Seeking a Nordic capital injection

BMK reports good H119 performance: Group revenues increased 3.4% overall to £78.3m from £75.7m and with adjusted EBITDA growing ahead of sales, up 25% from £6m in H118 to £7.5m. Animal Health, Genetics and Knowledge Services’ performance was robust, driven by progress with the field trials of the next generation sea lice treatment as well as 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. 

The proposed refinancing of the Group’s existing $90m credit facility via a NOK 850m ($95m) bond issue, underwritten by DNB Bank ASA, is a decision taken to increase financial headroom and provide greater flexibility for the Company’s growth strategy. As a reminder, growth initiatives include commercialisation plans for both the disease resistant, Specific Pathogen 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 vaccine and probiotics pipeline.

A listed NOK financing would provide access to, and raise the Group’s visibility in, the world’s largest aquaculture market. Their overall financial position for the period to end March 2019 stood at net debt of £65m up from £55.7m (end 2018) illustrating sustained investment in both tangible and intangible assets. With key product launches in view as well as potential news on commercial deals for Animal Health products and further rationalisation of the business, the outlook remains largely buoyant, except for Nutrition where weaker markets could continue in H219.

In light of the recently announced discussions for the Chile JV, as well as news on the outcome of marketing the NOK Bond, we leave our financial forecasts unchanged ahead of greater visibility at the interim results on 25 June. We reiterate our DCF valuation of BMK of £585m - or 105p per share.