Final Results

RNS Number : 9000U

Benchmark Holdings PLC

24 January 2017

 

24 January 2017

BENCHMARK HOLDINGS PLC

("Benchmark" or the "Company" or the "Group")

PRELIMINARY RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2016

A YEAR OF INVESTMENT BEGINS TO YIELD RESULTS

Benchmark, the aquaculture biotechnology and food chain sustainability business announces its Preliminary Results for the year ended 30 September 2016 (the "period").

£m	2016	2015
Revenue	109.4	44.2
EBITDA from Trading Activities1	22.3	2.4
Adjusted EBITDA2	9.2	(5.7)
Operating loss	(20.5)	(11.6)
Basic loss per share (pence)	(4.39)	(5.96)
Net cash	0.4	13.4

Financial Highlights:

·     Acquisition of INVE Aquaculture in December 2015 for US$342m (c.£230m) created new Advanced Animal Nutrition division

o  Funded by £219m (gross) equity raise and US$70m revolving credit facility

·     INVE revenue of £55m in line with expectations

·     Like for like³ revenue up 20% to £30m (2015: £25m)

·     Operating loss reflects

o  £12.9m expensed acquisition and integration costs related to INVE

o  £11.7m investment in expensed R&D (2015: £6.6m)

·     £30.7m (gross) equity placing in August 2016 to fund capital projects and bolt-on acquisitions

·     Cash and cash equivalents at period end of £38.1m (2015: £13.6m)

Operational highlights:

·     Integration of INVE acquisition on track, synergies delivered with Benchmark Group include

o  First sales of new aquaculture vaccine for sea bass achieved

o  First major tilapia breeding programme in Asia for Spring Genetics secured post period end

·     Bolt-on acquisition of world leading shrimp breeding programme in Colombia

·     Adverse environmental factors mitigated by diversified Group portfolio

·     £16m investment in state-of-the-art vaccine manufacturing facility in Braintree in commissioning phase, first commercial batches expected in H2 FY 2017

·     Constructing new year-round, land-based salmon egg production unit in Norway which will increase salmon ova production capacity by 37.5%

·     Ten year contract with top three global salmon producer supplying genetic material, breeding selection services and health support

·     Pipeline of products continues to progress well

o  Eight products developed entirely in-house in final regulatory approval or have achieved first sales 

o  Current product pipeline of 94 products with an addressable market of £783m

¹ EBITDA from Trading Activities - excludes costs relating to Investing Activities from reported IFRS numbers. Investing Activities comprise exceptional restructuring costs, acquisition costs, pre-operational expenses for new ventures and research and development expenditure

 ² Adjusted EBITDA - EBITDA before exceptional and acquisition cost

³ Like for like - statutory IFRS results excluding businesses acquired in either 2016 or 2015 (principally the Breeding and Genetics division and INVE)

Malcolm Pye, CEO of Benchmark, said:

"I am pleased to announce that the Group has delivered a financial performance in
line with the Board's expectations, in a transformational year.  Our strategy of diversification has mitigated the impact of environmental headwinds such as the drought caused by El Niño and the temporary Chilean border closure.  Our acquisition strategy has already begun to show its strategic worth, providing access to a wider client base and technical insight which is enhancing our existing suite of products, as well as an established distribution network into fast growing markets.  We continue to execute our strategy of deploying world leading technology through established distribution channels into long term growth markets.

"As planned, we have been investing in manufacturing capacity this year in order to serve our fast growing portfolio of products, with our state-of-the-art plant in Braintree in its commissioning phase.  This increased capacity will allow us to deliver our product pipeline which continues to progress well, with a number of products expected to enter commercialisation from 2017 to 2019. Seafood is becoming a more desirable and important component of diets across the world, driven by increasing health, wealth and the limitations of the current food chain. We are now the world's biggest player in aquaculture biotechnology, placing us at the forefront of this 'Blue Revolution'."

Annual Report and Accounts

The Company's Annual Report and Accounts for the financial year ended 30 September 2016 will shortly be available to view on the Company's website (www.benchmarkplc.com) and posted out to shareholders.

For further information, please contact:
Benchmark Holdings plc	Tel: [phone]
Malcolm Pye, CEO
Roland Bonney, COO
Rachel Aninakwah, Communications
Numis	Tel: [phone]
Michael Meade / Freddie Barnfield (NOMAD)
James Black (Corporate Broking)
Tavistock	Tel: [phone]
Matt Ridsdale / Niall Walsh / Sophie Praill

Chairman's Statement

Strategic Summary

The year ended 30 September 2016 was a transformative one for the Benchmark Group and saw us complete and consolidate our strategic platform; from genetics and egg production through to specialist nutrition and into the provision of veterinary services and health products for the global aquaculture sector. As a result, Benchmark is now uniquely resourced and positioned to provide an integrated package of products and services that have the potential to unlock some of the key biological constraints which hold back our customers' production potential.  The Group's technology platform of genetics, nutrition and health is supported by our technical knowledge, manufacturing and research capabilities. This combination enables us to have a significant market presence in the three key aquaculture species - salmon, tilapia and shrimp.

Our customers are increasingly recognising the significant value that Benchmark's technology platform can deliver in terms of driving their productivity, profitability and sustainability. 

The Group is focussing on delivering the many top line synergies arising from building this platform.  In particular, we are concentrating on growing sales and market share in developing markets and actively exploring routes to market and strategic relationships in these regions.  Furthermore, we are set to continue to execute our strategy of making value-enhancing bolt-on acquisitions, and investing in some important strategic joint ventures to deliver significant synergies and sales growth.

Results

During the year revenue grew substantially to £109.4m (2015: £44.2m). This was primarily as a result of the acquisition of INVE Aquaculture in December 2015 and the recovery of Salmosan sales and demonstrates that the business is beginning to scale.  Full details of the Group's earnings, cash flow and financial position are set out in the FY16 Financial Review.  The Group made an operating loss of £20.5m, principally due to increased investment in R&D, significant acquisition related expenses arising from the INVE acquisition and higher amortisation. These items offset an improved operating performance in the Animal Health division and the results of the profitable, newly formed Advanced Animal Nutrition division.  EBITDA before exceptional expenditure and acquisition related costs was £9.2m compared with a loss of £5.7m last year.

Summary of Activities

The acquisition of INVE Aquaculture, a leading specialist manufacturer of primary stage, technically advanced nutrition and health products for aquaculture, was the most transformative event of the year and, indeed, of the Company's history. This transaction has enabled Benchmark to offer a comprehensive range of products and services to our key markets and has significantly advanced our goal to bridge the sustainable food production gap. The acquisition has also opened up enhanced distribution opportunities for Benchmark's suite of products across its other divisions through INVE's existing network.

The INVE acquisition necessitated a substantial equity fundraise in conjunction with committed banking arrangements and facilities that will support the important capital expenditure projects and joint venture opportunities as we grow.  As a result, our balance sheet has been transformed and we have cash resources in situ to provide the flexibility we need to capture the opportunities we currently see.  As well as the INVE fundraise, we also raised a small amount of equity in the summer of 2016 which allowed a supportive, strategic investor to gain a meaningful interest in the business.  The £30m of capital raised at the time has allowed us to fully fund Salmobreed Salten which is critical to consolidating some of our long-term salmon farming relationships and also to buy a world-leading shrimp breeding programme from Ceniacua.  This acquisition was completed in August, and together with INVE, provides us with important opportunities in the rapidly-growing global shrimp market and penetration into the key geographies of Latin America and South East Asia.

Whilst this fundraise was done when the share price was relatively low, we believed that the small amount of the raise, coupled with the strategic benefits the new shareholder brings, justified the transaction.  I'm pleased that the share price has recovered since the middle of the year as the market has become more aware and familiar with the potential growth inherent in the Benchmark business strategy.  Our Capital Markets communications day in November  did much to bring the Benchmark business model to the attention of the investing institutions and we intend to repeat this exercise at regular intervals.

We have continued to invest in new and improved production facilities in order to secure supply of products key to our future growth.  The most significant examples are the new vaccine manufacturing facility in Braintree which has entered the commissioning phase, and the previously mentioned SalmoBreed Salten project where work has commenced to build a new salmon egg production unit in Norway which will increase our production capacity by 37.5%.

Outlook

The long-term drivers of growth in our sectors, including the growing global demand for aquaculture products, which we expect to grow at around 5% per annum, will continue to benefit Benchmark for many years to come.  In addition to capturing the opportunities for the products and services we have today, an important driver of our organic growth will be the delivery of commercial sales from our robust pipeline of new products, and although the exact timing of new product launches is difficult to predict, an increasing number of these are expected to come to market during 2017 to 2019.

The current year has started in line with the Board's expectations with some continued softness in the Asian shrimp farming market occasioned by the disease challenges faced by producers there.  We expect this to recover once these challenges are met, however the exact timing of the predicted uplift remains uncertain.  At the same time the salmon farming market which represents more than a third of Benchmark's business is experiencing record high prices which look likely to be sustained.  With new markets and customers opening up as our integrated offering becomes more familiar to the participants in the global 'Blue Revolution', we look forward to the future with great confidence.

The Hon. Alexander Hambro

Chairman

24 January 2017

STRATEGIC REVIEW

MALCOLM PYE, CHIEF EXECUTIVE OFFICER

In Summary

Benchmark delivered a solid performance, in a challenging but transformational year, defined by our investment in the future of the business. Through the acquisition of INVE Aquaculture in December 2015, we now have a platform to serve customers in over 70 countries and a superb route to market in the southern hemisphere and its fast-growing markets.  Benchmark's global distribution network in aquaculture, coupled with our comprehensive IP-rich technology portfolio, gives us an unrivalled offering.  We remain focused on growing sales and market share in developing markets, including China, for our Genetics and Nutrition businesses, and are actively exploring routes to market and strategic relationships in those regions.

Delivering Core Strategy

Since Benchmark was founded in 2000 to set a new standard for sustainable living, the key issues at stake remain the same - food production is still the largest polluter and water/energy consumer on the planet. The food industry will have to evolve in order to cope with a huge increase in population to approximately 9.7bn by 2050 (UN), requiring an increase in protein production of between 40% and 70%.

An increase in the production and efficiencies of farmed land animals will meet some of this demand, however  much of the gains in production have already been optimised for terrestrial animals, and wild marine fisheries are expected to meet maximum production capacity of 93m tonnes by 2030. The World Bank in their report 'Fish to 2030' (2013), projected that aquaculture will continue to fill the supply-demand gap, and that by 2030 62% of fish for human consumption will come from this industry. We view considerable opportunity in the fact that the aquaculture industry is still relatively nascent, with significant room for improvement in terms of industrialisation and best practice.

With 90% of the Company now involved in aquaculture, Benchmark is at the forefront of the 'Blue Revolution'.  Our integrated package of both products and services is being increasingly recognised by our customers for the significant value that this can deliver in terms of driving their productivity, profitability and sustainability.  However, the challenges our customers face do not stand still and we are therefore committed to continuing our investment in Benchmark's technology portfolio and our in-market technical services for the products we sell today.

We have built a platform which can best serve our customers, helping farmers to take control of their biological environment through the combination of genetics, nutrition, health and knowledge services. We are delivering this by:

·    Harnessing the best expertise

·    Deploying cutting edge technologies

·    Being embedded alongside our customers

More detail is provided on how we are achieving this in the FY16 Business Review.

Acquisitions and Integration

At the end of December 2015 INVE Aquaculture joined the Group, adding advanced nutrition to our offering and largely completing the building of Benchmark's technology platform and operating structure. Integration is on schedule, with the key account management programme progressing well and allowing us to identify and deliver the synergies. Work on the first co-developed products well underway, and INVE's distribution network has already proved beneficial for other existing Group products.

We continue to exploit the many synergies across INVE and Benchmark and expect to see increasing opportunities as new production challenges present themselves that require multi-faceted solutions in the aquaculture, agriculture and animal healthcare industries.

In August 2016, we strengthened our genetics offering through the acquisition of an established and leading South American shrimp breeding programme which enabled us to take the lead on pathogen-resistant shrimp and added the third major aquaculture species shrimp to our already strong aquaculture breeding business in salmon and tilapia. This has enabled us to increase our market penetration into the fast-growing global shrimp industry, which is seeing strong and growing customer demand for disease resilient stock.  Our physical presence in the region also furthers our penetration into the South American market for our wider suite of products.

Challenges

The ongoing effect of El Niño and disease challenges in South East Asia and Latin America and, coupled with low market prices in the shrimp sector, is resulting in delayed sector investment and lower growth rates in the short-term in both regions.  The unexpected border closure in Chile also impacted sales for salmon eggs.  This has to some extent been offset by our ability to grow sales in other developing markets and now that the border has reopened we are starting to recover sales in Chile.  The strong US dollar against many other countries has also negatively affected trading in some markets where our products are priced in dollars, in particular Latin America.

Our People

We are a technology and innovation-driven company, which means our success is driven by having very high calibre, skilled and driven people at every level of the business. During the year we have secured some extremely high quality people, particularly within our health, nutrition and breeding and genetics divisions.  We are already seeing the positive impacts of these new appointments in their areas of the business, with many joining from household industry names.

I am immensely proud of our team's response to our fast-paced acquisition strategy. We've acquired businesses with excellent management and like-minded teams that have similar values to Benchmark, which has made it easier to maintain and grow our culture whilst growing the business.  INVE's integration into the Group has far exceeded our expectations, with the teams and workflows principally aligned and advancing the many opportunities available to us.

Our employees' passion and engagement makes a big contribution to the value we deliver to our customers and our success in the market. Our thanks go to all of Benchmark's people whose culture of hard work, commitment and enthusiasm has enabled the Group to deliver the noteworthy progress reported herein. 

What we can build upon

Aquaculture is a young industry with significant untapped potential to feed a growing global population.  There is an urgent need to professionalise and modernise aquaculture.  To meet this opportunity, we will advance our technology centre to drive progress in the areas of disease, growth, feed efficiency, and welfare as well as incorporating new technologies such as gene editing.

The Future

Thanks to our highly supportive shareholders and strong income generation, we have the opportunity, the platform, the technology and the team to grow our sustainable business, supporting a healthier, more sustainable future for food production. We have a major growth opportunity ahead of us in aquaculture and sustainable food production technology and we are uniquely well placed to deliver that exciting prospect.

FY16 FINANCIAL REVIEW

KEY PERFORMANCE INDICATORS

Financial highlights:

·     Revenue increased by 148% to £109.4m (2015: £44.2m). Like for like sales, excluding businesses acquired in either 2016 or 2015, increased by 20% to £29.8m (2015: £24.7m)

·     EBITDA from Trading Activities¹ grew by £19.9m to £22.3m (2015: £2.4m)

·     Adjusted EBITDA² increased by 14.9m to £9.2m (2015: loss of £5.7m)

·     Animal Health division successfully recovered sales on Salmosan / Byelice

·     Acquisition of INVE Aquaculture in December 2015 for US$342m (c.£230m) created new Advanced Animal Nutrition division

·     Integration of INVE went to plan and first revenue synergies were achieved

·     Temporary closure of Chilean border to Icelandic produced salmon eggs impacted Breeding and Genetics revenues

·     Operating loss of £20.5m (2015: £11.6m) after increase in investing activities to £26.7m (2015: £10.1m), including £12.9m of expensed acquisition and integration costs

·     Expensed R&D increased by 77% to £11.7m (2015: £6.6m)

£m			2016	2015
Total revenue			109.4	44.2
Gross profit			50.8	16.1
Gross profit percentage			46%	36%
Operating expenses - Trading Activities			(28.5)	(13.7)
EBITDA from Trading Activities			22.3	2.4
Profit / (Loss) before tax from Trading Activities			4.3	(1.3)
Total net costs of Investing Activities			(26.7)	(10.1)
Loss before tax			(22.4)	(11.4)
Earnings / (Loss) per share from Trading Activities (pence)			1.79	(1.13)
Basic loss per share (pence)			(4.39)	(5.96)

¹ EBITDA from Trading Activities - excludes costs relating to Investing Activities from reported IFRS numbers. Investing Activities comprise exceptional restructuring costs, acquisition costs, pre-operational expenses for new ventures and research and development expenditure.

² Adjusted EBITDA - EBITDA before exceptional and acquisition costs.

Group results

2016 was a transformational year for the Group, with the completion of the acquisition of INVE Aquaculture BV on 30 December 2015 to form the Advanced Animal Nutrition division which more than doubled the scale of the Group's operations.  The Group's results include nine months of trading from the new division and this is a significant component of the comparison to 2015.

The continued strategy to build a platform to exploit the significant growth opportunity in the aquaculture market also delivers increased diversification of revenue streams across the supply chain in several species, both in cold and warm water.  This has improved the Group's ability to withstand individual market challenges.

Group revenue increased by 148% to £109.4m in the year (2015: £44.2m).  The growth in revenue was achieved through a combination of the successful acquisition of INVE and the recovery of Salmosan sales in the Animal Health division.  Like for like sales, excluding businesses acquired in either 2016 or 2015, increased 20% to £29.8m (2015: £24.7m).

The Group continues to separate the statutory IFRS results into Trading Activities and Investing Activities, in line with many of its peers in the sector, to present better the underlying performance and development of the business.  This is how the board monitors progress of the existing Group businesses.  Trading Activities are those related to products and services that have been developed and are producing revenue streams, while Investing Activities relate to the costs associated with acquiring new businesses and products and services being developed for future revenue streams and include a pipeline of vaccines at various stages of the development cycle.

The Group's statutory IFRS earnings (including both Trading and Investing Activities), set out in the Consolidated Income Statement, show an EBITDA loss for the year of £3.9m (2015: loss of £7.2m), and loss after tax for the year of £18.3m (2015: loss of £11.8m).  Basic and diluted earnings per share are both losses of 4.4p per share (2015: basic and diluted loss per share of 6.0p).

Trading Activities

Gross profit of £50.8m was up on the previous year (2015: £16.1m).  Overall gross profit percentage increased to 46% (from 36% in 2015) due to the change in sales mix towards Advanced Animal Nutrition and Animal Health products.  Like for like gross profit, excluding businesses acquired in either 2016 or 2015, increased 56% to £12.3m (2015: £7.9m).

Operating costs relating to Trading Activities (excluding amortisation and depreciation) in the year more than doubled from the comparative period to £28.5m (2015: £13.7m), with £11.4m of the increase coming from the newly created Advanced Animal Nutrition division.  Headcount increased from 402 at the start of the year to 884 principally through the INVE acquisition.  The remainder of the increase in operating costs reflects the inclusion of financial year 2015 acquisitions for a full year and increased activity within the Animal Health division.

Central operating costs have decreased from £4.9m in 2015 to £4.3m.  This decrease reflects the better efficiency that the enlarged Group can achieve through increased scale and the impact of continued strong cost control.

As a result of the above factors EBITDA from Trading Activities of £22.3m was up on the previous year (2015: £2.4m).

Investing Activities

Expensed R&D expenditure, one of the Group's key investment objectives, increased significantly to £11.7m (2015:  £6.6m) in the year as a result of the Group's strategy to invest in technology solutions for food animal producers.  The acquisition of INVE contributed £1.3m to the year on year increase as it also has a core focus on innovation to drive future growth.  Overall spend was in line with expectations and R&D as a percentage of sales fell to 10.7% (2015: 14.9%).

Pre-operational expenses in the year of £1.4m (2015: £1.6m) relate primarily to the results of the FAI Aquaculture business which was undergoing the final stages of a substantial refurbishment.  The Ardtoe site was unveiled in May 2016 and became fully operational at the end of the year. It will provide trials facilities to the Benchmark Group that will help to advance new product launches.  The new FVG laboratories in Chile and Brazil are also included within pre-operational expenditure and are nearing completion.

Significant acquisition related costs of £12.9m (2015: £1.3m) were incurred in the year principally in respect of the acquisition of INVE and the associated fund raising.  This acquisition was considerably larger than all of the acquisitions completed in 2015 and hence costs were higher.

Exceptional non-recurring costs of £0.1m (2015: £0.2m) related to the completion of the restructuring exercise undertaken on the Sustainability Science Division which began in 2015.

Depreciation and amortisation at £16.6m in the year (2015: £4.3m) was higher than in previous years due to the significant increase in tangible and intangible fixed assets balances following the increased investment in the year and during the previous year, primarily from the acquisition of INVE.  Amortisation of intangibles was £13.7m in the year.

Finance costs

Net finance costs of £2.2m (2015: net finance income of £0.2m) reflect the fact that a multi-currency revolving credit facility of up to $70m was put in place in December 2015.  This facility incurs interest in the range of 1.9% to 2.5% above LIBOR depending on leverage.

The consideration for INVE was denominated in USD, US$50m was drawn to part fund the purchase of INVE followed by a further US$5m and £5m - both of which were repaid during the year.  A foreign exchange loss of £5.0m arose due to the movement in exchange rates and has been included within finance costs.

Taxation

There was a tax credit in the period of £4.0m (2015: charge £0.4m).  Overseas tax charges in the Advanced Animal Nutrition were more than offset by deferred tax credits on the reversal of temporary differences, particularly those arising on the intangible assets arising on consolidation from recent acquisitions.  In particular, a deferred tax liability of £50.1m arose on the intangible assets acquired with INVE during the year.  The deferred tax credit for the year relating to those acquired intangible assets was £4.1m.  No deferred tax assets have been recognised on the losses incurred in the year due except where there is certainty over the timing of their recovery.

Earnings per share

Basic loss and diluted loss per share were both 4.4p (2015: loss per share 6.0p).  The movement year on year is due to a combination of the result for the year as noted above, and the issue of new shares in the equity raise used to fund the acquisition of INVE and the subsequent fund raise later in the year.  Earnings per share from Trading Activities rose to 1.8p (2015: loss per share 1.1p) with the movement due to an improved result coupled with the dilutive effect of the higher number of shares in issue.

Dividends

No dividends have been paid or proposed in the year (2015: £nil).

Balance sheet

Group net assets increased in the year to £367.7m (2015: £92.1m), with the main increase arising from the equity raises in the year.  Gross proceeds from the first raise used to fund the acquisition of INVE were £185.7m and £4.4m of costs related to the equity raise were netted off the share premium account.  In addition, a further equity issue was completed in August 2016 raising gross proceeds of £30.7m.

Intangible assets have increased in the year to £352.5m (2015: £65.9m).  Note 12 outlines the fair value of the assets and liabilities acquired in the acquisitions made during the year.  These include separately identifiable intangible assets of £147.6m relating to INVE's intellectual property, contracts, licences and customer lists.  Deferred tax liabilities totalling £50.1m were provided for the tax timing differences on these intangible assets.  Goodwill of £102.9m arose on the acquisition and reflects the synergies available from combining INVE with Benchmark.  There was a further increase of £47.6m in the net book value of intangible assets due to the movement in foreign exchange rates in the period, as those which were acquired in overseas acquisitions were revalued to the year end exchange rates.

Tangible fixed assets have increased by £24.8m to £50.0m in the year.  Other than those assets acquired with INVE, the main investment has been in the new vaccine manufacturing plant in Braintree, Essex, together with the investment in trials facilities at FAI Aquaculture's Ardtoe, Scotland site.

Cash flow

Net cash flow from operations was an outflow of £10.5m (2015: outflow £9.0m) due to the increased working capital demands of the enlarged Group which offset cash inflow before working capital adjustments of £3.7m (2015: cash outflow £8.2m). 

Cash flows were dominated by the proceeds of the two share placings in the year, with a total of £211.8m net of costs being received.  £181.3m of this was used to fund the acquisition of INVE, together with some of the receipts from the new debt facility entered into in December 2015, with total cash inflow from proceeds of the bank borrowings of £42.3m.  The balance of the INVE purchase price was settled by the issue of new shares. 

The rest of the proceeds from share placings is being used to fund a number of strategically important projects including investment in a partnership that is constructing a new salmon egg production facility in Norway and the acquisition of the shrimp breeding programme in South America.  The majority of the funds from this share issue remained on deposit with the Company's bankers at the year end.

Cash outflow on capital expenditure in the year was £18.7m as investment in expanded capacity at Braintree and Ardtoe nears completion (2015: £14.0m).

Cash at the period end stood at £38.1m (2015: £13.6m) and borrowings drawn under the revolving credit facility, net of debt raising costs, and finance leases stood at £37.7m giving the Group a net cash position of £0.4m.

Treasury

The Group has established procedures to mitigate financial risk to ensure sufficient liquidity is available to meet foreseeable requirements.  These ensure that finance is secured at minimum cost where required and that cash assets are invested securely and profitably.  The finance function manages the Group's foreign exchange, liquidity and funding, interest rate and credit risks within a framework of policies and guidelines authorised by the Board.

The Group uses simple derivative financial instruments for risk management purposes only.  Group policy prohibits speculative arrangements.  Transactions in financial instruments are always matched to an underlying business requirement, such as expected foreign currency revenues and payments.  The Group uses derivatives only to manage its foreign currency and interest rate risks arising from underlying business activities.  No such derivatives were outstanding at the year end.  Treasury activities are reported to the Board on a monthly basis within the Group management accounts.

Foreign exchange risk

The Group's reporting currency is pounds sterling.  Where group entities operate with a different functional currency, the Group's policy is, where possible, to allow group entities to settle liabilities denominated in their functional currency with the cash generated from their own operations in that currency.  Where group entities have liabilities denominated in a currency other than their functional currency (and have insufficient reserves of that currency to settle them), cash already denominated in that currency will, where possible, be transferred from elsewhere within the Group.

Where significant transactions are conducted in currencies other than the functional currencies of the individual entities, exposure to movements in exchange rate is mitigated by the use of simple financial derivative instruments as appropriate.

Liquidity and funding

The Group's finance function is responsible for sourcing and structuring borrowing requirements.  The Group began the year with no bank borrowings and, as a result of the revolving credit facility first drawn in December 2015, had £37.1m in bank borrowings at the end of the year.  The new facility has a maximum drawdown of US$70m leaving sufficient funding facilities (£15.4m at 30 September 2016) to meet its normal funding requirements in the medium term.

Interest rate management

Controls over interest rate exposure are in place and dealings are restricted to those banks with the necessary combination of geographic presence and suitable credit rating.

Credit risk

The policy followed in managing credit risk permits only minimal exposures, with any surplus funds invested mainly in short-term deposits with financial institutions that meet credit criteria approved by the Board.  Specifically, counterparty creditworthiness is determined by reference to credit ratings as defined by the global rating agencies: Fitch, Standard & Poor's and Moody's.

Advanced Animal Nutrition division

Summary Income Statement
£m	2016
Revenue	55.0
Cost of Sales	(26.5)
Gross Profit	28.5
Operating costs relating to Trading Activities	(11.4)
EBITDA (from Trading Activities)	17.1
Operating costs relating to Investing Activities	(1.3)
Depreciation and amortisation	(11.4)
Operating profit	4.5

The division has performed well, with sales of £55.0m and EBITDA from Trading Activities at £17.1m for the nine month's post acquisition of INVE.  Sales of core live feed products (artemia) were strong and selling prices were resilient.  Market prices for raw material sourced in Asia increased and this resulted in some erosion of gross profit percentage.  Adverse conditions in the main shrimp markets linked to: the drought caused by El Nino during H1; disease challenges for customers; and the strong US Dollar, resulted in lower volume of sales of replacement diets.  Gross profit percentage for these products remained stable.  These adverse impacts on sales and margin were partially offset by the favourable GBP:USD exchange rate (arising after the UK's decision to exit the EU) when converting the financial results of the division.  Operating costs relating to Trading Activities (20.6% of sales) were managed carefully with some increase in payroll and other employee related expenses as a result of the strategy to continue to grow by implementing three business initiatives: implement key accounts approach (China and Asia); accelerate the penetration in the farm and grow-out segment; and gain a market leading position in fish hatcheries (Asia).

Expensed R&D costs were £1.3m and capitalised R&D was £0.7m reflecting increased investment for supporting the above growth initiatives.

Breeding and Genetics division

Summary Income Statement
£m	2016	2015
Revenue	20.7	15.9
Cost of Sales	(13.5)	(9.9)
Gross Profit	7.2	6.0
Operating expenses relating to Trading Activities	(3.6)	(1.3)
EBITDA (from Trading Activities)	3.6	4.7
Operating costs relating to Investing Activities	(4.6)	(0.2)
Depreciation and amortisation	(2.6)	(1.3)
Operating loss	(3.6)	3.1

The Breeding and Genetics division experienced difficult trading conditions for sales of salmon eggs in the year as a result of the closure of the Chilean border to Icelandic eggs at the start of the year, lower stocking in the Chilean industry in response to environmental challenges.  The revenues lost as a result of these factors were offset by the impact of a full year's trade, and overall, revenues for the division increased to £20.7m (2015: £15.9m).  The integration of the division's Tilapia breeding business, Spring Genetics, was completed and its sales grew from £0.2m to £0.5m. The division's aquaculture genetics advisory business, AFGC, achieved growth in revenue of £1.4m. The addition of shrimp breeding through the acquisition of Genética Spring in August 2016 had limited impact on the division's results for the year. 

EBITDA from Trading Activities fell by £1.0m to £3.6m (2015: £4.6m).

Animal Health division

Summary Income Statement
£m	2016	2015
Revenue	24.8	21.1
Cost of Sales	(15.0)	(14.5)
Gross Profit	9.8	6.6
Operating costs relating to Trading Activities	(5.4)	(4.4)
EBITDA (from Trading Activities)	4.5	2.1
Operating costs relating to Investing Activities	(8.9)	(6.2)
Depreciation and amortisation	(1.5)	(1.9)
Operating loss	(6.0)	(6.0)

The division's pipeline of new technologies and products remains its key focus, and first sales of a new Nodavirus vaccine for seabass were made in July 2016.

The Animal Health division achieved significant improvement in year on year sales of Salmosan / Byelice with total revenue up on last year by 18%.  2015 sales were impacted by generic competition and the 2016 recovery is as a result of targeted sales activity by Benchmark's technical team.  It should be noted that demand for Salmosan is expected to reduce over time as the product continues through its life cycle, as a result of generic competition and as new solutions to the sea lice challenge become available to the industry.  EBITDA from Trading Activities for the division was a profit of £4.5m (2015: £2.1m). 

Expensed R&D costs (including amortisation and depreciation of acquired R&D assets) of £8.7m have been invested in the product pipeline in the period (2015: £5.5m).  This year for the first time the criteria for capitalising development costs have been met and £0.8m has been capitalised in respect of new products which are in the trial stages.

Technical Publishing and Sustainability Science divisions

Summary Income Statement
£m	2016	2015
Revenue	11.2	10.1
Cost of Sales	(7.0)	(6.9)
Gross Profit	4.2	3.2
Operating costs relating to Trading Activities	(4.0)	(3.4)
EBITDA from Trading Activities	0.2	(0.2)
Operating costs relating to Investing Activities	(1.6)	(0.2)
Depreciation and amortisation	(1.0)	(1.0)
Operating loss	(2.4)	(1.4)

The knowledge services divisions of Benchmark had a solid year following internal reorganisation and delivered sales of £11.2m (2015: £10.1m) and EBITDA from Trading Activities of £0.2m (2015: EBITDA loss of £0.2m).

Consolidated Income Statement for the year ended 30 September 2016

		Trading Activities¹	Investing Activities²	Total	Trading Activities¹	Investing Activities²	Total
		2016	2016	2016	2015	2015	2015
	Note	£000	£000	£000	£000	£000	£000
Revenue		109,375	-	109,375	44,199	-	44,199
Cost of sales		(58,562)	-	(58,562)	(28,102)	-	(28,102)
Gross profit		50,813	-	50,813	16,097	-	16,097
Operating costs		(28,502)	(26,028)	(54,530)	(13,674)	(9,494)	(23,168)
Operating costs - Exceptional		-	(146)	(146)	-	(160)	(160)
EBITDA³		22,311	(26,174)	(3,863)	2,423	(9,654)	(7,231)
Depreciation	6	(2,609)	(250)	(2,859)	(1,113)	(191)	(1,304)
Amortisation	7	(13,504)	(245)	(13,749)	(2,825)	(239)	(3,064)
Operating profit / (loss)		6,198	(26,669)	(20,471)	(1,515)	(10,084)	(11,599)
Finance costs		(6,170)	-	(6,170)	(34)	-	(34)
Finance income		3,984	-	3,984	260	14	274
Share of profit of equity-accounted investees, net of tax		273	-	273	-	-	-
Profit / (loss) on ordinary activities before taxation		4,285	(26,669)	(22,384)	(1,289)	(10,070)	(11,359)
Tax on profit/(loss) on ordinary activities		3,187	851	4,038	(751)	355	(396)
Profit / (loss) for the year		7,472	(25,818)	(18,346)	(2,040)	(9,715)	(11,755)
Profit / (loss) for the year attributable to:
-       Owners of the parent		7,481	(25,818)	(18,337)	(2,273)	(9,715)	(11,988)
-       Non-controlling interest		(9)	-	(9)	233	-	233
		7,472	(25,818)	(18,346)	(2,040)	(9,715)	(11,755)
Basic earnings / (loss) per share (pence)	4	1.79		(4.39)	(1.13)		(5.96)
Diluted earnings / (loss) per share (pence)	4	1.78		(4.39)	(1.13)		(5.96)

¹ Before items described in footnote 2 below

² Includes exceptional items, research and development expenditure, pre-operational expenses for new ventures and costs of acquiring new businesses as set out in note 11.

³ EBITDA - Earnings before interest, tax, depreciation and amortisation

Consolidated Statement of Comprehensive Income
for the year ended 30 September 2016

	Trading Activities¹	Investing Activities²	Total	Trading Activities¹	Investing Activities²	Total
	2016	2016	2016	2015	2015	2015
	£000	£000	£000	£000	£000	£000
Profit/(loss) for the year	7,472	(25,818)	(18,346)	(2,040)	(9,715)	(11,755)
Other comprehensive income/(expense)
Items that are or may be reclassified subsequently to profit or loss
Movement on foreign exchange reserve	48,386	-	48,386	(2,812)	-	(2,812)
Total comprehensive income/(expense) for the year	55,858	(25,818)	30,040	(4,852)	(9,715)	(14,567)
Total comprehensive income/(expense) for the year attributable to:
-       Owners of the parent	55,571	(25,818)	29,753	(5,071)	(9,715)	(14,786)
-       Non-controlling interest	287	-	287	219	-	219
	55,858	(25,818)	30,040	(4,852)	(9,715)	(14,567)

¹ Before items described in footnote 2 below.

² Includes exceptional items, research and development expenditure, pre-operational expenses for new ventures and costs of acquiring new businesses as set out in note 11.

Consolidated Balance Sheet

as at 30 September 2016

		2016	2015
	Notes	£000	£000
Assets
Non-current assets
Property, plant and equipment	6	50,023	25,141
Intangible assets	7	352,538	65,872
Investments, including associates		827	147
Trade and other receivables		-	293
Biological and agricultural assets	8	5,028	3,392
Total non-current assets		408,416	94,845
Current assets
Inventories		23,231	5,359
Biological and agricultural assets	8	6,831	4,948
Trade and other receivables		34,288	15,353
Cash and cash equivalents		38,140	13,564
Total current assets		102,490	39,224
Total assets		510,906	134,069
Liabilities
Current liabilities
Trade and other payables		(31,232)	(24,368)
Loans and borrowings	9	(289)	(63)
Corporation tax liability		(1,107)	(860)
Provisions		(1,086)	(1,033)
Total current liabilities		(33,714)	(26,324)
Non-current liabilities
Loans and borrowings	9	(37,407)	(93)
Other payables		(8,825)	(7,330)
Deferred tax		(63,261)	(8,224)
Total non-current liabilities		(109,493)	(15,647)
Total liabilities		(143,207)	(41,971)
Net assets		367,699	92,098
Issued capital and reserves attributable to owners of the parent
Share capital	10	521	219
Share premium reserve	10	339,431	94,672
Capital redemption reserve		5	5
Retained earnings		(18,904)	(1,021)
Foreign exchange reserve		45,365	(2,724)
Equity attributable to owners of the parent		366,418	91,151
Non-controlling interest		1,281	947
Total equity and reserves		367,699	92,098

Consolidated Statement of Changes in Equity

for the year ended 30 September 2016

	Share capital	Share premium reserve	Other reserves	Retained   earnings	Total attributable  to equity holders of parent	Non- controlling interest	Total equity
	£000	£000	£000	£000	£000	£000	£000
As at 1 October 2014	137	26,903	79	10,123	37,242	10	37,252
Comprehensive income for the year
(Loss)/profit for the year	-	-	-	(11,988)	(11,988)	233	(11,755)
Other comprehensive income	-	-	(2,798)		(2,798)	(14)	(2,812)
Total comprehensive income for the year	-	-	(2,798)	(11,988)	(14,786)	219	(14,567)
Contributions by and distributions to owners
Share issue	82	69,918	-	-	70,000	-	70,000
Share issue costs recognised through equity	-	(2,149)	-	-	(2,149)	-	(2,149)
Share based payment	-	-	-	748	748	-	748
Deferred tax on share options	-	-	-	96	96	-	96
Acquisition of non-controlling interest	-	-	-	-	-	718	718
Total contributions by and distributions to owners	82	67,769	-	844	68,695	718	69,413
As at 30 September 2015	219	94,672	(2,719)	(1,021)	91,151	947	92,098
Comprehensive income for the year
Loss for the year	-	-	-	(18,337)	(18,337)	(9)	(18,346)
Other comprehensive income	-	-	48,089	-	48,089	297	48,386
Total comprehensive income for the year	-	-	48,089	(18,337)	29,752	288	30,040
Contributions by and distributions to owners
Share issue	302	249,444	-	-	249,746	-	249,746
Share issue costs recognised through equity	-	(4,685)	-	-	(4,685)	-	(4,685)
Share based payment	-	-	-	749	749	-	749
Deferred tax on share options	-	-	-	(295)	(295)	-	(295)
Total contributions by and distributions to owners	302	244,759	-	454	245,515	-	245,515
Changes in ownership
Acquisition of subsidiary with non-controlling interests	-	-	-	-	-	46	46
Total changes in ownership interests	-	-	-	-	-	46	46
Total transactions with owners of the Company	302	244,759	-	454	245,515	46	245,561
As at 30 September 2016	521	339,431	45,370	(18,904)	366,418	1,281	367,699

Consolidated Statement of Cash Flows

for the year ended 30 September 2016

		2016	2015
	Notes	£000	£000
Cash flows from operating activities
Loss for the year		(18,346)	(11,755)
Adjustments for:
Depreciation of property, plant and equipment	6	2,859	1,304
Amortisation of intangible fixed assets	7	13,749	3,064
Loss on sale of property, plant and equipment		30	21
Finance income		(3,984)	(274)
Finance costs		6,170	34
Share of profit of equity-accounted investees, net of tax		(273)	-
Foreign exchange losses/(gains)		6,776	(1,445)
Share based payment expense		749	458
Tax (credit)/expense		(4,038)	396
		3,692	(8,197)
(Increase)/decrease in trade and other receivables		(3,729)	2,503
Increase in inventories and biological assets		(4,704)	(468)
Decrease in trade and other payables		(4,124)	(2,645)
Decrease in provisions		(238)	(47)
		(9,103)	(8,854)
Income taxes paid		(1,429)	(105)
Net cash flows used in operating activities		(10,532)	(8,959)
Investing activities
Acquisition of subsidiaries, net of cash acquired		(191,502)	(47,568)
Purchase of investments		-	(52)
Purchases of property, plant and equipment		(18,660)	(14,038)
Purchase of intangibles		(1,523)	(182)
Proceeds from sale of fixed assets		174	148
Interest received		254	274
Net cash flows used in investing activities		(211,257)	(61,418)
Financing activities
Proceeds of share issues		216,519	70,000
Proceeds from bank borrowings		42,254	-
Share-issue costs recognised through equity		(4,685)	(2,149)
Net cash flows from derivative financial instruments		3,731	-
Repayment of bank borrowings		(8,809)	(332)
Interest and finance charges paid		(2,481)	(34)
Payments to finance lease creditors		(164)	(55)
Net cash inflow from financing activities		246,365	67,430
Net increase/(decrease) in cash and cash equivalents		24,576	(2,947)
Cash and cash equivalents at beginning of year		13,564	16,511
Cash and cash equivalents at end of year		38,140	13,564

1.    Basis of preparation

The results for the year ended 30 September 2016, including comparative financial information, have been prepared in accordance with International Financial Reporting Standards ("IFRS"), and their interpretations adopted by the European Union.

Benchmark Holdings plc ("the Company") has adopted all IFRS in issue and effective for the year.  While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of IFRS, this announcement does not itself contain sufficient information to comply with IFRS.  The Company expects to publish full financial statements that comply with IFRS in January 2017.

The financial information set out above does not constitute the Company's statutory accounts for the years ended 30 September 2016 or 2015, but is derived from those accounts.  Statutory accounts for 2015 have been delivered to the Registrar of Companies.  The auditors have reported on those accounts: their reports were unqualified, did not draw attention to any matters by way of emphasis and did not contain statements under s498 (2) or (3) of the Companies Act 2006.  The accounts for 2016 will be delivered following the Company's AGM.

The financial information presented in respect of the year ended 30 September 2016 has been prepared on a basis consistent with that presented in the annual report for the year ended 30 September 2015.

2.    Accounting policies

The accounting policies adopted are consistent with those of the financial year ended 30 September 2015.

The Group has acquired businesses during the period whose accounting policies were not included in the accounts for the financial year ended 30 September 2015.  The accounting policies for these new entities are consistent with those already applied for the existing group.

Trading Activities and Investing Activities are disclosed and described separately in this preliminary announcement where it is necessary to do so to provide further understanding of the financial performance of the Group.

As a result of business combinations outlined in note 12, the Group has acquired new intangibles during the period which have been capitalised within intangible fixed assets.  The accounting policy in respect of intangible assets has been updated in the financial statements for the year ending 30 September 2016 to reflect the differing asset lives of these newly acquired assets.  Following these acquisitions, the significant intangibles recognised by the Group, their useful economic lives and the methods used to determine the cost of intangibles acquired in a business combination are as follows:

Intangible asset	Useful economic life	Valuation method
Websites	5 years	Assessment of estimated revenues and profits
Patents	2-5 years	Cost to acquire
Trademarks	2-5 years	Cost to acquire
Contracts	3-20 years	Assessment of estimated revenues and profits
Licences	3-20 years	Cost to acquire, or if not separately identifiable, assessment of estimated revenues and profits
Intellectual property	Up to 20 years	Cost to acquire, or if not separately identifiable, assessment of estimated revenues and profits
Customer lists	Up to 26 years	Assessment of estimated revenues and profits
Genetic material and breeding nuclei	10-40 years	Cost to acquire, or if not separately identifiable, assessment of estimated revenues and profits
Development costs	Up to 10 years	Cost to acquire

3.    Segment information

Operating segments are reported in a manner consistent with the reports made to the chief operating decision maker. It is considered that the role of chief operating decision maker is performed by the Board of Directors.

The Group operates globally and for management purposes is organised into reportable segments as follows:

·     Animal Health Division - provides veterinary services, environmental services diagnostics and animal health products to global aquaculture, and manufactures licenced veterinary vaccines and vaccine components;

·     Breeding and Genetics Division - harnesses industry leading salmon breeding technologies combined with state-of-the-art production facilities to provide a range of year-round high genetic merit ova;

·     Advanced Animal Nutrition -  manufactures and provides technically advanced nutrition and health products to the global aquaculture industry;

·     Corporate - the corporate segment represents revenues earned from recharging certain central costs to the operating divisions, together with unallocated central costs.

In addition to the above, reported together as "all other segments" are the following divisions, the results of which are not significant on an individual basis:

·     Sustainability Science Division - provides sustainable food production consultancy, technical consultancy and assurance services;

·     Technical Publishing Division - promotes sustainable food production and ethics through online news and technical publications for the international agriculture and food processing sectors and through delivery of training courses to the industries.

Measurement of operating segment profit or loss

The Group separates its operations into Trading Activities and Investing Activities to report segmental performance. These measures are used by management for planning and reporting purposes. These measures are not defined in International Financial Reporting Standards and may not be comparable with similarly described measures used by other companies. Trading and Investing Activities are described further in note 11.

Inter-segment sales are priced along the same lines as sales to external customers, with an appropriate discount being applied to encourage use of Group resources at a rate acceptable to local tax authorities.  This policy was applied consistently throughout the current and prior period.

Year ended 30 September 2016		Animal Health	Breeding and Genetics	Advanced Animal Nutrition	All other segments	Corporate	Inter-segment sales	Total
		£000	£000	£000	£000	£000	£000	£000
Revenue		24,837	20,717	55,024	11,195	3,002	(5,400)	109,375
Cost of sales		(15,035)	(13,523)	(26,517)	(6,985)	(938)	4,436	(58,562)
Gross profit/(loss)		9,802	7,194	28,507	4,210	2,064	(964)	50,813
Operating costs relating to Trading Activities		(5,352)	(3,553)	(11,382)	(4,049)	(4,317)	151	(28,502)
EBITDA from Trading Activities		4,450	3,641	17,125	161	(2,253)	(813)	22,311
Investing Activities:
R&D expenditure		(8,258)	(2,195)	(1,341)	-	-	74	(11,720)
Pre-operational expenses		(414)	(61)	80	(1,550)	-	582	(1,363)
Adjusted EBITDA		(4,222)	1,385	15,864	(1,389)	(2,253)	(157)	9,228
Acquisition-related (expenses)/ income		(257)	(2,387)	2	-	(10,317)	14	(12,945)
Exceptional items		-	-	-	(146)	-	-	(146)
EBITDA		(4,479)	(1,002)	15,866	(1,535)	(12,570)	(143)	(3,863)
Depreciation		(721)	(796)	(1,016)	(271)	(55)	-	(2,859)
Amortisation		(792)	(1,850)	(10,369)	(738)	-	-	(13,749)
Operating profit/(loss)		(5,992)	(3,648)	4,481	(2,544)	(12,625)	(143)	(20,471)
Finance costs								(6,170)
Finance income								3,984
Share of profit of equity-accounted investees, net of tax								273
Group loss before tax								(22,384)
Year ended 30 September 2015		Animal Health	Breeding and Genetics	Advanced Animal Nutrition	All other segments	Corporate	Inter-segment sales	Total
		£000	£000	£000	£000	£000	£000	£000
Revenue		21,098	15,871	-	10,101	2,271	(5,142)	44,199
Cost of sales		(14,524)	(9,912)	-	(6,906)	(1,463)	4,703	(28,102)
Gross profit/(loss)		6,574	5,959	-	3,195	808	(439)	16,097
Operating costs relating to Trading Activities		(4,445)	(1,339)	-	(3,405)	(4,924)	439	(13,674)
EBITDA from Trading Activities		2,129	4,620	-	(210)	(4,116)	-	2,423
Investing Activities:
R&D expenditure		(5,199)	(1,396)	-	-	-	-	(6,595)
Pre-operational expenses		(887)	-	-	(649)	(29)	-	(1,565)
Adjusted EBITDA		(3,957)	3,224	-	(859)	(4,145)	-	(5,737)
Acquisition-related (expenses)/ income		(65)	1,163	-	(18)	(2,414)	-	(1,334)
Exceptional items		-	(1)	-	509	(668)	-	(160)
EBITDA		(4,022)	4,386	-	(368)	(7,227)	-	(7,231)
Depreciation		(653)	(406)	-	(192)	(53)	-	(1,304)
Amortisation		(1,251)	(928)	-	(885)	-	-	(3,064)
Operating profit/(loss)		(5,926)	3,052	-	(1,445)	(7,280)	-	(11,599)
Finance costs								(34)
Finance income								274
Group loss before tax								(11,359)

4.    Earnings/loss per share

Basic earnings/loss per share is calculated by dividing the profit or loss attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares in issue during the period.

	2016	2015
Loss attributable to equity holders of the parent (£000)	(18,337)	(11,988)
Weighted average number of shares in issue (thousands)	417,952	201,280
Basic loss per share (pence)	(4.39)	(5.96)

Diluted loss/earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. This is done by calculating the number of shares that could have been acquired at fair value (determined as the average market price of the Company's shares since admission to AIM) based on the monetary value of the subscription rights attached to outstanding share options and warrants.

Therefore, the Company is required to adjust the earnings/loss per share calculation in relation to the share options that are in issue under the Company's share based incentive schemes as follows:

	2016	2015
Loss attributable to equity holders of the parent (£000)	(18,337)	(11,988)
Weighted average number of shares in issue (thousands)	417,952	201,280
Diluted loss per share (pence)	(4.39)	(5.96)

A total of 5,891,889 potential ordinary shares have not been included within the calculation of statutory diluted earnings/loss per share for the year (2015: 2,401,186) as they are anti-dilutive. However, these potential ordinary shares could dilute earnings/loss per share in the future.

Earnings/loss per share from Trading Activities

Net profit/loss attributable to equity shareholders has been adjusted to exclude exceptional items and other operating costs relating to Investing Activities as disclosed in note 11.

	2016	2015
Profit/(Loss) from Trading Activities attributable to equity holders of the parent (£000)	7,481	(2,273)
Weighted average number of shares in issue (thousands)	417,952	201,280
Earning/(Loss) per share from Trading Activities (pence)	1.79	(1.13)

Diluted earnings/loss per share from Trading Activities were as follows:

		2016	2015
	Profit/(Loss) from Trading Activities attributable to equity holders of the parent (£000)	7,481	(2,273)
	Weighted average number of shares in issue (thousands)	419,600	201,280
	Diluted earnings/(loss) per share from Trading Activities (pence)	1.78	(1.13)

5.    Net finance costs/(income)

		2016	2015
		£000	£000
Interest received on bank deposits Foreign exchange gains on financing activities		254 3,730	274 -
Finance income		3,984	274
Finance leases (interest portion) Foreign exchange losses on financing activities		(16) (4,978)	(3) -
Interest expense on financial liabilities measured at amortised cost		(1,176)	(31)
Finance costs		(6,170)	(34)
Net finance (costs)/income recognised in profit or loss		(2,186)	240
The foreign exchange gains of £3,730,000 were made on a foreign currency hedging instrument entered into to fix the exchange rate for the US Dollar consideration paid on the acquisition of INVE Aquaculture B.V.

6.    Property, plant and equipment

	Freehold Land and Buildings	Assets in the course of construction	Long Term Leasehold Property Improve-ments	Plant and Machinery	E commerce Infra-structure	Office Equipment and Fixtures	Total
	£000	£000	£000	£000	£000	£000	£000
Cost
Balance at 1 October 2014	728	142	2,615	4,540	204	905	9,134
Additions	264	10,950	14	1,628	-	178	13,034
On acquisition	4,638	-	77	1,530	-	71	6,316
Reclassification	-	-	114	39	-	(153)	-
Exchange differences	-	-	(39)	31	-	(10)	(18)
Disposals	-	-	(60)	(211)	-	(1)	(272)
Balance at 30 September 2015	5,630	11,092	2,721	7,557	204	990	28,194
Balance at 1 October 2015	5,630	11,092	2,721	7,557	204	990	28,194
Additions	1,268	11,785	487	4,803	-	317	18,660
On acquisition	3,017	555	-	2,204	-	313	6,089
Reclassification	518	(1,718)	1,480	34	43	(359)	(2)
Fair value adjustment	-	-	(75)	-	-	-	(75)
Exchange differences	2,015	93	267	1,325	-	102	3,802
Disposals	-	-	(33)	(411)	-	(227)	(671)
Balance at 30 September 2016	12,448	21,807	4,847	15,512	247	1,136	55,997
Accumulated Depreciation
Balance at 1 October 2014	-	-	234	1,151	145	362	1,892
Depreciation charge for the year	175	-	253	736	33	107	1,304
Exchange differences	-	-	-	(40)	-	-	(40)
Disposals	-	-	(36)	(67)	-	-	(103)
Balance at 30 September 2015	175	-	451	1,780	178	469	3,053
Balance at 1 October 2015	175	-	451	1,780	178	469	3,053
Depreciation charge for the year	638	-	358	1,638	21	204	2,859
Reclassification	-	-	79	162	42	(283)	-
Exchange differences	143	-	28	321	1	36	529
Disposals	-	-	-	(300)	-	(167)	(467)
Balance at 30 September 2016	956	-	916	3,601	242	259	5,974
Net book value
At 30 September 2016	11,492	21,807	3,931	11,911	5	877	50,023
At 30 September 2015	5,455	11,092	2,270	5,777	26	521	25,141
At 1 October 2014	728	142	2,381	3,389	59	543	7,242

7.    Intangible assets

	Websites	Goodwill	Patents and Trademarks	Intellectual Property	Customer Lists	Contracts	Licences	Genetics	Development costs	Total
	£000	£000	£000	£000	£000	£000	£000	£000	£000	£000
Cost or valuation
Balance at 1 October 2014	517	2,701	590	1,678	-	1,835	3,190	-	-	10,511
Additions - on acquisition	-	27,931	-	3,074	1,327	7,223	2,675	22,121	-	64,351
Additions - externally acquired	-	-	119	-	-	-	-	-	-	119
Exchange differences	-	(930)	-	(15)	-	(534)	(41)	(1,865)	-	(3,385)
Balance at 30 September 2015	517	29,702	709	4,737	1,327	8,524	5,824	20,256	-	71,596
Balance at 1 October 2015	517	29,702	709	4,737	1,327	8,524	5,824	20,256	-	71,596
Additions - on acquisition	-	103,137	208	117,019	4,789	-	25,562	601	-	251,316
Additions - externally acquired	44	-	30	9	-	-	-	-	-	83
Additions - internally developed	-	-	-	-	-	-	-	-	1,440	1,440
Disposals	-	(345)	-	-	-	-	-	-	-	(345)
Exchange differences	-	20,690	128	16,625	667	1,124	4,192	5,332	-	48,758
Balance at 30 September 2016	561	153,184	1,075	138,390	6,783	9,648	35,578	26,189	1,440	372,848
Accumulated amortisation and impairment
Balance at 1 October 2014	459	273	388	-	-	1,087	483	-	-	2,690
Amortisation charge for the period	56	-	61	261	133	1,369	454	385	-	2,719
Impairment	-	345	-	-	-	-	-	-	-	345
Exchange differences	-	-	-	-	-	(25)	-	(5)	-	(30)
Balance at 30 September 2015	515	618	449	261	133	2,431	937	380	-	5,724
Balance at 1 October 2015	515	618	449	261	133	2,431	937	380	-	5,724
Amortisation charge for the period	3	-	84	9,488	349	1,452	1,797	576	-	13,749
Disposals	-	(345)	-	-	-	-	-	-	-	(345)
Exchange differences	-	6	74	541	9	240	124	188	-	1,182
Balance at 30 September 2016	518	279	607	10,290	491	4,123	2,858	1,144	-	20,310
Net book value
At 30 September 2016	43	152,905	468	128,100	6,292	5,525	32,720	25,045	1,440	352,538
At 30 September 2015	2	29,084	260	4,476	1,194	6,093	4,887	19,876	-	65,872
At 1 October 2014	58	2,428	202	1,678	-	748	2,707	-	-	7,821

Additions relating to business combinations in the year are detailed in note 12.

8.    Biological assets

	2016	2015
	£000	£000
Organic sheep	262	223
Organic beef	244	202
Organic pigs	-	2
Organic hens	23	-
Broodstock, eggs and fingerlings	11,330	7,913
Total biological assets	11,859	8,340
Less: non current broodstock	(5,028)	(3,392)
Total current biological assets	6,831	4,948

Livestock

The Group operates a commercial and research farming and technology transfer business, and at 30 September 2016 held 3,269 (2015: 2,992) head of sheep, 447 (2015: 246) head of cattle, nil (2015: 27) pigs and 6,940 (2015: nil) hens. The Group had farming sales of £358,000 in the year ended 30 September 2016 (2015: £310,000).

The Group is exposed to financial risks arising from changes in the market value of farm animals. The Group does not anticipate that prices will decline significantly in the foreseeable future and, therefore, has not entered into derivative or other contracts to manage the risk of a decline in livestock price. The Group reviews its outlook for livestock prices regularly in considering the need for active financial risk management.

Broodstock, eggs and fingerlings

	Salmon Broodstock	Salmon eggs	Salmon  fingerlings	Lumpfish eggs and fingerlings	Tilapia	Total
	£000	£000	£000	£000	£000	£000
Biological assets 1 October 2015	5,636	1,485	350	369	73	7,913
Increase due to production / purchase	3,832	303	763	483	203	5,584
Due to physical changes	(2,879)	15,136	(221)	-	-	12,036
Foreign exchange movements	1,685	444	29	110	-	2,268
Reduction due to sales / discarding of stock	-	(15,001)	(626)	(577)	(225)	(16,429)
Fair value adjustments	(690)	(3)	-	642	9	(42)
Biological assets 30 September 2016	7,584	2,364	295	1,027	60	11,330
Broodstock, eggs and fingerlings - non current	5,028	-	-	-	-	5,028
Broodstock, eggs and fingerlings - current	2,556	2,364	295	1,027	60	6,302
	7,584	2,364	295	1,027	60	11,330

Assumptions used for determining fair value of broodstock, eggs and fingerlings

IAS41 requires that biological assets are accounted for at the estimated fair value net of selling and harvesting costs.  Fair value is measured in accordance with IFRS13 and is categorised into level 3 in the fair value hierarchy as the inputs include unobservable inputs in the valuation of broodstock, eggs and fingerlings for which there are no published market data available.

The calculation of the estimated fair value of salmon broodstock is primarily based upon its main harvest output being salmon eggs, which are priced upon our current seasonally adjusted selling prices for salmon eggs.  These prices are reduced for harvesting costs, freight costs, incubation costs and market capacity to arrive at the net value of broodstock.  The valuation also reflects the internally generated data to arrive at the biomass. This includes the weight of the broodstock, the yield that each kilogram of fish will produce and mortality rates. The fish take approximately four years to reach maturity, and so the fair value of the age and biomass of the fish is reflected in a discount to the gross biomass to reflect the progress to maturity.

The calculation of the fair value of the salmon eggs is based upon the current seasonally adjusted selling prices for salmon eggs less transport and incubation costs, and taking account of the market capacity. The valuation also takes account of the mortality rates of the eggs and expected life as sourced from internally generated data.

The calculation of the fair value of the salmon and lumpfish fingerlings is valued on current selling prices less transport costs. Internally generated data is used to incorporate mortality rates and the weight of the fish.

The lumpfish eggs are valued at cost. Internally generated data is used to calculate mortality rates.

The valuation models by their nature are based upon uncertain assumptions on sales prices, market capacity, weight, mortality rates, yields and assessment of the discounts to reflect the stages of maturity. The Group has a degree of expertise in these assumptions but these assumptions are subject to change. Relatively small changes in assumptions would have a significant impact on the valuation.  A 1% increase/decrease in assumed selling price would increase/decrease the fair value of biological assets by £119,000.

Total quantities held at 30 September were:

	2016	2015
Salmon broodstock         and fingerlings	557 tonnes	452 tonnes
Lumpfish fingerlings	1.5m units	1.4m units
Salmon eggs	23.6m units	16.5m units

9.    Loans and borrowings

		2016	2015
		£000	£000
Non-Current
Bank borrowings		37,133	-
Other loans		60	60
Finance lease creditor		214	33
		37,407	93
Current
Finance lease creditor		289	63
		289	63
Total loans and borrowings		37,696	156

On 30 December 2015, the Group completed the acquisition of the Inve Aquaculture Group and on the same day entered into new borrowing facilities consisting of a five-year revolving credit facility of up to $70,000,000 secured on the assets of the parent company, UK subsidiary companies and certain overseas subsidiary companies. At 30 September 2016, $50,000,000 was drawn down on the facility. The interest rate on the facility is between 1.9% and 2.5% above LIBOR depending on leverage. The finance lease liabilities are secured on the assets to which they relate.

10.  Share capital and share premium

	Share Capital		Share premium
Allotted, called up and fully paid	Number	£000	£000
Ordinary shares of 0.1 penny each
Balance at 30 September 2014	136,977,095	137	26,903
Shares issued to fund the acquisition of Salmobreed and Stofnfiskur	82,353,000	82	69,918
Share issue costs recognised through equity	-	-	(2,149)
Exercise of share options	19,430	-	-
Balance at 30 September 2015	219,349,525	219	94,672
Shares placed to fund the acquisition of INVE	215,922,141	216	185,477
Shares issued as consideration for the acquisition of INVE	38,635,671	39	33,188
Exercise of share options	50,742	-	-
Shares issued to management	110,873	-	95
Placing shares to fund investments in joint ventures and capital projects	47,279,127	47	30,684
Share issue costs recognised through equity	-	-	(4,685)
Balance at 30 September 2016	521,348,079	521	339,431

On 19 December 2014, the Company issued 82,353,000 shares of 0.1p each at a price of 85p per share to fund the acquisition of the entire share capital of Salmobreed AS and 89.45 per cent of the issued share capital of Stofnfiskur HF.

On 30 December 2015, the Company issued 215,922,141 shares of 0.1p each at a price of 86p per share to fund the acquisition of INVE Aquaculture Holdings B.V. In addition, on 31 December 2015, the Company issued 38,635,671 shares of 0.1p each at 86p as part consideration for the acquisition. Non-recurring costs of £4.4 million were incurred in relation to the share placing and this has been charged to the share premium account.

On 2 March 2016, the Company issued a total of 50,742 shares of 0.1p each to 6 employees of the Group relating to share options granted in August 2013 and March 2015.

On 20 April 2016, the Company issued a total of 110,873 shares of 0.1p each at a price of 86p per share to certain managers of INVE Aquaculture Holdings B.V.

On 4 August 2016, the Company placed 47,279,127 shares of 0.1p each at a price of 65p per share to fund investment in certain strategic joint ventures and capital projects. Non-recurring costs of £0.2 million were incurred in relation to the share placing and this has been charged to the share premium account.

Employee share option scheme

The Company introduced an employee share option scheme in 2010.  The options existing immediately before admission to trading on AIM on 18 December 2013 were subdivided into equivalent options over the new 0.1p ordinary shares.  At the year end, options exist over 5,257,431 (2015: 2,401,186) 0.1p ordinary shares in the Company and the exercise price is the nominal value of 0.1p per share.

Members of the scheme can exercise the options at any point from the third anniversary of the option grant date until the options lapse on the tenth anniversary of the option grant date. Options cannot be exercised after the option holder ceases to hold employment with any member of the Group.

11.  Trading and Investing Activities

The Group separates its operations into Trading Activities and Investing Activities in order to report the performance of its business. Trading Activities are those operations which generate earnings in the current period. Investing Activities are those activities which have no associated income stream in the current period, but which are intended to provide the Group with income generating operations in future periods. These measures are used by management for planning and reporting purposes and in discussions with and presentations to investment analysts and are defined below. These measures are not defined in International Financial Reporting Standards and may not be comparable with similarly described measures used by other companies.

In arriving at Trading Activities, the following Investing Activities are excluded from reported results:

-    exceptional costs of a non-recurring nature

-    costs of acquiring new businesses outlined in note 11

-    pre-operational expenses for new ventures

-    expenditure on research and development

A reconciliation of reported earnings to earnings from Trading Activities is shown below.

Reconciliation of Reported Earnings to Earnings from Trading Activities - year ended 30 September 2016

			Investing Activities
	Year ended 30 September 2016		Exceptional Items	Acquisition related costs	Pre-operational expenses for new ventures	R&D expenditure	Trading Activities
	£000		£000	£000	£000	£000	£000
Revenue	109,375		-	-	-	-	109,375
Cost of sales	(58,562)		-	-	-	-	(58,562)
Gross profit	50,813		-	-	-	-	50,813
Operating costs	(54,676)		146	12,945	1,363	11,720	(28,502)
EBITDA	(3,863)		146	12,945	1,363	11,720	22,311
Depreciation	(2,859)		-	-	-	250	(2,609)
Amortisation	(13,749)		-	-	-	245	(13,504)
Operating (loss)/profit	(20,471)		146	12,945	1,363	12,215	6,198
Finance costs	(6,170)		-	-	-	-	(6,170)
Finance income	3,984		-	-	-	-	3,984
Share of profit of equity-accounted investees, net of tax	273		-	-	-	-	273
(Loss)/profit on ordinary activities before taxation	(22,384)		146	12,945	1,363	12,215	4,285
Tax on (loss) / profit on ordinary activities	4,038		-	-	-	(851)	3,187
(Loss)/profit for the period	(18,346)		146	12,945	1,363	11,364	7,472
(Loss)/earnings per share (pence)	(4.39)		0.03	3.10	0.33	2.72	1.79
Weighted average number of shares (thousands)	417,952		417,952	417,952	417,952	417,952	417,952

Reconciliation of Reported Earnings to Earnings from Trading Activities - year ended 30 September 2015

		Investing Activities
	Year ended 30 September 2015	Exceptional Items	Acquisition related costs	Pre-operational expenses for new ventures	R&D expenditure	Trading Activities
	£000	£000	£000	£000	£000	£000
Revenue	44,199	-	-	-	-	44,199
Cost of sales	(28,102)	-	-	-	-	(28,102)
Gross profit	16,097	-	-	-	-	16,097
Operating costs	(23,328)	160	1,334	1,565	6,595	(13,674)
EBITDA	(7,231)	160	1,334	1,565	6,595	2,423
Depreciation	(1,304)	-	-	118	73	(1,113)
Amortisation	(3,064)	-	-	-	239	(2,825)
Operating (loss)/profit	(11,599)	160	1,334	1,683	6,907	(1,515)
Finance costs	(34)	-	-	-	-	(34)
Finance income	274	-	-	(2)	(12)	260
Loss on ordinary activities before taxation	(11,359)	160	1,334	1,681	6,895	(1,289)
Tax on loss on ordinary activities	(396)	-	-	(4)	(351)	(751)
(Loss)/profit for the period	(11,755)	160	1,334	1,677	6,544	(2,040)
Loss per share (pence)	(5.96)	0.08	0.66	0.83	3.26	(1.13)
Weighted average number of shares (thousands)	201,280	201,280	201,280	201,280	201,280	201,280

12.  Business Combinations

During the year the following business combinations occurred:

On 30 December 2015, Benchmark Holdings plc completed the acquisition of 100% of INVE Aquaculture Holding B.V. ("INVE"), a leading specialist manufacturer of primary stage technically advanced nutrition and health products for aquaculture, for a total consideration of $342 million (approximately £230.7 million).

The Directors identified a strong strategic rationale for the acquisition.  INVE's leadership in speciality aquaculture nutrition market is complementary to Benchmark's position in genetics and health.  The acquired business complements Benchmark's existing expertise and operations within aquaculture and the enlarged group will become a leading global provider of technology for sustainable food production, with a strong focus on the aquaculture sector, benefiting from immediate scale in advanced aquaculture nutrition and health products, enhanced sales, marketing and distribution network and the opportunity for cross selling and new product development.  The acquisition created the Advanced Animal Nutrition Division.

In view of the size of the acquisition relative to the Group, the transaction was classified as a reverse takeover under the AIM rules.  For accounting purposes, Benchmark Holdings plc has been identified as the acquirer and the transaction has been accounted for using the acquisition method.  This is because Benchmark Holdings plc has obtained control over the operations of INVE as a result of the transaction.

Certain intangible assets have been separately identified and provisionally valued as shown in the table below. Related deferred tax has also been provided. The goodwill arising on the acquisition represents the synergies available from combining the two businesses, and the skills and technical talent of the INVE workforce.

On 11 August 2016, the group acquired control over aquaculture breeding programmes previously owned and operated by Centro de Investigación de la Acuicultura de Colombia Ceniacua through its wholly-owned subsidiary, Genética Spring S.A.S. ("Genética Spring") together with the related business, freehold land, buildings and assets, for a total consideration of $2.17m (£1.67m).  The acquisition added a third species, shrimp, to Benchmark's aquaculture breeding business in salmon and tilapia, and strengthened Benchmark's position in the fast-growing shrimp industry. 

Details of the fair value of the consideration paid and assets and liabilities assumed during the year are shown in the table below:

	INVE Aquaculture Holdings B.V.	Genética Spring	Total
	£000	£000	£000
Consideration
Cost of investment	230,667	1,673	232,340
Satisfied by:
Cash	197,440	709	198,149
Deferred consideration	-	964	964
Equity	33,227	-	33,227
Total consideration	230,667	1,673	232,340
Fair value of assets acquired
Customer list	4,789	-	4,789
Patents and trademarks	208	-	208
Intellectual property	117,019	-	117,019
Contracts and Licences	25,562	-	25,562
Genetic Materials and Breeding Nuclei	-	601	601
Deferred tax on intangibles	(50,106)	-	(50,106)
Fixed assets	5,017	1,072	6,089
Investments	350	-	350
Inventories	16,686	-	16,686
Trade and other receivables	14,914	-	14,914
Cash and cash equivalents	6,647	-	6,647
Trade and other payables	(10,104)	-	(10,104)
Tax and social security	(2,373)	-	(2,373)
Loans and borrowings	(570)	-	(570)
Provisions	(291)	-	(291)
Total identifiable net assets	127,748	1,673	129,421
Goodwill	102,919	-	102,919

Measurement of fair values

The valuation techniques used for measuring the fair value of material assets acquired were as follows.

Assets acquired	Valuation technique
Property, plant and equipment	Market comparison technique and cost technique: The valuation model considers quoted market prices for similar items when they are available, and depreciated replacement cost when appropriate. Depreciated replacement cost reflects adjustments for physical deterioration as well as functional and economic obsolescence.
Intangible assets	Relief-from-royalty method and multi-period excess earnings method: The relief-from-royalty method considers the discounted estimated royalty payments that are expected to be avoided as a result of the patents or trademarks being owned. The multi-period excess earnings method considers the present value of net cash flows expected to be generated by the customer relationships, by excluding any cash flows related to contributory assets.
Inventories	Market comparison technique: The fair value is determined based on the estimated selling price in the ordinary course of business less the estimated costs of completion and sale, and a reasonable profit margin based on the effort required to complete and sell the inventories.
Other assets and liabilities	Management consider the fair value of other assets and liabilities to be equivalent to the purchase price, which was supported by an independent valuation.

The fair value of the ordinary shares issued was based on the listed share price of the Company at 30 December 2015 of £0.86 per share.

If new information obtained within one year of the date of acquisition about facts and circumstances that existed at the date of acquisition identifies adjustments to the above amounts, or any additional provisions that existed at the date of acquisition, then the accounting for the acquisition will be revised.

The Group incurred acquisition related costs of £9,504,000 in respect of INVE Aquaculture B.V. and £135,000 in respect of Genética Spring.

During the year INVE contributed £54,870,000 to the Group's revenue and increased EBITDA by £15,729,000 for the period.  The Genética Spring contributed £nil to the Group's revenue and decreased EBITDA by £61,000 for the period.  The table below shows the Group's pro-forma revenue and EBITDA if the acquisitions had taken place at the start of the period.

		INVE Aquaculture Holdings B.V.	Genética Spring	Total
	2016
	£000	£000	£000	£000
Revenue	109,375	14,200	-	123,575
EBITDA	(3,863)	2,300	-	(1,563)

 

END

 

 

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