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Benchmark Holdings PLC: DEEP DIVE
OVERVIEW

Benchmark Holdings at centre of growing aquaculture trend

Long-term fundamentals remain firmly in the seafood specialist's favour
salmon
OVERVIEW: BMK The Big Picture
Salmon and shrimp are the staple products but others are creeping up
  • Set up in 2000, the business is now worth around £229mln

  • A new salmon breeding operation in Salten, Norway - the most modern in the world – will boost capacity by 75%

  • Revenues for first half of 2019 of £78.3mln, up 3.4% on a year ago, with adjusted EBITDA of £7.5mln

 

What it does

Benchmark Holdings PLC (LON:BMK) has three core divisions, breeding and genetics – which includes characteristics such as disease resistance, production efficiency and product quality.

Advanced nutrition specialises in feeding the young animals including probiotics to get through the early life stages.

Animal health, meanwhile, tackles serious issues such as sea lice in fish farming.

Knowledge Services, the fourth leg, is the smallest and includes our aquaculture veterinary consulting services, data services, education and training,

Salmon and shrimp account for the bulk of revenues currently, but Benchmark is starting to see good demand for sea bass in Europe, sea bream (dorado) and in the southern hemisphere, tilapia.

Research house Equity Development has a price target of 98.5p compared to a current market price of 55p.

 

Inflexion points:

• For the first half of its current year, Benchmark posted adjusted EBITDA of £7.5mln for the first half on revenue of £78.3mln, up 3.4% on a year ago, while the EBITDA margin increased to 10% from 8%, boosted by the sale of higher value products, an increase in the value of biological assets and ongoing cost control

• In the second half, the company inaugurated a salmon egg production facility in Norway

• In May the company said it would take full control of its Chile-based salmon breeding joint venture. Benchmark said the money gained from dissolving the JV would be re-invested to build its presence independently in Chile, which is the world's second largest salmon producing country

 

Looking ahead

For the full year, the group expects the results to be in line with market forecasts despite “mixed conditions” in core markets with salmon benefitting from growing demand and stable prices but shrimp and sea bass/ bream being hit by depressed prices and lower sales following a temporary overstocking.

“This volatility is not unusual in our markets and we are monitoring it closely,” Benchmark said.

The group also announced a refinancing of its existing US$90mln credit facility to provide it with additional covenant flexibility and headroom to support the roll-out of products, including its next generation sea lice treatment and disease resistant shrimp.

 

CEO Interview – Malcolm Pye

 

Blue Sky

Fundamentals remain firmly in the company’s favour:

• The fishing industry has just about reached the limit of what it can catch in the sea and might even be in decline

• Seafood has emerged as an essential component of healthy diets

• The middle-class has started to flex its muscles in the southern hemisphere, traditionally a fish-eating culture

• A growing global population needs more food to be produced from the water

With shares trading at 41p as of 24 June 2019, Benchmark carries a market cap of £228.9mln.

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