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.
Its company profile fits very well into the category of those addressing ESG risks which are reported to be paramount in investor decision-making. At the same time, it is progressing towards key product launches from Genetics and Health - as well as potential news on commercial deals for Animal Health products and further rationalisation of the business.
BMK shares have risen sharply following sale by the Woodford Funds of the majority of its stake in the Company, removing at least in part the overhang on the shares. Yet the shares still remain at a low EV/sales of c 2x FY19e. We reiterate our DCF valuation of BMK of £585m, or 105p per share.
