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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Benchmark Holdings Plc | LSE:BMK | London | Ordinary Share | GB00BGHPT808 | ORD 0.1P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
-1.50 | -3.37% | 43.00 | 43.00 | 45.90 | 43.00 | 43.00 | 43.00 | 1,030 | 08:00:12 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
Pharmaceutical Preparations | 169.74M | -23.15M | -0.0313 | -13.74 | 317.92M |
TIDMBMK
RNS Number : 6167X
Benchmark Holdings PLC
20 December 2019
20 December 2019
Information within this announcement is deemed by the Company to constitute inside information under the Market Abuse Regulations (EU) No. 596/2014.
Benchmark Holdings plc
("Benchmark", the "Company" or the "Group")
Q4 Results
(3 months ended 30 September 2019)
In compliance with the terms of its senior secured bond which require the Company to publish quarterly financial information, Benchmark, the aquaculture health, nutrition and genetics business, announces its unaudited results for the 3 months ended 30 September 2019 (the "period"). All Q4FY19 figures quoted in this announcement are based on unaudited accounts.
This morning the Company published its full year audited results for the 12 months ended 30 September 2019 which can be found on https://www.benchmarkplc.com/investors
GBPm Q4 2019 Q42018 % YTD 2019 Restated* unaudited unaudited (Full year) YTD 2018 (Full year) ------------------------------------ ----------- ----------- ------- ------------- ------------- Adjusted ------------------------------------ ----------- ----------- ------- ------------- ------------- Adjusted EBITDA(2) from continuing operations 7.5 7.0 6.8 12.1 19.1 ------------------------------------ ----------- ----------- ------- ------------- ------------- EBITDA(1) from continuing operations 6.9 6.7 4.2 11.5 17.8 ------------------------------------ ----------- ----------- ------- ------------- ------------- Adjusted Operating Profit(3) from continuing operations 3.7 5.5 (31.4) 3.6 14.2 ------------------------------------ ----------- ----------- ------- ------------- ------------- Statutory ------------------------------------ ----------- ----------- ------- ------------- ------------- Revenue from continuing operations 37.0 33.6 10.0 127.3 131.6 ------------------------------------ ----------- ----------- ------- ------------- ------------- Loss before tax from continuing operations (53.7) (1.0) (73.3) (8.4) ------------------------------------ ----------- ----------- ------- ------------- ------------- (Loss)/profit for the period from continuing operations (53.2) (1.1) (73.3) 0.5 ------------------------------------ ----------- ----------- ------- ------------- ------------- Loss for the period - total incl. discontinued operations (61.5) (2.3) (83.1) (4.4) ------------------------------------ ----------- ----------- ------- ------------- ------------- Basic loss per share (p) (11.07) (0.51) (15.03) (0.94) ------------------------------------ ----------- ----------- ------- ------------- ------------- Net debt(4) (87.1) (55.7) (87.1) (55.7) ------------------------------------ ----------- ----------- ------- ------------- -------------
* 2018 numbers have been restated to reflect the ongoing continuing business. Knowledge Services Division and the veterinary services business within the Animal Health Division have been moved to discontinued operations in line with IFRS 5.
Q4 Overview
-- As announced in the trading update of 29 November, the Company has accelerated its programme of disposals and restructuring, and as a result, certain activities, primarily the Knowledge Services division and the veterinary services business in Animal Health, have been classified as discontinued operations.
-- Revenue from continuing operations of GBP37.0m was 10% above the prior year (Q4 2018: GBP33.6m) driven by strong growth in Genetics versus the same period last year.
-- Adjusted EBITDA(2) from continuing operations was up 7% at GBP7.5m (Q4 2018: GBP7.0m), driven by increased revenues in the period vs the prior year.
-- Adjusted EBITDA(2) margin 20% (Q4 2018: 21%) with growth in gross profit offset by step up in operating costs
-- Impairment of acquired intangibles in Advanced Nutrition of GBP44.8m as a result of a reduction in forecasts due to a material change in market outlook (impairing INVE).
-- Impairment of tangible and intangible assets related to discontinued operations of GBP6.9m
-- Statutory loss for the period including discontinued operations of GBP61.5m (2018: loss of GBP2.3m), primarily as a result of the impairments (including discontinued operations); as well as an increase in depreciation, amortisation, finance costs and exceptional costs
-- The weakness in the shrimp and sea bass/sea bream markets continued during the period.
Q4 Divisional overview
-- Genetics reported revenue growth of 60% against Q4 last year as a result of higher salmon egg sales supported by the Salten facility coming onstream and the export ban of all salmon eggs from Norway which benefitted StofnFiskur in the period. Revenues in the quarter were GBP10.0m (2018: GBP6.2m). Adjusted EBITDA for the division was GBP4.3m (Q42018: GBP3.3m).
-- Advanced Nutrition delivered revenues of GBP22.3m (Q42018: GBP21.5m), as a result of higher GSL Artemia volumes, the launch of D-FENSE vibrio inhibiting Artemia in Vietnam and higher volumes in Health, partly offset by lower volumes of non GSL eggs and lower Diets sales mainly in Greece. Adjusted EBITDA was 18% up at GBP4.5m (Q42018: GBP3.8m) helped by one off income from the settlement of infringement cases and the profit on disposal of a property in China which together totalled GBP1.1m.
-- Revenues in Animal Health (including Discontinued Operations of veterinary and diagnostics) in Q4 were GBP6.6m, 13% below the prior year (Q42018: GBP7.6m) as a result of lower contribution from field trials partially offset by higher toll manufacturing contribution (timing) and higher Salmosan sales and Adjusted EBITDA was a loss of GBP0.8m (Q42018: loss GBP0.4m).
Full Year Overview
This morning the Company published its full year audited results for the 12 months ended 30 September 2019 which can be found on https://www.benchmarkplc.com
-- Revenues from Continuing Operations of GBP127.3m, 3% below prior year (2018: GBP131.6m)
-- Total revenues including Continuing and Discontinued Operations of GBP148.7m, down 2% (2018: GBP151.5m)
-- Adjusted EBITDA(2) from Continuing Operations of GBP12.1m (2018: GBP19.1m)
-- Total Adjusted EBITDA(2) including Continuing and Discontinued Operations of GBP13.7m (2018: GBP17.0m)
-- Total R&D investment of GBP20.5m (2018: GBP19.2m) driven by products close to launch and investment in Genetics and Advanced Nutrition to maintain leadership in our core markets
-- Net debt(3) at period end of GBP87.1m (2018: GBP55.7m) as a result of investment in R&D and an increase in working capital including that related to growth in biological assets in the new production facilities
-- Year end liquidity(5) was GBP28.2m, well within the covenant threshold
-- Impairment of acquired intangibles in Advanced Nutrition of GBP44.8m as a result of a reduction in forecasts due to a material change in market outlook (impairing INVE).
-- Impairment of tangible and intangible assets related to discontinued operations of GBP7.5m
-- Current trading: Weakness in the shrimp and sea bass/sea bream markets continues and while some recovery is expected, it is unlikely to recover to 2018 levels in 2020. Overall the Company expects to deliver underlying Adjusted EBITDA from Continuing Operations (before one-off other income) in line with this year in FY2020 and to maintain sufficient liquidity to execute its product development programme and support its Continuing Operations after taking account of the expected timing and proceeds from the planned disposals and cost reductions
(1) EBITDA is earnings before interest, tax, depreciation and amortisation and impairment.
(2) Adjusted EBITDA is EBITDA(1) , before exceptional items and acquisition related expenditure.
(3) Adjusted Operating Profit is operating loss before exceptional items including acquisition related items and amortisation of intangible assets excluding development costs
(4) Net debt is cash and cash equivalents less loans and borrowings.
(5) Liquidity is defined as undrawn facilities plus cash balances.
Progress towards commercial launch of major products
-- Next generation sea lice treatment (product candidate BMK08) continued to show c.99% efficacy and excellent environmental and animal welfare credentials. In combination with CleanTreat(R), BMK08 is potentially transformative, addressing one of the largest industry challenges.
-- Production of specific pathogen resistant (SPR) shrimp commenced in Florida for export into Asia. Entered into agreement with two partners in Thailand for local multiplication and distribution.
Growth in core markets
-- Opening of state of the art, land-based salmon egg facility in Norway. Ramp-up of production according to plan
-- Establishment of wholly owned local production in Chile following dissolution of JV with AquaChile. Recovery of original investment which will be reinvested in the Chilean operation
-- Increased capacity at production plant in Thailand to meet growing long term demand for the Company's specialist diets
Continued Innovation
-- Winner of Aquaculture Innovation Award for CleanTreat(R), the Company's breakthrough purification system which removes medicinal residues from bath treatments
-- Launch of a new Artemia product (D-FENSE) which reduces the risk of infection from vibrio, one of the main industry challenges affecting shrimp and seabass/seabream
Q4 Management Commentary
Q4 saw a continuation of the trends in Q3, with weak shrimp and Mediterranean seabass/seabream markets having affected sales volumes in Advanced Nutrition; Animal Health delivered lower than anticipated contribution from trials of pre-licence products and Genetics performed well with continued growth in salmon egg sales.
During the period, the Company accelerated its programme of disposals and restructuring, and certain activities were classified as discontinued, primarily the Knowledge Services businesses and the veterinary and diagnostics services business in Animal Health.
Compared to the prior year, the results from Continuing Operations in the quarter reflected good growth in salmon genetics sales, a slightly higher revenue from Advanced Nutrition related to timing of sales, and lower contribution from trials in Animal Health. Revenue from continuing operations was GBP37.0m, 10% above the prior year (Q4 2018: GBP33.6m). Adjusted EBITDA from continuing operations was up 7% at GBP7.5m (Q4 2018: GBP7.0m), driven by higher revenues.
The weak market conditions in Advanced Nutrition resulted in a significant impairment of goodwill on acquisition of INVE of GBP44.8m (2018: GBPnil). Furthermore, there were other impairment charges on assets within discontinued operations of GBP7.5m (2018: GBPnil). As a consequence, the statutory loss for the period including discontinued operations was GBP61.5m (2018: loss GBP2.3m), reflecting an increase in depreciation, amortisation, finance costs and exceptional costs.
In addition, Peter George took over as Executive Chairman following Malcolm Pye's resignation as CEO in August 2019. Septima Maguire joined the Company post period end in November 2019 and was appointed CFO on 20 December 2019.
Advanced Nutrition
Advanced Nutrition delivered revenues of GBP22.3m (Q42018: GBP21.5m), as a result of higher GSL Artemia volumes, the launch of D-FENSE vibrio inhibiting Artemia in Vietnam and higher volumes in Health partly offset by lower volumes of non GSL eggs and lower Diets sales mainly in Greece. Adjusted EBITDA was 18% up at GBP4.5m (Q42018: GBP3.8m) helped by one off income from the settlement of infringement cases and the profit on disposal of a property in China which together totalled GBP1.1m.
Operationally, good progress was made in the launch of D-FENSE vibrio inhibiting Artemia across markets, including ongoing trials in several key markets, and first significant sales delivered. The Company held a customer event in Crete, with seminars attended by representatives from more than 90% of all Mediterranean seabass and seabream hatcheries.
Genetics
Genetics revenues in Q4 were GBP10.0m, 60% above the prior year (2018: GBP6.2m) driven by higher salmon egg sales as a result of the Salten facility coming onstream and the countrywide export ban of salmon eggs from Norway in the period which benefitted StofnFiskur.
Gross profit in the period was favourably impacted by an increase in the fair value of biological assets. Adjusted EBITDA for the division was GBP4.3m (Q42018: GBP3.3m) with the Adjusted EBITDA margin affected by higher operational costs compared to the prior year from new ventures including Benchmark Chile, Salten and the new SPR shrimp operation in Florida. Additionally, we incurred legal fees in the termination of the joint venture and the establishment of the wholly owned subsidiary in Chile in Q4 2019.
Operationally, for the first time the Company was able to supply eggs from its SalmoBreed strain throughout the summer thanks to our new biosecure facility in Salten.
Animal Health
Revenues in Animal Health (including Discontinued Operations of veterinary and diagnostics) in Q4 were GBP6.6m, 13% below the prior year (Q42018: GBP7.6m) as a result of lower contribution from field trials partially offset by higher toll manufacturing contribution (timing) and higher Salmosan sales and Adjusted EBITDA was a loss of GBP0.8m (Q42018: loss GBP0.4m).
Operationally, during the period the Company completed the fourth set of field trials in Norway with BMK08, achieving further efficiency gains for CleanTreat(R) which won the Aqua-Nor Innovation award in August 2019.
Activities in Knowledge Services were classified as discontinued.
Full Year Management Commentary
Revenue and Adjusted EBITDA
Group
The Advanced Nutrition division experienced very challenging market conditions in 2019 that led to a reduction in revenue, which was partially offset by growth in Genetics and as a result Group revenue from continuing operations decreased by 3% to GBP127.3m in the year (2018: GBP131.6m). The reduction in sales meant that Gross Profit from continuing operations decreased to GBP66.0m (2018: GBP68.5m) and Gross Margin remaining steady at 52% (2018: 52%) as prices remained relatively resilient albeit some price weakness was experienced in certain live feed products. In addition, there was a reduced contribution in Health from commercial scale field trials.
Total Group operating costs of continuing operations increased by 10% to GBP40.7m (2018: GBP37.0m). This increase reflects the operating costs of new production sites as they come on stream, increased costs related to currency transfers and a full year impact of increased management headcount to strengthen the Plc and Operations boards. Opex was reduced by other income of GBP1.8m (2018: GBP1.0m), mainly from R&D expenditure credits and proceeds from successful IP infringement cases. Expensed R&D of continuing operations increased to GBP12.8m (2018: GBP12.0m) with the increase being focussed on protecting the market positions of the more mature Genetics and Advanced Nutrition divisions as well as progressing the main pipeline opportunities in Animal Health.
Adjusted EBITDA from continuing operations decreased by 37% to GBP12.1m (2018: GBP19.1m) with the drop driven by lower sales in Advanced Nutrition and lower contribution from commercial scale field trials, offset by an increase in sales and margins in Genetics and one-off other income. Adjusted Operating Profit from continuing operations decreased to GBP3.6m (2018: GBP14.2m) due to the lower trading result combined with increased depreciation charges reflecting the contribution of the recently constructed production assets.
Total revenues (including discontinued operations) were GBP148.7m, down 2% (2018: GBP151.5m). Using the same foreign exchange rates experienced in 2018 (constant currency(1) ) revenue from continuing operations decreased by 3%. Total Adjusted EBITDA (including discontinued operations) decreased by 19% to GBP13.7m (2018: GBP17.0m).
Advanced Nutrition
Revenue of GBP76.8m was down 10% (2018: GBP85.7m) as a result of weak markets and aggressive price competition from CIS Artemia producers after a strong harvest. By product our live feed products were the most affected with volumes and revenues (in USD) down 23%, whilst specialist diets and health showed relative resilience with revenues (in USD) down 5% and 4%, respectively.
Strategically we maintained our prices and our premium positioning, which reflect our technical superiority. The weak demand environment did result in the division absorbing some increases in cost of sales and, while operating costs were tightly controlled and benefitted from the profit on sale of a property and the proceeds of IP infringement settlements, Advanced Nutrition reported a reduced Adjusted EBITDA result of GBP15.4m (2018: GBP21.6m) with a margin of 20% (2018: 25%). The weaker market outlook has resulted in an impairment of GBP44.8m to the carrying values of goodwill in the INVE business.
Genetics
Good growth in revenue and Adjusted EBITDA driven by an increase in salmon egg volumes (+16%) and prices reflecting our continued innovation and launch of new traits. Revenues of GBP39.7m were up 11% (2018: GBP35.8m), ahead of growth in the sector. The Company's ongoing innovation together with its investment in quality, biosecurity and availability of supply through our new production facilities will support future growth. The dissolution of the joint venture with AquaChile is now complete including transfer of ownership of the Ensenada salmon egg hatchery which will form the platform to establish Chilean production. The valuation of biological assets increased by GBP8.3m (2018: GBP4.0m) driven by the growth in sales in the year, the strong order book at the year end and the increasing output potential of the new production sites. As the division's new shrimp genetics get closer to market launch the costs of development were capitalised for the first time, with GBP1.5m capitalised in the year. These factors supported growth in gross margins to 64% (2018: 58%). Operating costs increased in line with the increase in production capacity in salmon and shrimp. As a result, the division delivered strong Adjusted EBITDA growth to GBP10.1m (2018: GBP7.9m) with Adjusted EBITDA margin rising to 25% (2018: 22%).
Animal Health
Revenue of GBP17.7m up 10% (2018: GBP16.2m). Growth was driven by an increase in sales of Salmosan, the Company's current sea lice treatment. This reflects the challenge of high sea lice levels, particularly in Chile. The Company continued to generate a contribution from commercial scale field trials of its next generation sea lice treatment (BMK08), although at a lower level than the prior year, as we approach commercial launch and the programme of trials in our main market reaches conclusion. Revenues from veterinary and diagnostics services also grew during the year.
Total R&D investment in the division was GBP11.2m (2018: GBP12.2m), of which GBP5.7m was expensed (2018: GBP5.6m). During the year the Company began a programme to reduce overall R&D spend while continuing to progress the main pipeline opportunities. This involved a streamlining of external R&D spend and a review of in-house trials facilities. The impact from this effort will come through from 2020 onwards.
Adjusted EBITDA loss narrowed for the division to GBP10.2m (2018: loss of GBP11.0m).
Knowledge Services
All operations of the division are included within discontinued operations. Revenue in this division in 2019 was GBP15.9m (2018: GBP15.8m) with associated Adjusted EBITDA of GBP1.3m (2018: GBP0.2m). Revenue was flat with a particularly strong performance in veterinary training offset by reduced sales in other businesses. Despite being broadly complementary to Benchmark's core activities, the Knowledge Services division is not integral to the Group's long-term strategy. Therefore, the disposal of the component businesses is part of the programme of structural efficiencies. The Company is in discussions with a number of interested parties and further announcements will be made in due course.
Exceptional items
Items that are material because of their nature 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. Exceptional expenses related to continuing operations of GBP0.6m (2018: GBP1.2m) derive from the changes in Group management. Exceptional expenses relating to discontinued operations of GBP0.7m (2018: GBPnil) include costs of closure of operations in the Knowledge Services division.
Depreciation, amortisation and impairments
Depreciation and impairments related to continuing operations of GBP8.5m (2018: GBP4.9m) with the increase principally arising from new production facilities coming onstream.
Amortisation and impairments related to continuing operations of GBP64.3m (2018: GBP16.8m) with the increase being due to impairments in the carrying value of goodwill related to the INVE business driven by the change in market outlook.
Net finance costs
During the year the Company completed a new senior secured floating rate bond issue of NOK 850m (USD 95.0m equivalent). The bond which matures in June 2023, will be listed on the Oslo market and has a coupon equivalent to the three months Norwegian Interbank Offered Rate + 5.25% p.a. with quarterly interest payments. This new bond issue was applied to refinance Benchmark's previous USD 90m revolving credit facility. In addition, a USD 15.0m revolving credit facility was provided by DNB Bank ASA (50%) and HSBC UK Bank PLC (50%). The revolving credit facility incurs interest in the range of 3.0 to 3.5% over London Interbank Offered Rate. The Group's other ring-fenced facilities remained in place including facilities totalling NOK 291m related to the funding of the new salmon egg production facility in Norway. Interest on these other debt facilities ranges between 2.65% above Norwegian base rates and 5%.
The Group incurred net finance costs from continuing operations of GBP12.1m during the year (2018: GBP4.6m). Included within this was interest charged on the Group's interest-bearing debt facilities of GBP6.0m (2018: GBP2.4m) reflecting a higher level of net debt during the year and the higher coupon post refinancing. Further, a foreign exchange loss of GBP4.6m arose due to the movement in exchange rates and there was a charge of GBP1.7m (2018: GBPnil) relating to the fair value change in the cross currency hedge taken out during the year.
Statutory loss before tax
The loss before tax from continuing operations for the year at GBP73.3m is higher than the prior year (2018: loss of GBP8.4m) due to the impact of the reduced trading result; higher depreciation, amortisation, and in particular impairment charges; and the increase in finance costs and exceptional costs; all as outlined above.
Taxation
There was a tax credit related to continuing operations in the period of GBP13,000 (2018: credit of GBP8.9m), mainly due to overseas tax charges in the Genetics division of GBP1.5m and in the Advanced Nutrition division of GBP2.6m, offset by deferred tax credits on intangible assets mainly arising on consolidation from acquisitions (the 2018 credit principally related to a reduction in the corporation tax rate in Belgium from 34% to 25%), recognition of a deferred tax asset on losses expected to be recovered.
Loss for the year
The loss for the year from continuing operations was GBP73.3m (2018: profit of GBP0.5m) and from discontinued operations the loss was GBP9.8m (2018: loss of GBP4.9m).
Earnings per share
Basic loss and diluted loss per share were both -15.03p (2018: loss per share -0.94p). The movement year on year is due to the reduced result for the year as noted above.
Dividends
No dividends have been paid or proposed in the year (2018: GBPnil) and the Board is not recommending a final dividend in respect of the year ended 30 September 2019.
Biological assets
A feature of the Group's net assets is its investment in biological assets, which under IAS 41 are stated at fair value. At 30 September 2019, the carrying value of biological assets was GBP28.5m (2018: GBP20.4m). The movement in the overall carrying value of biological assets is due principally to the increase in sales of and future orders for the Company's salmon eggs as well as expansion of own production.
Intangibles
Capitalised R&D increased by GBP0.5m to GBP7.7m (2018: GBP7.2m). R&D costs related to products that are close to commercial launch have to be capitalised when they meet the requirements set out under IFRS. Increased activities related to trials of and progress with the marketing authorisation application for BMK08 pushed capitalised development costs higher, together with the first time capitalisation of the new shrimp genetics. As Benchmark goes through a period of an increasing number of new products approaching launch this capitalisation will be an ongoing feature in the mid-term.
The dissolution of the genetics joint venture in Chile, and the consequent transfer of assets to Benchmark to part satisfy return of the original investment, led to an intangible addition representing the IP inherent within the breeding programme in Chile.
The impairment of intangible assets during the year of GBP47.6m principally relates to impairment of the goodwill from the acquisition of INVE where the change in market outlook has led to a reduction in value of the discounted cash flows for the Advanced Nutrition division.
Capital expenditure
Tangible fixed asset additions of GBP12.5m (2018: GBP25.1m) includes GBP1.0m cash investment in the final phase of the construction of the new salmon egg production facility in Norway, GBP4.1m initial investment in the new salmon egg production facility in Chile (transferred on dissolution of the previous JV) and GBP2.2m on improvements to salmon slaughter facilities in Iceland that are a vital part of the egg production process.
Cash flow
Net cash flow from operations was an outflow of GBP9.2m (2018: outflow of GBP3.7m) principally due to working capital increases: in Advanced Nutrition from purchase commitments with key live feed suppliers and in general the phasing of sales towards year end in general. In addition, the build of biological assets at new genetics production facilities resulted in an increased outflow in working capital of GBP8.6m (2018: outflow of GBP4.1m).
Total outflows to capex of GBP15.8m (2018: GBP32.7m) were substantially reduced because investment in the new salmon egg facility concluded at the beginning of the year.
Other cashflow items included the payment of the deferred consideration of GBP7.0m for the investment in the joint venture with AquaChile which was completed in 2018 and the initial consideration received on the subsequent dissolution of that joint venture in 2019 of GBP5.9m. The balance of the consideration for the dissolution of the joint venture of GBP6.9m was received post year end.
As a result of the above free cash flow was an outflow of GBP23.9m (2018: outflow of GBP36.2m). Net proceeds from increased borrowings of GBP21.4m were used to fund this outflow.
Cash at the period end stood at GBP16.1m (2018: GBP24.1m).
Liquidity and net debt
The Group's finance function is responsible for sourcing and structuring borrowing requirements.
As detailed under net finance costs above, during the year the Company completed a refinancing including a new senior secured floating rate bond issue of NOK 850m (USD 95.0m equivalent) and a USD 15.0m revolving credit facility. The Group's other ring-fenced facilities remained in place including facilities totalling NOK 291m related to the funding of the new salmon egg production facility in Norway.
The Group had GBP103.2m in bank borrowings at the end of the year (2018: GBP79.7m). Reported debt includes GBP27.1m in relation to the funding of the Group's new salmon egg production facility in Norway. This is ring-fenced debt within SalmoBreed Salten without recourse to the rest of the Group. At the year end a maximum of GBP12.2m was available on the Group's super senior revolving credit facility, of this GBPnil had been drawn. Net debt increased to GBP87.1m during the year (2018: GBP55.7m) as investment in working capital expanded and available long-term capital was invested in R&D and production capacity.
As outlined in the Basis of Preparation in Note 1 to the financial statements, there is an information undertaking within the terms of the NOK bond that requires the Company to publish quarterly financial statements within 60 days of the quarter end. The Company did not satisfy this requirement for the quarter to 30 September 2019 because the year end audit was not sufficiently complete for the publication of what would have effectively been deemed a Preliminary Announcement by reference to the UK Listing Rules. The NOK bond terms include permission for the Company to publish the quarterly financials within 20 business days of the end of the initial 60 day period.The Company satisfied the requirements of the NOK bond terms by announcing its quarterly financials simultaneously with the announcement of its preliminary results for the year ended 30 September 2019 on 20 December 2019.
The facilities combined with the year end cash balance of GBP16.1m means the Group had total liquidity of GBP28.2m. This, in conjunction with the expected proceeds from the disposal of non-core businesses and the reduction in cash outflows resulting from closing certain non-core activities is expected by the Directors to provide the Group with sufficient liquidity to fund continuing growth and provide adequate headroom.
Going concern
The accounts for 2019 have been prepared on a going concern basis. The forecast projections of the Group's performance for the period to September 2021 have been reviewed by the Directors and the Board has concluded that, while there is a material uncertainty that may cast significant doubt upon the ability to continue as a going concern, subject to the successful disposal of the discontinued operations in the near-term or, in the absence of this, to appropriate actions being taken to significantly reduce investment in and costs related to the product pipeline or further funding being sought, the Group should be able to continue in operation and meet its liabilities as they fall due over the period considered.
Unaudited Quarterly Financial Statements
Consolidated Income Statement
YTD 2018 Q4 2019 Q4 2018 YTD 2019 Restated* All figures in GBP000's Notes (unaudited) (unaudited) (audited) (audited) ----------------------------------------- ------- -------------- -------------- ------------ ------------ Revenue 36,978 33,618 127,343 131,643 Cost of sales (15,344) (14,085) (61,348) (63,150) -------------------------------------------------- Gross profit 21,634 19,533 65,995 68,493 Research and development costs (3,602) (3,505) (12,830) (12,040) Other operating costs (10,577) (8,845) (40,700) (37,012) Share of loss of equity-accounted investees, net of tax 18 (189) (414) (362) -------------------------------------------------- -------------- -------------- ------------ ------------ Adjusted EBITDA(2) 7,473 6,994 12,051 19,079 Exceptional - restructuring/acquisition related items (530) (333) (581) (1,239) -------------------------------------------------- -------------- -------------- ------------ ------------ EBITDA(1) 6,943 6,661 11,470 17,840 Depreciation and impairment (3,726) (1,533) (8,466) (4,869) Amortisation and impairment (51,486) (4,252) (64,254) (16,802) -------------------------------------------------- -------------- -------------- ------------ ------------ Operating (loss) / profit (48,269) 876 (61,250) (3,831) Finance cost (5,489) (2,098) (12,422) (4,927) Finance income 81 214 368 332 -------------------------------------------------- -------------- -------------- ------------ ------------ Loss before taxation (53,677) (1,008) (73,304) (8,426) Tax on loss 456 (131) 13 8,906 -------------------------------------------------- -------------- ------------ (Loss)/profit from continuing operations (53,221) (1,139) (73,291) 480 -------------------------------------------------- -------------- -------------- ------------ ------------ Discontinued operations Loss from discontinued operations, net of tax (8,278) (1,156) (9,789) (4,869) -------------------------------------------------- -------------- -------------- ------------ ------------ (61,499) (2,295) (83,080) (4,389) ------------------------------------------------- -------------- -------------- ------------ ------------ Loss for the year attributable to: - Owners of the parent (61,809) (2,837) (83,857) (5,009) - Non-controlling interest 310 542 777 620 -------------------------------------------------- -------------- (61,499) (2,295) (83,080) (4,389) ------------------------------------------------- -------------- -------------- ------------ ------------ Earnings per share Basic loss per share (pence) (11.07) (0.51) (15.03) (0.94) Diluted loss per share (pence) (11.07) (0.51) (15.03) (0.94) Earnings per share - continuing operations Basic loss per share (pence) (9.59) (0.30) (13.28) (0.03) Diluted loss per share (pence) (9.59) (0.30) (13.28) (0.03) Adjusted EBITDA from continuing operations 7,473 6,994 12,051 19,079 Adjusted EBITDA from discontinued operations (99) (911) 1,674 (2,061) -------------------------------------------------- -------------- -------------- ------------ ------------ Total Adjusted EBITDA 7,374 6,083 13,725 17,018 -------------------------------------------------- -------------- -------------- ------------ ------------
1 EBITDA - Earnings before interest, tax, depreciation and amortisation
2 Adjusted EBITDA - EBITDA before exceptional and acquisition related items
* 2018 numbers have been restated to reflect the ongoing continuing business. Knowledge Services Division and the veterinary services business within the Animal Health Division have been moved to discontinued operations in line with IFRS 5.
Consolidated Statement of Comprehensive Income
Q4 2019 Q4 2018 YTD 2019 YTD 2018 All figures in GBP000's (unaudited) (unaudited) (audited) (audited) ------------------------------------------ --- -------------- -------------- ------------ ------------ Loss for the period (61,499) (2,295) (83,080) (4,389) Other comprehensive income Items that are or may be reclassified subsequently to profit or loss Foreign exchange translation differences 9,424 2,505 13,919 7,624 Cash flow hedges - changes in fair value (2,615) - (3,549) - Cash flow hedges - reclassified to profit or loss (10) - (17) - Total comprehensive income for the period (54,700) 210 (72,727) 3,235 ----------------------------------------------- -------------- -------------- ------------ ------------ Total comprehensive income for the period attributable to: - Owners of the parent (54,924) (313) (73,174) 2,546 - Non-controlling interest 224 523 447 689 ----------------------------------------------- ------------ ------------ (54,700) 210 (72,727) 3,235 ---------------------------------------------- -------------- -------------- ------------ ------------ . Total comprehensive income for the period attributable to owners of the parent: - Continuing operations (47,186) 534 (63,188) 7,048 - Discontinued operations (7,738) (847) (9,986) (4,502)
----------------------------------------------- (54,924) (313) (73,174) 2,546 ---------------------------------------------- -------------- -------------- ------------ ------------
Consolidated Balance Sheet
as at 30 September 2019
30 September 30 September 2019 2018 All figures in GBP000's (audited) (audited) ------------------------------------------ -------------- -------------- Assets Property, plant and equipment 88,900 99,527 Intangible assets 275,744 325,386 Equity-accounted investees 3,453 17,457 Other investments 25 29 Biological and agricultural assets 12,469 8,502 Trade and other receivables - 4,145 Non-current assets 380,591 455,046 ------------------------------------------- -------------- -------------- Inventories 22,609 20,483 Biological and agricultural assets 16,024 11,892 Trade and other receivables 52,136 41,337 Cash and cash equivalents 16,051 24,090 ------------------------------------------- -------------- -------------- 106,820 97,802 Assets held for sale 15,970 - Current assets 122,790 97,802 ------------------------------------------- -------------- -------------- Total assets 503,381 552,848 ------------------------------------------- -------------- -------------- Liabilities Trade and other payables (35,235) (45,680) Loans and borrowings (3,231) (898) Corporation tax liability (2,703) (2,629) Provisions (404) (70) ------------------------------------------- -------------- -------------- (41,573) (49,277) Liabilities directly associated with (10,634) - the assets held for sale Current liabilities (52,207) (49,277) ------------------------------------------- -------------- -------------- Loans and borrowings (99,961) (78,868) Other payables (2,004) (1,219) Deferred tax (38,743) (41,637) Non-current liabilities (140,708) (121,724) ------------------------------------------- -------------- -------------- Total liabilities (192,915) (171,001) ------------------------------------------- -------------- -------------- Net assets 310,466 381,847 ------------------------------------------- -------------- -------------- Issued capital and reserves attributable to owners of the parent Share capital 559 557 Additional paid-in capital 358,044 357,894 Capital redemption reserve 5 5 Retained earnings (110,916) (28,240) Hedging reserve (3,566) - Foreign exchange reserve 60,202 45,953 Equity attributable to owners of the parent 304,328 376,169 Non-controlling interest 6,138 5,678 ------------------------------------------- Total equity and reserves 310,466 381,847 ------------------------------------------- -------------- --------------
Consolidated Statement of Changes in Equity
for the year ended 30 September 2019
Total attributable to equity Share holders Non- All figures in Share premium Other Hedging Retained of controlling Total GBP000's capital reserve reserves reserve earnings parent interest equity --------------- ---------- ---------- ---------- ---------- ----------- -------------- ------------- --------- 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 --------------- ---------- ---------- ---------- ---------- ----------- -------------- ------------- --------- Comprehensive income for the period (Loss)/profit for the period - - - - (83,857) (83,857) 777 (83,080) Other comprehensive income - - 14,249 (3,566) - 10,683 (330) 10,353 Total comprehensive income for the period - - 14,249 (3,566) (83,857) (73,174) 447 (72,727) --------------- ---------- ---------- ---------- ---------- ----------- -------------- ------------- --------- Contributions by and distributions to owners Share issue 2 150 - - - 152 - 152 Share based payment - - - - 1,181 1,181 - 1,181 Total contributions by and distributions to owners 2 150 - - 1,181 1,333 - 1,333 --------------- ---------- ---------- ---------- ---------- ----------- -------------- ------------- --------- Changes in ownership Disposal of subsidiary with NCI - - - - - - 13 13 Total changes in ownership interests - - - - - - 13 13 Total transactions with owners of the Company 2 150 - - 1,181 1,333 13 1,346 --------------- ---------- ---------- ---------- ---------- ----------- -------------- ------------- --------- As at 30 September 2019 (audited) 559 358,044 60,207 (3,566) (110,916) 304,328 6,138 310,466 --------------- ---------- ---------- ---------- ---------- ----------- -------------- ------------- ---------
Consolidated Statement of Cash Flows
All figures in GBP000's YTD 2019 YTD 2018 (audited) (audited) ------------------------------------------- --- ------------ ------------ Cash flows from operating activities Loss for the period (83,080) (4,389) Adjustments for: Depreciation and impairment of property, plant and equipment 17,227 6,841 Amortisation and impairment of intangible fixed assets 66,087 18,002 Loss on sale of property, plant and equipment (838) 8 Finance income (368) (332) Finance costs 7,773 2,432 Other adjustments for non-cash items 68 (1,931) Share of profit of equity-accounted investees, net of tax 414 362 Foreign exchange losses 5,620 2,609 Share based payment expense 1,181 1,511 Tax credit 111 (9,270) ------------------------------------------------ ------------ ------------ 14,195 15,843 Increase in trade and other receivables (12,516) (4,355) Increase in inventories (2,273) (815) Increase in biological and agricultural assets (8,593) (4,102) Increase/(decrease) in trade and other payables 3,968 (4,026) Increase/(decrease) in provisions 261 (388) ------------------------------------------------ ------------ ------------ (4,958) 2,157 Income taxes paid (4,253) (5,898) ------------------------------------------------ ------------ ------------ Net cash flows used in operating activities (9,211) (3,741) ------------------------------------------------ ------------ ------------ Investing activities Acquisition of subsidiaries, net of cash acquired (7) - Purchase of investments (7,020) (6,356) Receipts from disposal of investments 5,942 - Purchases of property, plant and equipment (7,850) (25,072) Purchase of intangibles (7,964) (7,581) Proceeds from sale of fixed assets 1,131 233 Interest received 447 261 ------------------------------------------------ ------------ ------------ Net cash flows used in investing activities (15,321) (38,515) ------------------------------------------------ ------------ ------------ Financing activities Proceeds of share issues 2 18,498 Proceeds from bank or other borrowings 92,578 41,206 Acquisition of NCI - (33) Repayment of bank or other borrowings (71,224) (5,815) Cash advances and loans made to other parties - (4,076) Interest and finance charges paid (5,366) (2,442) Payments to finance lease creditors (5) (218) Net cash inflow from financing activities 15,985 47,120 ------------------------------------------------ ------------ ------------ Net (decrease)/increase in cash and cash equivalents (8,547) 4,864 Cash and cash equivalents at beginning of period 24,090 18,779 Effect of movements in exchange rate 508 447 ------------------------------------------------ ------------ ------------ Cash and cash equivalents at end of period 16,051 24,090 ------------------------------------------------ ------------ ------------
Notes
1. Basis of preparation
These unaudited quarterly results have been prepared on the basis of the accounting policies which are to be set out in Benchmark Holdings Plc's annual report and financial statements for the year ended 30 September 2019.
The consolidated financial statements of the Group for the year ended 30 September 2019 were prepared in accordance with International Financial Reporting Standards ("IFRSs") as adopted for use in the EU ("adopted IFRSs") and applicable law.
Whilst the financial information included in this preliminary interim statement has been prepared on the basis of the requirements of IFRSs in issue, as adopted by the European Union and effective at 30 September 2019, this statement does not itself contain sufficient information to comply with IFRS.
The financial information set out above does not constitute the company's statutory accounts for the years ended 30 September 2019 or 2018. Statutory accounts for 2018 have been delivered to the registrar of companies, and those for 2019 will be delivered in due course. The auditor has reported on those accounts. Their report for 2019 was (i) unqualified, (ii) contains a material uncertainty in respect of going concern to which the auditor drew attention by way of emphasis without modifying their report and (iii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006. Their report for the accounts of 2018 was (i) unqualified, (ii) did not include a reference of any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006.
The financial statements are prepared on the going concern basis.
As at 30 September 2019 the Group had net assets of GBP310.5m (2018: GBP381.8m), including cash of GBP16.1m (2018: GBP24.1m) as set out in the consolidated balance sheet. The Group made a loss for the year of GBP83.1m (2018: GBP4.4m). As at 30 September 2019 the Company had net assets of GBP304.2m (2018: GBP341.5m), including cash of GBP0.8m (2018: GBP2.3m. The Company made a loss for the year of GBP35.2m (2018: GBP8.6m).
The Group was refinanced during the year, and on 24 June 2019 a new four-year senior secured floating rate listed bond issue of NOK 850m was completed and a new three and a half year USD 15m revolving credit facility agreed. As at 20 December total borrowings from the Group's facilities were GBP102.3m and the most recent month end cash reserves at the end of November were GBP19.8m.
The Directors have prepared base and sensitised cash flow forecasts for the Group covering the period to September 2021, including forecast compliance with the covenants specified in the new borrowings. Significant elements of the Group continue to be in a growth and investment phase, including the final stages of obtaining Marketing Authority approval for its latest sea lice treatment and the growth and expansion of its genetics business into inland salmon egg production and disease resistant shrimp genetics while riding out the headwinds in the shrimp market. The Directors have taken the decision to divest from a number of smaller or non-core businesses in the Group to help fund this ongoing investment and a structural efficiencies programme is well underway to that end. The business forecasts therefore include key assumptions on the timing and value of these business disposals and asset realisations, as well as other trading uncertainties common in businesses engaged in the aquaculture and research and development industries. The trading uncertainties include the timing of the grant of full licences for the new sea lice treatment, the pace of recovery in global shrimp markets, achieving anticipated growth targets in core Advanced Nutrition and Genetics markets, the supply and pricing of key raw materials, and potential distribution partner agreements. However good progress has been made with all of the disposals subject to the non-core divestment programme, with several reaching the non-binding offer stage and offers received reflecting a high level of interest.
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 and working capital management. These forecast cash flows, considering the ability and intention of the directors to implement mitigating actions should they be required, provide sufficient headroom in the forecast period. However, should the reasonably possible downside sensitivities from trading occur, alongside a significant delay or a reduction in the expected disposal proceeds below the low end of the valuation range in some of the larger business disposals, then this could remove all available headroom. In this event, either further financing would have to be sought or additional structural efficiency initiatives be identified and pursued. In the eventuality that further financing is required, the Directors believe that relationships with funders and the expected returns available on the growth areas within the Group in which ongoing investment is being made are sufficiently strong and attractive for the Group to be able to secure adequate additional funding should it be required.
Based on their assessment, the Directors believe it remains appropriate to prepare the financial statements on a going concern basis. However, these circumstances represent a material uncertainty that may cast significant doubt on the Group's and Company's ability to continue as a going concern and therefore to continue realising their assets and discharging its liabilities in the normal course of business. The financial statements do not include any adjustments that would result from the basis of preparation being inappropriate.
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.
2 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.
Segmental Revenue Q4 2019 Q4 2018 YTD 2019 YTD 2018 All figures in GBP000's (unaudited) (unaudited) (audited) (audited) ---------------------------- --------------- --------------- ------------- ------------- Animal Health 6,618 7,634 17,742 16,153 Genetics 9,978 6,234 39,696 35,755 Advanced Animal Nutrition 22,288 21,495 76,776 85,746 All other segments 3,262 3,527 15,881 15,786 Corporate 1,505 1,489 6,534 5,277 Inter-segment sales (1,822) (2,008) (7,890) (7,250) Total 41,829 38,371 148,739 151,467 ---------------------------- --------------- --------------- ------------- ------------- Segmental Adjusted EBITDA Q4 2019 Q4 2018 YTD 2019 YTD 2018 All figures in GBP000's (unaudited) (unaudited) (audited) (audited) ---------------------------- --------------- --------------- ------------- ------------- Animal Health (848) (375) (10,197) (10,992) Genetics 4,335 3,317 10,075 7,871 Advanced Animal Nutrition 4,479 3,795 15,406 21,627 All other segments 301 (250) 1,264 203 Corporate (893) (404) (2,823) (1,795) Inter-company - - - 104 Total 7,374 6,083 13,725 17,018 ---------------------------- --------------- --------------- ------------- -------------
Reconciliations of segmental information to IFRS measures
Revenue Q4 2019 Q4 2018 YTD 2019 YTD 2018 All figures in GBP000's (unaudited) (unaudited) (audited) (audited) --------------------------------- --------------- --------------- ------------- ------------- Total revenue per segmental information 41,829 38,371 148,739 151,467 Less: revenue from discontinued operations (4,851) (4,753) (21,396) (19,824) --------------------------------- Consolidated revenue 36,978 33,618 127,343 131,643 --------------------------------- --------------- --------------- ------------- ------------- Reconciliation of Reportable Segments Adjusted EBITDA to Loss before taxation from continuing operations YTD Q4 2019 Q4 2018 2019 YTD 2018 All figures in GBP000's (unaudited) (unaudited) (audited) (audited) ------------------------------------------ --------------- --------------- ------------- ------------- Total reportable segment Adjusted EBITDA 7,966 6,737 15,284 18,506 Other Segment and Corporate Adjusted EBITDA (592) (654) (1,559) (1,488) ------------------------------------------ --------------- --------------- ------------- ------------- 7,374 6,083 13,725 17,018 Less: Adjusted EBITDA from discontinued operations 99 911 (1,674) 2,061 ------------------------------------------ --------------- --------------- ------------- ------------- Adjusted EBITDA from continuing operations 7,473 6,994 12,051 19,079 Exceptional including acquisition related items (530) (333) (581) (1,239) Depreciation and impairment (3,726) (1,533) (8,466) (4,869) Amortisation and impairment (51,486) (4,252) (64,254) (16,802) Net finance costs (5,408) (1,884) (12,054) (4,595) Loss before taxation from continuing operations (53,677) (1,008) (73,304) (8,426) ------------------------------------------ --------------- --------------- ------------- ------------- 3 Impairment of goodwill and other intangible assets
Goodwill acquired in a business combination is allocated, at acquisition, to the cash generating units (CGUs) that are expected to benefit from the business combination. The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired.
Goodwill arises across all of the Group's operating segments, and is allocated specifically against the following CGUs:
Animal Advanced Knowledge Health Genetics Animal Nutrition Services Total 2019 2019 2019 2019 2019 GBP000 GBP000 GBP000 GBP000 GBP000 ---------------------------- -------- --------- ------------------ ---------- -------- Benchmark Vaccines Limited 432 - - - 432 Salmobreed AS - 7,065 - - 7,065 Stofnfiskur HF - 13,146 - - 13,146 Akvaforsk Genetic Center* - 8,691 - - 8,691 INVE Aquaculture Group - - 79,248 - 79,248 -------- --------- ------------------ ---------- -------- 432 28,902 79,248 - 108,582 ---------------------------- -------- --------- ------------------ ---------- --------
*Includes goodwill arising from the joint acquisition of Akvaforsk Genetics Center AS (which was transferred into Benchmark Genetics Norway) in the year and Benchmark Genetics USA (formerly Akvaforsk Genetics Center Inc.)
Animal Advanced Knowledge Total Health Genetics Animal Nutrition Services 2018 2018 2018 2018 2018 GBP000 GBP000 GBP000 GBP000 GBP000 ------------------------------- -------- --------- ------------------ ---------- -------- FVG Limited 288 - - - 288 Benchmark Vaccines Limited 432 - - - 432 Atlantic Veterinary Services Limited 167 - - - 167 Salmobreed AS - 7,435 - - 7,435 Stofnfiskur HF - 13,874 - - 13,874 Akvaforsk Genetic Center* - 9,194 - - 9,194 INVE Aquaculture Group - - 117,117 - 117,117 FAI do Brasil Criacao Animal Ltda - - - 96 96 FAI Aquaculture Limited - - - 450 450 5M Enterprises Limited - - - 379 379 Improve International Limited - - - 2,995 2,995 Improve International GmbH - - - 12 12 ------------------------------- -------- --------- ------------------ ---------- -------- 887 30,503 117,117 3,932 152,439 ------------------------------- -------- --------- ------------------ ---------- --------
*Includes goodwill arising from the joint acquisition of Akvaforsk Genetics Center AS (which was transferred into Benchmark Genetics Norway) in the year and Benchmark Genetics USA (formerly Akvaforsk Genetics Center Inc.)
The recoverable amounts of the above CGUs, with the exception of the Knowledge Services, the operations of which are discontinued, have been determined from value in use calculations. These calculations used board approved cash flow projections from five-year business plans based on actual operating results and current forecasts. These forecasts were then extrapolated into perpetuity taking account of specific terminal growth rates for future cash flows, using individual business operating margins based on past experience and future expectations in light of anticipated economic and market conditions. The pre-tax cashflows that these projections produced were discounted at pre-tax discount rates based on the Group's beta adjusted cost of capital reflecting management's assessment of specific risks related to each cash generating unit. Specific assumptions used are as follows.
Animal Health
The pre-tax cashflows from the five-year projections were discounted using a pre-tax discount rate of 13.1% (2018: 12.4%). An assumed CAGR of revenue of 49% (2018: 77%) in the five-year plan (2018: three-year plan) reflects the importance of the launch and commercialisation of the division's new sea lice treatment in the forecast period. A long-term growth rate of 2.5% (2018: 2.5%) has been used to extrapolate the terminal year cashflow into perpetuity.
The valuation of the Animal Health cash generating unit indicates sufficient headroom such that a reasonably possible change to key assumptions is unlikely to result in an impairment in related goodwill. However, should the division's new sea lice treatment not be successfully launched and commercialised, then impairment of the goodwill and other intangible assets could be possible.
Genetics
The pre-tax cashflows from the five-year projections were discounted using a pre-tax discount rate of 12.1% (2018: 11.2%). CAGR of revenue of 15% (2018: 18%) is implied by the five-year plan (2018: three-year plan), and a long-term growth rate of 2.5% (2018: 2.5%) has been used to extrapolate the terminal year cashflow into perpetuity.
Sensitivity testing of the recoverable amount to reasonably possible changes in key assumptions has been performed. All other assumptions being unchanged, an increase in the pre-tax discount rate to 15.2% would reduce the headroom on the Genetics CGU to nil. Should the discount rate increase further than this, then an impairment of the goodwill would be likely.
Advanced Animal Nutrition
The continued aggressive shrimp market conditions being experienced during the year and the expectation of a slower longer-term recovery in that market led to a reduction in the recoverable value of the CGU. The pre-tax cashflows from the five-year projections were discounted using a pre-tax discount rate of 11.5% (2018: 11.2%). CAGR of revenue of 12% (2018: 9%) is implied by the five-year plan, with the rate reflecting a particularly low year in FY19 and the recovery back to previous year's levels as well as growth from new products. Long term growth rate of 3.5% (2018: 4.0%) has been used to extrapolate the terminal year cashflow into perpetuity.
Following this review, the value in use calculation for the CGU showed GBP242m and a resulting impairment charge of GBP44.8m was made to the carrying value of the goodwill. Management believes the longer-term market value to be higher than this but are unable to test this in the market given the current stage of the cycle of the shrimp market.
The value in use assessment is sensitive to changes in the key assumptions used. Sensitivity analysis was performed and a reasonably likely downside scenario reflecting a slower recovery of the shrimp market and a reduced growth rate in the five-year plan for new products. This reasonably likely downside scenario includes a 5% reduction in FY20 revenue and CAGR of revenue of 10%. This would likely cause further impairment of GBP13.2m.
Knowledge Services
Following the decision to pursue the Structural Efficiencies programme, the Knowledge Services CGU is discontinuing. The goodwill for 5M Enterprises Limited, Improve International Limited, Improve International GmbH have been transferred into Assets Held for Sale. The goodwill for FAI do Brasil Criacao Animal Ltda and FAI Aquaculture Limited no longer has any value and has been fully impaired.
4 Discontinued activities
In June 2019 the Group announced a programme of structural efficiencies which focused on the disposal and discontinuation of non-core activities. This programme primarily includes the businesses of Knowledge Services Division and the veterinary services business within Animal Health Division.
Consequently, these operations have been classified as discontinued and part of the disposal group is presented as held for sale. The disposal group includes assets and liabilities within the Knowledge Services and Animal Health segments. The comparative consolidated statement of profit or loss and OCI has been represented to show the discontinued operations separately from continuing operations.
The disposals, together with the cost reduction/cost containment plan and enhanced working capital management will allow the Company to reallocate resources to priority revenue generating strategic projects and to maintain adequate headroom. The timing and proceeds from these actions are fundamental to maintain sufficient liquidity to execute the Group's product development programme and to support its Continuing Operations.
Significant progress to sell the disposal group has been made and sales are expected to complete within the first half of the financial year 2020.
Impairment losses relating to the disposal group
Impairment losses of GBP7,533,000 for write downs of discontinued operations to the lower of carrying amount and its fair value less costs to sell have been included in the "Depreciation and impairment" and "Amortisation and impairment" headings within discontinued operations. The impairment losses have been applied to reduce the carrying amount of Intangible assets and property, plant and equipment.
Results from discontinued operations
Q4 2019 Q4 2018 YTD 2019 YTD 2018 All figures in GBP000's (unaudited) (unaudited) (audited) (audited) ----------------------------------------- --- -------------- -------------- ------------ ------------ Revenue 4,851 4,753 21,396 19,824 Cost of sales (2,888) (3,549) (11,580) (14,297) ---------------------------------------------- Gross profit 1,963 1,204 9,816 5,527 Research and development costs (5) - (20) - Other operating costs (2,057) (2,115) (8,122) (7,588) ---------------------------------------------- -------------- -------------- ------------ ------------ Adjusted EBITDA (99) (911) 1,674 (2,061) Exceptional - restructuring/acquisition related items (434) - (745) - ---------------------------------------------- -------------- -------------- ------------ ------------ EBITDA (533) (911) 929 (2,061)
Depreciation and impairment (6,560) (455) (8,761) (1,972) Amortisation and impairment (1,085) (189) (1,833) (1,200) ---------------------------------------------- -------------- -------------- ------------ ------------ Operating loss / Loss before taxation (8,178) (1,555) (9,665) (5,233) Tax on loss (100) 399 (124) 364 ---------------------------------------------- -------------- -------------- ------------ ------------ Loss from discontinued operations (8,278) (1,156) (9,789) (4,869) ---------------------------------------------- -------------- -------------- ------------ ------------
Results from discontinued operations by segment
Animal Knowledge Animal Knowledge Total Health Services Total Discontinued Health Services Discontinued YTD 2019 YTD 2019 YTD 2019 YTD 2018 YTD 2018 YTD 2018 All figures in GBP000's (audited) (audited) (audited) (audited) (audited) (audited) ----------------- --- ------------ ------------ ------------------- ------------ ------------ -------------- Revenue 6,255 15,141 21,396 5,467 14,357 19,824 Adjusted EBITDA 288 1,386 1,674 (1,744) (317) (2,061) Operating loss (447) (9,218) (9,665) (2,475) (2,758) (5,233) ---------------------- ------------ ------------ ------------------- ------------ ------------ -------------- Animal Knowledge Total Animal Knowledge Total Health Services Discontinued Health Services Discontinued Q4 2019 Q4 2019 Q4 2019 Q4 2018 Q4 2018 Q4 2018 All figures in GBP000's (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) ---------------- --- -------------- -------------- --------------- -------------- -------------- -------------- Revenue 1,736 3,115 4,851 1,576 3,177 4,753 Adjusted EBITDA (287) 190 (97) (497) (414) (911) Operating loss (452) (7,724) (8,176) (624) (931) (1,555) --------------------- -------------- -------------- --------------- -------------- -------------- --------------
Enquiries
For further information, please contact: Benchmark Holdings plc Tel: 020 3696 0630 Peter George, Executive Chairman Mark Plampin/Septima Maguire, CFO Ivonne Cantu, Investor Relations Numis (Broker and NOMAD) Tel: 020 7260 1000 James Black, Freddie Barnfield, Duncan Monteith MHP Communications Tel: 020 3128 8742
Katie Hunt, Reg Hoare, Alistair de Kare-Silver benchmark@mphc.com
About Benchmark
Benchmark's mission is to enable food producers to improve their sustainability and profitability.
We bring together biology and technology, to develop innovative products which improve yield, quality and animal health and welfare for our customers. We do this by improving the genetic make-up, health and nutrition of their stock - from broodstock and hatchery through to nursery and grow out.
Benchmark has a broad portfolio of products and solutions, including salmon eggs, live feed (Artemia), diets and probiotics and sea lice treatments. Find out more at www.benchmarkplc.com
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
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