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Revenue rises slash Benchmark's losses

Biotechnology Economics +2 more

Benchmark’s revenues rose from £109 to £140 million in the 12 months up to September 2017, cutting the aquaculture biotechnology specialist's losses by two thirds.

Although the UK-based global biotechnology firm lost £7.6 million in the year, this was a marked improvement from a loss of £20.5 million in the previous 12 months.

Total group operating costs (excluding expensed R&D) increased by 32 percent to £39.3 million (2016: £29.9m). This increase reflects the impact of including a full year of INVE's costs, a reduced credit from forex gains and a key driver of the balance was an increase in average headcount from 703 in 2016 to 881 in 2017. Year-end headcount was 952 (2016: 884).

Adjusted EBITDA increased by 9 percent to £10.0 million (2016: £9.2m). On a like for like basis 2016 adjusted EBITDA was £10.0 million.

Investment in expensed R&D increased by £1.4 million to £13.1 million (2016: £11.7m). This represents a lower level of increase than in past years as R&D was managed to ensure it is aligned with revenue growth and an increase in capitalised R&D, as investment is more focused on products in the final stages of development.

Divisional disparities

The genetics division was its best performer revenue-wise during the 12 months ending on 30 September 2017, with revenues growing by 47 percent to £30.5 million. However, the division still made losses of £9.5 million, compared to a profit of £3.6 million in the previous 12-month period.

Key drivers in revenue increases included the rise in demand for salmon eggs, with sales up in every major market, and strong growth in recently launched products. Significant initiatives undertaken during the year included the launch of new salmon and shrimp products; the integration of the genetics division, which now includes salmon, shrimp and tilapia, and has customers in Asia, Europe, North and Latin America; and the new land-based production facility in Norway, through joint venture with Salten Stamfisk AS, receiving its first batch of broodstock (post-period).

Benchmark signed a nnew 10-year agreement for artemia harvested from the Great Salt Lake

Meanwhile the advanced nutrition saw like for like revenues grow by 21 percent over the prior year driven by continued signs of recovery in key shrimp markets and an increased market share driven by demand for higher margin live feed replacement and health diets. Losses fell from £4.4 million to £1.1 million.

Significant nutrition initiatives include a new 10-year sales and marketing agreement to secure continued access to high quality live feed (artemia) from the Great Salt Lake; the launch of new products Sanolife GUT and Sanolife PRO-2; and the development of 100 percent artemia replacement feed progressing to plan.

Animal health

Sales in the animal health division decreased from £24.8m to £15.1m as a result of drop in sales of the sea lice treatment Salmosan, but the company expects these to increase in 2018, partly due to a switch to direct distribution in Chile.

Highlights include the development of CleanTreat, an innovative water purification system that avoids contamination of marine waters from medicinal treatments of fish; the first commercial scale production at the new Braintree vaccine antigen manufacturing facility; the continued progress in animal health pipeline of 41 products of which seven are in their regulatory phase and 10 are in pre-regulatory development trials; post-period end, the commencement of field trials for Benchmark's new sea lice treatment.

Lice are estimated to have cost the global salmon industry £500 million in 2016

Alex Hambro, Benchmark Chairman, hailed CleanTreat as revolutionary, saying it: “marked a breakthrough development for Benchmark and for the salmon industry... CleanTreat will, we anticipate, set a new standard in environmental protection by allowing marine fish medicines to be delivered safely and without in any way contaminating the marine environment. We are in the process of evaluating additional applications and routes to market for the CleanTreat system.”

Reaction from the board

Malcolm Pye, Benchmark CEO, commented: "2017 has been a year of significant operational and strategic progress for Benchmark Holdings. Despite certain challenges, we have continued our focused investment in the development of the Group's pipeline and have put in place important technological, infrastructure and organisational building blocks. Benchmark is now one of the leading global providers of advanced nutrition, genetics and animal health in the industry.

Hambro, added: “There is an element of unpredictability in the introduction of new and innovative technologies and the nature of biological assets. For example, delays to introducing new products and the impact of both disease and climate have both been challenges for the business over the last year. However, I have been impressed with our ability to overcome these challenges during the year and believe that as the business has become more diversified, in the future it will be more able to mitigate these risks. What is predictable is that the demand for our products, driven by growth in demand for our customers' products, is showing long term growth.”