Shares in aquaculture firm Benchmark (BMK:AIM) jumped 13% to 64.5p on higher than average volume after the company said full year operating profits would be ‘significantly ahead of market expectations’.
Following a strong third quarter, which saw sales up 25% driven by a rise in demand across all three divisions, the fourth quarter to the end of September saw continued strong momentum thanks to an ongoing recovery in the company’s end markets.
This growth in the top line combined with tight cost control translated into a better trading performance than management expected, meaning group earnings before interest, taxes, depreciation and amortization will be well above the current market consensus of £15.9 million.
STRONG MARKET
Global demand for salmon continues to grow and even increased during the pandemic. Farmed fish represent around three quarters of overall salmon production worldwide.
What was once a luxury food is now among the most popular fish with consumers in Europe, the US, Japan and increasingly China, meaning producers can’t keep up with global demand.
Benchmark’s genetics business, which breeds salmon eggs for fish farmers allowing them to produce better, healthier fish, delivered a ‘strong end to the year’.
The advanced nutrition business, which makes early-stage nutrition, preventative health products and environmental solutions for the early stages of fish and shrimp production, delivered ‘excellent’ year on year growth.
Finally, the health business, which produces sea lice treatments to stop the spread of disease, registered its first revenues from three new products.
STRONG OUTLOOK
The company’s broker Numis calls it a ‘world-class aquaculture business capable of generating material, sustainable growth’ and has raised its EBITDA forecast to £18.5 million as well as increasing its share price target from 80p to 85p.
Analyst Daniel McNeela says Benchmark is trading on a big discount to other animal healthcare stocks which he argues is undeserved ‘given the meaningful strategic progress achieved in the last 12-18 months, the pace of growth of its core business and the emerging quality of earnings’.
