 2015, July 2015 and March 2016.

 

On 2 October 2018 the Company issued 246,700 shares at 0.1p each at 60.8p as part consideration for the acquisition of Videntis AS.

 

4.     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 Chairman's Statement.

 

As at 31 March 2019 the Group had net assets of £366.1m (30 September 2018: £381.8m), including cash of £23.8m (30 September 2018: £24.1m) as set out in the consolidated balance sheet. The Group made a loss for the period of £9.1m (12 months ending 30 September 2018: £4.4m).

 

On 24 June 2019, the Company completed a successful refinance of the existing banking facility replacing facilities of USD90m with Norwegian listed bonds valuing NOK850m (cUSD95m, c£75m) with an expiry date of 2023 and an associated $15m (c£12m) revolving credit facility available until 2022. As part of the process certain financial covenant requirements have been revised.

 

As at 24 June 2019, the existing banking facilities have been repaid in full with proceeds from the bond issue and drawings against the revolving credit facility were £nil. The most recent month end cash reserves at 31 May 2019 were £21.2m.

 

The Directors have prepared trading and cash flow forecasts for the Group covering the period to September 2020, including forecast compliance with the revised covenants. These forecasts include a number of assumptions in relation to trading performance across the Group including supply, demand and pricing of key raw materials and products, and the out-licensing of certain products in development. The forecasts also contain a number of board approved initiatives ("Structural Efficiencies programme") relating to structural and operational efficiencies to reallocate capital, reduce costs, grow margins, prioritise R&D spend, and exit from non-core activities.

 

The Directors have considered reasonably possible downside sensitivity scenarios, including mitigating actions within their control should these occur around deferring and reducing non-essential capital and revenue expenditure. These forecast cashflows, considering the ability and intention of the directors to implement mitigating actions should they need to, provide sufficient headroom in the forecast period.

 

The Directors have considered all of the factors noted above and are confident that the Group has adequate resources to continue to meet its liabilities as and when they fall due the period of 12 months from the date of approval of these interim condensed financial statements. Accordingly, the interim condensed financial statements have been prepared on a going concern basis.

5.     Accounting policies

 

Except as described below, the accounting policies adopted are consistent with those used in preparing the consolidated financial statements for the financial year ended 30 September 2018.

 

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

 

IFRS 9 Financial Instruments is effective for periods beginning on or after 1 January 2018 and so has been adopted with effect from 1 October 2018. The standard introduced a new impairment model for financial assets and new rules for hedge accounting. For trade and other receivables, the carrying values were shown net of a provision for impairment which equate to fair value, under IFRS 9 they are carried at amortised cost less impairment due to their purpose being the collection of contract cash flows. In determining the impairment, the group has applied the simplified approach permitted. This change in measurement has had no material impact on the group's financial position.



 

5.     Accounting policies (continued)

 

The group has elected to adopt the new general hedge accounting model in IFRS 9. This requires the Group to ensure that hedge accounting relationships are aligned with its risk management objectives and strategy and to apply a more qualitative and forward-looking approach to assessing hedge effectiveness. The Group uses forward foreign exchange contracts to hedge the variability in cash flows arising from changes in foreign exchange rates relating to certain foreign currency borrowings. The Group designates only the change in fair value of the spot element of the forward exchange contract as the hedging instrument in cash flow hedging relationships. The effective portion of changes in fair value of hedging instruments is accumulated in a cash flow hedge reserves as a separate component of equity.

IFRS 15 Revenue from Contracts with Customers, is effective for periods beginning on or after 1 January 2018 and so has been adopted with effect from 1 October 2018.  IFRS 15 supersedes IAS 11 Construction Contracts, IAS 18 Revenue, IFRIC 13 Customer Loyalty Programmes, IFRIC 15 Agreements for the Construction of Real Estate, IFRIC 18 Transfers of Assets from Customers and SIC 31 Revenue - Barter Transactions Involving Advertising Services. Following a detailed assessment and based on the nature of the Group's revenue streams, the adoption of the IFRS 15 did not have a material impact on the Group revenue recognition or profit.

6.     Estimates

 

The preparation of interim 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 interim 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 2018.

7.     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 as follows:

 

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

·      Benchmark Genetics Division - 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 Animal Nutrition Division - manufactures and provides technically advanced nutrition and health products to the global aquaculture industry.

 

In addition to the above, reported as "all other segments" is the Knowledge Services division. The division provides sustainable food production consultancy, technical consultancy and assurance services and promotes sustainable food production and ethics through online news and technical publications for the international agriculture and food processing sectors and through delivery of training courses to the industries.

 

In order to reconcile the segmental analysis to the Consolidated Income Statement, Corporate and Inter-segment sales are also shown. Corporate represents revenues earned from recharging certain central costs to the operating divisions, 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.

 



6 months ended 31 March 2019 (unaudited)



 Animal Health

 Genetics

 Advanced Animal Nutrition

 All other segments

 Corporate

 Inter-segment sales

 Total


Notes

 £000

 £000

 £000

 £000

 £000

 £000

 £000

 Revenue


7,150

22,602

40,900

8,264

3,590

(4,255)

78,251

 Cost of sales


(6,812)

(10,332)

(19,526)

(4,244)

(172)

736

(40,350)

 Gross profit / (loss)


338

12,270

21,374

4,020

3,418

(3,519)

37,901

 Research and development costs


(2,425)

(1,735)

(1,459)

-

-

-

(5,619)

 Operating costs


(4,051)

(5,341)

(10,348)

(3,283)

(5,020)

3,519

(24,524)

 Share of profit of equity-accounted investees, net of tax


-

(265)

-

-

-

-

(265)

 Adjusted EBITDA


(6,138)

4,929

9,567

737

(1,602)

-

7,493

 Exceptional including acquisition related items

9

-

-

-

-

-

-

-

 EBITDA


(6,138)

4,929

9,567

737

(1,602)

-

7,493

 Depreciation and impairment


(1,356)

(1,286)

(771)

(1,306)

(59)

-

(4,778)

 Amortisation


(107)

(1,030)

(7,339)

(527)

-

-

(9,003)

 Operating profit / (loss)


(7,601)

2,613

1,457

(1,096)

(1,661)

-

(6,288)

 Finance cost








(2,451)

 Finance income








409

 Loss before taxation








(8,330)



 

7.   Segment information (continued)

 

 

 


6 months ended 31 March 2018 (unaudited) 



 Animal Health

 Genetics

 Advanced Animal Nutrition

 All other segments

 Corporate

 Inter-segment sales

 Total


 Notes

 £000

 £000

 £000

 £000

 £000

 £000

 £000

 Revenue


4,126

20,978

44,096

7,450

2,295

(3,231)

75,714

 Cost of sales


(5,417)

(11,483)

(21,404)

(4,161)

(185)

1,013

(41,637)

 Gross profit / (loss)


(1,291)

9,495

22,692

3,289

2,110

(2,218)

34,077

 Research and development costs


(2,682)

(1,741)

(1,198)

-

-

-

(5,621)

 Other operating costs


(3,947)

(4,666)

(10,168)

(2,858)

(2,757)

2,218

(22,178)

 Share of profit of equity-accounted investees, net of tax


-

(231)

-

-

-

-

(231)

 Adjusted EBITDA


(7,920)

2,857

11,326

431

(647)

-

6,047

 Exceptional including acquisition related items

9

-

-

-

-

-

-

-

 EBITDA


(7,920)

2,857

11,326

431

(647)

-

6,047

 Depreciation 


(1,016)

(628)

(857)

(585)

(62)

-

(3,148)

 Amortisation and impairment


(123)

(1,077)

(7,131)

(822)

-

-

(9,153)

 Operating profit / (loss)


(9,059)

1,152

3,338

(976)

(709)

-

(6,254)

 Finance cost








(1,069)

 Finance income








1,730

 Loss before taxation








(5,593)

 

 



12 months ended 30 September 2018 (audited) 



 Animal Health

 Genetics

 Advanced Animal Nutrition

 All other segments

 Corporate

 Inter-segment sales

 Total


 Notes

 £000

 £000

 £000

 £000

 £000

 £000

 £000

 Revenue


16,153

35,755

85,746

15,786

5,277

(7,250)

151,467

 Cost of sales


(13,494)

(14,822)

(40,998)

(9,811)

(440)

2,118

(77,447)

 Gross profit / (loss)


2,659

20,933

44,748

5,975

4,837

(5,132)

74,020

 Research and development costs


(5,593)

(3,611)

(2,836)

-

-

-

(12,040)

 Operating costs


(8,058)

(9,089)

(20,285)

(5,772)

(6,632)

5,236

(44,600)

 Share of profit of equity-accounted investees, net of tax


-

(362)

-

-

-

-

(362)

 Adjusted EBITDA


(10,992)

7,871

21,627

203

(1,795)

104

17,018

 Exceptional including acquisition related items

9

-

(1,013)

-

-

(226)

-

(1,239)

 EBITDA


(10,992)

6,858

21,627

203

(2,021)

104

15,779

 Depreciation


(2,459)

(1,330)

(1,679)

(1,242)

(131)

-

(6,841)

 Amortisation and impairment


(108)

(2,171)

(14,523)

(1,200)

-

-

(18,002)

 Operating profit / (loss)


(13,559)

3,357

5,425

(2,239)

(2,152)

104

(9,064)

 Finance cost








(4,927)

 Finance income








332

 Loss before taxation








(13,659)

 



 

8.     Revenue

 

The Group's operations and main revenue streams are those described in the last annual financial statements. The Group's revenue is derived from contracts with customers.

 

The nature and effect of initially applying IFRS 15 on the Group's interim financial statements are disclosed in note 5.

 

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 7).

 

Sale of goods and provision of services

 



6 months ended 31 March 2019 (unaudited)



 Animal Health

 Genetics

 Advanced Animal Nutrition

 All other segments

 Corporate

 Inter-segment sales

 Total



 £000

 £000

 £000

 £000

 £000

 £000

 £000

 Sale of goods


4,120

20,692

40,871

642

-

-

66,325

 Provision of services


2,787

1,807

-

7,259

73

-

11,926

 Inter-segment sales


243

103

29

363

3,517

(4,255)

-



7,150

22,602

40,900

8,264

3,590

(4,255)

78,251












6 months ended 31 March 2018 (unaudited) 



 Animal Health

 Genetics

 Advanced Animal Nutrition

 All other segments

 Corporate

 Inter-segment sales

 Total



 £000

 £000

 £000

 £000

 £000

 £000

 £000

 Sale of goods


1,994

19,326

44,065

876

-

-

66,261

 Provision of services


2,032

1,475

-

5,868

78

-

9,453

 Inter-segment sales


100

177

31

706

2,217

(3,231)

-



4,126

20,978

44,096

7,450

2,295

(3,231)

75,714












12 months ended 30 September 2018 (audited) 



 Animal Health

 Genetics

 Advanced Animal Nutrition

 All other segments

 Corporate

 Inter-segment sales

 Total



 £000

 £000

 £000

 £000

 £000

 £000

 £000

 Sale of goods


11,093

29,578

85,581

2,036

-

-

128,288

 Provision of services


4,855

5,856

-

12,320

148

-

23,179

 Inter-segment sales


205

321

165

1,430

5,129

(7,250)

-



16,153

35,755

85,746

15,786

5,277

(7,250)

151,467

 



 

8.   Revenue (continued)

 

Primary geographical markets



6 months ended 31 March 2019 (unaudited)



 Animal Health

 Genetics

 Advanced Animal Nutrition

 All other segments

 Corporate

 Inter-segment sales

 Total



 £000

 £000

 £000

 £000

 £000

 £000

 £000

 Faroe Islands


126

4,416

1

-

-

-

4,543

 Greece


17

44

4,132

-

-

-

4,193

 Norway


961

11,439

205

-

-

-

12,605

 India


-

-

9,645

-

-

-

9,645

 UK


1,328

2,426

129

4,731

73

-

8,687

 Singapore


17

-

5,449

-

-

-

5,466

 Ecuador


-

-

4,342

-

-

-

4,342

 Rest of Europe


1,466

1,839

5,047

2,437

-

-

10,789

 Rest of World


2,992

2,334

11,921

734

-

-

17,981

 Inter-segment sales


243

104

29

362

3,517

(4,255)

-



7,150

22,602

40,900

8,264

3,590

(4,255)

78,251

 



6 months ended 31 March 2018 (unaudited) 



 Animal Health

 Genetics

 Advanced Animal Nutrition

 All other segments

 Corporate

 Inter-segment sales

 Total



 £000

 £000

 £000

 £000

 £000

 £000

 £000

 Faroe Islands


154

3,252

2

-

-

-

3,408

 Greece


-

74

3,991

3

-

-

4,068

 Norway


(676)

11,859

324

-

-

-

11,507

 India


7

-

10,266

-

-

-

10,273

 UK


1,197

2,482

74

4,070

78

-

7,901

 Singapore


2

-

5,276

-

-

-

5,278

 Ecuador


-

-

4,312

-

-

-

4,312

 Rest of Europe


1,163

2,105

6,013

2,188

-

-

11,469

 Rest of World


2,179

1,029

13,807

483

-

-

17,498

 Inter-segment sales


100

177

31

706

2,217

(3,231)

-



4,126

20,978

44,096

7,450

2,295

(3,231)

75,714












12 months ended 30 September 2018 (audited) 



 Animal Health

 Genetics

 Advanced Animal Nutrition

 All other segments

 Corporate

 Inter-segment sales

 Total



 £000

 £000

 £000

 £000

 £000

 £000

 £000

 Faroe Islands


158

6,778

7

-

-

-

6,943

 Greece


205

118

7,894

3

-

-

8,220

 Norway


2,264

16,277

698

44

-

-

19,283

 India


10

-

18,180

-

-

-

18,190

 UK


2,941

2,733

238

8,684

148

-

14,744

 Singapore


2

-

11,746

-

-

-

11,748

 Ecuador


-

-

9,253

-

-

-

9,253

 Rest of Europe


3,071

4,717

9,535

4,193

-

-

21,516

 Rest of World


7,297

4,811

28,030

1,432

-

-

41,570

 Inter-segment sales


205

321

165

1,430

5,129

(7,250)

-



16,153

35,755

85,746

15,786

5,277

(7,250)

151,467

 



 

9.     Exceptional including acquisition related 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.

 

 

 

 


6 months
ended
31 March 2019
(unaudited)

6 months
ended
31 March 2018
(unaudited)

12 months
ended
30 September 2018
(audited)



£000

£000

£000






 Acquisition related items


-

-

1,239






Total exceptional items


-

-

1,239

 

Acquisition related items are costs incurred in investigating and acquiring new businesses. During the 12 months ended 30 September 2018, the contingent consideration element of the provision for deferred consideration held for previous acquisitions was recalculated considering up to date performance of those acquisitions and the projected performance for the final 3 months of the earn out period (which ended on 31 December 2017) against the relevant sales volumes and revenue targets. As a result, £206,000 was released in the year.



 

10.   Taxation

 

 


6 months
ended
31 March 2019
(unaudited)

6 months
ended
31 March 2018
(unaudited)

12 months
ended
30 September 2018
(audited)



£000

£000

£000

Current tax expense





Analysis of charge in period





Current tax:





Current income tax expense on profits for the period


3,239

3,950

6,041

Adjustment in respect of prior periods


-

-

(309)

Total current tax


3,239

3,950

5,732






Deferred tax expense





Origination and reversal of temporary differences


(2,487)

(13,114)

(14,990)

Deferred tax movements in respect of prior periods


-

-

(12)

Total deferred tax


(2,487)

(13,114)

(15,002)






Total tax charge/(credit)


752

(9,164)

(9,270)

 

The reasons for the difference between the actual tax charge for the period and the standard rate of corporation tax in the United Kingdom applied to the result for the period are as follows:

 

 


6 months
ended
31 March 2019
(unaudited)

6 months
ended
31 March 2018
(unaudited)

12 months
ended
30 September 2018
(audited)



£000

£000

£000






Accounting loss before income tax


(8,330)

(5,593)

(13,659)











Expected tax credit based on the standard rate of UK corporation tax at the domestic rate of 19% (2018: 19%)


(1,583)

(1,063)

(2,595)

Income not taxable


-

-

(155)

Expenses not deductible for tax purposes


305

186

686

Deferred tax not recognised


2,890

2,245

4,788

Adjustment to tax charge in respect of prior periods


-

-

(321)

Effects of changes in tax rates


-

(10,496)

(10,496)

Different tax rates in overseas jurisdictions


(860)

(36)

(1,177)

Total tax charge/(credit)

752

(9,164)

(9,270)

 

Deferred tax is calculated at the substantively enacted rates, at which the temporary differences and tax losses are expected to reverse, in the territories in which they arose.  Reductions in the corporation tax rate in Belgium were substantively enacted in the previous year. The main rate of corporation tax was reduced from 34% to 29.58% effective from 1 January 2018 and to 25% from 1 January 2020.



 

11.   Earnings/loss per share

 

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

 


6 months
ended
31 March 2019
(unaudited)

6 months
ended
31 March 2018
(unaudited)

12 months
ended
30 September 2018
(audited)





Loss/(profit) attributable to equity holders of the parent (£000)

(9,528)

3,492

(5,009)





Weighted average number of shares in issue (thousands)

557,522

522,371

531,651





Basic (loss)/earnings per share (pence)

(1.71)

0.67

(0.94)





 

Diluted earnings/loss 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 for the period) based on the monetary value of the subscription rights attached to outstanding share options and warrants. The number of shares calculated above is compared with the number of shares that would have been issued assuming the exercise of the 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, and outstanding warrants, as follows:

 


6 months
ended
31 March 2019
(unaudited)

6 months
ended
31 March 2018
(unaudited)

12 months
ended
30 September 2018
(audited)





(Loss)/profit attributable to equity holders of the parent (£000)

(9,528)

3,492

(5,009)





Weighted average number of shares in issue (thousands) - basic

557,522

522,371

531,651





Adjustment for share options and awards (thousands)

-

2,848

-





Weighted average number of shares in issue (thousands) - diluted

557,522

525,219

531,651





Diluted (loss)/earnings per share (pence)

(1.71)

0.66

(0.94)





 



 

12.   Property, plant and equipment

 

 

Freehold Land and Buildings

Assets in the course of construction

Long Term Leasehold Property Improvements

Plant and Machinery

E commerce Infra-structure

Office Equipment and Fixtures

Total


£000

£000

£000

£000

£000

£000

£000

Cost








Balance at 1 October 2017

32,956

27,152

4,281

25,591

247

1,227

91,454

Additions

954

8,776

736

2,046

-

369

12,881

Reclassification

(2,450)

-

(99)

2,610

-

(61)

-

Increase /(decrease) through transfers from assets in the course of construction

71

(5,057)

3,534

1,452

-

-

-

Exchange differences

385

(609)

(107)

138

-

13

(180)

Disposals

-

(10)

(61)

(492)

-

(113)

(676)

Balance at 31 March 2018

31,916

30,252

8,284

31,345

247

1,435

103,479









Balance at 1 April 2018

31,916

30,252

8,284

31,345

247

1,435

103,479

Additions

724

8,929

138

1,547

-

853

12,191

Increase /(decrease) through transfers from assets in the course of construction

-

(3)

-

3

-

-

-

Exchange differences

(189)

1,182

117

337

-

104

1,551

Disposals

(23)

-

(2)

(144)

-

(111)

(280)

Balance at 30 September 2018

32,428

40,360

8,537

33,088

247

2,281

116,941









Balance at 1 October 2018

32,428

40,360

8,537

33,088

247

2,281

116,941

Additions

870

340

65

2,162

-

297

3,734

Increase /(decrease) through transfers from assets in the course of construction

117

(341)

2

215

-

7

-

Exchange differences

(1,542)

(2,210)

(86)

(644)

-

(51)

(4,533)

Disposals

-

(146)

(121)

(1,019)

-

(56)

(1,342)

Balance at 31 March 2019

31,873

38,003

8,397

33,802

247

2,478

114,800









Accumulated Depreciation








Balance at 1 October 2017

2,414

-

1,211

6,388

244

352

10,609

Depreciation charge for the year

666

-

413

1,923

1

145

3,148

Reclassification

-

-

(5)

25

-

(20)

-

Exchange differences

180

-

(47)

150

-

18

301

Disposals

-

-

(96)

(436)

-

(8)

(540)

Balance at 31 March 2018

3,260

-

1,476

8,050

245

487

13,518









Balance at 1 April 2018

3,260

-

1,476

8,050

245

487

13,518

Depreciation charge for the year

603

-

430

2,487

1

172

3,693

Exchange differences

13

-

81

209

-

75

378

Disposals

(21)

-

2

(79)

-

(77)

(175)

Balance at 30 September 2018

3,855

-

1,989

10,667

246

657

17,414









Balance at 1 October 2018

3,855

-

1,989

10,667

246

657

17,414

Depreciation charge for the period

1,146

-

446

2,340

1

227

4,160

Impairment charge for the period

-

-

-

618

-

-

618

Exchange differences

(427)

-

(22)

(318)

-

2

(765)

Disposals

-

-

(24)

(935)

-

(60)

(1,019)

Balance at 31 March 2019

4,574

-

2,389

12,372

247

826

20,408









Net book value








At 31 March 2019

27,299

38,003

6,008

21,430

-

1,652

94,392

At 30 September 2018

28,573

40,360

6,548

22,421

1

1,624

99,527

At 31 March 2018

28,656

30,252

6,808

23,295

2

948

89,961

 

The impairment in plant and machinery assets relates to a facility at FAI Aquaculture Limited following a decision to close one of its operating sites. 

13.   Intangible assets

 

 

Websites

Goodwill

Patents and Trade- marks

Intell- ectual Property

Customer Lists

Contracts

Licences

Genetics

Devel- opment costs

Total



£000

£000

£000

£000

£000

£000

£000

£000

£000

£000

 Cost or valuation












 Balance at 1 October 2017


597

149,941

811

134,638

6,784

9,510

34,664

26,245

3,531

366,721

 Additions - on acquisition


-

51

-

-

-

-

-

-

-

51

 Additions - externally acquired


19

-

10

44

-

-

-

-

-

73

 Additions - internally developed


-

-

-

-

-

-

-

-

2,176

2,176

 Exchange differences


-

(5,286)

(3)

(5,685)

(233)

(170)

(1,654)

(57)

(61)

(13,149)

 Balance at 31 March 2018


616

144,706

818

128,997

6,551

9,340

33,010

26,188

5,646

355,872













 Balance at 1 April 2018


616

144,706

818

128,997

6,551

9,340

33,010

26,188

5,646

355,872

 Additions - externally acquired


67

-

20

74

-

-

-

-

139

300

 Additions - internally developed


-

-

-

-

-

-

-

-

5,002

5,002

 Disposals


-

(447)

-

-

-

-

-

-

-

(447)

 Exchange differences


2

8,457

9

9,364

382

190

2,672

(2)

118

21,192

 Balance at 30 September 2018


685

152,716

847

138,435

6,933

9,530

35,682

26,186

10,905

381,919













 Balance at 1 October 2018


685

152,716

847

138,435

6,933

9,530

35,682

26,186

10,905

381,919

 Additions - on acquisition


-

-

-

318

-

-

-

-

-

318

 Additions - externally acquired


35

-

36

61

-

-

38

-

-

170

 Additions - internally developed


-

-

-

-

-

-

-

-

2,943

2,943

 Disposals


-

(84)

-

-

-

-

-

-

-

(84)

 Exchange differences


(4)

(2,383)

(5)

(213)

(6)

(323)

(417)

(1,940)

(3)

(5,294)

 Balance at 31 March 2019


716

150,249

878

138,601

6,927

9,207

35,303

24,246

13,845

379,972













 Accumulated amortisation and impairment









 Balance at 1 October 2017


531

276

631

22,902

1,028

5,506

4,899

1,811

-

37,584

 Amortisation charge for the period


9

-

47

6,303

200

696

1,062

389

-

8,706

 Impairment loss


-

447

-

-

-

-

-

-

-

447

 Exchange differences


-

-

(1)

(1,099)

(18)

(79)

(387)

(4)

-

(1,588)

 Balance at 31 March 2018


540

723

677

28,106

1,210

6,123

5,574

2,196

-

45,149













 Balance at 1 April 2018


540

723

677

28,106

1,210

6,123

5,574

2,196

-

45,149

 Amortisation charge for the period


12

-

111

6,328

203

703

1,099

393

-

8,849

 Disposals


-

(447)

-

-

-

-

-

-

-

(447)

 Exchange differences


-

1

12

2,136

35

114

681

3

-

2,982

 Balance at 30 September 2018


552

277

800

36,570

1,448

6,940

7,354

2,592

-

56,533













 Balance at 1 October 2018


552

277

800

36,570

1,448

6,940

7,354

2,592

-

56,533

 Amortisation charge for the period


15

-

(261)

6,942

350

691

923

343

-

9,003

 Exchange differences


-

-

(31)

(78)

(1)

(215)

(609)

(193)

-

(1,127)

 Balance at 31 March 2019


567

277

508

43,434

1,797

7,416

7,668

2,742

-

64,409













 Net book value












 At 31 March 2019 (unaudited)


149

149,972

370

95,167

5,130

1,791

27,635

21,504

13,845

315,563

 At 30 September 2018 (audited)


133

152,439

47

101,865

5,485

2,590

28,328

23,594

10,905

325,386

 At 31 March 2018 (unaudited)


76

143,983

141

100,891

5,341

3,217

27,436

23,992

5,646

310,723

 

The impairment loss in 2018 arose following an impairment review which showed that an amount of Goodwill, held within a subsidiary 5M Enterprises Limited for the previously acquired Old Pond business is no longer supported by discounted future cash flow projections.

13.   Intangible assets (continued)

 

Current estimates of useful economic lives of intangible assets are as follows:

 

Goodwill

Indefinite

Patents

2 - 5 years

Websites

5 years

Trademarks

2 - 5 years

Contracts

3 - 20 years

Licences

3 - 20 years

Customer lists

Up to 26 years

Intellectual property

Up to 20 years

Genetic material and breeding nuclei

10 - 40 years

Development costs

Up to 10 years

 

14.   Loans and borrowings

 

On 30 December 2015, the Group entered into facilities consisting of a five-year revolving credit facility (expiring on 11 December 2020) of up to USD 70m secured on the assets of the parent company, UK subsidiary companies and certain overseas subsidiary companies. On 7 January 2019, the accordion facility within the Group's existing bank facility was activated raising the total facility from USD 70m to USD 90m. At 31 March 2019, USD 83.1m was drawn down on the facility. Liabilities under this facility were settled on 24 June 2019 (note 15).

 

At 31 March 2019 SalmoBreed Salten AS, a subsidiary company, had a loan of NOK 216 million provided by Nordea Bank Norge ASA. The loan is a five-year term loan ending November 2023 at an interest rate of 2.65% above 3-month NIBOR. In addition, SalmoBreed Salten AS has a loan of NOK 55 million provided by Innovasjon Norge. The loan is a twelve-and-a-half-year term loan ending March 2031 at an interest rate of 4.2% above Norges Bank base rate. Salmobreed Salten AS has a loan of NOK 16.75 million provided by Salten Aqua ASA (the minority shareholder) this loan attracts interest at 2.5% above 3-month NIBOR and is repayable in a minimum of 6 years but not before the bank loans.

 

15.   Events after the reporting date

 

On 10 June 2019, the Group completed the dissolution of its joint venture with AquaChile in which it had a 49% ownership interest. The Group will receive back its original cash investment of USD 16.25 million (approximately £12.77m) in two instalments; a first payment of USD 7.5 million 10 days after completion, and the balance of USD 8.75 million to be paid six months after completion. The Group also received the IP rights, genetics material and biomass in the joint venture, and will, in the coming weeks, wholly own a standalone and established breeding facility. 

On 24 June 2019, the Group completed a new senior secured floating rate listed bond issue of NOK 850 million. The bond which matures in June 2023, has a coupon of 5.25% above three months NIBOR with quarterly interest payments. On the same day the Group repaid the outstanding borrowings under its $90m five-year facility (note 14). In addition, the Group entered into new borrowing facilities, a three-and-a-half-year revolving credit facility of up to USD 15.0 million secured on assets of certain group companies. The interest rate on the facility is between 3% to 3.5% above Libor depending on leverage. 

16.   Alternative performance measures

 

Management has presented the performance measures Adjusted EBITDA, Adjusted Operating Profit and Adjusted Profit Before Tax because it monitors performance at a consolidated level and believes that these measures are relevant to an understanding of the Group's financial performance.

Adjusted EBITDA which reflects underlying profitability, is earnings before interest, tax, depreciation, amortisation, impairment, exceptional items and acquisition related expenditure and is shown on the Income Statement.

Adjusted Operating Profit is operating loss before exceptional items including acquisition related items and amortisation of intangible assets excluding development costs as reconciled below.

Adjusted Profit Before Tax is earnings before tax, amortisation and impairment of acquired intangibles, exceptional items and acquisition related expenditure as reconciled below. These measures are not defined performance measure in IFRS. The

 

 

16.   Alternative Profit Measures (continued)

Group's definition of these measures may not be comparable with similarly titled performance measures and disclosures by other entities.

Reconciliation of Adjusted Operating Profit to Operating Loss



6 months
ended
31 March 2019
(unaudited)

6 months
ended
31 March 2018
(unaudited)

12 months
ended
30 September 2018
(audited)



£000

£000

£000

Revenue


78,251

75,714

151,467

Cost of sales


(40,350)

(41,637)

(77,447)

Gross profit


37,901

34,077

74,020

Research and development costs


(5,619)

(5,621)

(12,040)

Other operating costs


(24,524)

(22,178)

(44,600)

Depreciation


(4,778)

(3,148)

(6,841)

Amortisation of capitalised development costs


-

-

-

Share of profit of equity accounted investees net of tax


(265)

(231)

(362)

Adjusted operating profit


2,715

2,899

10,177

Exceptional including acquisition related items


-

-

(1,239)

Amortisation of intangible assets excluding development costs


(9,003)

(9,153)

(18,002)

Operating loss


(6,288)

(6,254)

(9,064)

 

Reconciliation of Loss Before Taxation to Adjusted Profit Before Tax



6 months
ended
31 March 2019
(unaudited)

6 months
ended
31 March 2018
(unaudited)

12 months
ended
30 September 2018
(audited)



£000

£000

£000






Loss before taxation


(8,330)

(5,593)

(13,659)

Exceptional including acquisition related items


-

-

1,239

Amortisation of intangible assets excluding development costs


9,003

9,153

18,002

Adjusted profit before tax


673

3,560

5,582

 

17.   Net debt

 Net debt is cash and cash equivalents less loans and borrowings.

 


6 months
ended
31 March 2019
(unaudited)

6 months
ended
31 March 2018
(unaudited)

12 months
ended
30 September 2018
(audited)



£000

£000

£000

Cash and cash equivalents


23,832

21,869

24,090

Loans and borrowings - current


(1,685)

(558)

(898)

Loans and borrowings - non-current


(87,677)

(62,627)

(78,868)



(65,530)

(41,316)

(55,676)

 

 


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