In Q1, Benchmark faced soft trading conditions primarily in its Advanced Nutrition segment, reporting a 25% revenue drop. Despite challenging shrimp market conditions, recent months showed signs of improvement, leading to expectations for better performance throughout the year. The sale of the Genetics business is set to close by the end of Q2, paving the way for a significant streamlining that could impact fiscal year '26 results positively. The Health segment remains cash-positive and profitable, with expectations for continued growth as key products like Salmosan perform well. Overall, Benchmark aims for recovery in margins and earnings as market conditions stabilize.
In the first quarter of the financial year 2025, Benchmark faced significant challenges, specifically influenced by a difficult shrimp market and ongoing operational adjustments. The company's focus during this quarter has largely been on preparing for the anticipated closure of its Genetics business deal with Novo Holdings, which is expected to finalize by the end of Q2. The deal is considered beneficial for shareholders, creating a more financially stable entity to drive operational effectiveness in the future.
The financial results demonstrated a downturn, with overall sales in the continuing business declining by 25%. This contraction was mostly attributable to the difficulties experienced in the shrimp sector, where the company reported an 11% drop in Nutrition sales at constant exchange rates. Conversely, sales into the marine fish market posted a 7% increase quarter-on-quarter, indicating some resilience in that segment. The Health segment experienced a staggering 71% decline, primarily due to the exit of the Ectosan product from the market.
Despite pessimistic trends, Benchmark's Nutrition business managed to maintain profitability, achieving a gross profit of GBP 6.6 million, although this was a 36% decline compared to previous periods. The Health business also delivered a gross profit of GBP 1 million, yet this was a 60% drop, largely due to diminished revenues from Ectosan. Nevertheless, Salmosan and Purisan, anti-sea lice products, persisted in delivering profits amidst challenging conditions.
Operational costs were reduced by approximately 15% year-over-year, primarily due to strategic shifts within the Health division that decreased its operating expenses to GBP 0.7 million from GBP 1.9 million a year prior. Additionally, corporate costs were trimmed from GBP 2.4 million to GBP 2 million. These reductions reflect a commitment to enhance efficiency, especially in preparation for a streamlined organization post-Genetics deal.
Management remains cautious about immediate improvements in market conditions but is optimistic about returning to normalized gross margins as the unfavorable product mix is resolved. Recent trends indicate that sales and margins began improving towards the end of Q1 and into the subsequent period. The company expects that the harvested Artemia, a crucial ingredient, will yield higher-grade products with improved margins moving forward.
Going forward, Benchmark aims to amplify its efforts in advanced nutrition and health sectors. The leadership anticipates strategically enhancing its commercial position to respond effectively to market demands, leveraging the strengths of its specialized products tailored for the shrimp and marine fish lifecycle. While immediate challenges persist, this proactive focus on operational improvements sets a hopeful tone for recovery.
In Health, the company plans to reintroduce Ectosan Vet and CleanTreat into the market, aiming for a more cost-effective and efficient land-based model to replace prior expensive methods. The leadership is confident in the viability of this relaunch, considering the ongoing high demand for effective sea lice solutions amidst a challenging market landscape.
As Benchmark transitions into a less complex organization post-Genetics sale, the management is optimistic about establishing a profitable and cash-generating business. Overall, there is hope for future earnings improvements from both Advanced Nutrition and Health. The plan encompasses a rightsizing of operations that is expected to yield significant cost savings and improve overall profitability moving forward, laying the groundwork for future growth.
Good morning to all of you, and welcome to this Quarterly Presentation for Benchmark. I'm Trond Williksen. And as usual, I'm here together with our CFO, Septima Maguire, and we are going to give you an update on our First Quarter Results for Financial Year '25.
We are following the normal program, starting with highlights, moving to give you a little bit more granularity on the business. Septima will take you through the more detailed financials before we end with sharing our view on the outlook for the company and for the quarters and the time that we have ahead. At the very end, there will, of course, be an opportunity for Q&A.
Starting with the highlights. Let me start out saying that this has really been a stepping stone quarter for us in Benchmark, where the main focus has been on moving towards the closing of the Genetics deal, as well as preparing for the subsequent streamlining of the company, bringing it into the next phase of its development.
In terms of the sale of Genetics, we signed a deal with Novo Holdings back in November. We consider this a good deal for our shareholders, as well as we have managed to get a very solid new owner for our unique Genetics business in the aquaculture industry. Since signing, we have been working on closing the conditions for the transaction. This has been progressing and the main regulatory approvals are now in place, and it will lead to a closing tentatively before the end of Q2.
As initially stated, we have also been working on preparation for streamlining of the company post closing and delivery of the TSA that is related to the deal. As we stated at the year-end presentation back in November, the aim of this is to rightsize the organization and the cost structure, positioning the group for the next phase of its development. We firmly understand that investors need to understand how the transaction and the subsequent streamlining and positioning of the organization post closing will affect their investment. So we will come back to the market with a separate announcement and a presentation as soon as the transaction is completed. Given this, the focus of this presentation will be to give an update on the trading in what has been a stepping stone quarter for us in Q1.
Trading buyers, Q1 has been soft for the main part of the remaining business in Benchmark, Advanced Nutrition or INVE, which is the brand name. In line with what we signaled at the full year presentation back in November, the trading reflects the ongoing weak market conditions in shrimp, another unfavorable product mix that we have been working through -- working our way through. To give a little bit more granular picture of how the development throughout the quarter has been, we experienced soft first 2 months in the quarter, while the development in December, the last month in the quarter was more positive, both in terms of sales and margin. This is also the picture that we have seen post period and that we expect will continue in the following months. As we gradually are working our way through the unfavorable product mix that has been impacting us over the last quarters. I will come back to this in more detail later in the presentation.
In terms of the Health business, we see the effects of the restructuring of this business coming through. This is now a significantly smaller business, but it is a business that is profitable and cash positive as opposed to what it has been before when it has had a significant negative effect on our cash flow. This gives this business area a good starting point to develop further from. In the quarter, we have seen good sales of Salmosan, Purisan, which is currently our commercial line in this business area, driven by the sea lice situation, both in Norway and Chile. It should also be noted that we are progressing our work to relaunch Ectosan Vet and CleanTreat in the market with a business model that will be favorable, both for us, as well as the customers in terms of cost and capital intensity. And I will also come back to this a little bit later in the presentation.
The development of revenues and adjusted EBITDA for the group in the quarter reflects what I've just been through. It should be noted that the operating costs are down 15% year-over-year, but this is still not reflective of the cost picture that we expect to see after the streamlining, the rightsizing that we are on to do later in the year following the completion of the Genetics transaction.
Now, on to give you a little bit more granularity to the operational performance in our 2 remaining business areas and starting with Advanced Nutrition. As just noted, Advanced Nutrition has had a soft quarter, and you can see it from the financials. The challenge for this business -- for the business in Advanced Nutrition besides being the difficult market conditions in shrimp has been the product mix. The challenging market situation in the shrimp industry has made it more difficult to sell the highest margin products in the portfolio due to increased price sensitivity of the customers. In addition to this, Artemia, which is a main part of Advanced Nutrition, Artemia is a natural resource with fluctuations in hatching rates and hatching rates is a key quality parameter. And during the last quarters, we have had a greater influx of inventory of Artemia with lower hatching rates, thus lower margins for us. So these 2 factors are the main explanation behind the low gross margins that we have seen in the quarter that we have left behind.
As mentioned initially, we have seen a development over the quarter where we gradually have been working our way through these issues. This started to come through in the last month of the quarter in December, and we have also seen this clearly post period. Going forward, we expect to be in a position where we again are getting back to more normalized margins. This will further be helped over time as we see that the harvest of Artemia from the last 2 seasons comes in with higher-grade and hatching rate is the prime quality parameter here. That implies that higher-grade products and better margins -- that implies higher-grade products and better margins for us going forward.
As I've stated in previous presentations over the last, I would say, 2 years now, we have had a strong focus on optimizing our performance in Nutrition regardless of the market situation that we've been in. Decisive actions have been taken to strengthen our commercial focus, broaden our product range and increase operational efficiency to mitigate market cyclicality. These actions are still very much in focus, and our aim is to have this shine through in our financial throughout the
Ear. A few words about the market situation, mainly 2 markets. The market in marine fish, mainly sea bass/sea bream in the Mediterranean has stayed quite stable, and we have been able to perform well. The challenge has been and continues to be the shrimp market that still has been difficult. We feel confident that this will turn, but are careful in predicting exactly when. Rather than betting on the market turn, we continue focusing on what we can do something with. We know that we have a very solid and tuned organization and management in Advanced Nutrition that has been strengthened over the last years. We know that we have a very good and wide product portfolio that is still in continuous development. And we know that we have a very relevant footprint in the market that also has been widened and strengthened over the last year. With this in mind, we are confident that we are in a good position in the current state of the market, but also for when the market conditions again are turning to become more positive.
Moving over to talk about the Health business area. As I said, when I went through the highlights, it's gone through a very significant change over the last year, which is also reflected very much in the financials. Since we paused Ectosan Vet and CleanTreat during the summer in 2024, we have positioned this business as a smaller but profitable and cash positive business with the capabilities to grow in the time to come. The current commercial backbone of this business is our original sea lice medicine, Salmosan and Purisan. Sales in the quarter has been good, driven by sea lice situation in Norway and Chile. And Salmosan and Purisan is one of the few medicines available for efficacious sea lice treatment for the salmon industry. But as also mentioned before, we have also kept our capabilities to provide the Ectosan Vet and CleanTreat solution. And given the magnitude of the sea lice challenge for the Norwegian and Chilean industry, but also other parts of the salmon industry, there is still a significant potential for this solution.
The team in the Health business area has used Q1 well to further develop an alternative land-based solution for CleanTreat. It's actually illustrated on this slide. The advantage of this model, albeit not being as mobile as the previous PSV integrated and barge models that we have been also been developing is that, we obtain a very significant reduction in operational cost, as well as reduce operational complexity to the farmers with a land-based solution. Both issues have been main hurdles, thus learning lessons from the first phase of the launch of this solution to the market. We are now at the point that we believe that we will be able to offer the solution at a cost that could be competitive with other alternative treatment methods for sea lice.
In addition, the solution keeps the benefits of being very favorable in terms of effects on fish health and fish welfare and represents a method that enables contained medical treatment in open cage aquaculture without leaving a footprint in terms of releasing medicines back to the sea. I remain a very strong believer in that this is the future of medicinal treatments in open cage aquaculture, and we are determined to pursue to get the solution back in the market with a business model that is favorable both for us but also for the customer. It should also be noted that given that we already have invested in the technology, we have 3 systems available, and we have the tools available to get the solution live again.
We are currently in discussions with farmers with a clear aim to relaunch the solution again. The signals we received from the industry is that, the industry needs the solution, and we are not giving up making it come through as a viable alternative, both for the industry, as well as for Benchmark. And I expect to give you more news on this -- on the progress of this as we are moving throughout the year.
With those words, I conclude my first part of the go through and leave it up to you, Septima, to take us through the numbers. Septima?
Thank you, Trond. So in a continuation from our approach, which we put forward at the year-end presentation back in December, and given where we are in terms of the divestment process for the Genetics business, I'm going to focus on the continuing business. That is the total group business we operated during the quarter, less the business being sold. It's important to note that the perimeter of the disposal is the stand-alone Genetics business without any allocation of the group corporate cost. So these continue to be within the results of the continuing business.
Moving on to the next slide to look at some of the key numbers by business area within this continuing group. For Nutrition, overall, sales fell by 11% at a constant exchange rate, driven by all of the product areas. Sales into the shrimp market continued to be challenging, whereas sales into the marine fish market grew by 7% quarter-on-quarter, which is a very solid outcome. For Health, sales fell by 71% at a constant exchange rate, but this was driven mainly by the exit of Ectosan from the market. When you break it down by product area, sales of Salmosan, Purisan fell slightly to GBP 1.6 million from GBP 2.1 million in the same quarter of the prior year. But this product continues to deliver from a sales and a profit perspective.
When we look at operating costs and R&D expenses, firstly, looking at operating costs. As you can see within the continuing business, the changes we've made in Health during financial year '24 have resulted in a reduction in OpEx from GBP 1.9 million last year versus GBP 0.7 million in the same quarter of this year. In Nutrition, we have an incremental increase of GBP 0.4 million, but this is in part driven by the timing of sales of tax credits in one of our Asian territories in quarter 1 of financial year '24 of GBP 0.8 million. So therefore, in real terms, operating costs in Nutrition have also reduced. Within corporate, these have also been reduced from GBP 2.4 million to GBP 2 million. Now, it should be noted the total cost of GBP 2 million includes the corporate costs allocated to support Genetics of GBP 0.7 million.
In R&D, you can see we continue to invest in the Nutrition business, continuing our confidence in the future growth potential within Nutrition. And we further reduced the spend in Health as a part of the restructuring of Health.
So moving on to the next slide to look at the income statement in totality. When we look at the revenue in the continuing business, overall for the continuing business, it fell by 25% based on the drivers we've looked at previously.
From a gross profit perspective, product mix has continued to drive down margin. Higher sales of Artemia with lower margin and the mix effect versus higher-margin products within Health and diets alongside significantly higher freight costs in Nutrition resulted in a drop of gross profit of 36% for that business area. But at an absolute level, the Nutrition business continued to deliver gross profit of GBP 6.6 million in the year. Health also saw a reduction in gross profit by 60% to GBP 1 million, driven in the main by the exit of Ectosan from the market. Salmosan and Purisan have delivered gross profit of GBP 1.1 million in the year, which represents a gross margin of 67%, albeit on lower sales.
Having already looked at the breakdown of operating costs and R&D, we can see that at a group level, these are down quarter-on-quarter, as Trond noted. And as a consequence of this, we were able to partially mitigate the reduction in gross profit within the period, resulting in adjusted EBITDA loss of GBP 0.2 million from the continued business.
Depreciation and amortization for the continued business have reduced significantly from GBP 9 million to GBP 4.2 million, reflecting the exit of the PSV model within Health and the depreciation associated with those right-of-use assets. Exceptionals of GBP 1.6 million relate to costs associated with the strategic review and the divestment of Genetics.
From a financial expenses perspective, the reduction by GBP 2.5 million to a cost of GBP 1 million is driven by more favorable FX gains of GBP 2.7 million, offset by slightly higher interest costs of GBP 0.2 million. But overall, when we look at the loss after tax, it has decreased to GBP 7.3 million.
Moving on to the next slide. So as we've previously stated, the intention is to repay the NOK bond and the RCF debt as part of the proceeds for the divestment. In terms of the Salten debt, the deal is on a cash-free debt-free basis, and therefore, this will be repaid at the closing of the deal. This will leave the remaining group with a very stable balance sheet and the ability to return capital to shareholders.
When we look at the cash flow as it is now, this is for the whole business, including Genetics, but we'll focus broadly on what will fall away, as well as we move into the future. As you can see, we had an outflow of cash generated from operations, driven largely by lower trading in genetics and of course, the cost of corporate, offset by Nutrition's cash inflow. From a working capital perspective, we had a fairly significant outflow in the period, driven in the main by the quarter 1 payments under the take-or-pay contract within Nutrition, which is $9.9 million. The next payment on this contract is within quarter 3 of financial year '25.
In terms of taxes, as I've noted previously, we pay tax in our main taxpaying territories, Norway, Iceland and Belgium. In quarter 1, the taxes paid related to genetics of GBP 0.7 million.
When you look at the interest expense, the majority of this cash out relates to the interest on the debt of PLC and Genetics, both of which will be repaid as part of the proceeds from the sale of Genetics.
From a CapEx perspective during the quarter, this was broken down into Genetics of GBP 0.4 million, which will not reoccur post divestment and Nutrition of GBP 0.5 million as we continue to invest in our facility in Thailand. Now, of course, we currently still have the debt and associated interest until we've completed the transaction. But once the debt has been repaid, we feel that these steps will strengthen the remaining business, allow it to move forward and focus on utilizing cash generated in the business within the business.
Back to you, Trond.
Thank you, Septima. And then I'm to talk about the outlook from where we stand today. And let's start with Advanced Nutrition. As I noted in my initial go through, we have been gradually moving out of an unfavorable product mix and seen an improvement in the latter part of Q1 and after closing of the period or post period. We expect to continue to see this development in the periods to come, gradually improving our performance over the year as we also see more of the effect of the decisive actions taken to strengthen commercial effort, broaden product portfolio and increase efficiency in the Advanced Nutrition or in the organization. As previously noted, we do not bet on a significant improvement in the market conditions, but it will come, and we will be in a good position to utilize a good market when it occurs.
In terms of Health, we have had a good start of the year. It is a small but profitable and cash-generative business now, but it has a good starting point to grow. We foresee that the trading of Salmosan, Purisan will continue to be good in the period to come as it is well placed in the sea lice toolbox for customers, even if it's a small product, but it's a good product. We still also continue our efforts to bring Ectosan Vet and CleanTreat back in the market, and we'll keep you updated on the progress with this in the periods to come. As noted, we are in discussions with customers on the solution, and this represents an opportunity for the group, as well as for the industry that we are determined to pursue.
As for the group, the focus is to close the Genetics deal. And as it looks now tentatively by the end of Q2. Following this, we will initiate the streamlining of the group to rightsize it into the next stage of Benchmark's development with cost effects expected to come through in full in financial year '26. As initially stated, details on how the deal, as well as the subsequent streamlining and positioning of the group will impact will follow in a separate announcement when the Genetics deal is closed.
With these words, I end our presentation, and we are opening up for questions. And that is going to be steered by you, [ Carina ].
Thank you. So the first question is, how should we think about the profit generation of the business going forward given the breakeven EBITDA in Q1 '25?
Well, we have had soft Q1, especially, I would say, in Advanced Nutrition. As we have been explaining, Q1 has been a quarter where we have been impacted by a very unfavorable product mix in a difficult market. At the end of the quarter, we saw improvement of that, and we have also seen that post period. So going forward, we expect that the gross margin and the earnings of Advanced Nutrition will correct itself and start to come back to more normalized levels again. And this is the aim that we have, and this is the clear belief that we have. And that will, of course, impact the remaining part of the group significantly.
When it comes to Health, it's a profitable business, but it's a small business as it is right now. Until we are again in a position to relaunch Ectosan Vet and CleanTreat, we will probably see a picture where it still remains small but a profitable business, adding to the profitability of the group. When Ectosan Vet and CleanTreat is online with a new business model, we probably see an improvement from that. So all in all, I think we should look upon the time to come where we are improving our earnings from operations. Both business areas should be are cash positive going forward.
As to the group, we have signaled very clearly that when the Genetics deal is closed, we are intending to streamline the group and rightsize this. So that will significantly take down the cost going forward. So that will also help the profitability of the group going forward.
Great. Could you also talk about the competitive backdrop for INVE?
A little bit unsure what you mean by backdrop, but the competitive situation, it's a highly specialized nutrition business tailored to deliver specialized products in the early stage -- life stage phase within shrimp and marine fish as it's very specialized, as it's a lot of competence, as a lot of things behind it. It is very well positioned. It's not very easy to compete within the niche that where we are very, very strong. So the competitive positioning of that business is great. What we have experienced over the, I would say, the last 2, 3 quarters, but even over more than a year now is a difficult shrimp market, which has been reflected in the numbers. It doesn't reflect on the competitive position and the positioning of that part of our group at all. Rather to the contrary, we have used that period in order to strengthen this business and strengthen the commercial positioning of this business by improving the organization, improving the products, improving the market reach, improving efficiencies. That should mean that when we are getting into a better landscape, both in terms of product mix, but also in terms of the shrimp market, we should be in an even better position and stronger position going forward.
And could you talk a bit about without Genetics, how you would describe the remaining business?
Well, it's -- I've stated that very clearly, I think also when we announced the Genetics deal. It will be far less -- a smaller business. It will be a smaller business, but it will be a far less complex business. And given where we are right now, given where we -- what we believe both in terms of Advanced Nutrition and Health, it will be a profitable and cash-generative business going forward. So those are the main things that we have been aiming at positioning the business to become, and this is how the business will be going forward.
And you've touched on this, but could you expand what it means to have a different business model for Ectosan Vet and CleanTreat and when these might be launched?
Yes. We have -- when we started out with the launch of Ectosan Vet and CleanTreat, we need to start -- we need to have a starting point, and we started with having the CleanTreat part of that solution on a PSV, which is we knew was very costly. It wasn't so costly at that time, but it became more and more costly as the cost of the PSV and the systems were developing as we moved along. And it was also even if it had desired mobility so we can move it along the coast and be where the need were at the right time, it had some operational complexities. Then we went on to look at and we have developed and have available integrated models for CleanTreat in wellboats, but that was again dependent on wellboats being built at the size that we desired. Then we looked at the barge model, which took down the cost and the complexity somewhat.
The next step that we have been developing now is to take the CleanTreat part of the solution on land, which enables us to take down the cost significantly and also the complexity of how to operate the solution, both for us, but also for the farmers. Fixed land-based will enable less complex operations that will benefit us, but also the farmers and definitely a less costly solution. And as I said, we believe now that we are in a position now going forward to offer such a solution with a cost that is competitive to other sea lice delicing methods, which has been a hurdle in the -- for the solution in the initial phase of the launch of the solution.
Great. And one last question. How do you plan to strengthen the commercial efforts within Advanced Nutrition? What will that look like?
We have been working on that, I will say, constantly for -- I think for a long time. And we have further focused on that over the last year and the last quarters. It has to do with how you do the setup, both in terms of commercial resources, combined with technical service resources. So you give the customer what they need in order to be sure that we do that. But it has also to do with the right people in the right places, and we are very, very happy with the commercial setup that we have in Advanced Nutrition at the moment. They are very, very good at what they are doing, and they are getting better and better as we are speaking. But it also has to position the right persons in the right places in order to, not only cover the [ existing ] market, but also emerging markets. And that is -- so it's a combination between those things that we have been working on, that we continue to work on. But I just want to underscore that we are very happy with the commercial setup that we have in Advanced Nutrition now. It is very good, and it's becoming better and better as we are moving forward.
Great. Thank you. That concludes the Q&A session.
Thank you, [ Carina ]. And I think that also concludes our presentation. So thank you for attending.