While Benchmark generated good FY19 performance in its Genetics and Animal Health divisions, previously flagged challenging conditions in Advanced Nutrition contributed to the acceleration of a restructuring process. This includes a vigorous review of non-core assets with a view to their disposal or closure, helping ensure the Group’s ongoing financial liquidity. Factoring in disposals and efficiencies, our new forecasts indicate liquidity within its NOK bond-lending covenant terms, supporting our 2020-22 sales CAGR estimate of 12%. Sales will be driven by launches of BMK’s innovative sea lice treatment BMK08, shrimp genetics products and sustained underlying performance.
BMK has identified as non-core the Knowledge Services and Veterinary Services (part of Animal Health) divisions, now set for disposal to generate cash for the Group (FY19 contribution from discontinued operations: £21m of revenue and £2m of EBITDA). It is also re-prioritising its R&D expenditure and targets increased efficiencies at its in-house trial facilities. Challenging conditions in the Advanced Nutrition division related to a widespread downturn in production in shrimp markets, compounded by pricing pressures in Artemia as well as economic factors affecting Mediterranean farmed-fish markets. These factors contributed to a 10% fall in FY19 revenues for the division to £77m. Weakness is set to continue into 2020. Favourable conditions in the salmon markets are expected to continue.
Animal Health sales, including discontinued non-core Veterinary services, rose 5% to £17m from £16.2m in FY18. Successful outcomes from commercial scale field trials of BMK’s next generation sea lice treatment, BMK08, which showed 99% efficacy and a high sustainability score, support the use of the product along with its CleanTreat® proprietary technology. This will help alleviate the high cost of sea lice to the industry while minimising environmental contamination, a key differentiator for the product. Launch of BMK08, which has peak sales estimate of £45m, is planned for H12021 CY subject to regulatory approval.
Genetics sales grew 11% from £35m to £39m as the scaling up of production for the Salten land-based salmon ova facility kicked in, providing an uplift in margins and production volumes. BMK is making good progress towards launching its diseaseresistant SPR shrimp targeted at the Asian markets (peak sales estimate; £40m). Reviewing forecasts, stripping out discontinued operations and taking a conservative view on prospects, our net debt forecasts still indicate no additional recourse to funding and are well within the liquidity levels under the NOK Bond covenant. Moving past current challenges, prospects are underpinned by the significance of sustainability to the industry and the disruptive potential of the Company’s new products.