BMK reports good H1’19 performance: Group revenues increased 3.4% overall to £78.3m from £75.7m, and adjusted EBITDA growing ahead of sales, up 25% from £6m in H1’18 to £7.5m driven by margin expansion in Animal Health, Genetics and Knowledge Services. Field trials of the next generation sea lice treatment progressed, with delivery on key milestones with the specific pathogen resistant (SPR) shrimp. Sales in these divisions helped to offset weaker than expected trading in Advanced Nutrition, caused by oversupply and price weakness in the shrimp and sea bass markets.
With key product launches now clearly in view, plus potential news on commercial deals for Animal Health products and further rationalisation of the business, the outlook remains largely buoyant. The exception being Nutrition where weaker markets will continue in H2’19.
The refinancing of the Group’s existing $90m credit facility via a NOK 850m ($95m) bond issue, underwritten by DNB Bank ASA, increases financial headroom and provides greater flexibility for the Company’s growth strategy. The listed NOK financing also raises the Group’s visibility amongst investors and industry players in the world’s largest aquaculture market.
Growth initiatives include commercialisation plans for both the disease resistant SPR shrimp (with initial launch planned by year end 2019) and the sea lice treatment (peak sales estimated >£45m) for 2020 launch. BMK is also progressing the development of its development pipeline: following rationalisation, it has identified a core of products with collective peak sales of £230m for planned launch over the next 5 years. The Group financial position for the period to end March 2019 stood at net debt of £65m, up from £55.7m (end 2018) after sustained investment in both tangible and intangible assets
We reiterate our DCF valuation of BMK of £585m - or 105p per share - and look forward to further news on the Company’s forthcoming product launches, as well as on commercial partnering discussions for the companion animal pipeline. The mediumterm outlook is under-pinned by the growing importance of sustainability and environmental, social and governance (ESG) factors to global investors.