Strong platform built to deliver growth
Benchmark (BMK) helps deliver improved healthcare products and services to the Animal Health and Aquaculture industry. Rising demand from clients for its products and services to manage sustainability practice in worldwide production and supply chains underlines BMK’s opportunity for significant organic and external growth.Full year results show that BMK strengthened and leveraged its diversified aquaculture platform in FY17. It also delivered 13% like for like revenue growth to £140m (adding back revenues for businesses acquired in FY16). The headline measure of adjusted EBITDA was flat at £10m year on year, with margins of 21% and 19% in Advanced Animal Nutrition (AAN) and Benchmark Genetics (BG) respectively, offset by headwinds in Animal Health (AH).
Highlights included strong like for like growth in AAN, up 21% to £83.7m, driven by ongoing demand for live feed replacement diets. This growth was despite a slow first half in shrimp markets as the disease crisis began to ease. Live feed replacement diets are forecast to contribute to expanding medium term margins at the division. BG registered 47% revenue growth to £30.5m driven by an increase in volumes up 18% and price increases of 13% in salmon ova, boosting EBITDA margin from 2% to 19%.
Looking ahead, we forecast a sustained demand for BMK’s products and services highlighted by the roll out of BMK’s novel Ectosan - CleanTreat sea lice treatment process, which is set to contribute to FY18 revenues. Company peak projected sales have increased from £25m to £45m, due in part to 100% efficacy seen in trials and its potential to minimise contamination. New products across each division, together with the sustained recovery in shrimp markets, contribute to our estimated revenue CAGR of 13% across the forecast period in parallel with an estimated CAGR of 35% in adjusted EBITDA.
BMK appears very well positioned given its diversified approach to meet strong underlying demand growth for farmed seafood. Our DCF is supported by undemanding multiples falling sharply over the forecast period. We maintain our DCF valuation at £521m, or 99.8p per share, taking forecast changes into account and including the higher than anticipated commercial potential of Ectosan/CleanTreat.
NB you can see a 20 minute interview with BMK management here:
https://www.youtube.com/watch?v=fWkAeUhzgQU
Benchmark Holdings is principally engaged in the provision of technical services, products and knowledge that support the development of sustainable food and farming industries. Co.'s reportable segments include: Animal Health Division, which provides veterinary services, environmental services diagnostics and animal health products to aquaculture, and manufactures licenced veterinary vaccines and vaccine components; Genetics Division, which harnesses salmon breeding technologies combined with production facilities to provide a range of high genetic merit ova; and Advanced Animal Nutrition, which manufactures and provides nutrition and health products to the aquaculture industry.
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