Benchmark’s losses narrow despite shrimp slowdown

Profitability now appears within reach for aquaculture technology group Benchmark Holdings (BMK), which saw revenue grow across two of its three business areas in FY2023. Advanced nutrition was the exception, with sales falling 7 per cent at constant exchange rates due primarily to a slowdown in global shrimp markets.

Nearly three-quarters of the division’s revenue is derived from shrimp, with the remainder split between Mediterranean sea bass and sea bream. In better news for Benchmark’s genetics business, which sells fish eggs, salmon markets have proved reasonably resilient. 

Egg sales in Norway, its biggest market, increased by 17 per cent across the 12 months to the end of September.

The group said it increased sales to all other territories this year – resulting in an almost 20 per cent uptick in salmon egg revenue to £45.6mn. However, other fish haven’t proved as popular with customers. Management took the decision to dispose of the group’s tilapia assets in the fourth quarter, citing the “slow industrialisation and adoption of tilapia genetics in the industry”. 

Elsewhere, Benchmark sells various sea lice treatments through its health division. Although they might sound like a minor nuisance, the blood-sucking parasites can prove deadly to fish and devastating to farmers. Sea lice infestations have been found at major salmon farms in Scotland and Iceland in recent months. 

In light of this, it’s hardly surprising that management has deemed Benchmark’s solutions – Ectosan Vet and CleanTreat – “key growth vectors” for the business. Demand for the products ultimately resulted in 27 per cent sales growth in the health division across FY2023. 

Looking ahead, much of Benchmark’s trajectory depends on a rebound in global shrimp demand: the advanced nutrition demand still accounts for 46 per cent of company revenues. Management said it is “seeing early signs of recovery [...] which we expect will contribute positively from Q2”. Broker Numis called the group’s FY2023 performance “very credible” and noted that if improvements in shrimp are sustained, the business “should be well positioned” for future growth. 

The analysts maintained their existing forecast of adjusted Ebitda growth of 6 per cent for the current financial year. While some uncertainty remains, we think it’s clear the company is moving in the right direction, as evidenced by a year-on-year reduction in its net debt figure. 

Benchmark’s leaders appear focused on achieving profitability and healthy cash generation. But we’d like to see a track record of both before moving onto a buy. Hold.

Last IC View: Hold, 43p, 23 May 2023