Benchmark helps deliver improved healthcare products and services to the Animal Health and Aquaculture industry and has just reported a confident message on FY18 trading to the end of September 2018.
They updated that adjusted EBITDA earnings for the period would be ahead of our estimates due to the higher margin mix of revenues from Advanced Nutrition. Headline financials for the period included c. 7% revenue growth vs FY17 to over £150m and adjusted EBITDA of over £16.5m, up 65% compared to FY17.
The outlook is positive across the Group and with strategic progress on key projects positioning Benchmark for sustained earnings growth driven by increasing recognition of the value of specialist aquaculture products.
FY18 saw improved profitability in Advanced Nutrition where earnings growth has been driven by sales of premium specialist diets, as opposed to lower margin live feed. In Genetics, the investment in developing disease-resistant salmon eggs paid off with high client demand that exceeded supply, together with market expansion. The Health Division made excellent progress towards the full commercial launch of Ectosan + Cleantreat, BMK’s revolutionary sea lice treatment. We are encouraged by both the number of successful trials, accelerating progress ahead of full commercial launch, as well as confirmation of strong outcomes, with 100% efficacy and no environmental impact.
The guidance on adjusted EBITDA being over £16.5m is higher than our forecast of £16.4m. Continuing this trend into FY19 takes our revenue forecast down to £174m (previously £183m), but again more than offset by an improving sales mix which we estimate will translate into an upgrade in FY19 adjusted EBITDA to £23.4m, 4.6% above our prior forecast of £22.4m.
Looking ahead, we expect news flow across the Group relating to the rollout of Ectosan + Cleantreat, plus further detail on the progress with the AquaChile JV.
Inputting new forecasts reflecting the improving earnings trajectory and the change in net debt gives an increased DCF valuation of £573m for Benchmark, versus £549m previously: this equates to 103p per share.