ANNUAL REPORT
2014
Benchmark’s core focus is driving sustainability
throughout the food chain and establishing
the highest possible standards of animal health
and welfare. All the markets in which the Group
operates are growing rapidly, driven by a global
need to find more sustainable food sources.
Aquaculture is a particular focus for the Group,
as it now provides more animal protein to the
global market than beef.
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Registered office:
Benchmark Holdings plc
Benchmark House
8 Smithy Wood Drive
Sheffield
S35 1QN
Registered number: 04115910
Our 2014 Annual Report is an integrated
report which presents our financial and
sustainability performance, underlining the
existing connections between competitive
environment, Group strategy, business model,
risk management and corporate governance.
C O N T E N T S
O V E R V I E W
– 0 1 –
07 Why We Do What We Do
08 Benchmark at a Glance
“2014 has been both fast-paced and
transformative for Benchmark. We have made
substantial investments across key areas of the
business in response to strong demand for our
products and services.”
Malcolm Pye, CEO
S T R A T E G I C
R E P O R T
– 0 2 –
12 Our Markets
13 Our Structure
14
Results in Brief
15 Highlights of 2014
16
20
24
Chairman’s Statement
Chief Executive’s Statement
Chief Financial Officer’s Review
32 Group Operational Overview
35 Group Operational Framework
40
Animal Health
46
52
59
62
66
70
72
73
74
Sustainability Science
Technical Publishing
Breeding & Genetics
Building a World Class Team
Investing in Next Generation
Scientific Research &
Production Capacity
Environmental Footprint
Key Performance Indicators
Risk Management
Principal Risks Summary
G O V E R N A N C E
– 0 3 –
78
80
Board of Directors
91
Remuneration Report
Corporate Governance Report
102 Directors’ Report
86 Nominations Committee Report
105 Directors’ Responsiblities
87
Audit Committee Report
F I N A N C I A L
S T A T E M E N T S
– 0 4 –
108
Independent Auditor’s Report
115 Company Statement
110 Consolidated Income Statement
of Changes in Equity
111 Consolidated Statement
of Comprehensive Income
112 Consolidated Balance Sheet
113 Company Balance Sheet
114 Consolidated Statement
of Changes in Equity
116 Consolidated Statement
of Cash Flows
117 Company Statement
of Cash Flows
118 Notes forming part of the
Financial Statements
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O V E R V I E W
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Benchmark Holdings plc Annual Report 2014 | Overview
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W H A T ’ S I N
T H I S S E C T I O N ?
07 Why We Do What We Do
08
Benchmark at a Glance
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Benchmark Holdings plc Annual Report 2014 | Overview
7
W H Y W E D O
W H A T
W E D O
Since Benchmark’s inception in 2000, there
have been some profound and unprecedented
shifts in the production of food globally. As we
move towards a predicted global population of
9.6bn by 2050, and a swelling middle class of
4.8bn by 2030, on a planet of finite resources,
the need for sustainable supply chains has never
been more pressing.
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Growing population
9.6bn people by 2050
(from 7.28bn in 2014)
Source: UN World Population
Prospects, 2012 Revision
Rising incomes
4.8bn middle class by 2030
(from circa 1.8bn in 2009)
Source: The Brooklings Institution (global
middle class defined as households with
daily expenditure of $10–$100 per person)
Increased urbanisation
66 per cent urban by 2050
(from 54 per cent in 2014)
Source: UN World Population
Prospects, 2012 Revision
The global food system has accomplished a great
deal to meet the needs of feeding a world that
is more urban, affluent and populous. However, it
must continue to advance in order to deliver more
calories and better nutrition at even higher levels of
efficiency while also conserving land, water and energy
resources and adapting to a changing climate.
Benchmark’s unique ability to innovate to make food
more plentiful, accessible and sustainable through
more responsible and ethical practice sits at the core
of our business model.
With four divisions and bases in 11 countries around
the world, we engage with the world’s major industries
at every stage of food production to help repair
and build a global food chain that is more efficient,
economical, ethical and environmentally friendly, and
that can serve the future of humanity.
Through our international client base — which ranges
from food producers, processors, retailers and
industry bodies through to pharmaceutical companies,
veterinarians, governments and centres of excellence
— we are able to access and develop improvements
in efficiency at every stage of the food chain, driving
forward innovation across green technologies,
manufacturing, packaging and distribution, and
fostering greater sustainability in food harvesting.
Our partnerships with universities, think tanks, non-
governmental organisations and thought leaders drive
research, innovations and solutions which inform
our day-to-day business practices which we are able
to communicate directly to our market via our world-
leading news websites and publications that have a
growing global readership of over six million.
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B E N C H M A R K A T A G L A N C E
First-class team with expert knowledge
and practical experience
280 people* in 11 countries
across 4 continents
Animal Health
Sustainablity Science
Technical Publishing
Breeding & Genetics
28 per cent growth in Benchmark’s revenue from 2013
Active in markets worth $180bn worldwide
* As of January 2015, following the acquisitions of Stofnfiskur and SalmoBreed
9
Provider of products and services to the
agriculture and aquaculture industries
State-of-the-art aquatic health clinical and
diagnostic laboratories in North America,
Europe and Asia
Sustainable research farms in England,
Scotland and Brazil
Over £20m set aside for expansion and
improvement of vaccine manufacturing facilities
£6.5m investment in research and
development (R&D) including acquired
intangibles in FY14
Long-term partnerships with scientific centres
of excellence including Oxford University,
University of Reading, St Andrew’s University,
Moredun Research Institute, Norwegian
Veterinary Institute and University of Maine
OVERVIEWBenchmark Holdings plc Annual Report 2014 | Overview 11
S T R A T E G I C
R E P O R T
0 2
W H A T ’ S I N
T H I S S E C T I O N ?
12
Our Markets
13
Our Structure
46
Sustainability Science
52
Technical Publishing
14
Results in Brief
59
Breeding & Genetics
15
Highlights of 2014
62
Building a World Class Team
16
Chairman’s Statement
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Chief Executive’s Statement
24
Chief Financial Officer’s Review
32
Group Operational Overview
35
Group Operational Framework
40
Animal Health
Benchmark’s aim is to become the world-leading
aquaculture health specialist and a leading
global player in each of its markets
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Investing in Next Generation
Scientific Research &
Production Capacity
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Environmental Footprint
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Key Performance Indicators
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Risk Management
74
Principal Risks Summary
STRATEGIC REPORTBenchmark Holdings plc Annual Report 2014 | Strategic Report
O U R
M A R K E T S
O U R
S T R U C T U R E
Aquaculture
$119bn global market
Animal Health
$22bn global market
➡ Aquaculture fastest-growing
food-producing sector
➡ $119bn global market, now larger than
beef (Source: Food and Agriculture
Organisation, FAO)
➡ Provides almost half of all fish for human
food, projected to rise to 62 per cent
by 2030 (FAO)
➡ Employment in the fisheries and aquaculture
sector has grown faster than the world’s
population (in percentage terms) (FAO)
➡ Between 2000–2012, fish aquaculture
production increased by 103 per cent (FAO)
➡ FAO estimates 40 per cent of shrimp
production is lost due to disease; this
is the equivalent of more than $3bn
Global Sustainability Consulting
$13.8bn global market
➡ Verdantix estimates global sustainability
consulting market at $13.8bn. Of this,
$1.2bn categorised as strategic and
management consulting services and
$12.6bn technical sustainability consulting
➡ Overall sustainability consulting market
estimated to be growing at 4–5 per cent,
per annum. Growth projected to continue
accelerating as developed economies
emerge from global recession
➡ Animal medicines and vaccines sector
estimated at $22bn within the estimated
$92–102bn animal health industry (includes
diagnostics, medicated feed, veterinary
services) (Source: Vetnosis)
➡ Animal medicines and vaccines sector
projected to grow at a CAGR of 5.7 per cent
per year (2011–2016) (Source: Vetnosis)
Science, Technical
& Medical Publishing
$26bn global market
➡ The Group’s technical publishing division
sits primarily within the agriculture segment
of the STM (science, technical and medical)
publishing market. STM market estimated in
2011 as a $26bn market with a projected
growth from 2013–2014 estimated at 5.3
per cent, and CAGR from 2009–2014 of 5.0
per cent (Source: Outsell 2011)
13
Our goal is to become a leading global player in each
of our markets. Benchmark’s divisions all support and
influence one another, providing added insight and
expertise across the breadth of the food chain and driving
efficiency. Our intention is to build a diversified and
balanced food sustainability group through investment
in four key areas:
➡ High-quality scientific R&D
➡ Growing a strong business development team
➡ Attracting the highest calibre of people
➡ Expanding into existing and new business sectors
through targeted acquisitions
During FY14 the Group operated 3 divisions;
➡ Animal Health
➡ Sustainability Science
➡ Technical Publishing
Since the year-end the Group has added a fourth division,
Breeding and Genetics, following the acquisition of
SalmoBreed AS and Stofnfiskur HS.
Technical
Publishing
Sustainability
Science
Animal
Health
Breeding &
Genetics*
* New division added post year-end, December 2014
STRATEGIC REPORTBenchmark Holdings plc Annual Report 2014 | Strategic Report R E S U LT S
I N B R I E F
H I G H L I G H T S
O F 2 0 1 4
15
Revenue (£m)
EBITDA from Trading Activities1 (£m)
(Loss) profit before tax (£m)
Basic earnings per share from Trading Activities2 (p)
Basic (loss) earnings per share (p)
Investment in scientific R&D (including acquired intangibles) (£m)
Net cash balance at period end (£m)
2014
35.4
6.6
(1.4)
3.29
(1.04)
6.5
16.5
2013
27.5
7.4
4.9
5.59
4.72
0.9
1.7
Successful flotation
on AIM raising
£24.7m (net)
of new equity
28%
increase in
revenue to
£35.4m
Increase in
headcount of
63 in the
year to
222
Increase
in product
pipeline
from
30 to 47
Successful completion of
secondary fundraise of
£70m
post year-end to fund acquisition
of SalmoBreed and Stofnfiskur to
create a world leading salmon and
aquaculture business
Over
£20m
set aside to expand vaccine
manufacturing capabilities at
UK sites in response to
growth seen across
vaccines business
1 EBITDA from Trading Activities excludes costs relating to Investing Activities from reported IFRS numbers. Investing Activities comprise
exceptional IPO related costs of £1.6m (2013: £0.2m), exceptional lease termination costs of £0.1m (2013: £nil), acquisition costs of
£0.4m (2013: £0.1m), pre-operational expenses for new ventures of £1.6m (2013: £0.2m) and research and development expenditure of
£2.7m (2013: £0.8m).
2 Earnings per Share from Trading Activities excludes costs relating to Investing Activities from reported IFRS numbers. Investing Activities
comprise exceptional IPO related costs of £1.6m (2013: £0.2m), exceptional lease termination costs of £0.1m (2013: £nil), acquisition
costs of £0.4m (2013: £0.1m), pre-operational expenses for new ventures of £1.6m (2013: £0.2m) research and development expenditure
of £2.7m (2013: £0.8m), and related tax credit on the above adjustments of £0.9m (2013: £0.4m).
Successful IPO and secondary fundraise
Increased merger and acquisitions activity
➡ £27.5m raised at IPO in December 2013 to fund
➡ Increasing number of acquisition opportunities
the development of our product pipeline, expansion
of our vaccine production facilities, and to harness
acquisition opportunities
➡ Since year-end, an additional £70m, raised to
fund the dual acquisition of SalmoBreed AS
and Stofnfiskur HF and increase the vaccine
manufacturing capacity
Launch of three pipeline products
➡ Mydiavac® — Launched in July 2014, giving
Benchmark immediate presence in a new sector
with this unique, inactivated Enzootic abortion
vaccine for sheep
➡ PondDtox® — Developed with partner company
Novozymes and launched in North America, this
new product is a world-leading microbial solution
that can both prevent and remedy hydrogen
sulphide toxicity in the water used for fin-fish
aquaculture
➡ Vaccine for a skin disease in cattle, toll
manufactured by Benchmark Vaccines
being developed and progressed
➡ Acquisition of Old Pond Publishing, bringing 120
new authors and contributors, and 450 new titles,
books, e-books and programmes
➡ Since year-end, acquisition of two leading salmon
breeding and genetics companies, SalmoBreed
and Stofnfiskur, creating a world-class salmon and
aquaculture business
Expansion of vaccine production capacity
➡ Braintree development — Phase 1: new office and
marketing suite is complete. Phase 2: antigen-
manufacturing facility is underway
➡ Edinburgh BioCampus — Development of existing
building and new factory is underway in order
to significantly increase the projected vaccine
manufacturing capacity at the site
➡ Integrated marine research facility rebuild
underway on the west coast of Scotland
Increased global outreach
Increase of pipeline from 30 to 47 products
including:
➡ Acquisition of next-generation aquaculture vaccine
➡ Purpose-built laboratories opened in Norway and
Thailand to provide rapid-response clinical services
and veterinary diagnostics to these prominent
markets
➡ First Russian publication — AgriTimes.ru, and
Latin American publication — Elporcino.com
➡ New website for global sheep industry —
TheSheepSite.com
technology platform
➡ £1.9m acquisition of Zoetis aquaculture
vaccine assets
➡ Development agreement signed with HypoPet AG
(‘HypoPet’) to bring to market a breakthrough cat
allergy vaccine by 2018
➡ HypoCat™ development brings into Benchmark
VLP (virus like particle) vaccine technology and
opens up a new, large scale (c.£250m) high-margin
market for the Group
➡ Total pipeline addressable market of £397m
per annum
STRATEGIC REPORTBenchmark Holdings plc Annual Report 2014 | Strategic Report C H A I R M A N ’ S
S T A T E M E N T
“Following the successful IPO in December
2013, which raised net proceeds of £25m, I am
delighted to inform you that the Company has
made notable progress in deploying those funds
through significant investment in expanding
manufacturing capacity, securing bolt-on
acquisitions and new product development.
All these initiatives were flagged at IPO as being
central to our growth strategy.
The largest acquisition in the period was that
of aquaculture vaccine assets from Zoetis,
which has expanded the Company’s new product
portfolio and accelerated its development.
Acquisitions form a key part of the Group’s growth
strategy and I am pleased to report that our activity
in this area has increased significantly over the last
few months, culminating in the dual acquisition of
leading salmon breeding and genetics companies,
SalmoBreed and Stofnfiskur in December 2014,
creating a world-leading salmon and aquaculture
business. We are continuing to evaluate a number
of further opportunities.”
The Hon. Alexander Hambro
Chairman
General overview
Your company has had a busy and productive year
and I am pleased to be able to present this inaugural
report and accounts as a public entity. Benchmark has
exacting but achievable strategic ambitions within a
substantial global market for animal health products
and services. Whilst there is a long way to go for the
business, major steps have been taken since the IPO
in December 2013 to deliver these objectives both in
terms of the products and services that Benchmark is
bringing to market but also in the judicious acquisition
of businesses and technologies that complement the
Company’s existing operations.
The various Executive Director’s reports contained
further in this document will provide you with detailed
explanations of the strategic, operating and financial
performance of your company during the year under
review and so I will confine myself to reporting on the
significant highlights and provide shareholders with an
insight into the Company’s tactical rationale.
An important component in understanding
Benchmark’s long term objectives is to note how the
Income Statement is divided into Investing Activities
and Trading Activities. The Investing Activites category
reflects how the Group’s financial resources are
devoted to developing and expanding the pipeline of
proprietary animal health products and services. The
Trading Activities category reflects how these products
and services, once fully developed, are performing in
their various markets. We are committed to investing
significant resources to secure the long term trading
prospects for the business and, as mentioned later
in this report, our pipeline of products currently in
development has an estimated revenue potential
in excess of £350m. We will continue to invest
significantly in this pipeline over the next few years
whilst ensuring that the revenue producing divisions
are prudently managed so as to achieve their growth-
oriented targets.
Financial overview
Revenue for the period was £35.4m (2013: £27.5m),
an increase of 28 per cent.
The principal driver of this growth was sales of the
Group’s proprietary animal health products which
rose by 22 per cent. The majority of this increase
arose from the inclusion of Salmosan® sales in
Chile for a full year (2013: 7 months). Salmosan® is
the Group’s market-leading sea lice treatment. The
Group’s development of sea lice products, to improve
17
on Salmosan’s effectiveness, has continued to
make progress and should be in a position to impact
revenues in the forthcoming financial year.
The Group’s earnings are set out in the Consolidated
Income Statement. The Group made an operating loss
of £1.2m (2013: operating profit £5.1m) due to an
increase in operating costs year on year reflecting the
increased scale of Group operations, and a significant
increase in spend on Investing Activities as outlined
below. Loss per share, both basic and diluted, was
1.04p (2013: basic earnings per share of 4.72p and
diluted earnings per share of 4.56p).
EBITDA from Trading Activities (the full reported
numbers excluding the costs relating to Investing
Activities) fell by 11 per cent to £6.6m (2013: £7.4m),
as the increased contribution from Salmosan® in Chile
was offset by investment in production infrastructure
as the Group gears up for further growth.
Operating costs relating to Trading Activities (excluding
amortisation and depreciation) increased by £2.8m to
£8.3m (2013: £5.5m), reflecting the Group’s organic
and acquisitive growth with five acquisitions completed
since March 2013. Group headcount has increased
from 159 at the start of the period to 222, primarily in
order to deliver the acceleration of our new products
pipeline and other planned growth. Our ability to
attract the highest calibre and most talented people
from within our sector demonstrates our commitment
to investing in the development of our team.
Costs relating to Investing Activities have increased
by £5.2m year on year to £6.4m (2013: £1.2m)
demonstrating the Group’s strategy to invest in the
growth of future revenue. These costs include R&D
expenditure of £2.7m (2013: £0.8m), pre-operational
expenses for new ventures of £1.6m (2013: £0.2m),
acquisition related costs of £0.4m (2013: £0.1m), the
exceptional costs of £1.6m relating to the IPO (2013:
£0.2m) and exceptional lease termination costs of
£0.1m (2013: £nil). R&D expenditure is classified as
an Investing Activity as it is one of the Group’s key
investment objectives.
On 18 December 2013 the Company was admitted
to AIM. The IPO raised gross proceeds of £27.5m
through the issue of 43m new ordinary shares. Total
IPO related costs (including share-based payment
schemes) incurred in the period under review
amounted to £3.1m. Of this, £1.6m has been treated
as exceptional costs and charged to income with the
balance of £1.5m being offset against share premium.
STRATEGIC REPORTBenchmark Holdings plc Annual Report 2014 | Strategic Report 19
issues addressed by the Board is illustrated on page
83. In addition, my fellow Non-executive Directors and
I have conducted site visits around the businesses
since our appointment in December 2013. Board
meetings have been held at different sites throughout
the year to give the Board familiarity with the Group’s
geographically dispersed operations.
Both Susan Searle and Basil Brookes have worked
hard to ensure the Audit and Remuneration functions
have been robustly conducted and established and you
will find their respective detailed statements on these
important areas later in this report.
Employees and sustainability
I have been very impressed with the calibre and
commitment of the Company’s employees that I have
met since taking on my role as Chairman earlier in
the year. I would like to thank all our employees for
their continued efforts as they focus on executing the
Company’s strategy and on putting our values into
action for the benefit of all our stakeholders.
We are proud to be a leader in running our business
in accordance with the three ‘E’s: Environment, Ethics
and Economics. We describe how we do this on page
37 within the Sustainability section of this Report.
Outlook
Your Board is pleased that the Company is
successfully executing the growth strategy set out
at the time of the IPO and is optimistic about the
opportunities ahead. We are enthusiastic about the
continued development of the new product pipeline
and progress with corporate acquisitions where the
Company is evaluating a number of targets. We have
been successful in diversifying our revenues away from
Salmosan and this, together with the relative resilience
that the product has shown to the introduction of
generics, puts us in a solid position. The integration
of Stofnfiskur and SalmoBreed is progressing well with
early indications of synergies and growth opportunities
materialising as expected.
The Hon. Alexander Hambro
Chairman
26 January 2015
Strategic overview
As outlined in the Company’s Admission Document,
your company’s goal is to become the world-leading
aquaculture health specialist and a leading global
player in each of our markets. Our intention is to build
a diversified and balanced food sustainability group
through investment in four key areas: high-quality
scientific R&D; growing a strong business development
team; attracting the highest calibre people; and
expansion into existing and new business sectors
through targeted M&A.
Benchmark has made progress in all these areas
across all its divisions since flotation, ranging from
an increase in the global workforce of 40 per cent to
investment in the establishment of our state-of-the-art
vaccine production facilities at the BioCampus near
Edinburgh and at our existing vaccine facility
in Braintree.
Most importantly, as Malcolm explains in the CEO
review starting on page 20, Benchmark’s focused
approach to synergistic M&A opportunities resulted
both in the acquisition of aquaculture assets from
Zoetis during the accounting period, an important
step in not only improving the Company’s Intellectual
Property (‘IP’) portfolio but also accelerating the
R&D pipeline. Furthermore, with the acquisition, post
year-end, of SalmoBreed and Stofnfiskur, two leading
salmon breeding and genetics companies, a new
Breeding and Genetics division for the Group
was created.
Governance and the Board
In preparation for its listing on AIM during the year, the
Company made a number of changes in its corporate
governance. Three new Non-executive Directors were
appointed (Susan Searle, Basil Brookes and myself as
Chairman) joining the three Executive Directors on the
Board (Malcolm Pye — CEO, Roland Bonney — COO
and Mark Plampin — CFO). The Board established an
Audit Committee, a Remuneration Committee and a
Nominations Committee which have responsibilities as
described in the Corporate Governance section of this
report starting on page 80.
As Chairman, it has been my primary responsibility
to lead the Board and ensure its effectiveness.
The Board has had a full schedule of meetings,
presentations, training sessions, papers and time
spent one-to-one between the Executive Directors
and the Non-executive Directors to ensure that the
Board functions effectively, stays informed, and knows
the business and its people in depth. The breadth of
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STRATEGIC REPORTBenchmark Holdings plc Annual Report 2014 | Strategic Report
C H I E F E X E C U T I V E ’ S
S T A T E M E N T
“2014 was an outstanding year for Benchmark,
beginning with the delivery of a highly successful
IPO that is enabling us to unlock the immense
potential in the dynamically growing markets
in aquaculture, animal health and sustainable
food production where we are becoming leading
technology providers.
Our overall results for the year demonstrated
solid performance in line with market
expectations, with growth across the Group
driving revenue up 28 per cent on 2013.
Notwithstanding the commitment of senior
management resource that went into the IPO,
the management team has, throughout the
year, also made strong progress with the
implementation of the Group’s overall strategy.
This has been a year of significant progress on
building the foundations for long-term success.”
Malcolm Pye
Chief Executive Officer
21
The Group’s core business is in areas where there is
a clear and immediate need for rapid development on
a global scale. Examples of this are the increase of
aquaculture production to replace declining marine and
freshwater wild catch, the development of sustainable
food production methods to reduce the food
industry’s considerable impact on the environment,
the world wide need for technical knowledge, and the
need to replace drugs with preventative medicines
like vaccines. These are urgent concerns for
humanity which are driving the long-term growth and
development of our business and which we believe will
continue to be key factors in these major markets.
In summary
The highlights of 2014, set out on page 15
demonstrate that the Group is well positioned to
deliver long-term growth in revenues and EBITDA.
Our maiden year as a public company has seen
the continuation of the fast-paced transformative
development for the Group that we anticipated over the
last decade. This environment presents the Group with
many significant business opportunities. We continued
to take advantage of this throughout the year and have
made substantial investments in key areas to support
our long-term strategy for sustainable growth.
Delivering Group strategy
The Benchmark group works as a ‘gear box’ to the
‘engines of production’ that are our core customers
in the aquaculture, agriculture and food industries,
whereby we provide the mechanisms for improvement
through technical development. Our business divisions
all support and influence one another, providing added
insight and expertise across the breadth of the food
chain, and driving efficiency.
Our core areas of focus within this are:
➡ Innovating products and technologies driving
improved efficiency of production
➡ Development of the science and methodologies
needed for advancing sustainable production
➡ Providing the technology and systems to drive
product quality improvement programmes
➡ Delivering knowledge, training and education
to our industries
Benchmark’s overall strategy is to continue to grow the
existing business whilst at the same time expanding
into areas where the same fundamental biology can
be exploited to drive innovation, development and
synergies across the Benchmark companies.
At this point in our development, the key components
required to ensure that we continue delivering this
long-term growth strategy are:
1. Our people — We have to continue to attract and
retain the highest calibre people to drive forward
our development. We have grown the Benchmark
team through the year with strong new recruits.
2. Investing strongly to build leadership capability
in scientific research — This has been a very
important year as we set out to sharply step up
our research capability. We have made some very
substantial progress and are pleased with the
rapid increase in output that is being achieved.
3. The investment in our people and R&D
programmes needs to be matched with investment
in the high-quality production facilities and
infrastructure needed to support our business
development through this period of dynamic growth
— this work is now well underway with major
projects progressing across the business.
Group performance
Growth in sales has been positive and our leading
products have performed well. The entry of a generic to
the market in Norway did not impact sales of our sea
lice treatment Salmosan® as negatively as predicted,
with total sales remaining strong and trading ahead of
management forecasts.
We have also seen volume growth across our
vaccine business and have commenced significant
investment at our UK sites in Edinburgh and Braintree
to expand capacity in order to progress contract-
manufacturing opportunities and provide the capability
to manufacture new products coming out of our own
development pipeline in the future.
Overall sales in the animal health business were up
27 per cent and towards the end of the year we had
three product launches: Mydiavac®, the first of our
own vaccines against Chlamydia in sheep, PondDTox®,
an innovative water treatment launched together with
Novozymes in the USA for fin-fish aquaculture, and a
new contract-manufactured cattle vaccine. These are
predicted to contribute to further revenue growth in
2015 and demonstrate our ability to bring vaccines
and new products to market; an increasing feature
of our business going forward.
Our vision for the Technical Publishing business is to
be a leading provider of news and commentary in order
to create the platform to facilitate knowledge transfer
and specialist education to those engaged in the
agriculture, aquaculture and food chain industries. Part
of our drive to grow this area of the business has been
STRATEGIC REPORTBenchmark Holdings plc Annual Report 2014 | Strategic Report 23
Each of our business divisions is focused on an
important area for the future development of our
industry sectors and each can be characterised by the
strong demand for scientific knowledge and progress.
The Group will continue to move rapidly where
necessary to access exciting opportunities that both
develop and bring to market new innovations, and this
will continue to drive the long term dynamic growth and
success of the Group.
The Group is at an exciting stage of its development
and is very well placed to deliver its ambitious long-
term growth plans.
through expansion into new markets including Russia,
Latin America and the companion animal sector. There
is growing demand for these services. Revenues have
grown in our technical publishing business by 23 per
cent as advertising revenues have increased, the
distance learning business has grown and technical
book sales have also increased partly as a result of
the acquisition of Old Pond Publishing in the second
half of the year.
Revenues also increased by 46 per cent in the
Sustainability Science division, as investment in
vaccine trials facilities and new research facilities
started to come into operation towards the end
of the year. We are seeing growth in demand for
our services as a result of increasing recognition
by business managers across the globe of the
importance of addressing the sustainable production
challenges and doing business in a more responsible,
socially and environmentally-acceptable way. The
2013 UN Global Compact-Accenture CEO Study on
Sustainability reported that 80 per cent of global CEOs
see sustainability as the primary route to growth in
innovation and leading to competitive advantage in
their industries and 93 per cent see it as important
to the future of their business.
Transformative acquisitions strategy
Benchmark’s strategy is based on long-term
investment in high-value, research biology based
business in the agri-food sector. This, coupled with a
high level of reinvestment and our management team’s
ability to move quickly to access opportunities in these
fast evolving markets, has allowed us to progressively
position ourselves as a leader in each of our sectors.
Benchmark recognises that in some situations there
is a stronger rationale for acquiring a business
or technology than there is for developing that
capacity in-house, and we continue to evaluate
targeted acquisitions as part of our overall business
development strategy. We have built a strong business
development team to manage this work and where
it is to our advantage we also work with external
M&A advisors (Equity Strategies) to support and add
additional strength to this strategic development work.
In 2014 we successfully integrated five complementary
businesses into the Group, adding capacity, expertise,
know-how and additional revenue streams across each
of our business divisions.
Our most recent acquisitions, completed post the year-
end, are transformative and so have been included
here for clarity. In December 2014, we successfully
secured the purchase of two of the world’s leading
salmon breeding and genetics companies — Norway-
based SalmoBreed and Iceland-based Stofnfiskur,
giving Benchmark a unique platform in the genetics
and breeding arena from which we can play a key
role in shaping the future of the salmon and
aquaculture industries.
The acquisitions of SalmoBreed and Stofnfiskur
created a fourth business division within the Group,
Benchmark Breeding & Genetics, which is expected to
become the second largest supplier of salmon eggs
and genetic expertise in the world. We believe the new
business has great potential and that we can grow
it very substantially in the future. This move reflects
our continued commitment to the rapidly developing
and growing global aquaculture industry and creates
the opportunity for further integrated approaches to
drive sustainable development together with many new
synergies across the Group.
Looking forward
The rising global demand for sustainably produced
animal protein will continue to drive growth in the
aquaculture, animal health, and sustainable production
technology sectors. The outlook for global aquaculture
in particular is extremely positive with consumption
from farmed stocks overtaking that of wild-caught
fish, and fish from farmed stocks now providing
more of the world’s protein than beef (FAO). The
aquaculture industry is ambitious, technology hungry
and fast moving and its accelerated growth brings
many challenges, the most serious of which is the
management of disease. This is an area where we will
continue to build our support for the global industry
through the provision of integrated solutions, rapid-
response on-farm diagnostic and clinical services, the
development of new vaccines and medicines and the
development of stock with improved genetics selected
for greater efficiency and resistance to disease.
We continue to see increased recognition for our focus
on the generation of animal vaccines and biologicals
as alternatives to antibiotics. In 2014, the correlation
between antibiotic use and the rise of increased
resistance in humans received widespread attention
from international governments and inter-governmental
bodies. This was further supported when the UK
Government’s Longitude Prize 2014 awarded £10m to
help solve the problem of global antibiotic resistance.
We have set aside substantial funds for investment
in developing our product pipeline, infrastructure
and capabilities to support this important area and
continue to see this as a key focus for the business.
STRATEGIC REPORTBenchmark Holdings plc Annual Report 2014 | Strategic Report C H I E F F I N A N C I A L
O F F I C E R ’ S R E V I E W
“Our maiden year as a public company has
delivered a solid financial performance during
a period of significant change. Key factors driving
this are the success of our branded animal
health products and the strength in depth of
our people.”
Mark Plampin
Chief Financial Officer
Key Financials
£000
Total revenue
EBITDA from Trading Activities
Profit before tax from Trading Activities
(Loss)/profit before tax
EPS from Trading Activities (pence)
Basic EPS (pence)
25
2014
2013
35,354
27,543
6,623
7,403
5,031
6,021
(1,375)
4,853
3.29
5.59
-1.04
4.72
Divisional Analysis
Revenue
EBITDA from Trading
Activities
Operating costs from
Investing Activities
Operating profit/(loss)
£000
2014
2013
2014
2013
2014
2013
2014
2013
Animal Health
32,981
25,878
10,462
10,243
(4,622)
(1,006)
4,924
8,368
Sustainability Science
3,073
2,099
(1,028)
(285)
(140)
Technical Publishing
2,873
2,343
(272)
107
(52)
-
-
(1,439)
(418)
(515)
(3)
Corporate
833
783
(2,539)
(2,662)
(1,592)
(162)
(4,157)
(2,843)
Inter-segment sales
(4,406)
(3,560)
-
-
-
-
-
-
Total Group
35,354
27,543
6,623
7,403
(6,406)
(1,168)
(1,187)
5,104
For commentary on — Animal Health see page 40
Sustainability Science see page 46 Technical Publishing see page 52
STRATEGIC REPORTBenchmark Holdings plc Annual Report 2014 | Strategic Report Group Results
Group Revenue
2014: £35.4m (+28%)
2014
2013
£35.4m
£27.5m
Group Revenue by Division
7.1
1.0
0.6
-0.8
35.4
40
35
30
27.5
m
£
25
20
15
10
5
0
2 0 1 3 R evenue
Anim al H ealth
S ustainability Science
Technical Publishing
Intra Group Eliminations
2 0 1 4 R evenue
Group turnover increased by 28% to £35.4m in the
year (2013: £27.5m). The principal driver of this
growth was sales of the Group’s own animal health
products (“own-products”), which rose by 22%. The
majority of this increase arises from the inclusion
of Salmosan® sales in Chile for a full year (2013:
7 months). Sales of own-products in the final two
months of the year were strong with September seeing
the highest monthly sales ever for the Group. Revenue
growth in Animal Health was driven by vaccine toll
manufacturing, up 10%, and distribution of animal
health products (“Factored Products”), up 35%.
Gross profit increased by 16% to £14.8m. Gross
profit percentage was 41.8% (2013: 46.4%). The
reduction was principally due to a changing sales mix
as the Group delivers its strategy to diversify revenue
streams within its chosen markets. Own-product gross
profit percentages were maintained at 2013 levels
despite competition from a generic sea lice product in
both Norway and the UK.
The Group made an operating loss of £1.2m (2013:
operating profit £5.1m) due to an increase in operating
costs year on year reflecting increased scale of Group
operations and a significant increase in spend on
Investment Activities as outlined below.
The Group has chosen to sub-divide its reported
figures in the financial statements into ‘Trading
Activities’ and ‘Investing Activities’ in order to better
present the performance of its business. Trading
Activities are those operations which generate
earnings in the current period, and 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 the future. Both activities are vital to the continued
and future success of the Group.
27
EBITDA from Trading Activities of £6.6m was 11%
down on the previous year (2013: £7.4m), despite
growth in total gross profit arising from the higher
turnover. This is due to an increase in operating
costs relating to Trading Activities (excluding
amortisation and depreciation) of £2.8m to £8.3m
(2013: £5.5m), reflecting the increased size of the
Group and its strategy to invest in the people and
infrastructure required to deliver continued revenue
growth. The Group’s strategy to support organic growth
with acquisitive growth has seen five acquisitions
completed since March 2013. Group headcount
increased from 159 at the start of the period to 222,
primarily in order to deliver the acceleration of our
new product pipeline and other planned growth.
The Group’s ability to attract the highest calibre and
most talented people from its sector shows our
commitment to investing in the development of our
senior management.
The increase in operating costs also includes
higher spend on strategic marketing and legal and
professional advice to provide enhanced protection
for the intellectual property in the Group’s products
and services. In addition, ongoing operating costs
specifically related to being a public company amount
to c. £0.25m.
Depreciation and amortisation at £1.4m in the year
(2013: £1.1m) was higher than in previous years
due to the higher tangible and intangible fixed assets
balances following the increased investment in
the year.
Trading Activities
Group EBITDA from Trading Activities
2014: £6.6m (-11%)
2014
2013
£6.6m
£7.4m
Reconciliation of Group Loss Before Tax
to Group EBITDA from Trading Activities
2.7
7
6.6
m
£
6
5
4
3
2
1
0
-1
-1.4
1.4
0.2
1.6
0.4 0.1
1.6
-2
IP O R elated Expenses
R & D Expenditure
Trading E BIT D A
Loss B efore Tax
D epreciation & A m ortisation
Pre-operational Ventures
Lease Termination C osts
Acquisition R elated C osts
N et Finance C osts
STRATEGIC REPORTBenchmark Holdings plc Annual Report 2014 | Strategic Report
Investing Activities
Investing Activities comprise the following:
R&D expenditure
Pre-operational expenses
Acquisition related costs
Exceptional items:
IPO costs
Share based payment
expense arising from IPO
Lease termination costs
2014
£000
2,690
1,585
440
1,298
292
101
2013
£000
752
154
100
162
-
-
6,406
1,168
R&D expenditure, one of the Group’s key investment
objectives, is classed as an Investing Activity as it
is undertaken to provide growth in future income
streams. Expenditure has increased significantly in the
year as the Group embarked on its strategy of high
quality scientific research and development as outlined
in the Admission Document published in December
2013. This included significant expansion of the new
product development team and the recruitment of a
Benchmark Vaccines R&D team.
We expect the trend for increased investment in
research and development to continue into the
future with expansion into marine aquaculture R&D
through the acquisition of Viking Fish Farms Limited,
the acquisition of intellectual property from Zoetis,
the signing of an agreement with HypoPet to bring
to market a breakthrough cat allergy vaccine and
agreement for a license to use a next-generation
aquaculture vaccine technology platform all taking
place in the year.
Pre-operational expenses relate to the costs of
setting up laboratory facilities in Norway and Thailand.
Neither facility was operational in 2014, but significant
operating costs were incurred as we demonstrate
to regulatory authorities that both facilities meet
local requirements. Both facilities will become fully
operational during 2015.
Acquisition related costs were incurred in the period
in respect of the acquisition of Viking Fish Farms
Limited, Aquatic Veterinary Services, Atlantic Veterinary
Services Limited, the Zoetis aquaculture assets and
the trade and assets of Old Pond Publishing, again
reflecting the focus on growth since the IPO. Costs
in the previous year related to the acquisition of
Benchmark Vaccines.
Significant non-recurring costs were incurred in relation
to the IPO. Total IPO costs amounted to £2.8m, of
which £1.3m was treated as exceptional IPO costs and
charged to income during the year, with the balance of
£1.5m being offset against share premium.
A number of one-off share based payment transactions
arose as part of the IPO. The expense for 2014 in
relation to these schemes amounted to £0.3m.
Lease termination costs relate to the relocation of Fish
Vet Group Norge AS to larger premises in Oslo, Norway.
Finance costs
Taxation
Earnings per share
29
Net finance costs have fallen in the year due to
repayment of term loans and cash balances held on
deposit following the IPO. Finance costs include a one-
off write off of £0.1m unamortised arrangement fees
arising from the early settlement of the term loan.
The Group benefited from a tax credit for its UK and
overseas operations of £0.1m in the period (2013: tax
charge of £0.6m). This is principally as a result of the
loss in the year, the tax deduction generated by the
exercise of EMI share options at the time of the IPO
and a tax credit from expenditure on R&D.
Basic loss per share was -1.04p (2013: earnings
per share 4.72p) and diluted loss per share was
-1.04p (2013: diluted earnings per share 4.56p). The
movement year on year has been impacted by reduced
earnings in the year as noted above, together with the
issue of 43m new shares as part of the IPO exercise.
Earnings per Share from Trading Activities was 3.29p
(2013: 5.59p). Again, the reduction is a result of the
impact of lower earnings and the dilutive effect of the
higher number of shares in issue.
Basic EPS
Basic EPS from Trading Activities
e
c
n
e
P
6
5
4
3
2
1
0
-1
-2
4.72
-1.34
-4.42
-1.04
B asic EP S 2 0 1 4
B asic EP S 2 0 1 3
Im pact of Increased
no. of S hares
Im pact of
R educed Earnings
5.59
-1.58
-0.72
3.29
e
c
n
e
P
6
5
4
3
2
1
0
B asic E P S fro m
Trading A ctivities 2013
Im pact of Increased
no. of S hares
Im pact of
R educed E arings
B asic E P S fro m
Trading A ctivities 2014
STRATEGIC REPORTBenchmark Holdings plc Annual Report 2014 | Strategic Report
Dividend
Cash flow and balance sheet
Group Cashflow 2014
24.7 0.8 0.2 3.0
3.9
0.7 2.9
16.5
1.7
30
25
20
m
£
15
10
5
0
2 0 1 4 O pening B alance
C ashflo w fro m O perations
IP O Proceeds
Dividends
R epay m ent of Loans
R esearch & D evelop m ent
Acquisitions
2 0 1 4 Closing B alance
Property, Plant & Equip m ent
Net Assets
2014: £37.3m (+213%)
2014
£37.3m
2013
£11.9m
The Company paid a dividend of 0.2p per share
(rebased) prior to the IPO (2013: 0.4p per share
(rebased)). As stated in the Admission Document, the
Company intends in the future to implement a dividend
policy taking into consideration the Company’s cash
flow generation and capital investment opportunities
from time to time. The Board does not recommend
payment of a final dividend in respect of the year
ended 30 September 2014.
Total cash inflow in the year was £14.8m, primarily
from the net proceeds of the IPO (£24.7m), giving
closing net cash balances of £16.5m. Net cash
outflow from operating activities was £0.5m. After
adding back the £1.3m IPO related costs, operating
activities generated £0.8m of cash.
Net assets have increased by £25.4m to £37.3m
(2013: £11.9m), primarily as a result of the net
£24.7m raised in the IPO.
Some of the funds raised in the IPO have been used
to invest in new businesses, tangible and intangible
fixed assets across all of our operating divisions. The
balance sheet includes identifiable intangible assets
of £2.0m arising on the acquisitions of intellectual
property from Zoetis (£1.7m) and contractual
relationships acquired in Vet-Aqua International and
Aquatic Veterinary Services (£0.3m), and goodwill
of £1.0m arising from the acquisitions of Old Pond
Publishing, Viking Fish Farms Limited and Atlantic
Veterinary Services Limited. In addition, a technology
licence agreement which was entered into with a
third party for a cost of £2m, has been included in
intangible assets, with £1.3m of the cost deferred
into future periods. Additions to tangible fixed assets
include post acquisition investment in research
facilities at Viking Fish Farms Limited, the construction
of the new animal health centre at FAI Farms Limited
and the development of the new customer suite and
offices at Benchmark Vaccines Limited.
31
Interest rate management
Controls over interest rate exposures are in place
and dealings are restricted to those banks with the
necessary combination of geographic presence and
suitable credit rating. The Group currently has no
bank loans.
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 & Poors
and Moodys.
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.
All bank borrowings have been repaid in the year and
the Group has sufficient funding facilities to meet its
normal funding requirements in the medium term.
STRATEGIC REPORTBenchmark Holdings plc Annual Report 2014 | Strategic Report
G R O U P O P E R A T I O N A L
O V E R V I E W
“Benchmark’s ability to innovate, develop and
successfully deliver our strategy is defined by the
skill, experience and commitment of our people
and by our world-leading research, operational
and manufacturing capabilities. We have made
significant progress on all these fronts in 2014.
Through our international client base, we are
engaged with the world’s major industries at
every stage of food production to help repair and
build a global food chain that is more efficient,
economical, ethical and environmentally friendly,
and that serves the future of humanity.”
Roland Bonney
Chief Operating Officer
Investment in research and innovation
A key strategy for Benchmark has always been to
invest strongly in building leadership capability in
scientific research. This is necessary to achieve
the rate of innovation required to drive long-term
successful new product development programmes.
We continue to have a multipronged approach to
this: working in collaboration with academic research
institutions and commercial partners; driving our own
in-house R&D programmes; and through the strategic
acquisition of intellectual property, technology and
new products.
This approach has continued to yield results for us
throughout the year, with our new product pipeline
increasing from 30 to 47 products, which have an
addressable market of £397m per annum. We have
acquired or licensed-in some exciting new vaccine
technologies and have expanded our development
programmes into a number of new areas. These
programmes are positioning us well to accelerate
our new product launches over the coming years to
continue to contribute strongly to driving Benchmark’s
rate of organic growth.
In September 2014 we entered into an agreement
with HypoPet, a Swiss research company based
at the University of Zurich, to deliver the final
commercialisation, manufacture and distribution of
a breakthrough vaccine for cats, HypoCat™, which
neutralises the Fel d 1 protein, the primary cause of
human allergic reaction to cats. With an estimated
10 per cent of the global population suffering from
cat allergies, the agreement opens up a new market
for Benchmark within the animal health sector with
an estimated global value of £250m. We expect the
vaccine to be commercialised within 3–4 years. The
agreement with HypoPet advances our strategy, as
articulated at our IPO in December 2013, to invest
in selected new technologies and opportunities to
grow our product offering in related markets at the
same time as exploiting our core vaccine production
expertise and facilities.
33
Investment in state of the art
facilities for future growth
Throughout 2014, we have been investing in high-
quality production facilities and infrastructure needed
to support our business development and production
capability. Work began on building a significant
expansion of our vaccine manufacturing sites in the
UK, which will enhance our product type capability and
double our production capacity by mid-2016.
We have set aside over £20m for investment to
expand our vaccine manufacturing capabilities at our
UK sites in Edinburgh and Braintree in response to
the growth we have seen across our vaccine business.
The investment will also allow us to progress
contract-manufacturing opportunities and support our
increased product pipeline.
We are well advanced on the building of an industry-
leading antigen production line at Braintree with
anticipated completion in autumn 2015. Detailed
planning of the development of the existing building at
the Edinburgh BioCampus is underway with projected
completion by summer 2016. These two investments
will significantly increase the Group’s vaccine
manufacturing capacity.
Up to £10m of this investment is to be funded
by proceeds from the recent Placing, which was
completed post year-end in December 2014. This will
be used to satisfy the increased requirements of our
product pipeline and the additional specialist capacity
required to manufacture the HypoCat™ vaccine.
During the year, a dedicated R&D team has been
established at Benchmark Vaccines to work alongside
the manufacturing and product development teams.
The Animal Health Centre at our research farm
in Oxford was completed ahead of target in the
summer 2014 with the first terrestrial animal trials
now underway.
We have established two ultra-modern diagnostic
laboratories in Oslo, Norway and in Bangkok, Thailand,
to provide the local aquaculture industries with
technically-expert and commercially-responsive fish
health analytical services. This expansion programme
carries on with projects to establish similar service
bases to clients in Chile and Brazil. Understanding the
ever-evolving disease and environmental challenge to
animal health is critical both for our success and that
of our clients.
STRATEGIC REPORTBenchmark Holdings plc Annual Report 2014 | Strategic Report As we move rapidly towards 300 people, maintaining
the culture and values of Benchmark is a key priority.
Throughout 2014 we have launched a number of
training and workplace initiatives, including Investors
in People and Axialent Conscious Business, to support
this process. The aim is to ensure our employees
remain informed about our strategy, how we operate
as a business, and our vision for the future, in order to
understand where we are doing well as an organisation
and where we need to focus our efforts in the future.
Investment in new sectors
The Group continues to invest in new sectors
offering clear synergies with the existing business,
as demonstrated by the post year-end establishment
of Benchmark Breeding & Genetics.
We are developing our sustainability science facilities
and species capabilities on our FAI farms’ units at
Jaboticabal, Sao Paulo State, Brazil, and in Oxford,
UK, where we continue to grow the sustainable food
chain work in partnership with some of the world’s
leading food brands. These facilities allow us to test
new developments in a true farming environment to
assess and demonstrate their true operational and
commercial value.
A £1.6m upgrade and expansion of capacity at
our marine research facility in Ardtoe, Scotland is
underway and will provide us with a state of the art
facility for the development of aquaculture health
strategies, products and management technologies.
We have also expanded the research teams working
within our primary research partners at the Moredun
Research Institute in Edinburgh and at the University
of Maine in the USA, alongside an enlarged, dedicated
in-house product development and technical
support team.
Investment in our people
The Benchmark team has been put together with
people who have a passionate interest in driving
sustainable progress in their area of expertise by
working as part of a group dedicated to addressing
issues of real importance to humanity.
The team is focused on delivering outcomes, through
harnessing new technologies and techniques, to help
our customers to address real issues and deliver
tangible opportunities within their businesses.
To support this we continue to invest in a range
of personal, professional and team development
initiatives under our ‘Off The Bench’ programme. This
programme is designed to ensure that we deliver the
best possible environment for personal development,
and that our teams can develop efficient and
constructive ways of working.
The ability, drive and passion of the Benchmark team
is fundamental to our success and we are determined
to maintain this even though we are growing rapidly.
This year, following the IPO which brought with it an
increase in central overhead, one particular challenge
we faced was the need to grow the Benchmark core
functions to support our planned enhanced rate of
growth. In doing this we have set out to manage
the timing of recruitment to control the rate of
growth of overheads.
G R O U P O P E R A T I O N A L
F R A M E W O R K
35
Animal Health
Sustainability Science
Health solutions for terrestrial and
aquatic animals
Research, practice and direction for aquaculture,
agriculture and food chain companies
➡ Veterinary services
➡ Disease diagnostics
➡ Manufacture of licensed vaccines
and antigens for farm, aquatic and
companion animals
➡ Contract-manufacture of veterinary
vaccines and medicines to EU GMP (Good
Manufacturing Practice) requirements
➡ Supply chain leadership programmes
➡ Codes of practice and auditing
➡ Environmental consultancy
➡ Sustainable farming research
➡ Business re-engineering
➡ Communication, design and brand
development
Technical Publishing
Breeding & Genetics*
Technical insight, e-learning and market
analysis for the global food chain
Good animal health and welfare through
robust breeding and genetics programmes
➡ Digital news
➡ Knowledge transfer
➡ Technical publishing
➡ E-learning and technical training
➡ Market analysis
➡ Identification and development of genetic
material to improve growth, disease
resistance and product quality
➡ Expected to be the second largest supplier
of salmon eggs and genetic expertise
in the world
➡ Leading supplier of salmon eggs with QTL
(qualitative trait loci) for resistance to two
of the key diseases in salmon
➡ Sites in Iceland and Norway
* from December 2014
STRATEGIC REPORTBenchmark Holdings plc Annual Report 2014 | Strategic Report O U R R E S P O N S I B I L I T Y
37
Our ‘3 Es’ approach to business is the
cornerstone of Benchmark. Our reputation is
built on being honest, transparent and fair.
We take a long-term view, operating in a
way that safeguards society and the world
in which we work both now and in the
future. The overriding principle of driving
sustainable business is based on the ‘3 Es’
paradigm, which places equal value on
Environment, Ethics and Economics. When
these are made part of any organisation,
the core structure of sustainability is built in.
E N V I R O N M E N T
E T H I C S
E C O N O M I C S
STRATEGIC REPORTBenchmark Holdings plc Annual Report 2014 | Strategic Report 39
B E N C H M A R K ’ S S T R A T E G Y
D R I V E S…
B Y B U I L D I N G :
good health and welfare of animals
a world-class team
growing sustainable business
knowledge transfer for the food chain
robust animal breeding and genetics
next-generation scientific research
and state-of-the-art production capacity
STRATEGIC REPORTBenchmark Holdings plc Annual Report 2014 | Strategic Report A N I M A L H E A LT H D I V I S I O N
41
G O O D H E A LT H A N D
W E L FA R E O F A N I M A L S
IN-HOUSE HEALTH
RESEARCH UNITS
Benchmark has set aside
substantial funds for investment
in developing animal health
solutions that reduce humanity’s
reliance on antibiotics
EXTENSIVE
PRODUCT PIPELINE
FIRST-CLASS
DIAGNOSTICS
TOOLS
“Controlling sea lice is still the number one challenge
facing the global salmon industry. Benchmark is the
only company working on a total control package
through the development of new products, new
vaccines and biological controls. No one else can
offer this service.”
John Marshall
Technical Director, Benchmark Animal Health
Good health and welfare of animals
Improving and promoting the health and welfare of
animals is core to our work. We take a comprehensive
and science-based approach, employing teams of
veterinarians, research scientists and diagnosticians.
The team work alongside commercial agriculturists
and aquaculturists to identify the priority disease
challenges facing our partners and clients in the
livestock, aquatic and companion animal sectors in
order to develop targeted health solutions.
Our in-house trials capacity, vaccine manufacturing
bases and network of fully operational commercial
farms are key to this, allowing us to develop, trial
and progress products and solutions rapidly through
to market.
Our activity has changed how global business engages
with and incorporates animal health and welfare
into their supply chains. Benchmark has become a
recognised and trusted partner to both small and
large clients in Europe, North and South America,
Asia and Africa.
Greater efficiency through
improved animal health
Poor health caused by disease is not only a major
animal welfare challenge to the animal, it is also
a significant economic burden for the producers
and industries concerned, acting as a barrier to
sustainable production.
Our team has wide-ranging experience in the
development of health solutions for terrestrial and
aquatic animals. Within the Animal Health division,
the Group’s primary focus is on the use of applied
biotechnology and the healthcare sciences in
aquaculture. Benchmark has become an international
player in aquaculture by providing a comprehensive
offering extending from veterinary health management
and diagnostic services through to vaccine and
medicine development, manufacture and distribution.
Product areas include:
➡ Clinical veterinary services to the international
aquaculture sector
➡ Fish health diagnostic services, technologies and
laboratory network
➡ Aquatic environment assessment and analysis
➡ Supply of parasiticides and biocides to the
aquaculture sector
➡ Fish vaccine research and discovery
➡ EU GMP (Good Manufacturing Practice)
animal vaccine manufacture to terrestrial and
aquaculture markets
Our aquaculture veterinary and diagnostic business
has expanded to become the world’s largest dedicated
aquaculture health provider, with a footprint on three
continents and a global team of over 50 veterinary
surgeons, diagnosticians, biologists and
environmental scientists.
Responsible health solutions
Globally, livestock and aquaculture production uses
more antibiotics than human medicine. Concern is
growing about the increasing rate of resistant bacteria
passing into humans via the food supply chain.
For over a decade, Benchmark has been working
to develop alternative health solutions to reduce
humanity’s reliance on antibiotics, which we support
through training to ensure best-management practices
and correct usage.
STRATEGIC REPORTBenchmark Holdings plc Annual Report 2014 | Strategic Report Global production
of fish and shellfish
Between 2000–2011, global production of fish
and shellfish increased by 81 per cent (FAO). This
accelerated growth brings with it many challenges,
the most serious of which is the rise in disease.
Through our aquatic health veterinary and diagnostic
business, the Fish Vet Group, Benchmark is
positioning veterinary health teams in primary
aquaculture regions in order to match the industry’s
pace of growth, by the provision of rapid-response
clinical services and aquatic veterinary diagnostics.
In 2014, we added to our existing bases in Scotland,
Ireland and the US by opening two state-of-the-art
diagnostic facilities in Oslo, Norway, and Bangkok,
Thailand. These purpose-built laboratories are
equipped with advanced diagnostic tools, including
qPCR and digital histopathology capabilities to ensure
the highest level of service for our clients.
We continue to attract and retain high-calibre
candidates, which has allowed us to build a world-
class aquatic health team with extensive experience
of the species and disease challenges in the regions
in which they work.
43
Benchmark has extensive experience in the
manufacture of licensed vaccines and antigens for
farm and companion animals, and over two decades’
of experience in the manufacture of fish vaccines.
We specialise in the contract-manufacture of veterinary
vaccines to EU GMP requirements, covering all stages
of production, from antigen manufacture through
to the finished product. We also provide bespoke
vaccine technology transfer and process
development services.
Our Five-Point Plan has received widespread support
and recognition. We continue to work with partners
throughout the sector including the Organisation for
the English Beef and Sheep Industry (EBLEX), MSD
Animal Health, TheSheepSite.com and Farmers’
Weekly to ensure the Plan is taken up on as many
farms as possible. The Plan has also been featured
on BBC Countryfile, in the Veterinary Record, the UN
Food & Agriculture Organization’s Gateway for Animal
Welfare and a number of other industry-focused
publications and outlets.
Case study: Technical research
and industry collaboration
Lameness is a major economic and animal welfare
challenge across the sheep sector. Production
losses due to lameness are estimated to cost as
much as £10–15 for every breeding ewe, costing
the UK industry £24m per annum as a result of lost
performance and treatment costs.
A framework to reduce lameness, most commonly
caused by the infectious bacterial diseases footrot and
scald, was formulated by Ruth Clements, Benchmark
Animal Health’s Head of Veterinary Programmes.
The 5 Point Plan was developed by drawing together
existing science and practical experience from
farmers who had achieved and sustained low levels of
lameness in their flock. The plan provides the industry
with a practical and effective strategy to help meet
lameness reduction targets (5 per cent or less by
March 2016; 2 per cent or less by March 2021) set
by the Farm Animal Welfare Committee (FAWC). The
five action points support the animal in three different
ways: building resilience, reducing disease challenge,
and establishing immunity via vaccination.
The Five-Point Plan has been implemented over four
years on 3,000 ewes at three farms. At Benchmark’s
farm in Oxford, lameness levels were reduced from a
national average of 18 per cent to less than 2 per cent
within the first year. Levels have been maintained at
less than 1 per cent for over three years.
As well as improving animal welfare and having an
economic benefit to the farmer, wide implementation
of the Five-Point Plan has the potential to substantially
reduce the number of doses of antibiotics used. This
is particularly relevant as antibiotic resistance is an
extremely important issue for all livestock species and
any opportunity to reduce it should be taken.
The Five-Point Plan
challenge
STRATEGIC REPORTBenchmark Holdings plc Annual Report 2014 | Strategic Report Our responsibility:
Correct use
To improve the health and welfare of animals by
creating robust solutions to the key challenges our
partners face. Our approach aims to reduce disease
challenge, build resilience and establish immunity
by developing appropriate products and to provide
actionable advice and training to ensure best-
management practices and correct use.
45
2013
£000
2014
£000
32,981
25,878
(18,548)
(13,605)
14,433
12,273
(3,971)
(2,030)
Animal Health Division
Financial Performance
Animal Health Division Revenue
2014: £33.0m (+27%)
Revenue
Cost of sales
Gross profit
£33.0m
Operating costs relating to
Trading Activities
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
e
e
r
t
n
i
a
r
B
,
s
e
n
i
c
c
a
V
k
r
a
m
h
c
n
e
B
£25.9m
EBITDA from Trading Activities
10,462
10,243
Own Products Revenue
2014: £20.8m (+27%)
£20.8m
£16.3m
Factored Products Revenue
2014: £5.8m (+35%)
£5.8m
£4.3m
Manufacturing Revenue
2014: £3.3m (+10%)
£3.3m
£3.0m
Fish Vet Group Services Revenue
2014: £0.74m (+3%)
£0.74m
£0.72m
Animal Health Division
EBITDA from Trading Activities
2014: £10.46m (+2%)
£10.46m
£10.24m
Operating costs relating to
Investing Activities
Depreciation and
amortisation
Operating profit
(4,622)
(1,006)
(916)
4,924
(869)
8,368
Sales in the Animal Health Division of £33.0m were up
£7.1m (27%) on the prior year. There has been growth
across all revenue streams with the main reasons for
the increase being:
➡ Own product revenue resulting from a full year of
Salmosan® sales in Chile
➡ Increase in vaccine manufacturing sales following
the successful launch of a new toll-manufacturing
contract
➡ Factored Product sales were up considerably due
to client demand
Divisional gross profit increased by 18% to £14.4m
(2013: £12.3m). Gross profit percentage declined
from 47% to 44% as a result of the changing sales
mix. The gross profit percentages for all revenue
streams were maintained at 2013 levels or better.
Operating costs relating to Trading Activities increased
by 96% as a result of investment in the people and
infrastructure to deliver continued growth in own-
product sales, vaccine manufacturing, and clinical and
diagnostic services.
The combination of increased sales volumes, changing
sales mix and increased investment in operating costs
resulted in a £0.2m increase in EBITDA from Trading
Activities for the Division to £10.5m.
Operating costs relating to Investing Activities comprise:
R&D expenditure of £2.7m (2013: £0.8m) which
reflects the significant expansion and acceleration
of the new product pipeline post IPO; Pre-operational
expenses of new ventures of £1.6m (2013: £0.2m),
which relates principally to the geographic expansion
of veterinary and diagnostic services to the global
aquaculture industry; acquisition and integration costs
amounting to £0.2m (2013: £0.1m) reflecting the
increased M&A activity of the division post IPO and
exceptional costs of £0.1m (2013: £nil) in respect of
IPO related items.
STRATEGIC REPORTBenchmark Holdings plc Annual Report 2014 | Strategic Report
S U S T A I N A B I L I T Y S C I E N C E D I V I S I O N
47
G R O W I N G
S U S T A I N A B L E B U S I N E S S
Benchmark operates a
broiler trials unit using
protocols approved by
the RSPCA. The unit
has been used by three
of the world’s major
breeding companies
£1.6m
investment commenced
to develop a UK
sustainable aquaculture
and shellfish
research facility
Benchmark research has resulted
in 5 per cent tree-cover becoming
the industry standard for laying
hens in the UK
“We are seeing an increased demand for
sustainability services from global businesses,
not just because it makes sense from an ethical
standpoint but because it supports them to manage
risk and reputation. Recent studies demonstrate this
can increase competitive advantage.”
Ruth Layton, Veterinary Development Director,
Group Sustainability Science
Benchmark Sustainability Science is recognised in
aquaculture, agriculture and the food chain for our
innovative work and development of sustainable
systems and practices. Through our network of
research farms and facilities, and a highly skilled
team made up of farmers, veterinarians, research
scientists, geneticists, business strategists and
producers, we understand the issues up and down
the supply chain. We are able to mobilise a unique
combination of science and design to help solve
immediate and emerging problems in the food chain
and equip and prepare our partners for a world that
is more urban, affluent and populous. We offer our
partners a suite of sustainability science services
from the strategic, tactical and technical level,
through to design and communications.
Strategic
We help establish long-lasting partnerships and
industry leadership programmes for retailers,
producers, governmental and non-governmental
organisations. Our 3Es — Ethics, Environment and
Economics — sustainability framework provides
insight and direction for international businesses
and brands looking to make a difference. We offer
world-class strategic environmental advice to drive
sound sustainable business management and
operations for our clients, including waste and
resource assessments, ISO and regulatory standard
compliance, and renewable energy planning.
Tactical
In the seafood sector we helped Espersen, a world
leader in the processing of high-quality frozen fish
products, tackle the major challenge facing the marine
fishing industry of ensuring viable fish stocks today
and in the future. In close partnership with Espersen
we developed ‘CatchIT’ — a database system that
connects available scientific fisheries data to the
everyday decisions of the purchasing team. Through
robust criteria ‘CatchIT’ assesses whether a target
fishery is healthy, requires an action plan, or is to be
declined by Espersen’s buyers.
Technical
We work within the commercial constraints of our
partners while using the latest in animal behaviour
science to develop management practices that meet
consumers’ increased demand for transparency and
higher animal welfare, while also ensuring scalability.
Applying this approach to the swine industry, we have
shown that routine tail-docking of pigs on commercial
farms is avoidable by addressing the root causes
of why pigs engage in tail biting. By keeping pigs in
stable family groups, and giving them a constant
supply of manipulative material which allows them to
exhibit their natural behaviours of rooting and foraging
with their snouts, their stress level drops and tail
biting stops.
Design & communications
We offer a full-service creative practice providing
communications, design and development for brand,
print and digital media to the food, arts and culture
sectors. We work with good people to make good
things happen. We believe that good design should do
more than look good. Good design should influence
behaviour and change minds.
STRATEGIC REPORTBenchmark Holdings plc Annual Report 2014 | Strategic Report Expansion of research
farming facilities
The aquaculture industry is the fastest growing food
production sector working to meet the ever-growing
demand for seafood worldwide. It is a crucial part of a
future sustainable food chain, but it faces considerable
pressure to stay ahead of disease challenges, develop
best-practice standards of animal and worker welfare,
and limit its environmental footprint, while continuing
its high-growth trajectory. To meet this complex set of
demands, Benchmark Sustainability Science is deeply
invested in this industry.
We are in the process of investing £1.6m in state-of-
the-art facilities at the Ardtoe Marine Research facility,
including a new trials facility, fin-fish unit, micro-algae
production unit and a shellfish research centre.
The existing facility is internationally recognised as a
world leader in the development of marine aquaculture,
science and technology. The continuing pioneering
spirit and an ethos of innovation makes the facility one
of the most dynamic and diverse organisations within
the marine aquaculture and biosciences sector.
49
‘egg seconds’ — which due to their lower eggshell
quality are worth 30 per cent less than grade A eggs
— boosting the farmers income. Trees also boost
the soil and the wider environment through reduced
nutrient leaching and carbon sequestration, as well
as providing opportunities for multiple incomes off the
land through agroforestry or combining egg production
with growing nut trees or fruit orchards.
Economic savings
2 per cent reduction in egg seconds is worth £3,720
in savings (31p per bird); 1 per cent reduction in
mortality is worth £1,428 in savings (11.9p per bird)
― on a typical 12,000 bird flock [1]
As of October 1st 2014 all “Freedom Foods’’ free-
range eggs require that the hens are raised on ranges
with a minimum of 5 per cent tree cover, benefiting
both farmers and chickens.
After years of implementing and documenting this
practice across their supply chain this year McDonald’s
featured the story of laying hens’ love for trees in one of
their advertising campaigns.
[1] A. Bright, A. D. Joret (2012). Laying hens
go undercover to improve production,
Veterinary Record.
Case study: Practical solutions
to industry challenges
Trees — they are easy to overlook
When designing any kind of system or service it is
important to see it from the user’s point of view. We
believe the same is true for animal agriculture. When
McDonald’s UK tasked us with improving their egg
supply chain we started our process by understanding
the chicken. What we found was that our ordinary
chicken’s ancestor was a South East Asian jungle fowl.
It lived and flourished under the canopy of trees. This
varied environment allowed the chicken to have and
do what it wanted — some shade and protection from
predators, elevation and opportunities to perch, the
covered ground to scratch and peck for food, and dust
bathe to keep its feathers clean.
The environment in the South East Asian forest is
a far cry from how chickens live in most of today’s
conventional and free-range egg production systems.
In principle, the free-range system is closest to the
natural environment by allowing chickens access to
the outdoors. But what we found was that most free-
range farmers reported that their chickens hardly used
the range. It turned out they spent most of their time
inside, or hovering right outside the door, rather than
wander out into the open field.
By looking at the origin of chickens, understanding
their innate behaviours, reviewing the currently
available science, and conducting our own on-farm
trials with chickens, our hypothesis was that the open
field was also unattractive to the laying hen as it
represented threats of the unknown, as well as fear
of aerial predators and harsh weather.
Introducing the tree
McDonald’s planted trees on all the farms that supply
free-range eggs to their restaurants and we monitored
the subsequent improvements. We found that simply
planting trees outside hen houses improved the
welfare and production of the flocks. When laying
hens in free-range systems are provided with trees,
they range more. We found that being out more and
venturing further afield reduces pecking at each other,
which in turn improves the welfare of the flock. For
the first time, we also showed that this improves the
productivity of the flock. We found that the provision
of trees on the range reduces the mortality in the
flock. We also found that planting trees on a minimum
of 5 per cent of the range lowered the numbers of
y
t
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l
i
c
a
F
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c
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F
STRATEGIC REPORTBenchmark Holdings plc Annual Report 2014 | Strategic Report
Our responsibility: Recognised
as a trusted partner
To grow value for our shareholders and stakeholders
by mobilising a unique combination of science
and design to find solutions to our immediate and
emerging food chain challenges.
Sustainability Science Division
Financial Performance
Sustainability Science Division Revenue
2014: £3.1m (+46%)
2014
2013
£3.1m
£2.1m
Sustainability Science Division
EBITDA from Trading Activities
2014: (£1.0m) (-261%)
-£1.0m
2014
-£0.3m
2013
Revenue
Cost of sales
Gross profit
Other income
Operating costs relating to
Trading Activities
EBITDA from Trading
Activities
Operating costs relating to
Investing Activities
Depreciation and
amortisation
Operating loss
51
2014
£000
2013
£000
3,073
2,099
(2,339)
(1,808)
734
101
291
111
(1,863)
(687)
(1,028)
(285)
(140)
(271)
(1,439)
-
(133)
(418)
Sales in the Sustainability Science Division of £3.1m
were up £1.0m on the prior year. The main driver of
this increase was the revenue of acquired businesses.
EBITDA from Trading Activities was supressed by
significant investment in increased operating costs
at the acquired businesses and by an increase in
consultancy & research headcount. This investment is
part of the division’s strategy to drive significant future
revenue growth.
Operating costs relating to Investing Activities
comprise acquisition and integration costs and the
increase reflects the increased M&A activity of the
division post IPO.
d
r
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f
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F
STRATEGIC REPORTBenchmark Holdings plc Annual Report 2014 | Strategic Report
T E C H N I C A L P U B L I S H I N G D I V I S I O N
53
K N O W L E D G E T R A N S F E R
F O R T H E F O O D C H A I N
GLOBAL
FOOTPRINT
Distance learning for
industry professionals
“5m Publishing’s vision is not just to be a leading
provider of news and commentary across agriculture
and aquaculture communities; our raison d’être is to
deliver knowledge transfer and specialist education
across our markets.”
James Banfield
Managing Director, 5m Publishing
Distance learning
Benchmark’s Technical Publishing division currently
offers 15 distance learning courses to develop core
industry skills. In 2008, the company launched a
Certificate in Sustainable Aquaculture, which was
developed by technical experts from the Fish Vet
Group and St Andrews University.
The collaboration with 5m and the University of St
Andrews has developed with the introduction of both
a Postgraduate Diploma and a Postgraduate MSc.
New courses for 2015 will cover key industry issues
including sea lice control, sustainability and cattle
lameness.
The division has built a global readership of over 6
million users across its online portfolio and it is via
this community that the company continues to grow
its sales of specialist products and services into the
agri-food sector:
➡ Online news and technical information to the
global agri-food sectors
➡ 400 books, DVDs and CDs on agriculture,
aquaculture, education and knowledge transfer
➡ Distance learning for industry professionals
from CPD to MSc
➡ Industry data analysis and editorial coverage
of the latest peer reviewed scientific papers
➡ E-commerce sales of specialist products and
technical equipment
As part of our drive to grow our business, increase
the opportunities we offer and retain customers for
longer, we have developed new products for markets
including Russia, Latin America and the companion
animal sectors. We have also delivered a highly
successful conference on cow longevity and developed
geo-location capability: determining the location of an
online visitor in order to deliver tailored content based
on their location.
Revenue growth at 5m during 2014 has come from
new regional and tactical products, such as new
language sites and digital magazines with industry
focused topics.
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STRATEGIC REPORTSERVING6 MILLIONREADERS400titles in agriculture & aquacultureAUTHORITATIVE TRUSTED NEWSBenchmark Holdings plc Annual Report 2014 | Strategic Report
Demand for technical
information continues unabated
Since Google started counting in 2006, over 30
million people have read, referenced and relied upon
our global portfolio worldwide. We create and deliver
media from a global industry to a global audience of
over 6 million visitors per year.
Our portfolio continues to expand with exclusive digital
titles, three e-commerce platforms and a growing
frontlist of new books and DVDs.
55
Case study: Digital magazines
5m has published 17 digital magazines in the past
12 months. They offer a unique opportunity to engage
with the audience in many different ways, with over half
a million page views across these publications. Our
diagnostic platform enables advertisers to seamlessly
deliver content, including video to desktops and
mobile devices.
In partnership with the organisers of ViV Europe,
the multi-species event for animal husbandry and
processing, we produced an official digital show guide
— ViV Digital. This special edition examined many
of the issues facing the sector as well as looking
at the latest developments that were on show. The
organisers were able to deliver last-minute information
about the event and conference schedule, promote
future events, and our advertisers showcased their
products and services. It was co-written by editors
from our species sites, promoted by us and the
organisers to all participants at the show and was the
most successful Digital edition to date; with 39 per
cent more page views than any previous publication.
STRATEGIC REPORTBenchmark Holdings plc Annual Report 2014 | Strategic Report Our responsibility: Knowledge
transfer for people and business
To serve people and businesses working in agriculture,
aquaculture and the food chain with industry news,
technical information, e-learning and market analysis.
In a rapidly changing food industry we want to be a
provider of knowledge and insight to help our partners
understand how these changes affect their business
and to develop their expertise.
Technical Publishing Division
Financial Performance
57
Technical Publishing Division Revenue
2014: £2.9m (+23%)
2014
2013
£2.9m
£2.3m
Technical Publishing Division
EBITDA from Trading Activities
2014: (£0.3m) (-354%)
-£0.3m
2014
2013 £0.1m
Revenue
Cost of sales
Gross profit
Operating costs
relating to Trading
Activities
EBITDA from Trading
Activities
Operating costs
relating to Investing
Activities
Depreciation and
amortisation
Operating loss
2014
£000
2,873
(2,438)
435
2013
£000
2,343
(1,546)
797
(707)
(690)
(272)
(52)
(191)
(515)
107
-
(110)
(3)
Sales in the Technical Publishing Division of £2.9m
were up £0.5m on the prior year. The main reason
for the increase was the strong organic growth at 5m
Publishing (up 25%) plus the acquisition of Old Pond
Publishing during the year.
EBITDA from Trading Activities was impacted by
significant increased investment in operating costs
resulting from expansion of headcount towards the
end of 2013. This investment was part of the planned
strategy to drive revenue growth, and run-rate sales
are increasing as a result.
Operating costs relating to Investing Activities
comprise acquisition and integration costs and the
increase reflects the increased M&A activity of the
division post-IPO.
STRATEGIC REPORTBenchmark Holdings plc Annual Report 2014 | Strategic Report New division added post year-end:
Breeding & Genetics
DECEMBER 2014
R O B U S T A N I M A L
B R E E D I N G & G E N E T I C S
59
➡ World-leading salmon and aquaculture breeding
➡ Expected to be the world’s second largest salmon egg producer
➡ Global market for salmon egg production estimated at £160m
➡ Demand for salmon is growing at 7 per cent per year, whilst
production is only growing at 3 per cent
New markets
The technology held within the two companies provides
an excellent platform from which to move into new and
emerging markets for aquaculture breeding such as
tilapia, catfish, grouper, sea bass, sea bream
and shrimp.
The Food and Agriculture Organisation estimates
that 40 per cent of tropical shrimp production is lost
annually to disease, which equates to more than US
$3bn, emphasing the need to find real solutions to
these growing challenges.
Services
The main activities of the two businesses are:
➡ Salmon ova production
➡ Fingerling production
➡ Selective breeding of Atlantic salmon
➡ Research & Development
➡ Domestic and international consultancy
Post year-end, Benchmark acquired two salmon
breeding companies: Stofnfiskur HF and SalmoBreed
AS. By combining the two companies, Benchmark
has brought together the strengths of SalmoBreed in
genetics with Stofniskur’s unique capability to supply
fertile ova 52 weeks of the year to create a world-
leading salmon and aquaculture breeding business ―
expected to be the world’s second largest salmon
egg producer.
The acquisitions have created a fourth business
division for Benchmark: Benchmark Breeding &
Genetics. The new division has diversified target
markets and genetically advanced strains, reflecting
Benchmark’s continued commitment to the
aquaculture industry.
Group synergies
Breeding technology is one of the primary drivers
of efficient production, disease management and
sustainability, meaning that the acquisitions are
a complementary fit for the Benchmark Group.
The technology used in genetics and breeding also
function within the same fundamental biology
currently being exploited in the Company’s Animal
Health and Sustainability Science divisions, thus
creating numerous opportunities for synergistic
development and combined approaches to solving
key industry problems, including disease, metabolic
disorders and nutritional efficiency.
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STRATEGIC REPORTBenchmark Holdings plc Annual Report 2014 | Strategic Report
Our responsibility:
Robust genetics
To supply the food chain industry with robust genetics
that are developed to make step-wise improvements
on the ethical, environmental and economic
credentials of the sector. Improving efficiency and
profitability and reducing loss.
61
Case study: Breeding for pancreas
disease resistance
Disease is one of the most challenging issues facing
fish farming industries today. Infectious diseases
caused by bacteria, viruses or parasites impair fish
welfare and lead to financial losses. Pancreas Disease
(PD) is an important economic disease of European
farmed Atlantic salmon. It can cause significant losses
due to morbidity, mortality and reduced production. PD
was first recognised in Scotland in 1976 and while the
name suggests that the primary organ damaged is the
pancreas, severe cardiac and skeletal myopathies are
also key features of this disease. Chronic PD has also
been known as ‘sudden death syndrome’ (SDS).
Working with researchers in the field, Norwegian
salmon breeding and genetics company, SalmoBreed
AS, was able to identify gene markers for PD. The
QTL’s (quantitative trait loci) are a potential game-
changer for the industry by significantly enhancing
resistance to the disease in salmon. From an
extensive bank of material from controlled challenge
tests with PD performed on SalmoBreed broodstock
lines, DNA samples were analysed and markers were
identified on the genome that is strongly associated
with the salmon’s ability to resist the disease.
There were previously no tools to tackle this disease
problem which caused the Norwegian aquaculture
industry losses of hundreds of millions of NOK.
All year round ova
Benchmark Breeding & Genetics is the only company
in the world able to deliver commerical volumes of
Atlantic salmon eggs every week of the year.
This ability to supply eggs outside the natural salmon
breeding season allows us to help optimise the
salmon industry’s efficiency. All broodstock is reared
in-house, on land, in large broodstock farms which
ensures outstanding biosecurity, enabling us to provide
our customers with disease-free salmon ova.
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STRATEGIC REPORTBenchmark Holdings plc Annual Report 2014 | Strategic Report
B U I L D I N G A
W O R L D - C L A S S T E A M
Employee retention
rate of
92%
over the last
12 months
94%
of employees
invested in Share
Incentive Plan
(SIP) at IPO
63
increase in
headcount in
the year
Over
60%
of employees
graduates
63
“Our people come to work because they believe in what
we are doing and in the role they play in delivering this.”
Anna Winton
Head of People
Building a first-class team has always been a core part of our
strategy. Our founding vision for Benchmark was to build a
profitable, thriving and ethical company where employees feel
inspired, valued and motivated to come to work.
Attracting the highest calibre people
Talent and succession planning
Over 60 per cent of our team are graduates and we
are proud of the highly technical global team we have
built. We have been adept in recruiting the highest
calibre people, adding vital expertise and experience to
the Group in order to support our clients and advance
key areas of the business.
In the year ended September 2014, we successfully
recruited several world-renowned fish health
specialists into our aquatic health business, the Fish
Vet Group, each bringing to the business invaluable
knowledge and experience of prominent species-
specific disease challenges relevant to the regions in
which they work.
Strong management team
We continue to add to our strong management team
who are delivering the substantial level of investment
being made throughout the business. In addition to
their daily roles, they have also ensured the smooth
day-to-day running of the company through several key
developments this year including the IPO, mergers and
acquisitions, and the subsequent £70m fundraise
which was completed post year-end.
Preparation for the next phase of Benchmark’s growth
has included the recruitment of a group of professional
business managers to both secure succession and
enhance the Group’s capabilities and corporate
governance systems. The key members of the
management team have an average of over 20 years’
experience in their relevant business sectors, with
wide-ranging and long-held relationships at a senior
level across the Group’s industries.
To ensure we have the future capability we need, we
have begun a process of strategic talent planning to
identify and address the gaps between our current
resources and the resources we will need to achieve
our future strategic goals. This integrated and
continuous process will determine our future talent
requirements, in terms of both skill set and location.
It will then inform the need for talent acquisition and
development programmes. Succession planning is
also integral to our talent strategy, ensuring we have
the leadership resources to achieve our strategic
objectives now and in the future.
Investing in the future
For the year ended 2014, employee retention was 92
per cent and participation in our Share Incentive Plan
(SIP) during the IPO was 94 per cent. The Directors
view both of these as being indicative of the strong
investment, commitment and value employees place
on themselves and the roles they play in delivering
Benchmark’s vision.
As we move rapidly towards 300 people, maintaining
this culture and our values is a key priority. We continue
to place high importance on how we can develop our
culture, improve our working environment and deliver
on the aspirations of our people as we continue to
grow as an organisation.
Throughout 2014 we launched a number of workplace
initiatives, including Investors in People (IiP) and
Axialent Conscious Business, to support this process.
The aim is to support and develop our employees
to ensure they remain informed about our strategy,
understand how we operate as a business, and our
vision for the future. This process will allow us to
ascertain where we are doing well as a business
and where we need to focus our efforts to make
improvements.
STRATEGIC REPORTBenchmark Holdings plc Annual Report 2014 | Strategic Report O U R R E S P O N S I B L I T Y:
I N V E S T I N G I N O U R P E O P L E
65
To invest in our people and communities by
building long-term relationships based on
mutual respect, trust and benefit because the
success of our business relies on the actions
and attitudes of our team. We are committed
to continuously attracting and retaining people
of the highest calibre and creating a working
environment where they feel inspired to drive
our growth and impact.
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STRATEGIC REPORTBenchmark Holdings plc Annual Report 2014 | Strategic Report
I N V E S T I N G I N N E X T -
G E N E R A T I O N S C I E N T I F I C
R E S E A R C H & P R O D U C T I O N
C A P A C I T Y
NEW ANTIGEN-MANUFACTURING
FACILIT Y UNDERWAY AT
BR AINTREE UK SITE
£1.9m
acquisition of Zoetis aquaculture vaccine
assets and next-generation aquaculture
vaccine technology platform
Purpose-built laboratories opened
in Norway and Thailand to provide
rapid-response clinical services
and veterinary diagnostics to these
prominent markets
Development agreement signed with
HypoPet to bring to market a
breakthrough cat allergy vaccine by
2018, this brings into Benchmark
expertise of VLP (virus like particle)
vaccine technology
ESTABLISHING VACCINE
MANUFACTURING FACILIT Y AT
EDINBURGH BIOCAMPUS SITE
Increase of product pipeline from
30 to 47
products with an addressable
market of
£397m pa
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“Our focus is on exploiting the most powerful and
effective vaccine science and technology, developing
our production capacity in order to grow our product
pipeline, and building on our vaccine manufacturing
expertise and facilities.”
Bob Long
Managing Director, Benchmark Vaccines
Following our successful IPO in December 2013,
we have been making significant investment across
targeted areas of the business in order to support
our growing product pipeline. We have set aside over
£20m to establish vaccine manufacturing capacity
at our Edinburgh site and to increase manufacturing
capacity at our Braintree site in response to the
growth we have seen across our vaccine business.
The investment will also allow us to progress
contract-manufacturing opportunities and support our
increased product pipeline.
We are well advanced on the building of an industry-
leading antigen production line at Braintree with
anticipated completion in autumn 2015. Detailed
planning of the development of the existing building at
the Edinburgh BioCampus is underway with projected
completion by summer 2016. These two investments
will significantly increase the Group’s vaccine
manufacturing capacity.
Up to £10m of this investment is to be funded
by proceeds from the recent Placing, which was
completed post year-end in December 2014. This will
be used to satisfy the increased requirements of our
product pipeline and the additional specialist capacity
required to manufacture the HypoCat™ vaccine.
Our newly constructed vaccine trials unit in Oxford
was completed ahead of target in the summer 2014,
receiving full authorisation in July 2014 from the
Veterinary Medicines Directorate, Defra. The first
terrestrial animal trials are now underway.
In September 2014, we entered into an agreement
with HypoPet, a Swiss research company based
at the University of Zurich, to deliver the final
commercialisation, manufacture and distribution of
a breakthrough vaccine for cats, HypoCat™, which
neutralises the Fel d 1 protein, the primary cause of
human allergic reaction to cats. With an estimated
10 per cent of the global population suffering from
cat allergies, the agreement opens up a new market
for Benchmark within the animal health sector with
an estimated global value of £250m. We expect the
vaccine to be commercialised within 3–4 years. The
agreement with HypoPet advances our strategy, as
articulated at our IPO in December 2013, to invest
in selected new technologies and opportunities to
grow our product, offering in related markets at the
same time as exploiting our core vaccine production
expertise and facilities.
Through our aquatic health veterinary and diagnostic
business, the Fish Vet Group, we are positioning
highly experienced teams in primary aquaculture
regions to support the pace of growth of global
aquaculture through the provision of rapid-response
clinical services and aquatic veterinary diagnostics.
In 2014 we added to our existing bases in Scotland,
Ireland and the US with the opening of two state-
of-the-art diagnostic facilities in Oslo, Norway, and
Bangkok, Thailand. These purpose-built laboratories
are equipped with advanced diagnostic tools, including
qPCR and digital histopathology capabilities to ensure
the highest level of service for our clients. Our team
of histopathologists and diagnosticians are connected
around the globe via specialist digital technology.
STRATEGIC REPORTBenchmark Holdings plc Annual Report 2014 | Strategic Report
BioCampus
Benchmark has investment planned to fund the first
stage of the development of our Edinburgh BioCampus
manufacturing facilities.
The facility forms a key site from which we will develop and
accommodate the growth of our Animal Health Division’s
biotechnology and vaccine manufacturing business and
capabilities. Through Benchmark Animal Health, we expect
to create 35 jobs at the plant in the short-term, eventually
rising to 70 jobs in the medium-term.
69
Laboratories and facilities
Fish Vet Group, Asia
Our team in Bangkok use digital histopathology, qPCR
and other diagnostic tools to provide rapid, actionable
advice for aquaculture producers throughout the
region. Their experienced histopathologists are
connected to the Fish Vet Group global team of
diagnosticians via digital pathology technology.
Fish Vet Group, Norway
Our laboratory in Oslo offers detection of virus
and bacteria by PCR, as well as histopathological
examination of salmonids. With state-of-the-art
automated equipment and a specialist team, the
laboratory delivers high-throughput screening. Through
the use of our digital histopathology system, our
experienced in-house team is able to collaborate
closely with the global Fish Vet Group team.
Animal Health Centre
Vaccines for food production animals are playing an
increasingly important role in managing health and
reducing disease at farm level, while decreasing our
reliance on antibiotics.
Our Animal Health Centre in Oxford is a dedicated,
Defra-approved facility to enable animal health
companies to comply with marketing authorisation
requirements and complete the required potency
and safety testing prior to the batch release of
vaccine products.
Our on-site vets, animal health and quality control
staff ensure the animals receive the best level of
care and that all of the trials are conducted to the
highest standards.
STRATEGIC REPORTBenchmark Holdings plc Annual Report 2014 | Strategic Report Environmental footprint:
Moving towards a “net positive”
71
All businesses have an impact on the environment in which they operate.
Recognising this, Benchmark has embarked on an ambitious agenda not
only to reduce our carbon footprint and environmental impact, but also to
become a “net positive” Group. Through driving forward environmentally
sound sustainable business management and operations within the Group
and with our clients we will strive to make our environmental footprint a
positive one.
This agenda begins with ensuring adherence to relevant environmental
legislations and standards by implementing best practices within waste
minimisation and management, energy use and water use. Through
internal stakeholder engagement and education we will empower our
Directors and site managers to conduct environmental site impact
assessments and put in place environmental management strategies.
Wherever we are building new sites we will ensure the design incorporates
green building techniques, which examine both the materials used and the
efficiency of the buildings when in use.
The goal is to maximise the energy generated, minimise our own use, and
realise environmental and financial benefits by selling the surplus energy
to adjacent entities or back to the grid.
What we’ve done
In 2013 we installed new solar panel electricity generation at our Head
Office in Sheffield, our new Animal Health Centre in Oxford and at our
offices in Braintree; since the installation we have used 17–20 per cent
less energy and generated additional income of circa £25,000 per annum.
To address our carbon footprint by reducing the number of flights we take,
we have invested in video conferencing units at seven Benchmark sites:
Sheffield, Inverness, Oxford, Braintree, Edinburgh, Portland and Oslo. This
will not only reduce our carbon footprint but also enable our employees to
spend less of their time travelling.
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STRATEGIC REPORTBenchmark Holdings plc Annual Report 2014 | Strategic Report
73
The principal risks and uncertainties facing the Group are summarised
on the following pages. The opportunities that arise from those risks and
uncertainties have also been identified.
The principal risks are formally reviewed periodically by the Board.
Updates in terms of emerging risks or significant actions undertaken are
addressed as and when required at Board meetings. The principal risks
are determined through an evaluation of likelihood of occurrence and
potential impact, with company Directors continually assessing risk and
uncertainty in their respective businesses.
K E Y P E R F O R M A N C E
I N D I C A T O R S
R I S K
M A N A G E M E N T
The Group’s key performance indicators are set by reference to its strategic objectives.
➡ Mid to long-term growth in revenue and earnings
➡ Successful and secure investment of the Group’s
per share from Trading Activities;
available capital in long term revenue and
generation of EBITDA from Trading Activities;
Group Revenue
2014: £35.4m (+28%)
Group EBITDA from Trading Activities
2014: £6.6m (-11%)
2014
2013
£35.4m
£27.5m
Basic EPS from Trading Activities
5.59
-1.58
-0.72
3.29
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6
5
4
3
2
1
0
B asic E P S fro m
Trading A ctivities 2013
Im pact of Increased
no. of S hares
Im pact of
R educed E arings
B asic E P S fro m
Trading A ctivities 2014
2014
2013
2014
2013
£6.6m
£7.4m
Products in Pipeline
2014: 47 (+57%)
47
30
Investment in R&D (including acquired intangibles)
2014: £6.5m (+622%)
2014
2013
£0.9m
£6.5m
Net Assets
2014: £37.3m (+213%)
➡ Building on the Group’s track record of recruiting
the highest calibre and most appropriate people,
in terms of skills and experience;
2014
£37.3m
2013
£11.9m
Headcount (Including Number of Graduates)
2014: 222 (+40%)
2014
2013
133
222
95
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STRATEGIC REPORTBenchmark Holdings plc Annual Report 2014 | Strategic Report
P R I N C I P A L R I S K S S U M M A R Y
Risks and uncertainties
Mitigating factors
Opportunities
Risks and uncertainties
Mitigating factors
Opportunities
75
Generic products may be viewed
as more effective than the
Group’s products.
Under utilisation of animal health
vaccine manufacturing facilities
would result in a shortfall
in revenue.
Salmosan® is a branded product which is
manufactured to a high specification and is
trusted by the Salmon industry. The Group has
invested heavily in field-based technical support
and other disease management services to
ensure customers have a total aqua-solution
available to them. An improved version of
Salmosan® (Salmosan Vet®) has recently
been launched in order to provide product
differentiation. Sea lice treatments represent
a very small proportion of the costs of salmon
farming whereas the costs of stock damage or
loss can be prohibitively expensive.
There is a shortage of animal health vaccine
manufacturing capacity in Europe and hence toll-
manufacturing opportunities are available. The
Group’s new product pipeline includes a number
of vaccines that will provide significant utilisation
of Group manufacturing capacity in the future.
The Group is reliant on the
continued success of its
research and development
programmes for aquaculture
and the commercial success
of its pipeline products. An
unexpectedly high new product
development failure rate or delay
in reaching market would delay
revenue growth.
The Group has built a high calibre team of
animal health product development specialists
covering all stages of the process to market.
Many new products in development involve
collaboration with industry partners and
often present a lower risk as the Group can
leverage the partner’s existing development
work. Rigorous proof of concept studies are
undertaken at an early stage in order to seek to
minimise the possibility of failure.
The Group’s revenue and
profitability are currently largely
derived from a single product.
The Group is reliant on third
parties to provide it with some
raw materials and manufacturing
services.
The recent establishment of Benchmark
Breeding and Genetics provides significant
diversification of Group revenues. The new
division is predicted to deliver the largest
proportion of Group revenues in 2015. The new
product pipeline of 47 products will diversify this
risk significantly. Two new own-products were
launched in 2014. Already in 2015 an improved
version of Salmosan® has been launched —
Salmosan Vet®. The Group is targeting several
more new product launches in 2015.
Wherever possible dual suppliers of key raw
materials, components and manufacturing
services are engaged. In addition the Group
continually evaluates the security of the supply
chain for each of its products and will consider
establishing in-house manufacturing where there
is a high risk. The Group will also increase stock
holding where appropriate in order to mitigate
the risk of product shortages.
Damage to Group assets could
result in loss of principal animal
health vaccine manufacturing
facility coupled with long-lasting
consequential losses including
loss of customers.
Work is underway to construct and fit out a
second manufacturing site at BioCampus
Edinburgh. This will help the Group to
significantly reduce disaster recovery time
scales and hence losses.
The provision of total aqua-solutions presents
opportunities for pull-through of services and
new products.
Having in-house manufacturing provides
security of supply of the Group’s own-products.
The shortage of manufacturing capacity in
Europe presents opportunities to win new toll-
manufacturing contracts with Animal Health
companies, thereby increasing the Group’s
profile with potential collaborative partners.
This approach to product development tends to
enable the Group to access a wider portfolio of
potential solutions to identified market needs
and often allows accelerated progress to
market launch.
The Group is fast building a strong position as
a key player in the global aquaculture industry
and this brings new opportunities at an
increasing pace.
Where dual supply is achieved this presents
opportunities for cots saving and also to
encourage collaboration. Where in-house
manufacturing is the preferred approach this can
present opportunities to generate revenues from
providing manufacturing services to third parties.
The launch of a second manufacturing facility
will provide substantial additional capacity.
Helping customers to avoid over-use ensures the
long term sales of a product and allows time for
the launch of new generation treatments from
the Group’s new product pipeline.
Consistent disease free production results in
increased customer confidence and the potential
to expand sales.
Failure of critical new plant
or new facilities coming on-
line within anticipated time
scales would lead to a delay
in recouping generating cash
flows. There could be potential
contractual penalties for failure
to supply.
Development of resistance to
some existing products would
lead to reduced efficacy.
Disease outbreaks in salmon
breeding programmes would
lead to reduced revenues,
reputational damage and the
potential for product liability
claims.
Failure to obtain necessary
regulatory approvals for
movement of salmon eggs or
milt between countries would
lead to delay in delivering
synergies between Benchmark
Breeding and Genetics
companies.
Each new capital project undergoes detailed
planning under the supervision of an
experienced project manager who works with
a designated in-house project team including
Finance, Legal, IT, People, Regulatory, etc. These
teams are supplemented by retained specialist
consultants and advisors. Close attention is
paid to drafting of supplier contracts in order to
reduce the risk of delays or where appropriate
pass the cost on to the contractor.
The Group has deployed a technical support
team to provide customers with regular advice
and training on proper use of its products. There
is a particular focus on good stock management
and avoiding over-use.
Group breeding facilities operate high standards
of bio-security, quality control and quality
assurance. In particular Stofnfiskur’s location in
Iceland provides some of the best resources for
disease free production.
The Benchmark Breeding and Genetics division
has one of the most experienced technical
teams in the industry with in depth knowledge of
regulatory requirements for movement of salmon
eggs and milt.
The Strategic Report was approved by the Board on 26 January 2015
and signed on its behalf by
Malcolm Pye
Chief Executive Officer
STRATEGIC REPORTBenchmark Holdings plc Annual Report 2014 | Strategic Report 77
W H A T ’ S I N
T H I S S E C T I O N ?
78
Board of Directors
80
Corporate Governance Report
86
Nominations Committee Report
87
Audit Committee Report
91
Remuneration Report
102 Directors’ Report
105 Directors’ Responsiblities
G O V E R N A N C E
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GOVERNANCEBenchmark Holdings plc Annual Report 2014 | Governance
B O A R D O F
D I R E C T O R S
Board
Committees
Nominations Committee
Alex Hambro (Chair)
Susan Searle
Audit Committee
Basil Brookes (Chair)
Alex Hambro
Remuneration Committee
Susan Searle (Chair)
Basil Brookes
Malcolm Pye, Chief Executive Officer
Malcolm works across the Group on strategic business development, marketing,
acquisitions and commercial matters. His role includes the development
of important synergies between the Group’s companies and ensuring that
opportunities are resourced and exploited.
Malcolm is a graduate of Zoology / Applied Zoology from the University of Wales
(Bangor). He has over 30 years’ experience in international agribusiness including
at board level within the Hillsdown Holding / HMTF animal breeding, feed milling,
veterinary and poultry companies. During his time at Hillsdown, Malcolm also worked
extensively on M&A projects, both leading and advising on acquisitions and disposals.
Roland Bonney, Chief Operating Officer
Roland works across the Group companies leading on strategic business
development, marketing, acquisitions and the development of Group synergies.
His role also includes communications and people development across the Group.
Roland is an experienced agriculturalist having set up businesses in large-scale
extensive farming and food chain development consultancy to global food retailers.
He also has wide international experience working on business development in the
USA and in the emerging Latin American and Chinese markets.
Mark Plampin, Chief Financial Officer
Mark is responsible for financial controls and management information working
with Group company boards to develop and deliver the Group’s strategy. Mark is a
qualified Chartered Certified Accountant with over 20 years’ experience.
A large part of Mark’s career has been spent as a lead advisor in corporate finance,
working on M&A and the strategic development of high growth, small and mid-
market businesses. Mark joined Benchmark in his current role in 2010 from PKF
(UK) LLP (now BDO LLP), where he was a Partner and National Chairman of the Food
Sector Group.
78
Benchmark Holdings Annual Report 2014
79
The Hon. Alex Hambro, Non-executive Chairman
Alex has been in the private equity industry both in the UK and USA for 27 years
during which time he has acted as a principal investor; manager and sponsor of
private equity and venture capital management teams; and adviser to high net
worth families on their private equity investment strategies and targets. Alex
managed the venture capital and private equity fund investment portfolio for
Hambros plc, prior to its sale to Société Générale in 1998.
Alex is a founding director of Crescent Capital, a venture capital fund management
team based in Belfast, and Judges Scientific plc, a scientific instrumentation
manufacturing group. In addition to his Chairmanship responsibilities at these two
companies, Alex is a Non-executive Director of Bapco Closures Ltd, Izon Science
Ltd, Octopus Eclipse VCT plc and Hazel Renewable Energy VCT 2 plc.
Susan Searle, Non-executive Director
Susan has over 20 years’ experience working with entrepreneurs and academic
inventors in the commercialisation of university research and holds an MA in
Chemistry from Exeter College, Oxford. She co-founded Imperial Innovations Group
plc, now one of the world’s leading technology venture investment businesses,
leading as CEO from 2002 to 2013.
Susan currently holds non-executive directorships at Horizon Discovery™ Group
plc, an international life science company, and QinetiQ Group plc, an engineering
and technology services FTSE 250 company. Susan is the Chairman of the
remuneration committee for Horizon Discovery Group and sits on the Remuneration,
Audit, Nominations and Risk committees at QinetiQ. She is deputy chair of Mercia
Technologies plc and chairs its audit committee. Susan is also a Trustee of charity,
Fight for Sight.
Basil Brookes, Non-executive Director
Basil was one of the founders and the Finance Director of Wilmington Group
plc, a listed media company which floated in 1995. He held that position until
November 2012. Basil has over 20 years’ experience as a finance director in
the media industry, 18 of which were on the boards of fully listed companies. In
his early career Basil gained extensive corporate finance experience at Maxwell
Communication Corporation plc where he went on to be appointed Finance Director
in 1990.
Prior to working in the media industry, Basil worked at Coopers & Lybrand where
he qualified as a Chartered Accountant and went on to become a senior manager
gaining experience in audit and financial investigations. Basil holds an MA in
Mathematics from Magdalen College, Oxford, and is a Member of the Association of
Corporate Treasurers.
Athene Blakeman, Company Secretary and Group Legal Counsel
Athene is responsible for providing legal support to the Group and the Board,
including advising on and managing acquisitions, commercial contracts and product
pipeline opportunities, developing the Group’s IP strategy and coordinating the
company secretarial function.
Athene spent nine years as a corporate lawyer at Slaughter and May, and Travers
Smith LLP, working with Benchmark on its IPO in 2013, before joining the Company
in summer 2014.
GOVERNANCEBenchmark Holdings plc Annual Report 2014 | Governance
C O R P O R A T E
G O V E R N A N C E R E P O R T
This report describes our governance principles and
structures and reflects our commitment to good
corporate governance across the Group.
Chairman’s overview
The Chairman’s views on corporate governance at
Benchmark Holdings and our compliance with the
Corporate Governance Code for Small and Mid-Size
Quoted Companies issued by the Quoted Companies
Alliance (‘the QCA Code’) are included in the
Chairman’s statement set out on pages 16 to 19.
Compliance with the QCA Code
This report describes how, during the period since the
IPO in December 2013, we complied with the main
principles of the QCA Code. Benchmark Holdings
is committed to good corporate governance across
the Group, for which the Board is accountable. The
Company’s description of its strategy is set out in
the Strategic Report starting at page 10. A copy of
the QCA Code can be purchased from the Quoted
Companies Alliance website at www.theqca.com
Corporate governance framework
Benchmark Holdings operates within a clear
governance framework, which is outlined in the
diagram opposite and set out in this report. The
Group’s risk management framework is outlined in
the Strategic Report commencing on page 10.
81
BENCHMARK HOLDINGS plc
Chairman
Alex Hambro
Principal objective
Leading the Board to ensure effectiveness
in all aspects of its role
BOARD OF BENCHMARK HOLDINGS plc
Six Directors
Three Executive Directors, a Non-executive
Chairman and two further Non-executive Directors
Principal objective
Collectively to ensure the long term success of the Company
AUDIT COMMITTEE
NOMINATIONS COMMITTEE
REMUNERATION COMMITTEE
Basil Brookes (Chairman)
Alex Hambro
Alex Hambro (Chairman)
Susan Searle
Susan Searle (Chairman)
Basil Brookes
Principal objective: to ensure that
the interests of shareholders are
properly protected in relation to
financial reporting and internal
controls
Principal objective: to lead a
formal, rigorous and transparent
process for the appointment of
new directors to the Board and its
committees
Audit Committee Report
page 87
Nominations Committee Report
page 86
Principal objective: to develop
policy on Executive remuneration
and set the remuneration of the
Chairman of the Board, individual
Executive Directors and senior
managers immediately below
Board level
Remuneration Committee Report
page 91
GOVERNANCEBenchmark Holdings plc Annual Report 2014 | Governance The Board reviews strategic issues on a regular
basis and exercises control over the performance
of the Company by agreeing budgetary targets and
monitoring performance against those targets.
Certain matters are reserved for approval by the
Board and the Board has overall responsibility for
the Group’s system of internal controls and risk
management, as described on pages 81 and 83.
Following presentation by executive management
and a disciplined process of review and challenge
by the Board, clear decisions on policy and strategy
are adopted and the executive management are
empowered to implement those decisions. A formal
schedule of matters reserved for Board approval is
maintained which covers items that are significant to
the Group as a whole due to their strategic, financial
or reputational implications. A summary of these
matters is shown on the next page.
Board size and composition
Since the IPO, the Board has comprised six Directors:
the Chairman, two further Non-executive Directors and
three Executive Directors. The size and composition
of the Board and its Committees are reviewed by
the Board and, in future years, will be reviewed by
the Nominations Committee to ensure that there
is an appropriate balance and diverse mix of skills,
experience, independence and knowledge of
the Group.
As part of the IPO process, the following Directors
resigned their positions on 21 November 2013: David
Cox, Jim Muirhead, Kevin Lawless, Paul Cook, Peter
Southgate and Ruth Layton. On 18 December 2013
Alex Hambro, Susan Searle and Basil Brookes were
appointed to the Board.
The Board is collectively responsible for the long-
term success of the Group. The Executive Directors
are responsible for running the business operations
and ensuring that the necessary financial and
human resources are in place in order to achieve
the Company’s strategic aims. The Non-executive
Directors are responsible for:
➡ Constructively challenging and helping develop
proposals on strategy;
➡ Scrutinising the performance of management;
➡ Satisfying themselves that financial controls and
systems of risk management are robust;
➡ Determining levels of remuneration;
➡ Satisfying themselves on the integrity of financial
information; and
➡ Succession planning for the Executive Directors.
83
Succession planning
and reward
Ensuring adequate succession
plans are in place
Board and Board Committee
appointments and removals
Appointment or removal of
Company Secretary
Appointment or removal of the
auditors and determination of
the audit fee
Major changes in employee shares
or pension schemes
Approval of appointment and
remuneration of senior management
Strategy
Approval and monitoring strategic
and annual business plans
Review of business performance
Approval of significant acquisitions,
mergers or disposals
Review and approval of the long term
objectives and strategic direction of
the Group
Regulatory
Approval of the Company’s interim
dividend and recommendation
of final dividend
Compliance with AIM rules for
companies and QCA Corporate
Governance Code for Small and
Mid-size Quoted Companies
B O A R D
D E C I S I O N S
Reporting
Approval of the Annual Report
and Accounts to be put before
the Company
Approval of the financial statements
Finance, governance
and controls
Internal control and risk
management systems
Approval of policies, major
projects and contracts
Oversight of Directors’
conflicts of interests
Rules and procedures for dealing
in the Company’s shares
GOVERNANCEBenchmark Holdings plc Annual Report 2014 | Governance
Board roles and responsibilities
Conflicts of interest
Full biographical details for all Board members can be
found on pages 78 and 79 of this report.
Chairman — Alex Hambro
The role of the Chairman (or Chair) is to:
➡ Lead the Board to ensure effectiveness in all
aspects of its role;
➡ Set the agenda for Board meetings;
➡ Ensure the membership of the Board is
appropriate to meet the needs of the business;
➡ Oversee Board Committees as they carry out their
duties including reporting to the Board;
➡ Establish appropriate personal objectives for the
Chief Executive Officer;
➡ Ensure Directors are up to date with training and
development;
➡ Provide the information necessary for Directors
to take a full and constructive part in Board
discussions;
➡ Promote an open culture of debate; and
➡ Develop and maintain effective communication
with shareholders.
Chief Executive Officer — Malcolm Pye
The role of the Chief Executive Officer is to:
➡ Run the day-to-day business and operations
of the Group;
➡ Lead the development and delivery of strategy to
enable the Group to meet the requirements of its
shareholders;
➡ Lead and oversee the executive management
of the Group;
➡ Deliver the Group’s budget and strategic plans;
and
➡ Provide the appropriate environment to recruit,
engage, retain and develop the personnel needed
to deliver the strategy.
Any Director is obliged to seek authorisation before
taking up any position that conflicts, or may conflict,
with the interests of the Company. The Board is
empowered to authorise situations of potential conflict
of interest, where it sees fit, so that a Director is
not in breach of his or her duty. All existing external
appointments and other such ‘situational conflicts’ of
each Director have been reviewed and authorised by
the Board. All Directors must ensure that their external
appointments do not involve a time commitment that
would adversely affect their responsibilities to the
Company. If a conflict were to arise in relation to a
transaction or other arrangement proposed between
the Company and a party in which any Director had an
interest, that Director would be obliged to declare the
interest. Where the interest is material, the relevant
Director will not be permitted to vote on decisions
relating to the matters in which he or she has
an interest.
Re-election of Directors
The appointment of all Directors was approved at the
Annual General Meeting held on 11 March 2014. The
Articles of Association require directors to retire by
rotation at the third AGM after the AGM when they
were elected.
Non-executive Director independence and
length of service
➡ The Board considered each Non-executive
Director’s independence on appointment and
concluded that they were independent. The Board
will review independence on an annual basis.
Non-executive Directors are appointed for specified
terms, subject to re-election, and terms beyond six
years are subject to rigorous review. Accordingly, Non-
executive Directors are appointed for a maximum of
two terms of three years and, thereafter, may serve for
an additional period only at the invitation of the Board.
The respective periods of service of our Non-executive
Directors (including the Chairman) are:
Name
Date of
Appointment
Term
Alex Hambro
18 December 2013
3 years
Susan Searle
18 December 2013
Basil Brookes
18 December 2013
3 years
3 years
Induction, business awareness
and development
Board and committee
attendance during 2013/14
85
The Chairman is responsible for ensuring that
Directors receive a full formal and comprehensive
induction. This includes but is not limited to:
➡ An overview of the Group, its functions
and governance
Name
Chairman:
➡ Briefings on Directors’ regulatory and compliance
Alex Hambro
responsibilities
➡ Site visits to Group locations
➡ Detailed reviews of the strategic projects and
initiatives underway
➡ One-to-one meetings with senior managers
In order that Directors continue to further their
understanding of the issues facing the Group and
are able to challenge constructively and help develop
proposals on strategy, the Non-executive Directors
are encouraged to visit Group locations. During the
year under review, visits have taken place to our
facilities in Inverness, Ardtoe, Edinburgh, Sheffield,
Oxford and Braintree. These site visits, which include
business presentations and updates, are in addition
to the frequent reviews on current issues made at the
scheduled board meetings by Executive Directors and
other senior managers and the presentation on his or
her business that each company managing director
or functional head makes to the Board at one of its
scheduled meetings at least annually.
Board meetings
During the financial year ended 30 September 2014,
the Board held 12 scheduled board meetings. In
2013/14, all Directors committed an appropriate
amount of time to fulfil their duties and responsibilities
to the Board.
Board
meetings
Audit
Committee
meetings
Remuneration
Committee
meetings
9
9
9
3
3
-
-
2
2
Non-executive Directors:
Basil Brookes
Susan Searle
Executive Directors:
Malcolm Pye
Roland Bonney
Mark Plampin
Paul Cook
David Cox
Kevin Lawless
Ruth Layton
Jim Muirhead
Peter Southgate
12
12
12
1
-
-
1
-
-
Relations with shareholders
Engagement with our shareholders is essential
to ensure that Benchmark Holdings’ medium-
and long-term objectives are understood and to
receive feedback on our strategy, performance and
governance. It is also crucial that shareholders
have the confidence in the Board’s ability to oversee
the implementation of the strategy and that, if they
have concerns, they know to whom these should be
addressed. The Chairman is primarily responsible
for ensuring that the Board is accessible to major
shareholders and that channels for communication are
open. He also has principal responsibility for ensuring
that all of the Board members and in particular the
Non-executive Directors are aware of any concerns
raised by major shareholders and that their views are
taken into account. The Chief Executive Officer, Chief
Operating Officer and Chief Financial Officer all have
regular dialogue with institutional shareholders.
GOVERNANCEBenchmark Holdings plc Annual Report 2014 | Governance
Shareholder engagement activities during the financial
year included:
➡ A number of face-to-face meetings with investors
during the year; and
➡ Directors attending the AGM, where they were
available to answer questions and undertake
constructive dialogue with shareholders.
Going concern
The Strategic Report reviews, in relation to the Group
as a whole:
➡ Its business activities
➡ Its financial position
➡ The factors likely to affect its future development
and performance
➡ The objectives and policies in managing the
financial risks to which it is exposed
N O M I N A T I O N S
C O M M I T T E E
R E P O R T
The composition of the Nominations Committee
during the year was:
➡ Alex Hambro (Chair)
➡ Susan Searle
While only members of the Committee have the right
to attend meetings, the Head of People and external
advisers may also be invited to contribute on specified
agenda items.
Key objective
To lead a formal, rigorous and transparent process for
the appointment of new Directors to the Board and
its Committees.
The Directors have assessed, in the light of current
and anticipated economic conditions, the Group’s
ability to continue as a going concern, including its
solvency and liquidity. The Directors confirm they
are satisfied that the Company and the Group have
adequate resources to continue in business for
the foreseeable future. For this reason, they
continue to adopt the ‘going concern’ basis for
preparing accounts.
Share capital and control
Details are included on pages 102 and 103 of the
Directors’ Report.
Responsibilities
➡ To review the composition of the Board including
its balance of skills and experience;
➡ To lead the process for Board appointments and
recommend the appointment of new Directors;
➡ To review the re-appointment of Non-executive
Directors;
➡ To make recommendations on the composition of
the Board’s Committees;
➡ To consider succession for senior and Executive
positions.
The Committee’s terms of reference are reviewed
annually and a summary of these are available on the
Governance section of our website at
www.bmkholdings.com
The Nominations Committee did not meet during the
period under review.
A U D I T C O M M I T T E E
R E P O R T
87
The composition of the Audit Committee during the
year was:
➡ Basil Brookes (Chair)
➡ Alex Hambro
The Committee members are both independent Non-
executive Directors. There is more information on
Basil’s relevant experience on page 79.
In addition to Committee members, there are a
number of regular attendees at each meeting. The
Chief Financial Officer and lead external audit partner
normally attend all scheduled Audit Committee
meetings. The Audit Committee members regularly
take time before or after a meeting, without any
Executive Directors or senior management present,
to raise any questions and discuss issues with the
external auditor. The Chairman of the Audit Committee
meets the CFO and the external auditor separately to
review current issues and developments prior to each
meeting of the Audit Committee, such meetings often
taking place by telephone.
Key objective
To ensure that the interests of shareholders are
properly protected in relation to financial reporting and
internal controls.
Responsibilities
As 2014 was Benchmark’s first year as an AIM listed
company, the audit of the financial statements to 30
September 2014 represented the first audit as an AIM
listed company. Additionally, the Audit Committee was
not constituted until listing, after the preparation and
signature of the 2013 financial statements. During the
year the main responsibilities were:
➡ To review accounting policies and the integrity and
content of the financial statements;
➡ To monitor disclosure controls and procedures and
the Group’s internal controls;
➡ To consider the adequacy and scope of
external audits;
➡ To oversee the appointment and ongoing
relationship with the external auditor;
➡ At the Board’s request, to provide advice on
whether the Annual Report and Accounts, taken
as a whole, is fair, balanced and understandable;
➡ To monitor the objectivity, independence and
effectiveness of the external auditor, including the
scope and expenditure on non-audit work;
➡ To review and approve the statements to be
included in the Annual Report on internal control
and risk management;
➡ To review and report on the significant issues
considered in relation to the financial statements
and how they are addressed.
The Committee’s terms of reference are reviewed
annually and a summary of these are available on the
Governance section of our website at
www.benchmarkplc.com
Actions undertaken during the year
The key activities for the Committee in 2013/14 are
set out below.
At the request of the Board, the Committee reviewed
the presentation of the Company’s unaudited results
for the six months to 31 March 2014 to ensure
that they were presented in a fair, balanced and
understandable way. Particular attention was paid to
the results of investing activities, for which much of
the cash raised in the IPO was to be used, as well
as Trading Activities which the Board regards as
‘core earnings’.
Given that the 2014 audit was the first undertaken
under the oversight of the Audit Committee, the
review of the annual audit process along with the
performance of the lead audit partner was undertaken
after the financial year-end. The robustness of the
audit process, quality of delivery and service levels
provided was rigorously assessed and input sought
from senior management and those involved in the
audit process across the business.
The Committee recognises the importance of
safeguarding auditor objectivity. The following
safeguards are in place to ensure that auditor
independence is not compromised:
GOVERNANCEBenchmark Holdings plc Annual Report 2014 | Governance
The Audit Committee has completed its review of
the effectiveness of the Group’s systems of internal
control during the year. It confirms that the necessary
action plans to remedy identified weaknesses in
internal control are in place and have been throughout
the year. Where appropriate, the Audit Committee
ensures that necessary actions have been, or
are being, taken to remedy or mitigate significant
failings or weaknesses identified from the review of
effectiveness of internal controls. The Group’s internal
controls over the financial reporting and consolidation
processes are designed under the supervision of the
Chief Financial Officer to provide reasonable assurance
regarding the reliability of financial reporting and
the preparation and fair presentation of the Group’s
published financial statements for external reporting
purposes in accordance with IFRS.
Because of its inherent limitations, internal control
over financial reporting cannot provide absolute
assurance and may not prevent or detect all
misstatements whether caused by error or fraud. The
Group’s internal controls over financial reporting and
the preparation of consolidated financial information
include policies and procedures that provide
reasonable assurance that transactions have been
recorded and presented accurately.
Management regularly conducts reviews of the
internal controls in place in respect of the processes
of preparing consolidated financial information
and financial reporting. During the year ended 30
September 2014, there were no changes to the
internal controls over these processes that have or
are reasonably likely to materially affect the level of
assurance provided over the reliability of the
financial statements.
89
Risk management and internal control
system features
Risk management control system
As well as the risks that management identify through
the ongoing processes of reporting and performance
analysis, the Audit Committee has additional risk
identification processes, which include:
➡ Risk and control process for identifying,
evaluating and managing major business risks.
During the year, the Chief Financial Officer
oversaw an exercise to evaluate the risks
faced by the business and to identify suitable
mitigating actions;
➡ External audit reports, which comment on controls
to manage identified risks and identify new ones;
➡ A confidential whistle-blowing helpline and an
email address available for employees to contact
the Non-executive Directors in confidence.
Internal control system
The internal controls which provide assurance to
the Committee of effective and efficient operations,
internal financial controls and compliance with law and
regulation include:
➡ A formal authorisation process for investments;
➡ An organisational structure where authorities
and responsibilities for financial management
and maintenance of financial controls are
clearly defined;
➡ Anti-bribery and corruption policies and procedures
and a dedicated email hotline, designed to
address the specific areas of risk of corruption
faced by the Group;
➡ Our comprehensive financial review cycle where
the annual budget is approved by the Board and
monthly variances are reviewed against detailed
financial and operating plans.
➡ The Audit Committee carries out an annual review
of the external auditor as to its independence from
the Group in all material respects and that it is
adequately resourced and technically capable to
deliver an objective audit to shareholders. Based
on this review the Audit Committee recommends
to the Board the continuation, or removal and
replacement, of the external auditor;
➡ The external auditor may provide audit-related
services such as regulatory and statutory reporting
as well as formalities relating to shareholder and
other circulars;
➡ The external auditor may undertake due diligence
reviews and provide assistance on tax matters
given its knowledge of the Group’s business. Such
provision will be assessed on a case-by-case basis
so that the best adviser is retained. The Audit
Committee monitors the application of policy in
this regard and keeps the policy under review;
➡ The Audit Committee reviews on a regular basis all
fees paid for audit and consultancy services with
a view to assessing the reasonableness of fees,
value of delivery and any independence issues
that may have arisen or may potentially arise in
the future;
➡ The external auditor reports to the Directors and
the Audit Committee regarding their independence
in accordance with Auditing Standards. BDO
LLP’s policy is that audit partners are required
to be rotated every fifth year, and audit senior
management every seventh year;
➡ Different teams are used on all other assignments
undertaken by the auditor;
➡ Non-audit services carried out by the external
auditor are generally limited to w ork that is closely
related to the annual audit or where the work is of
such a nature that a detailed understanding of the
business is beneficial;
➡ The Audit Committee monitors these costs in
the context of the audit fee for the year, in order
to ensure that the potential to affect auditor
independence and objectivity does not arise. The
split between audit and non-audit fees for 2014
and information on the nature of the non-audit
fees incurred is detailed in Note 7 accompanying
the consolidated financial statements.
The Audit Committee monitors the effectiveness
of the external audit functions. To comply with this
requirement, the Committee reviews and comments
on the external audit plans before it approves them. It
then considers progress during the year by assessing
the major findings of their work, the perceptiveness of
observations, the implementation of recommendations
and management feedback. At the request of the
Board, the Committee also monitors the integrity of
all financial statements in the Annual Report and half
year results statements, and the significant financial
reporting judgements contained in them. Further
details of the Committee’s procedures to review the
effectiveness of the Group’s systems of internal
control during the year can be found in the section
on effective risk management and internal control
below. The Committee recognises that all financial
statements include estimates and judgements by
management. The key audit areas are agreed with
management and the external auditors as part of
the year-end audit planning process. This includes
an assessment by management at both a business
unit and Group level of the significant areas requiring
management judgement. These areas are reviewed
with the auditors to ensure that appropriate levels of
audit work are completed and the results of this work
are reviewed by the Committee.
Effective risk management and
internal control
One of the Board’s key responsibilities is to ensure
that management maintains a system of internal
control which provides assurance of effective and
efficient operations, internal financial controls and
compliance with law and regulation. The Group’s
systems are designed to identify key financial and
other risks to the Group’s business and reputation,
and to ensure that appropriate controls are in place.
Consideration is given to the relative costs and
benefits of implementing specific controls.
Assurance
On behalf of the Board, the Audit Committee examines
the effectiveness of:
➡ The systems of internal control, primarily through
reviews of the financial controls for financial
reporting of the annual, preliminary and half yearly
financial statements and a review of the nature,
scope and reports of external audit;
➡ The management of risk by reviewing evidence of
risk assessment and management; and
➡ Any action taken to manage critical risks or
to remedy any control failings or weaknesses
identified, ensuring these are managed through
to closure.
GOVERNANCEBenchmark Holdings plc Annual Report 2014 | Governance R E M U N E R A T I O N R E P O R T F O R T H E
Y E A R E N D E D 3 0 S E P T E M B E R 2 0 1 4
91
Statement from Susan Searle,
Chairman of the Remuneration Committee
Dear Shareholder,
2014 was Benchmark’s first year as a plc. The
Company underwent a major transition from private
company to traded public company, and a decision
was taken not to make any major adjustments to the
Executive Directors’ salaries at the time of the IPO,
nor to issue options under the new share incentive
schemes during the first financial year. The Executive
Directors were keen to demonstrate that, together with
the senior team, they could deliver and execute the
strategy in the public company environment, before
making any major changes.
The Company enjoys a culture of cooperation
with strong team values and a sense of shared
participation in the Group’s achievements and
vision for the future. A significant amount of the
Company’s success can be attributed to these
values, together with the strong leadership and united
vision of the Executive Directors. This philosophy
has been enhanced by a remuneration policy which
is non-hierarchical and encourages share ownership
throughout the workforce. Future remuneration policy
is being developed in a way that maintains these
cultural values.
During the year, the Remuneration Committee
commissioned a review by MM&K of all aspects of the
Executive Directors’ remuneration, which included a
benchmarking exercise against the Company’s peers.
MM&K also reviewed and advised the Remuneration
Committee on the Company’s remuneration policy and
the use of its share schemes.
Following the review of the Executive Directors’
remuneration, it is clear that the Executive Directors’
salaries are substantially below those of their peer
group. The Committee decided, over the coming two
to three years, to move these salaries to a level which
is reasonably competitive, whilst recognizing that the
Executive Directors’ long-term involvement with the
business is a key motivating factor. Malcolm Pye and
Roland Bonney are founders of the business, and
Mark Plampin has been with the Company for over
four years.
Performance of the Executive Directors is assessed
against metrics which are relevant to Benchmark’s
business and have regard to the Company’s stage
of development. In determining bonus payments,
the Committee assessed performance against four
key indicators which focus on the delivery of
sustainable mid-to long-term growth through
execution of the Company’s strategy (see page 92).
During the year excellent progress was made in all
areas, and this is reflected in the awards made to
the Executive Directors.
The Company is traded on the AIM Market of the
London Stock Exchange and is not required to
produce a Remuneration Report. We have elected
to prepare this report to explain to shareholders the
Company’s remuneration policy and its approach
to the remuneration of the Executive Directors. An
advisory resolution inviting shareholders to approve
the Remuneration Report will be put to shareholders
at the Company’s Annual General Meeting to be held
on 5 March 2015. We look forward to receiving
your support.
Susan Searle
Chairman of the Remuneration Committee
26 January 2015
GOVERNANCEBenchmark Holdings plc Annual Report 2014 | Governance
Remuneration Committee composition
and responsibilities
The composition of the Remuneration Committee
during the year was:
➡ Susan Searle (Chair)
➡ Basil Brookes
The committee members are both independent Non-
executive Directors. The Company Secretary acts as
secretary to the committee and the Head of People
also attends committee meetings to provide advice on
remuneration policies and practices. At appropriate
times, the Remuneration Committee invites the views
of the Chief Executive and Chairman of the Board,
and seeks advice from independent remuneration
consultants. No Director or employee is present when
his or her own remuneration or fees are discussed.
Key objectives
The key objectives of the Remuneration Committee
are to develop the Company’s policy on executive
remuneration and to fix the remuneration of the
executive directors, chairman of the board and
senior managers.
Responsibilities
Following its IPO on AIM in December 2013, this was
Benchmark’s first year as a traded public company.
During the year, the Remuneration Committee reviewed
its scope of work and agreed with the Board a more
detailed mode of operation for the committee.
The main responsibilities of the Remuneration
Committee are:
➡ To monitor and develop the Company’s
remuneration policy
➡ To determine the remuneration of the executive
directors in line with the Company’s remuneration
policy
➡ To approve the service agreements of the
executive directors
➡ To approve the remuneration of senior managers in
line with the Company’s remuneration policy
➡ To determine the fees of the Chairman
➡ To review the Company’s annual bonus proposals
and to approve bonuses for the executive directors
and senior managers
➡ To approve the design of and oversee awards
under the Company’s share incentive plans,
including approving awards to the executive
directors and senior managers
➡ To consider risks to the Group in light of its
remuneration policies
An overview of the Remuneration Committee’s terms
of reference is available on the Governance section of
our website at www.benchmarkplc.com
Directors’ Remuneration Policy
The transition from private company to traded public
company was made in December 2013. The Group’s
historic remuneration policy has operated successfully
to create a motivated workforce with shared values
and a culture of mutual support, and will be continued.
The Company’s remuneration policy balances
three key objectives:
➡ To pay reasonably competitively in the relevant
talent markets to sustain motivation and
commitment, recognising that Benchmark has
a unique culture and staff join and remain with
Benchmark in order to share in the company’s
vision for sustainability and to participate in the
important work it does;
➡ To remunerate in a way that makes economic
sense for the Company, ensuring there is a
fair balance of return to the executive team,
management, staff and shareholders for their
contributions to the Company’s success;
➡ To encourage the cooperative behaviours
which promote business priorities and lead
to high performance.
The Company’s remuneration policy supports a
climate of team involvement and generates a shared
enthusiasm for the growth and success of the Group
as a whole. It encourages cooperation, sharing of
ideas and mutual support between people in different
business units. The policy reflects and supports
the sense that the Group is involved in creating and
delivering services which benefit mankind and the
natural environment. The policy also recognises that
the non-monetary rewards of team membership,
intellectual stimulation, freedom, creativity and
producing something worthwhile, have equal or higher
place in maintaining personal commitment and in
attracting and retaining the best people.
Future remuneration policy
The Executive Directors’ remuneration comprises fixed
elements in the form of a base salary, benefits and
pension contributions, and a variable discretionary
element in the form of a bonus, which may be satisfied
in cash, deferred shares (or nominal cost share
options), or a combination of both. The company has
long-term share plans in place but does not intend to
make awards to the Executive Directors at this stage.
Fixed elements of remuneration
The fixed elements of the Executive Directors’
remuneration are designed to attract and retain
directors of the appropriate calibre, with the requisite
knowledge, skills and experience, and to sustain
motivation and commitment.
Historically, the salaries of the Executive Directors
have been increased annually by reference to the retail
price index, in line with the policy applied across the
Group. Following a review of the Executive Directors’
remuneration commissioned by the Remuneration
Committee, that the Executive Directors’ salaries were
found to be substantially below those of their peer
group, and action will be taken to move towards market
over the coming three years, as detailed on page 99.
The Executive Directors all participate in defined
contribution pension schemes. The terms on which
the Company contributes to the Executive Directors’
pensions are the same as the terms applicable to
other employees. The Company contributes up to 10
per cent of the employee’s salary, starting at 5 per
cent and increasing by 1 per cent for every three years
of service.
The Executive Directors also receive private medical
insurance for themselves and their families, and death-
in-service benefits.
Variable elements of remuneration
Executive Directors are eligible for an annual
performance bonus, part of which may be deferred for
three years and paid in shares or nominal cost share
options. From January 2014, the maximum award,
including any deferred element, is 100 per cent of
salary. The bonus is designed to reward and incentivise
success leading to sustainable long-term growth and to
recognise the Directors’ commitment to the business.
The Executive Directors’ performance is measured by
reference to four key metrics, set out below:
➡ Progress towards the Group’s objectives of mid to
long-term growth in revenue and earnings per share
from Trading Activities;
➡ Successful and secure investment of the Group’s
available capital in long term revenue and
generation of EBITDA from Trading Activities;
➡ Building on the Group’s track record of recruiting
the highest calibre and most appropriate people, in
terms of skills and experience; and
➡ Establishing a strong and long-lasting leadership
position in the development of sustainable food
and farming internationally.
93
The Remuneration Committee exercises judgment
in assessing performance against these metrics. In
setting bonus levels the Remuneration Committee
also considers the amount of bonuses paid by
the Company’s peer group with reference to Group
members’ performance. No elements of the bonus
are guaranteed.
The variable element of Executive Directors’
remuneration may, in the future, be supplemented with
awards under share-based long-term incentive plans.
The Company believes that awards to the Executive
Directors under these plans is not necessary at the
present time, in light of the fact that Roland Bonney
and Malcolm Pye are founder shareholders and have
substantial holdings in the Company, and action is
being taken to increase Mark Plampin’s interest in
shares by weighting his bonus towards deferred
share options.
Statement of consideration of employment
conditions elsewhere in the Group
The Remuneration Committee approves the salary
increases and bonuses of all senior employees.
The Committee also reviews and agrees all awards
made under the Company’s employee share plans.
In 2014, the average salary increase across the
Group was 3.9 per cent. The average salary increase
across the Executive Directors was 10.8 per cent;
the increase will be higher in 2015 as a result of the
recent benchmarking review. The entitlements of the
Executive Directors to pension contributions are the
same as those of employees. Bonuses for employees
are determined on a discretionary basis, by reference
to a combination of Group and individual performance.
Senior managers’ bonuses for 2014 will be paid
part in cash, and part will be deferred and satisfied
in nominal cost share options (other than where the
individual is already a substantial shareholder in
the Company).
The Company enjoys a strong cooperative culture
and the remuneration policy supports a sense of
shared participation in the Group’s achievements.
Everyone in the team is expected and encouraged to
have an interest in the Company’s shares at a level
that reflects the strategic contribution of their role.
At the time of the IPO, the Company offered all of its
employees an opportunity to acquire ordinary shares
through a SIP, up to a maximum amount of £1,500,
with an equal number of matching shares being
issued to each employee. 94 per cent of employees
elected to participate in this offering. The Group
GOVERNANCEBenchmark Holdings plc Annual Report 2014 | Governance
had a successful and eventful year, during which the
Company became a traded public company, three new
products were launched, significant further investment
was made in the product pipeline, infrastructure and
a new breeding and genetics division, and a £70m
fundraising was completed. In 2015, the Company
intends to issue nominal cost share options over not
more than 0.65 per cent of issued share capital to
its staff, including employees of the newly acquired
companies within the breeding and genetics division.
This grant will not be extended to the Executive
Directors or senior management, who received
share options as part of their 2014 bonus (where
appropriate). The grant is in line with the Company’s
historic remuneration policy, which has seen options
granted across the workforce at times of significant
achievement in the Company’s development.
Executive Directors’ service contracts and
remuneration on termination
All service contracts for Executive Directors are
approved by the Remuneration Committee. The date
of commencement of the service contract of each
of the Executive Directors is 18 December 2013.
All contracts are terminable by either party on 12
months’ notice at any time, and by the Company
at any time and without compensation in case of
serious misconduct, breach of duty or in similar
circumstances.
In the event of termination by the Company without
cause, the Executive Director is entitled to receive
payment of salary for any unexpired notice period
and any accrued holiday entitlement. In the event of
termination for cause, the Director is not entitled to
compensation in respect of salary.
The Executive Directors’ bonuses are fully
discretionary. In the event of termination during a
bonus period, the Remuneration Committee will
consider payment of a bonus on a pro rata basis for
the relevant portion of the year worked, having regard
to the circumstances. Deferred bonuses which have
been satisfied in share options remain exercisable
where the Executive Director is a good leaver,
including in case of death, incapacity, redundancy,
retirement, and where the Remuneration Committee
so determines. In all other circumstances, deferred
bonuses satisfied in share options cease to be
exercisable on termination of employment and lapse.
95
Non-executive Directors’ terms of appointment
The Non-executive Directors hold office under letters of appointment. Each appointment is for a term
of three years commencing on 18 December 2013. All directors will stand for re-election at least every
three years; two Directors will stand for re-election at the Annual General Meeting to be held on 5
March 2015. Non-executive Directors are typically invited to serve for two three-year terms.
Either the Company or the Non-executive Director may terminate the appointment on three months’
notice, and the appointments are subject to the Company’s articles of association and to the Director
being re-elected by shareholders upon retirement by rotation. On termination as a result of the Non-
executive Director not being re-elected by shareholders or under the articles of association for reasons
connected with outside interests or independence, the appointment terminates immediately and
the Non-executive Director is not entitled to compensation. On termination in other circumstances,
including on 3 months’ notice, a Non-executive Director is entitled to accrued but unpaid directors’ fees
to the date of termination but no other compensation.
The dates of appointment of, and length of service for each Non-executive Director are shown in the
table below.
Director
Basil Brookes
Alex Hambro
Susan Searle
Shareholder dilution
Date of appointment
Length of service as at 2015 AGM
18 December 2013
18 December 2013
18 December 2013
1 year 2 months
1 year 2 months
1 year 2 months
The total number of ordinary shares issued and issuable in respect of options granted in any ten year
period under the Company’s discretionary share option schemes (excluding pre-IPO options under the
Enterprise Management Incentive (EMI) scheme) is restricted to 10 per cent of the Company’s issued
ordinary shares from time to time.
In the financial year ended 30 September 2014, no such shares or options were issued. In the coming
year, the Company expects to allocate nominal cost share options over no more than 0.30 per cent
of issued share capital in respect of 2014 bonuses payable to the Executive Directors and senior
management, and over no more than a further 0.65 per cent of issued share capital to other staff as
mentioned on page 93. No further shares or options under discretionary share option schemes are
expected to be granted in the financial year ending 30 September 2015.
GOVERNANCEBenchmark Holdings plc Annual Report 2014 | Governance Annual Report on remuneration for 2014
Non-executive Directors
Single total figure of remuneration for the financial year ended 30 September 2014
The remuneration in respect of qualifying services of the directors who served during the
financial year ended 30 September 2014 is as set out below.
Executive Directors
A number of the Company’s former Executive Directors stepped down from the Board in anticipation
of the Company’s IPO in December 2013, remaining part of the senior management team.
Director
Basil Brookes
Alex Hambro
Susan Searle
Annual fee
Fees paid (£)
35,000
45,000
35,000
2014 (a)
29,596
41,480
39,596
Total
(a) Comprising annual fees for the period, plus additional fee for pre-iPO time commitments
97
2013
-
-
-
Post IPO Executive
Directors
Roland Bonney
Mark Plampin
Malcolm Pye
Total remuneration of post-
IPO Executive Directors
Pre-IPO Executive Directors
(a)
Paul Cook
David Cox
Ruth Layton
Kevin Lawless
Jim Muirhead
Peter Southgate
Total remuneration of all
Directors
Salary
Bonus (c)
Taxable
benefits
Long-term
incentives
Pension
2014
2013
112,255
116,000
112,084
155,032 (d)
112,255
116,000
1,952
3,016
4,096
-
10,020
240,227
114,015
95,850
6,725
372,707
203,637
-
10,020
242,371
114,959
336,594
387,032
9,064
95,850
26,765
855,305
432,611
12,895
12,895
12,895
12,895
8,288
12,895
-
-
-
-
-
-
342
272
129
349
328
228
-
-
-
-
-
-
1,159
14,396
107,579
1,335
14,502
110,572
1,159
14,183
99,815
774
663
14,018
151,581
9,279
70,499
1,335
14,458
99,753
409,357
387,032
10,712
95,850
33,190
936,141
1,072,410
(a) Stepped down from the Board on 21 November 2013, in anticipation of the Company’s IPO in December 2013. Amounts
shown above relate to the period for which these individuals served as directors, and are pro rated for this period from the total
annual amounts.
(b) Benefits provided for all Executive Directors are medical insurance coverage for the Directors and their families, and death
in service benefits.
(c) Each Executive Director received a bonus of £1,000 linked to participation in the company SIP, which was paid in
December 2013.
(d) Mark Plampin received a bonus of £8,032 on the IPO in relation to the exercise of options under the EMI scheme, which was
paid in February 2014, and an exceptional bonus of £31,000 in December 2013 for work relating to the IPO. On the balance of
£115,000, 60 per cent is deferred and will be satisfied in nominal cost share options.
Executive Directors’ salaries were reviewed with effect from 1 January 2015 following a benchmarking
exercise undertaken by the Remuneration Committee and having regard to the Group’s performance in
2014, and the increases awarded are shown on page 99.
Executive Directors’ bonuses for the financial year ended 30 September 2014
The Remuneration Committee considers that the performance of the Executive Directors should be
assessed against the delivery of long-term sustainable growth through execution of the business
strategy. The Executive Directors’ bonuses were determined in light of their performance against four
KPIs, which are set out on page 93.
Excellent progress has been made against these metrics. Details of the Group’s financial performance
can be found in the Chief Financial Officer’s review on page 25. The Group continued to invest in
its product pipeline through research and the acquisition of new products, in infrastructure at its
Ardtoe site and vaccine manufacturing facilities, and in a new breeding and genetics division through
the successful acquisition of two complementary Nordic companies in conjunction with a £70m
fundraising. Group headcount grew by 43 per cent in 2014 with graduates representing 69 per cent
of new employees. The Group strengthened its relationships with key players in the food industry and
the acquisitions of SalmoBreed and Stofnfiskur enhanced the Group’s position and profile as a leading
supplier to the aquaculture industry.
The Remuneration Committee determined the Executive Directors’ bonuses in light of this performance,
having regard to the requirement to fairly balance the needs of shareholders and executive rewards
within its bonus culture. The Remuneration Committee also took account of the benchmarking exercised
conducted by it in consultation with remuneration consultants. Accordingly, the Executive Directors
received bonuses in respect of the financial year ended 30 September 2014 as set out below.
Roland Bonney
Mark Plampin
Malcolm Pye
2014
116,000
155,032 (b)
116,000
Bonus (£) (a)
2013
-
11,850
-
(a) Each Executive Director received a bonus of £1000 in December 2013 as part of the company’s SIP initiative.
(b) Mark Plampin received a bonus of £8,032 on the IPO in relation to the exercise of options under the EMI scheme, which was
paid in February 2014 and an exceptional bonus of £31,000 in December 2013 for work relating to the IPO. On the balance of
£115,000, 60 per cent is deferred and will be satisfied in nominal cost share options.
GOVERNANCEBenchmark Holdings plc Annual Report 2014 | Governance
In light of Malcolm Pye and Roland Bonney’s substantial holdings of ordinary shares in the Company
(each owns 6.91 per cent of the issued share capital), their bonuses were paid in cash. Mark Plampin
wishes to increase his interest in ordinary shares in the Company and, in consultation with the
Remuneration Committee, elected to receive 60 per cent of his bonus in the form of deferred share
options under the CSOP and the balance in cash.
The deferred bonus payable to Mark Plampin will be satisfied in the form of options granted under the
CSOP. The options will be exercisable from the third anniversary of grant and will have an exercise price
equal to the nominal value of the ordinary shares (0.1p). The number of ordinary shares over which
options will be granted to satisfy the deferred bonus has not yet been determined as the award has not
yet been made.
Defined contribution pension scheme
The Executive Directors all participate in defined contribution pension schemes. Roland Bonney and
Malcolm Pye participate in the Benchmark Holdings Executive Pension Scheme and Mark Plampin
participates in a self-invested personal pension (SIPP).
In accordance with the policy set out on page 93, the Company contributes 9 per cent of salary for
each of Roland Bonney and Malcolm Pye, and 6 per cent of salary for Mark Plampin.
LTIP awards
No awards under the Company’s share plans were made to the directors in the financial year ended 30
September 2014.
Executive Directors’ external appointments
None of the Executive Directors held Non-executive Directorships or external appointments with
organisations other than the Company in the financial year ended 30 September 2014.
Non-executive Directors’ fees for the financial year ended 30 September 2014
No changes were made to the Non-executive Directors’ fees in the financial year ended
30 September 2014.
99
Statement of implementation of Remuneration Policy in 2015
Executive Directors’ salaries
The three Executive Directors work together very closely, sharing the leadership of the business, and
developing and executing its strategy. During 2014, the Remuneration Committee engaged MMK
to undertake a review the Executive Directors’ remuneration, which found that base salaries were
significantly out of line with its peer group. The Company intends to take action over a two to three
year period to move towards market, whilst taking account of management’s philosophy that the team
should be led by example with a shared sense of participation. Accordingly, from 1 January 2015, the
Executive Directors’ base pay was increased as set out below.
Salary (£)
2015
145,000
140,000
150,000
Increase in salary 2014 to
2015 (%)
2014
115,000
115,000
115,000
2013
26%
22%
30%
Roland Bonney
Mark Plampin
Malcolm Pye
Bonus
The 2015 bonus will be implemented in line with the future policy described above, including the
possible deferral of part into shares or nominal price options.
LTIP
The Company does not intend to make awards to the Executive Directors under its long-term share
incentive plans in 2015.
Non-executive Directors’ fees
The fees payable to Non-executive Directors are due to be reviewed after the second anniversary of the
Company’s IPO. Accordingly, no review of fees is expected in the coming year. The Company continues
to have regard to the generous time commitments made by the Non-executive Directors to the Company
during a very active period for the Group.
GOVERNANCEBenchmark Holdings plc Annual Report 2014 | Governance Additional information on Directors’ interests
Directors’ interests under the Company’s employee share plans.
Details of the Executive Directors’ interests in outstanding share awards under the employee share
plans during the financial year ended 30 September 2014 are set out below.
No share awards under the employee share plans were granted to the directors during the financial
year ended 30 September 2014.
Share option
scheme
Options
held at 30
September
2013
Options
exercised in
year
Options
granted in
year
At 30
September
2014
Exercise
price
Grant date
Date from
which
exercisable
Mark
Plampin
EMI scheme
(a)
150,000 (b)
150,000
EMI scheme
150,000 (b)
150,000
EMI scheme
135,000 (b)
-
-
-
-
-
0.1p
25th August
2010
25th August
2013
0.1p
29th June
2012
18
December
2013 (c)
135,000
0.1p
29 August
2013
29 August
2016
101
Directors’ interests in ordinary shares
At 30 September 2014, the interests of the Directors and their connected persons in ordinary shares were as follows:
Roland Bonney
Basil Brookes
Alex Hambro
Malcolm Pye
Mark Plampin
Susan Searle
Interests in ordinary
shares at 30 September
2014
% of Company’s issued
share capital (d)
Interests in ordinary shares
at 30 September 2013 (a)
15,145,686
39,062 (b)
46,875 (b)
15,145,686
401,686 (c)
98,125 (b)
11.06%
0.03%
0.03%
11.06%
0.29%
0.07%
21,630,000
-
-
21,630,000
-
(a) Adjusted to reflect share division undertaken on IPO.
(b) Held through self-invested personal pension (SIPP).
(c) Comprising 130,000 ordinary shares registered in own name, 267,000 ordinary shares held through self-invested personal
pension (SIPP), and 4,686 ordinary shares held through the Benchmark employee share incentive plan.
(d) As at 30 September 2014. On 19 December 2014, an additional 82,353,000 ordinary shares were issued pursuant
to a placing.
The deferred element of the 2014 bonus as described on page 97 is not included in this table as the awards have not
yet been made.
There were no changes in the Directors’ interests in ordinary shares between 30 September 2014
and the date of this report.
(a) Prior to its IPO, the Company operated an Enterprise Management Incentive (EMI) share option scheme. At 30 September
2014, options over 1,282,000 ordinary shares remained outstanding under the EMI scheme, including options over 135,000
ordinary shares held by Mark Plampin as detailed above. No further grants may be made under the EMI scheme.
(b) Adjusted to reflect share division undertaken on IPO.
(c) Early vesting as a result of the Company’s IPO on 18 December 2013.
Susan Searle
Chairman of the Remuneration Committee
26 January 2015
GOVERNANCEBenchmark Holdings plc Annual Report 2014 | Governance D I R E C T O R S ’
R E P O R T
The Directors present their annual report and audited
financial statements of the Company and of the Group
for the year ended 30 September 2014.
Directors
The Directors who served the Company during
the year were as follows:
Benchmark Holdings plc is a public limited company,
incorporated and domiciled in England and its shares
are admitted to trading on AIM on the London
Stock Exchange.
➡ Malcolm Pye
➡ Roland Bonney
➡ Mark Plampin
Principal activities and business review
The information that fulfils the requirements of
the business review, including details of the 2014
results, key performance indicators, principal risks
and uncertainties and the outlook for future years
are set out in the Chairman’s Statement (page 16)
and the Strategic Report (pages 10 to 75) (including
key performance indicators and principal risks and
uncertainties) (pages 72 to 75).
Results and dividend
The Group’s loss for the year attributable to owners
of the parent was £1.3m (2013: profit of £4.3m). An
interim dividend of £0.2m equivalent to 1.82 pence
per share (rebased) was paid prior to listing (2013:
£0.4m equivalent to 4.44 pence per share (rebased))
and the Directors do not recommend a final dividend in
relation to the 2014 financial year (2013: £nil).
Research & development
The Group’s research and development activities are
outlined in the Strategic Report on pages 66 to 69.
➡ Alex Hambro (appointed 18 December 2013)
➡ Basil Brookes (appointed 18 December 2013)
➡ Susan Searle (appointed 18 December 2013)
➡ Paul Cook (resigned 21 November 2013)
➡ David Cox (resigned 21 November 2013)
➡ Kevin Lawless (resigned 21 November 2013)
➡ Ruth Layton (resigned 21 November 2013)
➡ Jim Muirhead (resigned 21 November 2013)
➡ Peter Southgate (resigned 21 November 2013)
All Directors served throughout the year, unless
otherwise indicated.
Re-election of Directors
The Articles of Association require Directors to retire
by rotation at or prior to the third Annual General
Meeting (AGM) after the AGM or General Meeting at
which they were elected.
Non-executive Directors are appointed for specified
terms, subject to re-election, and terms beyond six
years are subject to rigorous review. Accordingly, Non-
executive Directors are appointed for a maximum of
two terms of three years and thereafter may serve for
an additional period only at the invitation of the Board.
Directors remuneration and interests
The Remuneration Report set out on pages 91 to 101
will be presented to shareholders for approval at the
AGM. It includes details of Directors’ remuneration,
interests in the shares of the Company, share options
and pension arrangements.
103
Directors’ indemnity
All of the Directors benefited from qualifying third-party
indemnity provisions during the year and at the date of
this report.
Groups, the Group has a policy of giving them full and
fair consideration for all vacancies for which they are
suitably qualified. Employees who become disabled
during employment will be retained wherever possible
and retrained if necessary.
Share capital and substantial shareholdings
Details of the issued share capital, together with detail
of movements during the year, are shown in note 26
accompanying the financial statements. The Company
has one class of ordinary share which carries no right
to fixed income. Each ordinary share carries the right
to one vote at general meetings of the Company.
At 26 January 2015 the Company has been notified of
the following substantial shareholdings comprising 3%
or more of the issued ordinary share capital of
the Company:
Woodford Investment Management LLP
Lansdowne Partners
Invesco Asset Management Ltd
Roland Bonney
Ruth Layton
Malcolm Pye
Slater Investments Ltd
Hargreave Hale Ltd
% of issued
share capital
14.50
13.51
13.22
6.91
6.91
6.91
3.47
3.29
Financial instruments
Details of the Group’s financial risk management
objectives and policies are included in note 3 to
the financial statements.
Political and charitable donations
No political donations were made by any Group
company in the year.
Benchmark encourages employee involvement in
charitable causes, and provides manpower and office
facilities to Farmability, a farming related charity set
up for the benefit of adults with autism and learning
difficulties.
Disabled employees
The Group aims to be an equal opportunities employer
with a commitment to help people develop their
potential. In relation to disabled people or minority
Employee involvement
The Directors recognise that communication with the
Group’s employees is essential and the Group places
importance on the contributions and views of its
employees.
Employees are kept informed on matters affecting
them as employees and on various issues affecting
the performance of the Group through announcements
on the Group’s intranet and formal and informal
meetings at local level. The Group operates an
all employee share incentive plan (SIP) in which
all employees are eligible to participate. 94% of
employees elected to participate in the SIP grant made
at the time of the IPO, and the Company intends during
2015 to establish an arrangement by which regular
investments in the SIP can be made by all employees.
Length of notice of general meetings
The Companies Act 2006 requires listed companies
to call general meetings on at least 21 clear days’
notice unless shareholders have approved the calling
of general meetings at shorter notice. A resolution to
approve 14 days as a minimum period of notice for all
general meetings of the Company other than AGMs will
be proposed at the AGM to be held on 5 March 2015.
The 14-day notice period would only be used where
the flexibility is merited by the business of the meeting
and is thought to be to the advantage of shareholders
as a whole. The Company offers the facility for all
shareholders to vote by electronic means. This
facility is accessible to all shareholders and would be
available if the Company was to call a meeting on 14
clear days’ notice.
Power to allot shares
Each year at the AGM, the directors seek authority
to allot shares for the following year. At the last AGM
held on 11 March 2014, shareholders authorised the
directors to allot relevant securities up to an aggregate
nominal value of £45,202.44, representing one-third
of the issued share capital, and to further allot equity
securities up to an additional aggregate nominal value
of £45,202.44 in connection with a fully pre-emptive
rights issue, in accordance with ABI guidance, and to
allot for cash equity securities having a nominal value
not exceeding in aggregate £13,697.71 (being 10% of
GOVERNANCEBenchmark Holdings plc Annual Report 2014 | Governance the issued share capital). The authority expires at the
conclusion of the next AGM. At the forthcoming AGM,
similar authorities will be sought from shareholders.
Authority for the Company to
purchase its own shares
At the Company’s 2014 AGM, shareholders renewed
the Company’s authorities to make market purchases
of up to 13,697,710 ordinary shares, representing
10% of the issued share capital. These authorities
were not used during the year or up to the date of
this Report. At the 2015 AGM, shareholders will be
asked to renew these authorities for another year and
the resolution will once again propose a maximum
aggregate number of ordinary shares which the
Company can purchase of 10% of the issued ordinary
share capital. Details are contained in the Notice of
AGM. The Company held no treasury shares during the
year or at the date of this Report.
Statement of disclosure of
information to auditor
In the case of each director in office at the date the
directors’ report is approved, the following applies:
➡ so far as the director is aware, there is no relevant
audit information of which the Company’s auditor
is unaware; and
➡ they have taken all the steps that they ought
to have taken as a director in order to make
themselves aware of any relevant audit information
and to establish that the Company and Group’s
auditor is aware of that information.
This confirmation is given and should be interpreted
in accordance with the provisions of s418 Companies
Act 2006.
Auditor
A resolution to re-appoint BDO LLP as auditor to the
Company will be put to the AGM.
This report was approved by the Board on 26 January
2015 and signed on its behalf.
Athene Blakeman
Company Secretary
105
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and
explain the Group’s transactions and disclose with
reasonable accuracy at any time the financial position
of the Group and enable them to ensure that the
financial statements comply with the requirements of
the Companies Act 2006. They are also responsible
for safeguarding the assets of the Group and hence
for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
Website publication
The Directors are responsible for ensuring the Annual
Report and the financial statements are made
available on a website. Financial statements are
published on the Company’s website in accordance
with legislation in the United Kingdom governing the
preparation and dissemination of financial statements,
which may vary from legislation in other jurisdictions.
The maintenance and integrity of the company’s
website is the responsibility of the Directors. The
Directors’ responsibility also extends to the on-going
integrity of the financial statements contained therein.
D I R E C T O R S ’
R E S P O N S I B L I T I E S
Statement of Directors’ responsibilities in
relation to the Group financial statements
and Annual Report
The Directors are responsible for preparing the
strategic report, the Directors’ report and the financial
statements in accordance with applicable law
and regulations.
Company law requires the Directors to prepare
financial statements for each financial year. Under that
law the Directors have elected to prepare the Group
and Company financial statements in accordance with
International Financial Reporting Standards (IFRSs)
as adopted by the European Union. Under company
law the Directors must not approve the financial
statements unless they are satisfied that they give a
true and fair view of the state of affairs of the Group
and Company and of the profit or loss of the Group for
that period. The Directors are also required to prepare
financial statements in accordance with the rules of
the London Stock Exchange for companies trading
securities on the Alternative Investment Market.
In preparing these financial statements, the Directors
are required to:
➡ Select suitable accounting policies and then apply
them consistently;
➡ Make judgements and accounting estimates that
are reasonable and prudent;
➡ State whether they have been prepared in
accordance with IFRSs as adopted by the
European Union, subject to any material
departures disclosed and explained in the
financial statements;
➡ Prepare the financial statements on the
going concern basis unless it is inappropriate
to presume that the Company will continue
in business.
GOVERNANCEBenchmark Holdings plc Annual Report 2014 | Governance F I N A N C I A L
S T A T E M E N T S
0 4
107
W H A T ’ S I N
T H I S S E C T I O N ?
108
Independent Auditor’s Report
110 Consolidated Income Statement
111 Consolidated Statement of
Comprehensive Income
112 Consolidated Balance Sheet
113 Company Balance Sheet
114 Consolidated Statement of Changes in Equity
115 Company Statement of Changes in Equity
116 Consolidated Statement of Cash Flows
117 Company Statement of Cash Flows
118 Notes forming part of the Financial Statements
FINANCIAL STATEMENTSBenchmark Holdings plc Annual Report 2014 | Financial Statements
108
Benchmark Holdings Annual Report 2014 | Financial Statements | Independent Auditor’s Report
Benchmark Holdings Annual Report 2014 | Financial Statements | Independent Auditor’s Report
109
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006
requires us to report to you if, in our opinion:
•
•
adequate accounting records have not been kept by the parent company, or returns
adequate for our audit have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting
records and returns; or
•
certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Richard Wilson (senior statutory auditor)
For and on behalf of BDO LLP, statutory auditor
Nottingham
United Kingdom
26 January 2015
BDO LLP is a limited liability partnership registered in England and Wales (with registered
number OC305127).
Independent Auditor’s report to the members of
Benchmark Holdings plc
for the year ended 30 September 2014
We have audited the financial statements of Benchmark Holdings plc for the year ended
30 September 2014 which comprise the Consolidated Income Statement, the Consolidated and
Company Balance Sheets, the Consolidated Statement of Comprehensive Income, the
Consolidated and Company Statement of Changes in Equity, the Consolidated and Company
Statement of Cash Flows and the related notes. The financial reporting framework that has been
applied in their preparation is applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union and, as regards the parent company financial
statements, as applied in accordance with the provisions of the Companies Act 2006.
This report is made solely to the company’s members, as a body, in accordance with Chapter 3
of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might
state to the company’s members those matters we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the company and the company’s members as a body,
for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
As explained more fully in the statement of directors’ responsibilities, the directors are
responsible for the preparation of the financial statements and for being satisfied that they give
a true and fair view. Our responsibility is to audit and express an opinion on the financial
statements in accordance with applicable law and International Standards on Auditing (UK and
Ireland). Those standards require us to comply with the Financial Reporting Council’s (“FRC’s”)
Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the Financial
Reporting Council’s website at www.frc.org.uk/auditscopeukprivate.
Opinion on financial statements
In our opinion:
•
•
•
•
the financial statements give a true and fair view of the state of the group’s and the
parent company’s affairs as at 30 September 2014 and of the group’s loss for the year
then ended;
the group financial statements have been properly prepared in accordance with IFRSs as
adopted by the European Union;
the parent company financial statements have been properly prepared in accordance with
IFRSs as adopted by the European Union and as applied in accordance with the
provisions of the Companies Act 2006; and
the financial statements have been prepared in accordance with the requirements of the
Companies Act 2006.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion the information given in the strategic report and directors’ report for the financial
year for which the financial statements are prepared is consistent with the financial statements.
110
Benchmark Holdings Annual Report 2014 | Financial Statements | Consolidated Income Statement
Benchmark Holdings Annual Report 2014 | Financial Statements | Consolidated Statement of Comprehensive Income
111
Consolidated Income Statement
for the year ended 30 September 2014
Consolidated Statement of Comprehensive Income
for the year ended 30 September 2014
Revenue
Cost of sales
Gross profit
Other income
Operating costs
Operating costs – Exceptional
EBITDA
Depreciation
Amortisation
Operating (loss)/profit
Finance cost
Finance income
Note
4
5
28
11
14
15
10
10
Trading
Activities1
2014
£000
Investing
Activities2
2014
£000
Total
2014
£000
Trading
Activities1
2013
£000
Investing
Activities2
2013
£000
35,354
(20,582)
27,543
(14,766)
35,354
(20,582)
14,772
101
(8,250)
-
6,623
(533)
(871)
5,219
(248)
60
-
-
-
-
(4,715)
(1,691)
(6,406)
-
-
14,772
101
(12,965)
(1,691)
217
(533)
(871)
(6,406)
(1,187)
-
-
(248)
60
12,777
111
(5,485)
-
7,403
(347)
(784)
6,272
(259)
8
-
-
-
-
(1,006)
(162)
(1,168)
-
-
(1,168)
-
-
Total
2013
£000
27,543
(14,766)
12,777
111
(6,491)
(162)
6,235
(347)
(784)
5,104
(259)
8
Trading
Activities1
2014
£000
Investing
Activities2
2014
£000
Total
2014
£000
Trading
Activities1
2013
£000
Investing
Activities2
2013
£000
Total
2013
£000
(Loss)/profit for the year
Other comprehensive income/(expense)
Movement on foreign exchange reserve
4,171
(5,492)
(1,321)
5,084
(791)
4,293
89
-
89
(5)
-
(5)
Total comprehensive (expense)/income for the year
4,260
(5,492)
(1,232)
5,079
(791)
4,288
Total comprehensive (expense)/income for the year
attributable to:
– Owners of the parent
– Non-controlling interest
4,266
(6)
(5,492)
-
(1,226)
(6)
5,080
(1)
(791)
-
4,289
(1)
4,260
(5,492)
(1,232)
5,079
(791)
4,288
1 Before items described in footnote 2 below
2
Includes exceptional items (costs relating to the IPO and lease termination costs), research and development expenditure,
pre-operational expenses for new ventures and costs of acquiring new businesses as set out in note 28.
(Loss)/profit on ordinary activities
before taxation
Tax on (loss)/profit on ordinary activities 12,28
5,031
(860)
(6,406)
914
(1,375)
54
6,021
(937)
(1,168)
377
4,853
(560)
(Loss)/profit for the year
4,171
(5,492)
(1,321)
5,084
(791)
4,293
(Loss)/profit for the year attributable to:
– Owners of the parent
– Non-controlling interest
4,177
(6)
(5,492)
-
(1,315)
(6)
5,085
(1)
(791)
-
4,294
(1)
4,171
(5,492)
(1,321)
5,084
(791)
4,293
Basic (loss)/earnings per share (pence)
Diluted (loss)/earnings per share (pence)
13
13
3.29
3.23
(1.04)
(1.04)
5.59
5.40
4.72
4.56
1 Before items described in footnote 2 below
2
Includes exceptional items (costs relating to the IPO and lease termination costs), research and development expenditure,
pre-operational expenses for new ventures and costs of acquiring new businesses as set out in note 28.
112
Benchmark Holdings Annual Report 2014 | Financial Statements | Consolidated Balance Sheet
Benchmark Holdings Annual Report 2014 | Financial Statements | Company Balance Sheet
113
Consolidated Balance Sheet
as at 30 September 2014
Assets
Non-current assets
Property, plant and equipment
Intangible assets
Trade and other receivables
Deferred tax assets
Total non-current assets
Current assets
Inventories
Agricultural assets
Trade and other receivables
Cash and cash equivalents (excluding bank overdrafts)
Total current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Loans and borrowings
Corporation tax liability
Provisions
Total current liabilities
Non-current liabilities
Loans and borrowings
Other payables
Provisions
Total non-current liabilities
Total liabilities
Net assets
Issued capital and reserves attributable to owners of the parent
Share capital
Share premium reserve
Capital redemption reserve
Share based payment reserve
Foreign exchange reserve
Retained earnings
Equity attributable to owners of the parent
Non-controlling interest
Note
2014
£000
2013
£000
Note
2014
£000
2013
£000
Company Balance Sheet
as at 30 September 2014
14
15
20
25
18
19
20
37
21
22
23
22
21
23
26
26
27
27
27
27
7,242
7,821
523
339
15,925
4,470
539
11,058
16,511
3,572
3,674
-
241
7,487
4,203
507
6,969
3,250
32,578
14,929
48,503
22,416
(8,281)
(115)
(48)
(1,080)
(5,069)
(2,244)
(857)
-
(9,524)
(8,170)
(96)
(1,631)
-
(2,199)
-
(135)
(1,727)
(2,334)
(11,251)
(10,504)
37,252
11,912
137
26,903
5
1,106
74
9,017
37,242
10
90
693
5
626
(15)
10,497
11,896
16
Assets
Non-current assets
Property, plant and equipment
Investments
Deferred tax assets
Other financial assets
Total non-current assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Total current liabilities
Non-current liabilities
Loans and borrowings
Total non-current liabilities
Total liabilities
Net assets
Issued capital and reserves attributable to owners of the parent
Share capital
Share premium reserve
Capital redemption reserve
Share based payment reserve
Retained earnings
Total equity and reserves
14
17
25
17
20
37
65
5,610
47
-
5,722
19,703
14,078
66
4,071
79
1,965
6,181
4,496
418
33,781
4,914
39,503
11,095
21
(3,544)
(1,337)
22
26
26
27
27
27
(3,544)
(1,337)
(60)
(60)
(60)
(60)
(3,604)
(1,397)
35,899
9,698
137
26,903
5
943
7,911
90
693
5
497
8,413
35,899
9,698
The financial statements on pages 110 to 157 were approved and authorised for issue by the Board of Directors on
26 January 2015 and were signed on its behalf by:
Total equity and reserves
37,252
11,912
The financial statements on pages 110 to 157 were approved and authorised for issue by the Board of Directors on
26 January 2015 and were signed on its behalf by:
MJ Plampin
Chief Financial Officer
MJ Plampin
Chief Financial Officer
114
Benchmark Holdings Annual Report 2014 | Financial Statements | Consolidated Statement of Changes in Equity
Benchmark Holdings Annual Report 2014 | Financial Statements | Company Statement of Changes in Equity
115
Consolidated Statement of Changes in Equity
for the year ended 30 September 2014
Company Statement of Changes in Equity
for the year ended 30 September 2014
Share
capital
£000
Share
premium
reserve
£000
Other
reserves
£000
Retained
earnings
£000
Total
attributable
to equity
holders
of parent
£000
Non-
controlling
interest
£000
Total
equity
£000
At 1 October 2012
92
693
294
6,876
7,955
17
7,972
Comprehensive income for the year*
Profit/(loss) for the year
Other comprehensive expense
Total comprehensive income for the year
Contributions by and distributions to
owners*
Dividends
Share based payment
Deferred tax on share options*
Shares purchased for cancellation
Total contributions by and distributions
to owners
At 30 September 2013
Comprehensive income for the year
Loss for the year
Other comprehensive income
Total comprehensive income for the period
Contributions by and distributions to owners
Dividends
IPO costs recognised through equity
Acquisition part paid in shares
Share based payment
Deferred tax on share options
IPO share issue
Employee shares issued
-
-
-
-
-
-
(2)
(2)
90
-
-
-
-
-
-
3
-
43
1
-
-
-
-
-
-
-
-
-
(5)
(5)
-
233
92
2
4,294
-
4,294
(5)
4,294
4,289
(401)
-
-
(272)
(401)
233
92
(272)
327
(673)
(348)
(1)
-
(1)
-
-
-
-
-
4,293
(5)
4,288
(401)
233
92
(272)
(348)
693
616
10,497
11,896
16
11,912
-
-
-
-
(1,538)
100
-
-
27,457
191
-
89
89
-
-
-
438
42
-
-
(1,315)
(1,315)
-
89
(6)
-
(1,321)
89
(1,315)
(1,226)
(6)
(1,232)
(165)
-
-
-
-
-
-
(165)
(1,538)
100
441
42
27,500
192
-
-
-
-
-
-
-
-
(165)
(1,538)
100
441
42
27,500
192
26,572
Total contributions by and distributions
to owners
47
26,210
480
(165)
26,572
At 30 September 2014
137
26,903
1,185
9,017
37,242
10
37,252
*A total of £92,000 of deferred tax on share options has been reclassified from “comprehensive income for the year” to “contributions by
and distributions to owners” in respect of the year ended 30 September 2013.
Share
capital
£000
Share
Capital
premium redemption
reserve
£000
reserve
£000
At 1 October 2012
92
693
Comprehensive income for the year*
Profit for the year
Total comprehensive income for the year
Contributions by and distributions to owners*
Dividends
Share based payment
Deferred tax on share options*
Shares purchased for cancellation
Total contributions by and distributions to owners
-
-
-
-
-
(2)
(2)
-
-
-
-
-
-
-
At 30 September 2013
90
693
Comprehensive income for the year
Loss for the year
Total comprehensive income for the year
Contributions by and distributions to owners
Dividends
IPO costs recognised through equity
Acquisition part paid in shares
Share based payment
Deferred tax on share options
IPO share issue
Employee shares issued
Total contributions by and distributions to owners
-
-
-
-
-
3
-
43
1
47
-
-
-
(1,538)
100
-
-
27,457
191
26,210
3
-
-
-
-
-
2
2
5
-
-
-
-
-
-
-
-
-
-
Share
based
payment
reserve
£000
Total
attributable
to equity
holders
£000
Retained
earnings
£000
248
7,072
8,108
-
-
-
233
16
-
2,014
2,014
2,014
2,014
(401)
-
-
(272)
(401)
233
16
(272)
249
(673)
(424)
497
8,413
9,698
-
-
-
-
-
436
10
-
-
(337)
(337)
(337)
(337)
(165)
-
-
-
-
-
-
(165)
(1,538)
100
439
10
27,500
192
446
(165)
26,538
At 30 September 2014
137
26,903
5
943
7,911
35,899
*A total of £16,000 of deferred tax on share options has been reclassified from “comprehensive income for the year” to “contributions by
and distributions to owners” in respect of the year ended 30 September 2013.
116
Benchmark Holdings Annual Report 2014 | Financial Statements | Consolidated Statement of Cash Flows
Benchmark Holdings Annual Report 2014 | Financial Statements | Company Statement of Cash Flows
117
Consolidated Statement of Cash Flows
for the year ended 30 September 2014
Company Statement of Cash Flows
for the year ended 30 September 2014
Net cash flows (used in)/from operating activities
(537)
5,518
Purchases of property, plant and equipment
Cash flows from operating activities
(Loss)/profit before tax
Adjustments for:
Depreciation of property, plant and equipment
Amortisation of intangible fixed assets
Loss on sale of property, plant and equipment
Finance income
Finance expense
Share based payment expense
Increase in trade and other receivables
Decrease in inventories and agricultural assets
Increase in trade and other payables
Increase/(decrease) in provisions
Income taxes paid
Note
2014
£000
2013
£000
(1,375)
4,853
14
15
10
10
32
533
871
41
(60)
248
438
696
(4,272)
3
2,903
945
275
(812)
347
784
3
(8)
259
233
6,471
(1,483)
254
1,268
(450)
6,060
(542)
Investing activities
Acquisition of subsidiaries and businesses, net of cash acquired
Purchases of property, plant and equipment
Purchase of intangibles
Interest received
(2,942)
(3,864)
(727)
60
(280)
(1,636)
(156)
-
Net cash flows used in investing activities
(7,473)
(2,072)
Financing activities
Proceeds of IPO share issue
IPO costs recognised through equity
Employee share issues
Purchase of ordinary shares
Proceeds from bank borrowings
Repayment of bank borrowings
Interest paid
Payments to finance lease creditors
Dividends paid to the holders of the parent
27,500
(1,538)
195
-
-
(2,864)
(248)
(105)
(165)
-
-
-
(272)
145
(876)
(251)
(42)
(401)
Net cash flows from/(used in) financing activities
22,775
(1,697)
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
14,765
1,746
1,749
(3)
Cash and cash equivalents at end of year
37
16,511
1,746
Cash flows from operating activities
(Loss)/profit before tax
Adjustments for:
Depreciation of property, plant and equipment
Loss on sale of property, plant and equipment
Finance income
Finance expense
Dividends received*
Share based payment expense
(Increase)/decrease in trade and other receivables
Increase in trade and other payables
Note
2014
£000
2013
£000
14
32
(296)
2,016
26
2
(386)
-
(3,500)
243
(3,911)
(16,052)
2,207
19
-
(1)
117
(4,742)
40
(2,551)
484
327
Net cash flows from operating activities
(17,756)
(1,740)
Investing activities
Loans to subsidiary undertakings
Investment in subsidiary undertakings
Dividends received*
Interest received
2,292
(400)
(27)
3,500
59
(2,050)
-
(10)
4,742
1
Net cash flows from investing activities
5,424
2,683
Financing activities
Proceeds of IPO share issue
Employee share issues
IPO costs recognised through equity
Purchase of ordinary shares
Dividends paid to the holders of the parent
Net cash flows from/(used in) financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
27,500
195
(1,538)
-
(165)
25,992
13,660
418
Cash and cash equivalents at end of year
37
14,078
*The prior year company statement of cash flows has been amended to reclassify dividends received from subsidiary companies into
investing activities. This has no impact on the net increase in cash and cash equivalents, but reduces net cash flows from operating
activities and increases net cash flows from investing activities by £4,742,000.
-
-
-
(272)
(401)
(673)
270
148
418
118
Benchmark Holdings Annual Report 2014 | Financial Statements | Notes forming part of the financial statements
Benchmark Holdings Annual Report 2014 | Financial Statements | Notes forming part of the financial statements
119
Notes forming part of the financial statements
for the year ended 30 September 2014
1 Accounting policies
Corporate information
Benchmark Holdings plc (the Company) is a public limited company, which has been listed on the Alternative Investment Market (AIM), a
sub-market of the London Stock Exchange. The Company is incorporated and domiciled in England and Wales. The registered office is at
Benchmark House, 8 Smithy Wood Drive, Sheffield, S35 1QN.
The Group is principally engaged in the provision of technical services, products and specialist knowledge that support the global
development of sustainable food and farming industries.
Basis of preparation
The principal accounting policies adopted in the preparation of the financial statements are set out below. The policies have been
consistently applied to all the years presented, unless otherwise stated. The Company and Group have adequate resources to continue in
operational existence for the foreseeable future and as a result of this the going concern basis has been adopted in preparing the
financial statements.
These financial statements have been prepared in accordance with International Financial Reporting Standards, International Accounting
Standards and Interpretations (collectively IFRSs) issued by the International Accounting Standards Board (IASB) as adopted by the
European Union (“adopted IFRSs”) and those parts of the Companies Act 2006 that are applicable to companies that prepare financial
statements in accordance with IFRS.
The preparation of financial statements in compliance with adopted IFRS requires the use of certain critical accounting estimates. It also
requires Group management to exercise judgement in applying the Group’s accounting policies. The areas where significant judgements
and estimates have been made in preparing the financial statements and their effect are disclosed in note 2.
Basis of consolidation
The consolidated financial statements comprise the financial statements of the Group and its subsidiaries at 30 September 2014.
Subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtained control, and continue to be
consolidated until the date when such control ceases.
Where the Company has the power, either directly or indirectly, to govern the financial and operating policies of another entity or business
so as to obtain benefits from its activities, it is classified as a subsidiary. The consolidated financial statements present the results of
the Company and its subsidiaries (“the Group”) as if they formed a single entity. Intercompany transactions, balances, unrealised gains
and losses resulting from intra-Group transactions and dividends are eliminated in full.
The consolidated financial statements incorporate the results of business combinations using the acquisition method. In the consolidated
balance sheet, the acquiree’s identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the
acquisition date.
Non-controlling interests, presented as part of equity, represent a proportion of a subsidiary’s profit or loss and net assets that is not held by
the Group. The total comprehensive income or loss of non-wholly owned subsidiaries is attributed to owners of the parent and to the
non-controlling interests in proportion to their respective ownership interests.
A separate income statement for the Company is not presented, in accordance with Section 408 of the Companies Act 2006. The loss
for the year for the Company was £337,000 (2013: profit £2,014,000).
Standards issued but not effective
A number of new standards, amendments to standards and interpretations are effective for annual periods beginning after 1 January
2014, and have not been applied in preparing these consolidated financial statements. Those which may be relevant to the Group are set
out below. The adoption of these standards is not expected to have a material effect on the financial statements unless otherwise
indicated:
IFRS 10 Consolidated Financial Statements – IFRS 10 replaces the portion of IAS 27 Consolidated and Separate Financial Statements
that addresses the accounting for consolidated financial statements. It also addresses the issues raised in SIC-12 Consolidation –
Special Purpose Entities.
IFRS 10 establishes a single control model that applies to all entities including special purpose entities. The changes introduced by IFRS
10 will require management to exercise significant judgement to determine which entities are controlled and therefore are required to be
consolidated by a parent, compared with the requirements that were in IAS 27. Based on the preliminary analyses performed, IFRS 10 is
not expected to have any impact on the currently held investments of the Group.
IFRS 12 Disclosure of Interests in Other Entities – Contains the disclosure requirements for entities that have interests in subsidiaries,
joint arrangements (i.e., joint operations or joint ventures), associates and/or unconsolidated structured entities.
IAS 32 Offsetting Financial Assets and Financial Liabilities – Amendments to IAS 32 – The amendments clarify the offsetting criteria,
specifically:
• when an entity currently has a legal right of set off; and
• when gross settlement is equivalent to net settlement.
1 Accounting policies (continued)
IAS 36 Impairment of Assets – The amendments reverse the unintended requirement in IFRS 13 Fair Value Measurement to disclose the
recoverable amount of every cash-generating unit to which significant goodwill or indefinite-lived intangible assets have been allocated, if that
amount was based on fair value less costs of disposal. Under the amendments, additional information is required to be disclosed only when
an impairment loss has been recognised or reversed.
Furthermore, IFRS 9 Financial Instruments: Classification and Measurement has been issued but is not yet effective. The standard has been
developed in several phases and replaces IAS 39 Financial Instruments: Recognition and Measurement in its entirety. The effective date of
the fully completed version of IFRS 9 is for periods beginning on or after 1 January 2018 with restrospective application. The Group has not
yet quantified the full impact of all phases of the final standard.
IFRS 15 Revenue from Contracts with Customers, which was issued on 28 May 2014 has an effective date of 1 January 2017. IFRS 15
supersedes IAS 11 Construction Contracts, IAS 18 Revenue, IFRIC 13 Customer Loyalty Programmes, IFRIC 15 Agreements for the
Construction of Real Estate, IFRIC 18 Transfers of Assets from Customers and SIC 31 Revenue – Barter Transactions Involving Advertising
Services. The Group has not yet quantified the potential impact of this standard.
New standards and interpretations applied for the first time
The following standards with an effective date of 1 January 2013 have been adopted without any significant impact on the amounts reported
in these financial statements:
IFRS 7 (amended) – Disclosures – Offsetting Financial Assets and Financial Liabilities
IFRS 13 Fair Value Measurement
IAS 12 (amended) – Deferred Tax: Recovery of Underlying Assets
Revenue
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably
measured, regardless of when the payment is being made. Revenue is measured at the fair value of consideration received or receivable,
taking into account contractually defined terms of payment and excluding taxes or duty. The Group assesses its revenue arrangements
against specific criteria in order to determine if it is acting as a principal or agent. The Group has concluded that it is acting as a principal
in all of its revenue arrangements. The following specific criteria must also be met before revenue is recognised:
Sale of goods
Within Benchmark Animal Health, revenue from the sale of licenced veterinary vaccines and vaccine components is recognised when the
Group has transferred the significant risks and rewards of ownership to the buyer, usually on delivery. Where the buyer has a right of
return, revenue and cost of sales are adjusted for the value of the expected returns based on historical results, taking into consideration
the specifics of each arrangement.
Within Benchmark Sustainability Science, revenue from the sale of agricultural produce is recognised when the Group has transferred the
significant risks and rewards of ownership to the buyer, usually on delivery. Where the buyer has a right of return, revenue and cost of sales
are adjusted for the value of the expected returns based on historical results, taking into consideration the specifics of each arrangement.
Within Benchmark Technical Publishing, revenue from the sales of books and publications is recognised when the Group has transferred
the significant risks and rewards of ownership to the buyer, usually on delivery.
Rendering of services
Services including sustainable food production consultancy, technical consultancy and assurance services are provided by Benchmark
Sustainability Science and Benchmark Animal Health. Online news, marketing and technical publications, book publishing, online shops
and online distance learning programs are provided by Benchmark Technical Publishing.
Provided the amount of revenue can be measured reliably and it is probable that the Group will receive any consideration, revenue for
these services is recognised in the period in which they are rendered.
Business combinations
Business combinations are accounted for using the acquisition method. The cost of acquisition is measured as the aggregate of the
consideration transferred, measured at the acquisition date fair value and its amount of any non-controlling interest in the acquiree. For
each business combination, the Group elects whether to measure the non-controlling interest in the acquiree at fair value or at the
proportionate share of the aquiree’s identifiable assets.
If the business combination is achieved in stages, the previously held equity interest is remeasured at its acquisition date fair value and
any resulting gain or loss is recognised in the consolidated income statement. Direct costs of acquisition are recognised immediately as
an expense.
Foreign currency
The Group’s consolidated financial statements are presented in UK pounds sterling, which is also the parent Company’s functional
currency. For each entity the Group determines the functional currency, and items included in the financial statements of each entity are
measured using that functional currency.
Transactions entered into by Group entities in a currency other than the currency of the primary economic environment in which they
operate (their “functional currency”) are recorded at the rates ruling when the transactions occur. Foreign currency monetary assets and
liabilities are translated at the rates ruling at the reporting date. Exchange differences arising on the retranslation of unsettled monetary
assets and liabilities are recognised immediately in the consolidated income statement.
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1 Accounting policies (continued)
On consolidation, the results of overseas operations are translated into sterling at rates approximating to those ruling when the transactions
took place. All assets and liabilities of overseas operations, including goodwill arising on the acquisition of those operations, are translated at
the rate ruling at the reporting date. Exchange differences arising on translating the opening net assets at opening rate and the results of
overseas operations at actual rate are recognised in other comprehensive income and accumulated in the foreign exchange reserve.
Exchange differences recognised in the income statement in the Group entities’ separate financial statements on the translation of
long-term monetary items forming part of the Group’s net investment in the overseas operation concerned are reclassified to other
comprehensive income and accumulated in the foreign exchange reserve on consolidation.
On disposal of a foreign operation, the cumulative exchange differences recognised in the foreign exchange reserve relating to that
operation up to the date of disposal are transferred to the consolidated income statement as part of the profit or loss on disposal.
Financial assets
The Group classifies all of its financial assets as loans and receivables and has not classified any of its financial assets as held
to maturity.
Loans and receivable assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active
market. They arise principally through the provision of goods and services to customers (e.g. trade receivables), but also incorporate
other types of contractual monetary asset. They are initially recognised at fair value plus transaction costs that are directly attributable to
their acquisition or issue, and are subsequently carried at amortised cost using the effective interest rate method, less provision
for impairment.
Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the part of the
counterparty or default or significant delay in payment) that the Group will be unable to collect all of the amounts due under the terms
receivable, the amount of such a provision being the difference between the net carrying amount and the present value of the future
expected cash flows associated with the impaired receivable. For trade receivables, which are reported net, such provisions are recorded
in a separate allowance account with the loss being recognised within operating costs in the consolidated income statement. On
confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the
associated provision.
From time to time, the Group elects to renegotiate the terms of trade receivables due from customers with which it has previously had a
good trading history. Such renegotiations will lead to changes in the timing of payments rather than changes to the amounts owed and, in
consequence, the new expected cash flows are discounted at the original effective interest rate and any resulting difference to the
carrying value is recognised in the consolidated income statement (operating profit).
The Group’s loans and receivables comprise trade and other receivables and cash and cash equivalents in the consolidated balance sheet.
Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short term highly liquid investments with
original maturities of three months or less from inception, and for the purpose of the statements of cash flows, bank overdrafts. Bank
overdrafts are shown within loans and borrowings in current liabilities on the consolidated balance sheet.
Financial liabilities
The Group classifies its financial liabilities as other financial liabilities which include the following items:
• Bank borrowings which are initially recognised at fair value net of any transaction costs directly attributable to the issue of the
instrument. Such interest bearing liabilities are subsequently measured at amortised cost using the effective interest rate method,
which ensures that any interest expense over the period to repayment is at a constant rate on the balance of the liability carried in
the consolidated balance sheet.
• Trade payables and other short-term monetary liabilities, which are initially recognised at fair value and subsequently carried at
amortised cost using the effective interest method.
Share capital
The Group’s ordinary shares are classified as equity instruments.
Retirement benefits: Defined contribution schemes
Contributions to defined contribution pension schemes are charged to the income statement in the year to which they relate.
Share-based payments
Where equity settled share options are awarded to employees, the fair value of the options at the date of grant is charged to the
consolidated income statement over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of
equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognised over the vesting period
is based on the number of options that eventually vest. Non-vesting conditions and market vesting conditions are factored into the fair
value of the options granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether the market
vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition or where a
non-vesting condition is not satisfied.
Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured
immediately before and after the modification, is also charged to the consolidated income statement over the remaining vesting period.
1 Accounting policies (continued)
Leased assets
Where substantially all of the risks and rewards incidental to ownership of a leased asset have been transferred to the Group (a “finance
lease”), the asset is treated as if it had been purchased outright. The amount initially recognised as an asset is the lower of the fair
value of the leased property and the present value of the minimum lease payments payable over the term of the lease. The
corresponding lease commitment is shown as a liability. Lease payments are analysed between capital and interest. The interest element
is charged to the consolidated income statement over the period of the lease and is calculated so that it represents a constant
proportion of the lease liability. The capital element reduces the balance owed to the lessor.
Where substantially all of the risks and rewards incidental to ownership are not transferred to the Group (an “operating lease”), the total
rentals payable under the lease are charged to the consolidated income statement on a straight-line basis over the lease term. The
aggregate benefit of lease incentives is recognised as a reduction of the rental expense over the lease term on a straight-line basis.
Goodwill
Goodwill is initially measured at cost, being the excess of the cost of a business combination over the total acquisition date fair value of the
identifiable assets, liabilities and contingent liabilities acquired. Goodwill is capitalised as an intangible asset with any impairment in carrying
value being charged to the consolidated income statement. Where the fair value of identifiable assets, liabilities and contingent liabilities
exceed the fair value of consideration paid, the excess is credited in full to the consolidated income statement on the acquisition date.
Externally acquired intangible assets
Externally acquired intangible assets are initially recognised at cost and subsequently amortised over their useful economic lives,
generally not exceeding 20 years, on a straight-line basis from the time they are available for use.
Intangible assets are recognised on business combinations if they are separable from the acquired entity or give rise to other
contractual/legal rights. The amounts ascribed to such intangibles are arrived at by using appropriate valuation techniques (see section
related to critical estimates and judgements below).
In-process research and development programmes acquired in such combinations are recognised as an asset, even if subsequent
expenditure is written off because it does not meet the criteria specified in the policy for development costs below.
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
Patents
Trademarks
Contracts
Licences
Intellectual property
5 years
2-5 years
2-5 years
3 years
6 to 15 years
Up to 20 years
Assessment of estimated revenues and profits
Cost to acquire
Cost to acquire
Assessment of estimated revenues and profits
Cost to acquire
Cost to acquire
Impairment of non-financial assets (excluding inventories, investment properties and deferred tax assets)
The carrying values of all non-current assets are reviewed for impairment, either on a stand-alone basis or as part of a larger cash
generating unit, when there is an indication that the assets might be impaired. Additionally, goodwill, intangible assets with indefinite useful
lives and intangible assets which are not yet available for use are tested for impairment annually. Where the carrying value of an asset
exceeds its recoverable amount (i.e. the higher of value in use and fair value less costs to sell), the asset is written down accordingly.
Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried out on the smallest
group of assets to which it belongs for which there are separately identifiable cash flows; its cash generating units (‘CGUs’). Goodwill is
allocated on initial recognition to each of the Group’s CGUs that are expected to benefit from the synergies of the combination giving rise
to the goodwill.
Impairment charges are included in the consolidated income statement, except to the extent they reverse gains previously recognised in
other comprehensive income. An impairment loss recognised for goodwill is not reversed.
Internally generated intangible assets (development costs)
Expenditure on internally developed products is capitalised if it can be demonstrated that:
• it is technically feasible to develop the product for it to be sold;
• adequate resources are available to complete the development;
• there is an intention to complete and sell the product;
• the Group is able to sell the product;
• sale of the product will generate future economic benefits; and
• expenditure on the project can be measured reliably.
Capitalised development costs are amortised over the periods the Group expects to benefit from selling the products developed. The
amortisation expense is included within the cost of sales line in the consolidated income statement.
Development expenditure not satisfying the above criteria and expenditure on the research phase of internal projects are recognised in
the consolidated income statement as incurred.
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1 Accounting policies (continued)
Deferred taxation
1 Accounting policies (continued)
Cash and cash equivalents
Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the balance sheet differs from its
tax base, except for differences arising on:
• the initial recognition of goodwill;
• the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction
affects neither accounting or taxable profit; and
• investments in subsidiaries and jointly controlled entities where the Group is able to control the timing of the reversal of the
difference and it is probable that the difference will not reverse in the foreseeable future.
Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available against which
the difference can be utilised. The carrying amount of deferred tax asset is reviewed at each balance sheet date and reduced to the
extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the reporting date
and are expected to apply when the deferred tax liabilities/assets are settled/recovered.
Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities and
the deferred tax assets and liabilities relate to taxes levied by the same tax authority on either:
• the same taxable Group company; or
• different Group entities which intend either to settle current tax assets and liabilities on a net basis, or to realise the assets and
settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax assets or liabilities are
expected to be settled or recovered.
Property, plant and equipment
Items of property, plant and equipment are initially recognised at cost. As well as the purchase price, cost includes directly attributable
costs and the estimated present value of any future unavoidable costs of dismantling and removing items. The corresponding liability is
recognised within provisions.
Freehold land is not depreciated. Assets in the course of construction which have not yet been brought into use are not depreciated until
fully commissioned and the asset is brought into use. Depreciation is provided on all other items of property, plant and equipment so as
to write off their carrying value over their expected useful economic lives. It is provided at the following rates:
Freehold property
Long term leasehold property improvements
Plant and machinery
Motor vehicles
E commerce infrastructure
Other fixed assets
Inventories
–
–
–
–
–
–
2% per annum straight line
2% – 10% per annum straight line
15% per annum reducing balance
25% per annum reducing balance
10% per annum straight line
15% – 33% per annum straight line
Inventories are initially recognised at cost, and subsequently at the lower of cost and net realisable value. Cost comprises all costs of
purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.
Livestock
Livestock is measured at fair value less costs to sell. The fair value of livestock is based on quoted prices of livestock and adjusted for
age, breed, and genetic merit in the principal (or most advantageous) market for the livestock, and therefore is categorised within level 2
of the fair value hierarchy set out in IFRS 13.
Government grants
Government grants received on capital expenditure are included in the balance sheet as deferred income and released to the income
statement over the life of the asset. Grants for revenue expenditure are netted against the cost incurred by the Group. Where retention of
a government grant is dependent on the Group satisfying certain criteria, it is initially recognised as deferred income. When the criteria
for retention have been satisfied, the deferred income balance is released to the consolidated income statement or netted against the
asset purchased.
Provisions
The Group has recognised provisions for liabilities of uncertain timing or amount including those for onerous leases, leasehold
dilapidations, sale or return obligations and legal disputes. The provision is measured at the best estimate of the expenditure required to
settle the obligation at the reporting date, discounted at a pre-tax rate reflecting current market assessments of the time value of money
and risks specific to the liability. In the case of leasehold dilapidations, the provision takes into account the potential that the properties
in question may be sublet for some or all of the remaining lease term.
Investments in subsidiary undertakings
Investments in subsidiaries are stated at cost less provision for impairment.
Cash and cash equivalents comprise cash balances and call deposits with an original maturity of three months or less. Bank overdrafts
that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash
equivalents for the purpose of the statements of cash flows.
Dividends
Dividends are recognised when they become legally payable. In the case of interim dividends to equity shareholders, this is when
declared by the Directors. In the case of final dividends, this is when approved by the shareholders at the AGM.
2 Critical accounting estimates and judgements
The Group makes certain estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on
historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In
the future, actual experience may differ from these estimates and assumptions. The estimates and assumptions that have a significant risk of
causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
Estimates and assumptions
(a)
Impairment of goodwill
The Group is required to test, on an annual basis, whether goodwill has suffered any impairment. The recoverable amount is determined
based on value in use calculations. The use of this method requires the estimation of future cash flows and the choice of a discount rate
in order to calculate the present value of the cash flows. More information including carrying values is included in note 16.
(b) Legal proceedings
The Group reviews outstanding legal cases following developments in the legal proceedings and at each reporting date, in order to
assess the need for provisions and disclosures in its financial statements. Among the factors considered in making decisions on
provisions are the nature of litigation, claim or assessment, the legal process and potential level of damages in the jurisdiction in which
the litigation, claim or assessment has been brought, the progress of the case (including the progress after the date of the financial
statements but before those statements are issued), the opinions or views of legal advisers, experience on similar cases and any
decision of the Group’s management as to how it will respond to the litigation, claim or assessment.
(c) Valuation of contracts and licences
The valuation of contracts and licences acquired as part of a business combination has been calculated based upon value in use which
requires the use of a discount rate in order to calculate the present value of cash flows. These intangibles are reviewed annually
for impairment.
(d)
Income taxes
The Group is subject to income tax in several jurisdictions and significant judgement is required in determining the provision for income
taxes. The Group believes that its accruals for tax liabilities are adequate for all open audit years based on its assessment of many
factors including past experience and interpretations of tax law. This assessment relies on estimates and assumptions and may involve a
series of complex judgements about future events. To the extent that the final tax outcome of these matters is different than the
amounts recorded, such differences will impact income tax expense in the period in which such determination is made.
(e) Share-based payments
The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date
at which they are granted. Estimating fair value for share-based payment transactions requires determination of the most appropriate
valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determination of the most
appropriate inputs to the valuation model including the expected life of the share option, volatility and dividend yield and making assumptions
about them. The assumptions and models used for estimating fair value for share-based payment transactions are disclosed in note 32.
3 Financial instruments – Risk Management
The Group is exposed through its operations to the following financial risks:
• Credit risk
• Fair value or cash flow interest rate risk
• Foreign exchange risk
• Liquidity risk
In common with all other businesses, the Group is exposed to risks that arise from its use of financial instruments. This note describes
the Group’s objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative
information in respect of these risks is presented throughout these financial statements. There have been no substantive changes in the
Group’s exposure to financial instrument risks, its objectives, policies and processes for managing those risks or the methods used to
measure them from previous periods unless otherwise stated in this note.
Principal financial instruments
The principal financial instruments used by the Group, from which financial instrument risk arises, are as follows:
• Trade receivables
• Cash and cash equivalents
• Trade and other payables
• Bank overdrafts
• Floating-rate bank loans
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3 Financial instruments – Risk Management (continued)
A summary of the financial instruments held by category is provided below:
Group
Financial assets
Cash and cash equivalents (note 37)
Trade and other receivables (note 20)
Total financial assets
Financial liabilities
Trade and other payables (note 21)
Loans and borrowings (note 22)
Total financial liabilities
Company
A summary of the financial instruments held by category is provided below:
Financial assets
Investments (note 17)
Other financial assets (note 17)
Cash and cash equivalents (note 37)
Trade and other receivables (note 20)
Total financial assets
Financial liabilities
Trade and other payables (note 21)
Loans and borrowings (note 22)
2014
£000
16,511
9,161
2013
£000
3,250
5,853
25,672
9,103
Financial liabilities at amortised cost
2014
£000
9,241
211
2013
£000
4,649
4,443
9,452
9,092
2014
£000
5,610
-
14,078
19,432
2013
£000
4,071
1,965
418
4,361
39,120
10,815
Financial liabilities at amortised cost
2014
£000
3,499
60
2013
£000
1,306
60
Total financial liabilities
3,559
1,366
There were no financial instruments classified as fair value through profit or loss or available for sale.
General objectives, policies and processes
The Board has overall responsibility for the determination of the Group’s risk management objectives and policies and, whilst retaining
ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure the effective
implementation of the objectives and policies to the Group’s finance function.
The Board receives monthly reports from the Group Chief Financial Officer through which it reviews the effectiveness of the processes put
in place and the appropriateness of the objectives and policies it sets.
3 Financial instruments – Risk Management (continued)
The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Group’s
competitiveness and flexibility. Further details regarding these policies are set out below:
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual
obligations. The Group is mainly exposed to credit risk from credit sales. It is Group policy, implemented locally, to assess the credit risk
of new customers before entering contracts.
Credit risk also arises from cash and cash equivalents and deposits with banks and financial institutions. For banks and financial
institutions, only independently rated parties with minimum rating “A” are accepted.
Further disclosures regarding trade and other receivables, which are neither past due nor impaired, are provided in note 20.
Fair value and cash flow interest rate risk
During the first part of the year, the Group was exposed to cash flow interest rate risk from long-term borrowings at variable rate.
However, the long term borrowings were repaid during the year removing this interest rate risk.
During 2014 and 2013, the Group’s borrowings at variable rate were denominated in Sterling.
At 30 September 2014, if interest rates on Pound Sterling-denominated borrowings had been 100 basis points higher/lower with all
other variables held constant, profit after tax for the year and net assets would have been £11,000 (2013: £44,000) lower/higher, mainly
as a result of higher/lower interest expense on floating rate borrowings at the start of the year. The Directors consider that 100 basis
points is the maximum likely change in Sterling interest rates over the next year, being the period up to the next point at which the Group
expects to make these disclosures.
Foreign exchange risk
Foreign exchange risk arises when individual Group entities enter into transactions denominated in a currency other than their functional
currency. The Group’s policy is, where possible, to allow Group entities to settle liabilities denominated in their functional currency
(primarily US dollar or Pound Sterling) 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.
The Group is predominantly exposed to currency risk on purchases made from a major supplier in US Dollars and on sales in North
America made in US dollars. There is a natural hedge between these two transactions; any surplus US dollars generated are used to
fund the overseas US dollar denominated operations of the Group.
At 30 September 2014, if the pound sterling had strengthened/weakened by 10% against both the US dollar and Euro with all other
variables held constant, the recalculated post tax loss for the year would have been £11,000 (2013: £50,000) higher/lower mainly as a
result of foreign exchange gains/losses on translation of US dollar/Euro denominated deferred consideration balances, trade receivables
and trade payables.
Liquidity risk
Liquidity risk arises from the Group’s management of working capital and the finance charges and principal repayments on its debt
instruments. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due.
The Group’s policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due. To achieve
this aim, the Group seeks to maintain cash balances (or agreed facilities) sufficient to meet expected requirements detailed in rolling
three month cashflow forecasts, and in longer term cashflow forecasts.
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3 Financial instruments – Risk Management (continued)
The following table sets out the contractual maturities (representing undiscounted contractual cash-flows) of financial liabilities:
Group
As at September 2014
Trade and other payables
Loans and borrowings
Total
As at September 2013
Trade and other payables
Loans and borrowings
Total
Company
As at September 2014
Trade and other payables
Loans and borrowings
Total
As at September 2013
Trade and other payables
Loans and borrowings
Total
Capital Management
Up to
3 months
£000
7,610
31
7,641
Up to
3 months
£000
4,649
2,244
6,893
Up to
3 months
£000
3,499
-
3,499
Up to
3 months
£000
1,306
-
1,306
Between
3 and 12
months
£000
-
93
93
Between
3 and 12
months
£000
-
-
-
Between
3 and 12
months
£000
-
-
-
Between
3 and 12
months
£000
-
-
-
Between
1 and 2
years
£000
982
99
1,081
Between
1 and 2
years
£000
-
2,199
2,199
Between
1 and 2
years
£000
-
60
60
Between
1 and 2
years
£000
-
60
60
Between
2 and 5
years
£000
649
-
649
Between
2 and 5
years
£000
-
-
-
Between
2 and 5
years
£000
-
-
-
Between
2 and 5
years
£000
-
-
-
Over
5 years
£000
-
-
-
Over
5 years
£000
-
-
-
Over
5 years
£000
-
-
-
Over
5 years
£000
-
-
-
The Group monitors “adjusted capital” which comprises all components of equity (i.e. share capital, share premium, non-controlling
interest, retained earnings, and share based payment reserve). The Group’s objectives when maintaining capital are:
• to safeguard the entity’s ability to continue as a going concern, so that it can continue to provide returns for shareholders and
benefits for other stakeholders, and
• to provide an adequate return to shareholders by pricing products and services commensurately with the level of risk.
The Group sets the amount of capital it requires in proportion to risk. The Group manages its capital structure and makes adjustments to
it in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the
capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares,
or sell assets to reduce debt.
The Group monitors capital on the basis of the debt to adjusted capital ratio. Following the IPO in December 2013, bank debt was repaid
in full, although the Group continues to operate with a £4m overdraft facility. The requirement for new debt continues to be monitored for
optimal funding of current and future operations.
4 Revenue
Revenue arises from:
Sale of goods
Provision of services
5 Other income
Grants receivable
2014
£000
30,635
4,719
2013
£000
24,117
3,426
35,354
27,543
2014
£000
101
2013
£000
111
Grants receivable include grants and donations received by the Group’s subsidiary FAI do Brasil Criacao Animal Ltda, in respect of
projects carried out by this entity. Since this is not considered to be part of the main revenue generating activities, the Group presents
this income separately from revenue.
6 Expenses by nature
Changes in inventories of finished goods and work in progress
Changes in agricultural assets
Write-down of inventory to net realisable value
Raw materials and consumables used
Staff costs (see note 8)
Depreciation of property, plant and equipment
Amortisation of intangible assets
Research and development costs
Foreign exchange losses
Operating lease expense: Property
Loss on disposal of property, plant and equipment
Transportation expenses
Advertising expenses
Exceptional expenses (see note 11)
Investing activities excluding research and development
Other costs
2014
£000
358
(32)
107
14,690
9,766
533
871
2,690
93
690
41
550
499
1,691
2,025
2,070
2013
£000
(2,634)
(94)
215
10,803
7,064
347
784
752
37
295
3
360
187
162
254
4,015
Total cost of sales, operating costs, depreciation and amortisation
36,642
22,550
7 Auditor’s remuneration
Audit of these financial statements
Amounts receivable by auditors and their associates in respect of:
Audit of financial statements of subsidiaries pursuant to legislation
Audit related assurance services
Services relating to taxation
Fees as reporting accountants for IPO
All other services
2014
£000
4
72
10
12
256
6
360
2013
£000
4
51
-
20
-
31
106
128
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129
8 Staff costs
9 Segment information
Staff costs (including Directors) comprise:
Wages and salaries
Social security contributions and similar taxes
Defined contribution pension cost
Share-based payment expense (note 32)
The average monthly number of employees, including Directors, during the year was as follows:
Production
Administration
Management
Directors’ remuneration
Emoluments
Total pension and other post-employment benefit costs
2014
£000
8,239
770
334
423
2013
£000
5,997
529
305
233
9,766
7,064
2014
No.
2013
No.
128
29
25
182
2014
£000
918
33
951
82
13
23
118
2013
£000
885
66
951
During the year retirement benefits were accruing to 9 Directors (2013: 9) in respect of defined contribution pension schemes.
The highest paid Director received remuneration of £277,000 (2013: £122,000).
The value of the Group’s contributions paid to a defined contribution pension scheme in respect of the highest paid Director amounted to
£7,000 (2013: £6,000).
In addition to the above, there was an accounting charge for share based payments in respect of the Directors for £26,000 (2013: £40,000).
The aggregate gain on the exercise of options by the Directors during the year was £192,000 (2013: £nil).
Further details of Directors’ remuneration are provided in the Remuneration Report on pages 91 to 101.
The key management of the Group is deemed to be the Board of Directors who have authority and responsibility for planning and
controlling all significant activities of the Group.
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 three reportable segments as follows:
• Animal Health Division – provides veterinary services, environmental services, diagnostics and animal health products to global
aquaculture and agriculture, and manufactures licenced veterinary vaccines and vaccine components;
• 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.
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 28.
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.
Segment assets exclude tax assets and assets used primarily for corporate purposes. Segment liabilities exclude tax liabilities and loans
and borrowings unless directly related to individual segments.
Year ended 30 September 2014
Revenue
Cost of sales
Gross profit/(loss)
Other income
Operating costs relating to
Trading Activities
EBITDA from Trading Activities
Operating costs relating to
Investing Activities:
R&D expenditure
Pre-operational expenses
Acquisition related expenses
Exceptional items
EBITDA
Depreciation
Amortisation
Operating profit/(loss)
Finance expense
Finance income
Group loss before tax
Notes
Animal Sustainability
Science
Health
£000
£000
Technical
Publishing
£000
Corporate
£000
Intersegment
sales
£000
32,981
(18,548)
14,433
-
3,073
(2,339)
2,873
(2,438)
734
101
435
-
833
(1,210)
(377)
-
(4,406)
3,953
(453)
-
Total
£000
35,354
(20,582)
14,772
101
(3,971)
(1,863)
(707)
(2,162)
453
(8,250)
10,462
(1,028)
(272)
(2,539)
11
(2,690)
(1,585)
(222)
(125)
5,840
(309)
(607)
-
-
(108)
(32)
(1,168)
(182)
(89)
-
-
(12)
(40)
(324)
(16)
(175)
-
-
(98)
(1,494)
(4,131)
(26)
-
4,924
(1,439)
(515)
(4,157)
-
-
-
-
-
-
-
-
-
6,623
(2,690)
(1,585)
(440)
(1,691)
217
(533)
(871)
(1,187)
(248)
60
(1,375)
130
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131
9 Segment information (continued)
Year ended 30 September 2013
9 Segment information (continued)
30 September 2013
Notes
Animal Sustainability
Science
Health
£000
£000
Technical
Publishing
£000
Corporate
£000
Intersegment
sales
£000
Total
£000
Animal
Health
£000
Sustainability
Science
£000
Technical
Publishing
£000
Corporate
£000
Total
£000
Revenue
Cost of sales
Gross profit
Other income
Operating costs relating to
Trading Activities
EBITDA from Trading Activities
Operating costs relating to
Investing Activities:
R&D expenditure
Pre-operational expenses
Acquisition related expenses
Exceptional items
EBITDA
Depreciation
Amortisation
Operating profit/(loss)
Finance expense
Finance income
Group profit before tax
30 September 2014
25,878
(13,605)
2,099
(1,808)
2,343
(1,546)
12,273
-
(2,030)
10,243
(752)
(154)
(100)
-
9,237
(148)
(721)
8,368
291
111
(687)
(285)
-
-
-
-
(285)
(133)
-
(418)
11
783
(1,180)
(397)
-
(3,560)
3,373
27,543
(14,766)
(187)
-
12,777
111
797
-
(690)
(2,265)
187
(5,485)
107
(2,662)
-
-
-
-
107
(47)
(63)
-
-
-
(162)
(2,824)
(19)
-
(3)
(2,843)
-
-
-
-
-
-
-
-
-
7,403
(752)
(154)
(100)
(162)
6,235
(347)
(784)
5,104
(259)
8
4,853
Animal
Health
£000
Sustainability
Science
£000
Technical
Publishing
£000
Corporate
£000
Total
£000
Additions to non-current assets
439
598
(68)
(9)
960
Reportable segment assets
Deferred tax asset
Total Group assets
Reportable segment liabilities
Loans and borrowings
(excluding leases and overdrafts)
Total Group liabilities
United Kingdom
Rest of Europe
Chile
Other
18,570
2,177
729
699
22,175
241
22,416
5,532
812
450
861
7,655
2,849
10,504
External revenue by
location of customers
Non-current assets by
location of assets
2014
£000
14,148
5,926
13,612
1,668
35,354
2013
£000
9,520
7,421
8,587
2,015
2014
£000
13,607
1,363
-
955
2013
£000
7,011
3
-
473
27,543
15,925
7,487
Additions to non-current assets
5,655
1,974
191
(3)
7,817
Customers with turnover in excess of 10% of total turnover
Reportable segment assets
Deferred tax asset
Total Group assets
Reportable segment liabilities
Loans and borrowings
(excluding leases and overdrafts)
Total Group liabilities
16,921
3,917
2,320
25,006
48,164
339
48,503
Customer A
Customer B
Customer C
Customer D
8,039
1,732
666
814
11,251
-
11,251
All of the above customers purchase goods from the Animal Health operating segment.
2014
£000
4,607
4,469
13,612
3,105
2013
£000
6,728
3,039
7,994
2,940
25,793
20,701
132
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133
10 Finance income and expense
12 Tax expense (continued)
2014
£000
2013
£000
The reasons for the difference between the actual tax charge for the year and the standard rate of corporation tax in the United Kingdom
applied to profits for the year are as follows:
Finance income
Interest received on bank deposits
Finance cost
Finance leases (interest portion)
Interest expense on financial liabilities measured at amortised cost
Total finance expense
Net finance expense recognised in profit or loss
11 Exceptional items
60
13
235
248
188
8
3
256
259
251
Items that are material because of their size or nature, non-recurring and whose significance is sufficient to warrant separate disclosure
and identification within the consolidated financial statements are referred to as exceptional items. The separate reporting of exceptional
items helps to provide an understanding of the Group’s underlying performance.
Exceptional IPO costs
Exceptional share based payment expense arising from IPO
Lease termination costs
Total exceptional costs
2014
£000
1,298
292
101
1,691
2013
£000
162
-
-
162
On 18 December 2013 Benchmark Holdings plc was admitted to trading on AIM. The IPO raised gross proceeds of £27.5 million through
the issue of 42,968,750 new ordinary shares. However, significant non-recurring costs were incurred in relation to the IPO and it is
deemed necessary to separately identify these costs within the results for year.
Total IPO costs amounted to £2,836,000. Of this, £1,298,000 has been treated as exceptional IPO costs and charged to income during
the period, with the balance of £1,538,000 being offset against the share premium account.
A number of one-off share based payment transactions arose as part of the IPO. The expense for the current year in relation to these
transactions amounted to £292,000.
12 Tax expense
Accounting (loss)/profit before income tax
Expected tax charge based on the standard rate of United Kingdom
corporation tax at the domestic rate of 22% (2013: 23.5%)
Expenses not deductible for tax purposes, other than goodwill amortisation
Research and development relief
Deferred tax not recognised
Adjustments to tax charge in respect of prior periods
Different tax rates in overseas jurisdictions
Total tax (credit)/expense
Changes in tax rates and factors affecting the future tax charge
2014
£000
2013
£000
(1,375)
4,853
(302)
55
(325)
516
2
-
(54)
1,140
13
(392)
12
(271)
58
560
Finance Act 2013 includes provision for the main rate of corporation tax to reduce to 20% on 1 April 2015. The reductions in the
corporation tax rate were substantively enacted on 3 July 2013 and will reduce future tax charges. Deferred tax has been calculated at
20% being the rate applying from April 2015.
There was no deferred tax recognised in other comprehensive income.
13 Earnings per share
Basic earnings per share is calculated by dividing the profit attributable to ordinary equity holders of the Company by the weighted
average number of ordinary shares in issue during the period.
Net (loss)/profit attributable to equity holders of the parent (£000)
Weighted average number of shares in issue (thousands)
Basic (loss)/earnings per share (pence)
2014
2013
(1,315)
126,959
(1.04)
4,294
91,037
4.72
Diluted 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.
2014
£000
2013
£000
Therefore the Company is required to adjust the earnings per share calculation in relation to the share options that are in issue under the
Company’s share based incentive schemes as follows:
Current tax expense
Current tax on profits for the year
Adjustment for under provision in prior periods at amortised cost
Total current tax
Deferred tax expense
Origination and reversal of temporary differences (Note 25)
Total deferred tax credit
Total tax credit
-
2
2
(56)
(56)
(54)
836
(271)
565
(5)
(5)
560
Net (loss)/profit attributable to equity holders of the parent (£000)
Weighted average number of shares in issue (thousands)
Diluted basic (loss)/earnings per share (pence)
2014
2013
(1,315)
126,959
(1.04)
4,294
94,084
4.56
A total of 2,250,000 potential ordinary shares have not been included within the calculation of statutory diluted earnings per share for
the year (2013: nil) as they are anti-dilutive. However, these potential ordinary shares could dilute earnings per share in the future.
134
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135
13 Earnings per share (continued)
Earnings per share from Trading Activities
14 Property, plant and equipment
Group
Net profit attributable to equity shareholders has been adjusted to exclude exceptional items and other operating costs relating to
Investing Activities as disclosed in note 28.
Profit from Trading Activities attributable to equity holders of the parent (£000)
Weighted average number of shares in issue (thousands)
Earnings per share from Trading Activities (pence)
Diluted earnings per share from Trading Activities were as follows:
Profit from Trading Activities attributable to equity holders of the parent (£000)
Weighted average number of shares in issue (thousands)
Diluted earnings per share from Trading Activities (pence)
2014
2013
4,177
126,959
3.29
5,085
91,037
5.59
2014
2013
4,177
129,209
3.23
5,085
94,084
5.40
Assets
in the
Freehold
Land and
Course of
Buildings Construction
£000
£000
Long Term
Leasehold
Property
Improvements
£000
Plant and
Machinery
£000
E commerce
Infra-
structure
£000
Office
Equipment
and
Fixtures
£000
Cost
Balance at 1 October 2012
Additions
Disposals
Balance at 1 October 2013
Additions
On acquisition
Reclassification
Exchange differences
Disposals
Balance at 30 September 2014
Accumulated depreciation
Balance at 1 October 2012
Depreciation charge for the year
Disposals
Balance at 1 October 2013
Depreciation charge for the year
Reclassification
Exchange differences
Disposals
Balance at 30 September 2014
Net book value
At 30 September 2014
At 30 September 2013
At 1 October 2012
-
700
-
700
28
-
-
-
-
728
-
-
-
-
-
-
-
-
-
728
700
-
Total
£000
3,335
1,748
(13)
5,070
4,030
228
-
(16)
(178)
945
376
-
1,321
1,264
30
-
-
-
1,617
535
(13)
2,139
2,340
198
-
(3)
(134)
238
137
-
375
8
-
(179)
-
-
535
-
-
535
248
-
179
(13)
(44)
2,615
4,540
204
905
9,134
47
53
-
100
134
-
-
-
839
166
(12)
993
253
-
(2)
(93)
118
32
-
150
37
(42)
-
-
159
96
-
255
109
42
-
(44)
1,163
347
(12)
1,498
533
-
(2)
(137)
234
1,151
145
362
1,892
-
-
-
-
142
-
-
-
-
142
-
-
-
-
-
-
-
-
-
142
2,381
3,389
59
543
7,242
-
-
1,221
1,146
898
778
225
120
280
3,572
376
2,172
Security over the assets is disclosed within note 22.
The above includes the following in respect of plant and machinery held under finance leases (note 29):
Cost
Accumulated depreciation
Net book value
2014
£000
339
(109)
230
2013
£000
283
(75)
208
136
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137
14 Property, plant and equipment (continued)
Company
15 Intangible assets
Cost
Balance at 1 October 2012
Additions
Balance at 1 October 2013
Additions
Disposals
Balance at 30 September 2014
Accumulated depreciation
Balance at 1 October 2012
Depreciation charge for the year
Balance at 1 October 2013
Depreciation charge for the year
Disposals
Balance at 30 September 2014
Net book value
At 30 September 2014
At 30 September 2013
At 1 October 2012
Office equipment
and fixtures
£000
112
10
122
27
(2)
147
37
19
56
26
-
82
65
66
75
Websites
£000
Goodwill
£000
Patents
and
Trademarks
£000
Intellectual
Property
£000
Contracts
£000
Licences
£000
Total
£000
Cost
Balance at 1 October 2012
Additions – externally acquired
Balance at 1 October 2013
Additions – externally acquired
515
-
515
2
1,419
270
1,689
1,012
374
156
530
60
-
-
-
1,678
1,565
-
1,565
270
1,194
-
1,194
1,996
5,067
426
5,493
5,018
Balance at 30 September 2014
517
2,701
590
1,678
1,835
3,190
10,511
Accumulated amortisation and impairment
Balance at 1 October 2012
Amortisation charge for the year
Balance at 1 October 2013
Amortisation charge for the year
Balance at 30 September 2014
328
63
391
68
459
273
-
273
-
273
374
-
374
14
388
-
-
-
-
-
43
522
565
522
17
199
216
267
1,035
784
1,819
871
1,087
483
2,690
Net book value
At 30 September 2014
58
2,428
202
1,678
748
2,707
7,821
At 30 September 2013
124
1,416
156
At 1 October 2012
187
1,146
-
-
-
1,000
978
3,674
1,522
1,177
4,032
Additions to goodwill, intellectual property and contracts are detailed in note 33.
Current estimates of useful economic lives of intangible assets are as follows:
Goodwill
Patents
Websites
Trademarks
Contracts
Licences
Intellectual property
Infinite
5 years
5 years
5 years
3 years
6 years
Up to 15 years
138
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139
16 Impairment testing of goodwill
17 Subsidiary undertakings
Goodwill acquired in a business combination is allocated, at acquisition, to the cash generating units (CGUs) that are expected to benefit
from the business combination. The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill
might be impaired.
Goodwill arises across all of the Group’s operating segments, and is allocated specifically against the following CGUs:
FVG Limited
Benchmark Vaccines Limited
Atlantic Veterinary Services Limited
FAI do Brasil Criacao Animal Ltda
Dust Collective Limited
Allan Environmental Limited
FAI Aquaculture Limited
5M Enterprises Limited
FVG Limited
Benchmark Vaccines Limited
FAI do Brazil Criacao Animal Ltda
Dust Collective Limited
Allan Environmental Limited
5M Enterprises Limited
Animal Health
2014
£000
Sustainability
Science
2014
£000
Technical
Publishing
2014
£000
288
439
167
-
-
-
-
-
894
-
-
-
96
120
225
446
-
887
-
-
-
-
-
-
-
647
647
Animal Health
2013
£000
Sustainability
Science
2013
£000
Technical
Publishing
2013
£000
288
439
-
-
-
-
727
-
-
96
120
150
-
366
-
-
-
-
-
323
323
Total
2014
£000
288
439
167
96
120
225
446
647
2,428
Total
2013
£000
288
439
96
120
150
323
1,416
The recoverable amounts of the above CGUs have been determined from value in use calculations which have been predicated on
discounted cash flow projections from formally approved budgets. These budgets cover a three year period to 30 September 2017, other
than for Benchmark Vaccines Limited, in which a detailed five year forecast has been used to cover the manufacturing expansion
programme for that business. These budgets were then extrapolated in perpetuity taking account of specific growth rates for future cash
flows, using individual business operating margins based on past experience and future expectations in light of anticipated economic and
market conditions.
The pre-tax cashflows that these projections produced were discounted at pre-tax discount rates based on the Group’s beta adjusted cost
of capital reflecting management’s assessment of specific risks related to the cash generating unit. A single discount rate of 13% has
been used in the impairment calculations which the Directors believe fairly reflects the risks inherent in each of the CGUs, and a zero
growth rate was used in extrapolating the budgets into perpetuity.
The value in use assessment is sensitive to changes in the key assumptions used, most notably the discount rate and the growth rates.
A sensitivity analysis has been performed on the individual CGUs, and based on this analysis, no reasonably possible changes to these
assumptions resulted in an additional impairment charge being required.
The principal direct and indirect subsidiary undertakings of Benchmark Holdings plc, all of which have been included in these
consolidated financial statements, are as follows:
Name
Animal Health Division
Benchmark Animal Health Group Limited
Benchmark Animal Health Limited
Benchmark Vaccines Limited
FVG Limited
Fish Vet Group Asia Limited
Fish Vet Group Norge AS
FVG Inc
Atlantic Veterinary Services Limited
Vet Aqua International Limited*
Sustainability Science Division
FAI Farms Limited
FAI do Brasil Criacao Animal Ltda
FAI Aquaculture Limited (formerly Viking Fish Farms Limited)
RL Consulting Limited
Trie Benchmark Limited
Allan Environmental Limited
Dust Collective Limited
Technical Publishing Division
5M Enterprises Limited
5M Enterprises Inc
Country of
incorporation
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Thailand
Norway
USA
Ireland
Ireland
United Kingdom
Brazil
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
USA
Proportion of ownership
interest as at 30 September
2013
2014
100%
100%
100% -
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
-
100%
-
100%
100%
99.25%
100%
100%
100%
100%
100%
98.5%
98.5%
100%
99.25%
-
100%
100%
100%
100%
98.5%
98.5%
* Vet Aqua International Limited is consolidated into the Group by virtue of the Group’s control over the business via a put and call
option agreement entered into during the year for the business to be acquired at a future date.
Company
Cost or valuation
Balance at 1 October 2012
Additions
Amounts repaid
Balance at 30 September 2013
Additions
Capitalisation of intercompany balances
Amounts repaid
Balance at 30 September 2014
Net book value
At 30 September 2014
At 30 September 2013
At 1 October 2012
Loans to
subsidiary
companies
£000
Investments in
subsidiary
companies
£000
1,166
1,965
(1,166)
1,965
-
-
(1,965)
-
-
1,965
1,166
2,744
1,327
-
4,071
693
846
-
5,610
5,610
4,071
2,744
140
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141
17 Subsidiary undertakings (continued)
In 2014 the Company acquired 100% of the ordinary share capital of Viking Fish Farms Limited for £400,000 and subscribed for an
additional £100,000 of shares in Trie Benchmark Ltd. Furthermore, through FVG Ltd, the Group acquired 100% of the ordinary share
capital of Atlantic Veterinary Services Limited for €200,000. During the year, intercompany balances totalling £846,000 were converted
into share capital. Additionally £193,000 (2013: £192,000) of the charge associated with share options relates to employees of
subsidiary companies, and so this amount has been treated as an investment in the books of the Company.
18 Inventories
Group
Raw materials
Work in progress
Finished goods and goods for resale
2014
£000
1,560
1,679
1,231
2013
£000
935
160
3,108
Total inventories at the lower of cost and net realisable value
4,470
4,203
During 2014 £14,797,000 (2013: £11,018,000) was recognised as an expense for inventories carried at net realisable value. This is
recognised in cost of sales. The cost of inventories recognised as an expense includes £107,000 (2013: £215,000) in respect of write-
downs of inventory to net realisable value, and has been increased by £449,000 (2013: reduced by £53,000) in respect of the reversal
of such write-downs. Previous write-downs have been reversed as a result of increased sales prices in certain markets.
The Company did not have any inventories at the year end (2013: £nil).
19 Agricultural assets
Group
Organic sheep
Organic beef
Organic pigs
Total livestock
2014
£000
237
298
4
539
2013
£000
214
287
6
507
The Group operates a commercial and research farming and technology transfer business, and at 30 September 2014 held 2,856
(2013: 2,559) head of sheep, 253 (2013: 271) head of cattle and 66 (2013: 42) pigs. The Group had farming sales of £309,000 in the
year ended 30 September 2014 (2013: £237,000).
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.
20 Trade and other receivables
Group
Trade receivables
Less: provision for impairment of trade receivables
Trade receivables – net
Loans to related parties
Total financial assets other than cash and cash equivalents classified as loans and receivables
Prepayments
Other receivables
Total trade and other receivables
Less: non-current portion: prepayments
2014
£000
9,224
(63)
9,161
-
9,161
1,774
646
11,581
(523)
2013
£000
5,890
(37)
5,853
-
5,853
221
895
6,969
-
Current portion
11,058
6,969
All non-current receivables are due within five years from the end of the reporting period.
The fair values of trade and other receivables classified as loans and receivables are not materially different to their carrying values. As
at 30 September 2014 trade receivables of £1,002,000 (2013: £1,517,000) were past due but not impaired. They relate to customers
with no default history. The ageing analysis of these receivables is as follows:
Up to 3 months overdue
3 to 6 months overdue
6 to 12 months overdue
Movements on the Group provision for impairment of trade receivables are as follows:
At 1 October
Provided during the year
Receivable written off during the year as uncollectable
At 30 September
2014
£000
903
59
40
2013
£000
1,296
221
-
1,002
1,517
2014
£000
37
26
-
63
2013
£000
85
20
(68)
37
The movement on the provision for impaired receivables has been included in the administrative expenses line in the consolidated
income statement.
In accordance with the accounting policy on revenue recognition £nil (2013 – £296,000) has been derecognised from gross trade
receivables as this is subject to a specific return clause.
Other classes of financial assets included within trade and other receivables do not contain impaired assets.
142
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143
20 Trade and other receivables (continued)
Company
Receivables from related parties
Total financial assets other than cash and cash equivalents classified as loans and receivables
Prepayments
Other receivables
Total trade and other receivables
Less: non-current portion
Current portion
21 Trade and other payables
Group
Trade payables
Other payables
Accruals
Total financial liabilities, excluding loans and borrowings, classified as financial liabilities
measured at amortised cost
Other payables – tax and social security payments
Deferred income
Total trade and other payables
Less: non-current portion
Current portion
Book values approximate to fair value at 30 September 2014 and 2013.
Company
Trade payables
Payables to related parties
Other payables
Accruals
Total financial liabilities, excluding loans and borrowings, classified as financial liabilities
measured at amortised cost
Other payables – tax and social security payments
2014
£000
2013
£000
19,432
4,361
19,432
182
89
19,703
-
4,361
11
124
4,496
-
19,703
4,496
2014
£000
3,575
2,391
3,275
9,241
164
507
9,912
(1,631)
2013
£000
1,416
2,083
1,150
4,649
277
143
5,069
-
8,281
5,069
2014
£000
203
2,663
-
633
3,499
45
2013
£000
75
536
1
694
1,306
31
Total trade and other payables
3,544
1,337
Book values approximate to fair value at 30 September 2014 and 2013.
22 Loans and borrowings
Group
Non-Current
Bank loans secured
Other loans
Finance lease creditor (note 29)
Current
Overdrafts
Bank loans secured
Finance lease creditor (note 29)
Total loans and borrowings
2014
£000
-
60
36
96
-
-
115
115
211
2013
£000
2,069
60
70
2,199
1,504
720
20
2,244
4,443
The fair value of loans and borrowings is not materially different to the carrying value and has not been separately disclosed.
All bank loans were repaid during the year. There were no bank loans outstanding at the end of the year. The interest rate on bank loans
in the prior year was 4.5% above LIBOR.
The Group operates with an overdraft facility of £4,000,000, which is secured on the assets of the parent and UK subsidiary companies.
The finance lease liabilities are secured on the assets to which they relate.
The currency profile of the Group’s loans and borrowings is as follows:
Sterling
Company
The book value and fair value of loans and borrowings are as follows:
Non-Current
Other loans
Total loans and borrowings
2014
£000
2013
£000
211
4,443
2014
£000
60
60
2013
£000
60
60
The fair value of loans and borrowings is not materially different to the carrying value and has not been separately disclosed.
All of the company’s borrowings are in Sterling.
144
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145
23 Provisions
25 Deferred tax
Legal fees
provision
£000
Repairs
provision
£000
Other
provisions
£000
At 1 October 2012
Charged to profit or loss
Utilised in year
At 1 October 2013
Charged to profit or loss
Utilised in year
At 30 September 2014
Current
Non-current
At 30 September 2014
Current
Non-current
At 30 September 2013
Legal fees provision
530
40
(490)
80
220
-
300
300
-
300
-
80
80
55
-
-
55
-
(25)
30
30
-
30
-
55
55
Total
£000
585
40
(490)
135
970
(25)
-
-
-
-
750
-
750
1,080
750
-
1,080
-
750
1,080
-
-
-
-
135
135
There is an on-going legal dispute involving FVG Limited, a subsidiary company, relating to improper usage of the Salmosan product by a
third party. Additionally, FVG Limited has recently commenced legal action against a Norwegian company for breach of a trademark owned
by the Group. At the year end, the Directors reviewed the adequacy of the provision based on current information relating to the two
matters, and consider that the provision should be increased by £220,000 to £300,000. Although the latter action is at a relatively early
stage, the Directors consider this to be a reasonable estimate of the likely financial outcome of defending the Group’s position, and that
both matters could be settled in the financial year ending 30 September 2015.
Repairs provision
Under property operating lease agreements, FAI Farms Limited, a subsidiary company, has a rolling obligation to maintain all properties to
the standard that prevailed at the inception of the lease. The Directors estimate the costs of this obligation at £15,000 (2013:
£15,000). Additionally, Benchmark Vaccines Limited has a repairs provision of £15,000 in respect of its Braintree premises.
Other provisions
Provisions totalling £750,000 (2013: £nil) were made during the year in relation to potential rebates to customers/distributors based on
targeted volumes, price fluctuations and potential stock returns under right of return clauses. The Directors expect these to be settled in
the financial year ended 30 September 2015.
24 Dividends paid and proposed
Declared and paid during the year
Interim dividend for 2014: 0.18 pence per share (rebased) (2013: 0.44 pence per share (rebased))
Final dividend for 2014: £nil per share (2013:£nil)
2014
£000
165
-
165
2013
£000
401
-
401
Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 20% (2013: 20%). Finance Act
2013 includes provision for the main rate of corporation tax to reduce to 20% on 1 April 2015. The reductions in the corporation tax rate
were substantively enacted on 3 July 2013 and will reduce future tax charges. Deferred tax has been calculated at 20% being the rate
applying from April 2015.
The movement on the deferred tax account is as shown below:
Group
At 1 October
Recognised in income statement
Tax credit (note 12)
Recognised in equity
At 30 September
Company
At 1 October
Recognised in income statement
Tax expense
Recognised in equity
At 30 September
2014
£000
241
56
42
339
2014
£000
79
(42)
10
47
2013
£000
144
5
92
241
2013
£000
64
(1)
16
79
There was no deferred tax recognised in other comprehensive income.
Deferred tax assets have been recognised in respect of all tax losses and other temporary differences giving rise to deferred tax assets
where the Directors believe it is probable that these assets will be recovered. The Directors believe there is sufficient evidence that the
amounts recognised will be recovered against future taxable profits. The Group did not recognise deferred tax assets of £469,000
(2013: £nil) in respect of losses amounting to £2,217,000 (2013: £nil) and temporary differences of £128,000 (2013: £nil). The losses
primarily relate to losses made in overseas jurisdictions.
No deferred tax is recognised on the unremitted earnings of overseas subsidiaries and joint ventures. As the earnings are continually
reinvested by the Group and there is no intention for these entities to pay dividends, no tax is expected to be payable on them in the
foreseeable future.
The movements in deferred tax assets and liabilities (prior to the offsetting of balances within the same jurisdiction as permitted by
IAS 12) during the period, together with amounts recognised in the consolidated income statement and amounts recognised in other
comprehensive income are as follows:
Group
Accelerated capital allowances
Other temporary and deductible differences
Available losses
Fair value of share options
Net tax assets/(liabilities)
Asset
2014
£000
-
60
136
201
397
Liability
2014
£000
(58)
-
-
-
(58)
(Charged)/
credited
to profit
or loss
2014
£000
(Charged)/
credited
to equity
2014
£000
-
(36)
92
-
56
-
-
-
42
42
Net
2014
£000
(58)
60
136
201
339
146
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147
25 Deferred tax (continued)
26 Share capital and share premium
Accelerated capital allowances
Other temporary and deductible differences
Available losses
Fair value of share options
Net tax assets/(liabilities)
Company
Accelerated capital allowances
Other temporary and deductible differences
Available losses
Fair value of share options
Net tax assets/(liabilities)
Accelerated capital allowances
Other temporary and deductible differences
Available losses
Fair value of share options
Net tax assets/(liabilities)
Asset
2013
£000
-
96
44
159
299
Asset
2014
£000
-
12
-
39
51
Asset
2013
£000
-
55
3
29
87
Liability
2013
£000
(58)
-
-
-
(58)
Liability
2014
£000
(4)
-
-
-
(4)
Liability
2013
£000
(8)
-
-
(8)
(Charged)/
credited
to profit
or loss
2013
£000
(Charged)/
credited
to equity
2013
£000
(44)
37
12
-
5
-
-
-
92
92
(Charged)/
credited
to profit
or loss
2014
£000
(Charged)/
credited
to equity
2014
£000
4
(43)
(3)
-
(42)
-
-
-
10
10
(Charged)/
credited
to profit
or loss
2013
£000
(Charged)/
credited
to equity
2013
£000
1
(1)
(1)
-
(1)
-
-
-
16
16
Net
2013
£000
(58)
96
44
159
241
Net
2014
£000
(4)
12
-
39
47
Net
2013
£000
(8)
55
3
29
79
Allotted, called up and fully paid
Ordinary shares of £1 each
Balance at 1 October 2012
Shares purchased for cancellation
Balance at 1 October 2013
Shares issued as part consideration for acquisition of Viking Fish Farms Ltd
Exercise of share options
Balance immediately prior to Admission 18 December 2013
Ordinary shares of 0.1 penny each
Conversion of one old Ordinary Share of £1 each into
1,000 new Ordinary Shares of 0.1p each
Exercise of share options
Placing shares: 42,968,750 of 0.1p each at 64p per share
Less IPO costs recognised through equity
Benchmark Share Incentive Plan
Share Capital
Number
£000
Share
premium
£000
91,711
(1,404)
90,307
184
1,500
91,991
91,991,000
1,457,000
42,968,750
-
560,345
92
(2)
90
-
2
92
92
1
43
-
1
693
-
693
100
-
793
793
-
27,457
(1,538)
191
Balance at 30 September 2014
136,977,095
137
26,903
On 14 October 2013 the Company issued 184 ordinary shares of £1 each at a price of £543.48 per share as consideration for the
acquisition of 100 ordinary shares of £1 each in the capital of Viking Fish Farms Limited.
On 21 November 2013, the Company allotted and issued a total of 1,500 ordinary shares of £1 each to 10 employees of the Group
relating to share options granted in August 2010.
Immediately prior to Admission to trading on AIM on 18 December 2013, each of the Ordinary Shares of £1 was subdivided into 1,000
shares of 0.1p each.
On 18 December 2013, the Company placed 42,968,750 new shares of 0.1p each at a price of 64p per share. On the same date the
Company allotted and issued a total of 1,457,000 Ordinary Shares of 0.1p each to 27 employees of the Group relating to share options
granted in June 2012 and August 2013.
On 23 January 2014 the Company issued 560,345 shares of 0.1 pence each in respect of the Benchmark Share Incentive Plan (“SIP”).
The SIP shares consist of shares purchased at 64p per share up to a maximum amount of £1,500 each by eligible employees
(“Partnership Shares”) as well as free matching shares granted subject to certain conditions of the SIP (“Matching Shares”).
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 1,282,000 0.1p ordinary shares in the Company and the exercise price is the nominal value of 0.1p per share. Movements in the
share options are disclosed in note 32.
Members of the scheme can exercise the options at any point from the third anniversary of joining the scheme until the options lapse on
the tenth anniversary of joining. Options cannot be exercised after the option holder ceases to hold employment with any member of
the Group.
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149
27 Reserves
The following describes the nature and purpose of each reserve within equity:
Reserve
Description and purpose
28 Trading and Investing Activities (continued)
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 2014
Share premium reserve
Amount subscribed for share capital in excess of nominal value.
Capital redemption reserve
Amounts transferred from share capital on redemption of issued shares.
Share-based payment reserve
The share-based payment transaction reserve recognises the value of equity-settled share-based
payment transactions provided to employees, including management personnel, as part of their
remuneration. Refer to note 32 for further details of these plans.
Foreign exchange reserve
Gains/losses arising on retranslating the net assets of overseas operations into sterling.
Retained earnings
All other net gains and losses and transactions with owners (e.g. dividends) not
recognised elsewhere.
28 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 relating to the Company’s flotation on AIM
• costs of acquiring new businesses (Benchmark Vaccines in 2013, Viking Fish Farms Ltd and Atlantic Veterinary Services Ltd in 2014)
and costs related to the purchase of Zoetis aquaculture assets and the trade and assets of Old Pond Publishing in 2014
• one-off lease termination costs
• pre-operational expenses for new ventures (Fish Vet Group Norge and Fish Vet Group Asia)
• expenditure on research and development
Investing Activities
Year ended
30 September
2014
£000
Exceptional
items
£000
Acquisition
related
costs
£000
Pre-
operational
expenses
for new
ventures
£000
R&D
expenditure
£000
Trading
Activities
£000
35,354
(20,582)
14,772
101
(12,965)
(1,691)
217
(533)
(871)
(1,187)
(248)
60
-
-
-
-
-
1,691
1,691
-
-
1,691
-
-
-
-
-
-
440
-
440
-
-
440
-
-
-
-
-
-
1,585
-
1,585
-
-
1,585
-
-
-
-
-
35,354
(20,582)
14,772
-
2,690
-
2,690
-
-
2,690
-
-
101
(8,250)
-
6,623
(533)
(871)
5,219
(248)
60
(1,375)
54
1,691
(50)
440
(30)
1,585
-
2,690
(834)
5,031
(860)
Revenue
Cost of sales
Gross profit
Other income
Operating costs
Operating costs – Exceptional
EBITDA
Depreciation
Amortisation
Operating (loss)/profit
Finance cost
Finance income
(Loss)/profit on ordinary
activities before taxation
Tax on profit on ordinary activities
(Loss)/profit for the period
(1,321)
1,641
410
1,585
1,856
4,171
(Loss)/profit for the period
attributable to:
– Owners of the parent
– Non-controlling interest
(1,315)
(6)
1,641
-
410
-
1,585
-
1,856
-
4,177
(6)
(1,321)
1,641
410
1,585
1,856
4,171
Earnings per share (pence)
(1.04)
1.30
0.32
1.25
1.46
3.29
Weighted average number
of shares (millions)
126,959
126,959
126,959
126,959
126,959
126,959
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151
28 Trading and Investing Activities (continued)
Reconciliation of Reported Earnings to Earnings from Trading Activities – year ended 30 September 2013
29 Leases
Finance leases
Investing Activities
Year ended
30 September
Exceptional
non-
acquisition
2013 related items
£000
£000
Exceptional
acquisition
related
costs
£000
Pre-
operational
expenses
for new
ventures
£000
R&D
expenditure
£000
Trading
Activities
£000
27,543
(14,766)
12,777
111
(6,491)
(162)
6,235
(347)
(784)
5,104
(259)
8
4,853
(560)
4,293
4,294
(1)
4,293
-
-
-
-
-
162
162
-
-
162
-
-
162
-
162
162
-
162
-
-
-
-
100
-
100
-
-
100
-
-
100
(23)
77
77
-
77
-
-
-
-
154
-
154
-
-
154
-
-
154
-
154
154
-
154
-
-
-
-
752
-
752
-
-
752
-
-
27,543
(14,766)
12,777
111
(5,485)
-
7,403
(347)
(784)
6,272
(259)
8
752
(354)
6,021
(937)
398
5,084
398
-
5,085
(1)
398
5,084
Revenue
Cost of sales
Gross profit
Other income
Operating costs
Operating costs – Exceptional
EBITDA
Depreciation
Amortisation
Operating profit
Finance cost
Finance income
Profit on ordinary
activities before taxation
Tax on profit on ordinary activities
(Loss)/profit for the period
(Loss)/profit for the period
attributable to:
– Owners of the parent
– Non-controlling interest
The Group leases plant and machinery with a carrying value of £230,000 (2013: £208,000). Such assets are generally classified as
finance leases as the rental period amounts to the estimated useful economic life of the assets concerned and often the Group has the
right to purchase the assets outright at the end of the minimum lease term by paying a nominal amount.
Future lease payments are due as follows:
Not later than one year
Later than one year and not later than five years
Later than five years
Not later than one year
Later than one year and not later than five years
Later than five years
The present values of future lease payments are analysed as:
Current liabilities
Non-current liabilities
Minimum
lease
payments
2014
£000
124
39
-
163
Minimum
lease
payments
2013
£000
23
75
-
98
Interest
2014
£000
9
3
-
12
Interest
2013
£000
3
5
-
8
2014
£000
115
36
151
Present
value
2014
£000
115
36
-
151
Present
value
2013
£000
20
70
-
90
2013
£000
20
70
90
Earnings per share (pence)
4.72
0.18
0.08
0.17
0.44
5.59
Operating leases – lessee
Weighted average number
of shares (millions)
91,037
91,037
91,037
91,037
91,037
91,037
The Group has entered into commercial leases on certain items of land and buildings. These leases have an average life of greater than
five years. There are no restrictions placed on the Group by entering into these leases.
The total future value of minimum lease payments under non-cancellable operating leases for land and buildings are as follows:
Not later than one year
Later than one year and not later than five years
Later than five years
2014
£000
604
1,449
2,458
2013
£000
533
1,411
2,069
4,511
4,013
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153
30 Retirement benefits
The Group operates a defined contribution pension scheme. The assets of the scheme are held separately from those of the Group in an
independently administered fund. The pension cost represents contributions payable by the Group and amounted to £334,000 (2013:
£305,000). Contributions totalling £37,500 (2013: £11,000) were payable to the fund at the balance sheet date and are included in
other payables.
31 Capital commitments
At 30 September 2014 the Group and Company had capital commitments as follows:
32 Share-based payment (continued)
Share options issued in August 2010
All of the share options in this tranche were exercised during the year.
The fair value of the EMI equity settled share options granted is estimated at the date of grant using the Black Scholes Merton model
taking into account the terms and conditions on which the options were granted. The expense recognised for these options during the
year was £nil (2013: £85,000). The prior year charge was reflected in the income statement and included within Operating Costs –
Trading Activities.
Group
2014
£000
Group
2013
£000
Company
2014
£000
Company
2013
£000
Share options issued in June 2012
All of the share options in this tranche were exercised during the year.
Contracted for but not provided within these
financial statements
329
460
-
-
32 Share-based payment
Share options
The Group operates an EMI based equity settled share option scheme for certain employees. Options are exercisable at a price equal to
the nominal value of the parent Company’s shares. The vesting period is three years. If the options remain unexercised after a period of
ten years from the date of grant the options expire. Options are forfeited if the employee leaves the Group before the options vest.
The share options under the scheme are as follows:
Year ended 30 September 2014:
No. of options
Year
2010
2012
2013
2013
As at
1 October
2013
Exercised
prior to
Conversion
admission of options on
admission
date
Exercised
post
As at
admission 30 September
2014
date
1,500
(1,500)
-
-
1,420
126
1,193
-
-
-
1,418,580
(1,420,000)
125,874
(37,000)
89,000
1,191,807
-
1,193,000
-
-
Option
Price*
100.00p
0.10p
0.10p
0.10p
Exercise Period
September 2013 to
September 2020
June 2014 to
June 2022
August 2016 to
July 2023
August 2016 to
July 2023
* The option price is the nominal value of the parent Company’s shares. Immediately prior to trading on AIM on 18 December 2013, each
of the Ordinary Shares of £1 was subdivided into 1,000 shares of 0.1p each. Each existing unexercised share option was accordingly
converted to 1,000 new share options.
Of the total number of options outstanding at 30 September 2014, nil (2013: 1,500) were exercisable.
Taking into account the impact of converting the £1 shares issued for the exercise pre-admission into 0.1p shares, options exercised in
2014 resulted in 2,957,000 shares being issued at a weighted average price of 0.1p. The related weighted average share price at the
time of exercise was 59p per share. No options were exercised in the prior year.
Year ended 30 September 2013:
No. of options
Year
2010
2012
2013
2013
As at
1 October
2012
Granted in
2013
As at
Exercised in 30 September
2013
2013
Option
Price
1,500
1,420
-
-
-
-
126
1,193
-
-
-
-
1,500
100.00p
1,420
100.00p
126
100.00p
1,193
100.00p
Exercise Period
September 2013 to
September 2020
June 2014 to
June 2022
August 2016 to
July 2023
August 2016 to
July 2023
The fair value of the EMI equity settled share options granted is estimated at the date of grant using the Black Scholes Merton model
taking into account the terms and conditions on which the options were granted. The expense recognised for these options during the
year was £101,000 (2013: £136,000). This has been reflected in the income statement and included within Operating Costs, with
£78,000 in Operating Costs – Exceptional and £23,000 in Operating Costs - Trading Activities.
Share options issued in August 2013
Share options outstanding at the year-end had a weighted average exercise price of 0.1p and a weighted average remaining contractual
life of 9 years.
The fair value of the EMI equity settled share options granted is estimated at the date of grant using the Black Scholes Merton model
taking into account the terms and conditions on which the options were granted. The expense recognised for these options during the
year was £18,000 (2013: £2,000). This has been reflected in the income statement and included within Operating Costs, with £9,000 in
Operating Costs – Exceptional and £9,000 in Operating Costs – Trading Activities.
Additional share options issued in August 2013
Share options outstanding at the year-end had a weighted average exercise price of 0.1p and a weighted average remaining contractual
life of 9 years. The fair value of the EMI equity settled share options granted is estimated at the date of grant using the Black Scholes
Merton model taking into account the terms and conditions on which the options were granted.
The expense recognised for these options during the year was £114,000 (2013: £10,000). This has been reflected in the income
statement and included within Operating Costs – Trading Activities.
Employee bonus share award
As disclosed in note 26, the Company issued 560,345 shares of 0.1 pence each in respect of the Benchmark Share Incentive Plan
(“SIP”) in January as an award to employees upon admission to AIM. These shares consisted of shares purchased by employees at 64p
per share up to a maximum amount of £1,500 each by eligible employees (“Partnership Shares”) as well as free matching shares
granted subject to certain conditions of the SIP (“Matching Shares”). The expense recognised for the matching shares was £190,000
and this has been reflected in the income statement and included in Operating Costs – Exceptional.
Share warrants
During the period, the Company issued warrants to a supplier to acquire 375,146 ordinary shares at the placing price of 64p per share,
exercisable at any time between the first anniversary of Admission and the fifth anniversary of Admission. The fair value of the services
for which the warrants were granted was £15,000, and this value has been charged to Operating Costs – Exceptional in the year with a
corresponding credit to reserves.
The Group did not enter into any other share-based payment transactions with parties other than employees during the current or
previous period.
The total charge reflected in the consolidated income statement in relation to all of the above share based transactions, and included
within Operating Costs was £438,000 (2013: £233,000), with £146,000 charged to Operating Costs - Trading Activities and £292,000
charged to Operating Costs – Exceptional. The share-based payment expense comprises:
Equity-settled schemes
Bonus award to employees on admission to AIM
Total charge in relation to employees (note 8)
Share warrants
Total share based payment charge
2014
£000
233
190
423
15
438
2013
£000
233
-
233
-
233
The total charge reflected in the Company’s income statement was £243,000 (2013: £40,000), with £27,000 charged to Operating
Costs – Trading Activities (2013: £40,000) and £216,000 charged to Operating Costs – Exceptional (2013: £nil).
154
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Benchmark Holdings Annual Report 2014 | Financial Statements | Notes forming part of the financial statements
155
33 Business Combinations
34 Related party transactions
Details of the fair value of the consideration paid and assets acquired during the year are shown below:
Viking
Fish
Farms Ltd
£000
Atlantic
Veterinary
Services Ltd
£000
Vet-Aqua
Inter-
national
£000
Zoetis
aquaculture
assets
£000
Old
Pond
Publishing
£000
Aquatic
Veterinary
Services
£000
Allan
Environ-
mental
£000
Total
£000
Consideration
Cash
Deferred consideration
Equity
Total consideration
300
-
100
400
Fair value of assets acquired
Fixed assets
Intellectual property
(included in intangibles)
Contracts
Inventories
Debtors
Cash
Trade and other creditors
Tax and social security
Deferred income
Loans
Accruals
54
-
-
19
77
42
(10)
(6)
(145)
(75)
(2)
167
-
-
-
333
-
1,852
-
-
167
333
1,852
-
-
-
-
11
19
-
(25)
-
-
(5)
-
-
170
11
253
-
(101)
-
-
-
-
174
1,678
-
-
-
-
-
-
-
-
-
Total identifiable net assets
(46)
-
333
1,852
Goodwill
446
167
-
-
584
-
584
-
-
-
272
-
-
-
-
-
-
(12)
260
324
100
-
-
100
-
-
100
-
-
-
-
-
-
-
-
100
-
75
-
3,003
408
100
75
3,511
-
-
-
-
-
-
-
-
-
-
-
-
228
1,678
270
302
341
61
(111)
(31)
(145)
(75)
(19)
2,499
-
75
1,012
During the year the following business combinations occurred:
• On 14 October 2013 Benchmark Holdings Limited acquired 100% of the issued share capital of Viking Fish Farms Limited for
consideration of £400,000, comprising £300,000 cash and 184 ordinary shares with a fair value of £100,000. The goodwill arising
is attributable to the ability to expand the Group’s research and development activities into marine aquaculture.
• On 9 December 2013 FVG Limited acquired 100% of the issued share capital of Atlantic Veterinary Services Limited, an Irish
registered business, for €200,000 cash consideration. On the same date that it purchased Atlantic Veterinary Services Ltd, FVG
Limited entered into a put and call option agreement to purchase a related party, Vet-Aqua International, for a maximum consideration
of €400,000, such consideration being dependent upon certain conditions being met. The option can be exercised between 30 June
and 31 July 2016. The terms of the agreement indicate that FVG Limited effectively assumed control of Vet Aqua International at the
date of signing the agreement by virtue of the fact that it has control over the business relating to inputs, processes and outputs and
that any material change can only be effected by FVG Limited’s consent. Under IFRS3 (Business Combinations) these facts
demonstrate that FVG Limited has had control of Vet-Aqua International since the date the option agreement was signed, and so the
results of Vet-Aqua International have been consolidated into the Group from that date. The goodwill arising on the acquisition of
Atlantic Veterinary Services Ltd is attributable to the expansion into a new geographical location.
• On 17 February 2014 FVG Limited purchased the aquaculture vaccine and development assets from animal health company Zoetis
Inc. for US$3m cash consideration. The deal also included the acquisition of a worldwide license to utilise specific Zoetis ‘know how’
to help drive the future research and development of these aquaculture vaccines.
• On 1 April 2014 5M Enterprises Limited acquired the trade and assets of Old Pond Publishing for cash consideration of £584,000.
The acquisition sees the Group strengthen its position as a leader in the supply of knowledge transfer, market analysis and
e-commerce to the global food chain. The goodwill arising from the acquisition is attributable to the potential for organic growth from
the increased range and scale of the Group’s publishing service.
• On 28 May 2014 FVG Limited acquired the business and assets of Aquatic Veterinary Services for cash consideration of £100,000,
all of which related to the value of existing customer contracts.
• Allan Environmental Limited acquired the trade and assets of Allan Environmental Solutions during the previous financial year. The
earn-out terms included in that agreement have been reassessed and contingent consideration has been increased by £75,000 in
this respect.
Entities acquired during the year contributed £1,700,000 to the Group’s revenue and reduced EBITDA from Trading Activities by
£100,000 for the period. If the acquisitions had taken place at the start of the period, the Group’s pro-forma revenue and EBITDA from
Trading Activities would have been approximately £35,600,000 and £6,700,000 respectively.
Transactions between the Company and its subsidiary undertakings, which are related parties, amounted to £832,000 in the year (2013:
£783,000). These transactions related to inter-company recharges. Balances with subsidiary undertakings are shown in notes 20 and
21. Details of transactions between the Group and other related parties are disclosed in the following note.
Included within trade and other receivables are the following loans to related parties:
Benchmark Holdings Limited
Executive Pension scheme
Total
Group
2014
£000
-
-
Group
2013
£000
37
37
Company
2014
£000
Company
2013
£000
-
-
-
-
Included within trade and other payables due after more than one year are the following loans from related parties:
Director
Total
Group
2014
£000
(60)
(60)
Group
2013
£000
(60)
(60)
Company
2014
£000
Company
2013
£000
(60)
(60)
(60)
(60)
The loan from Malcolm Pye, Chief Executive Officer, has no fixed repayment date.
During the year, Group entities entered into the following trading transactions with related parties that are not members of the Group:
Benchmark Holdings Limited Executive Pension scheme
Purchases
2014
£000
166
2013
£000
36
Included above is the arms-length purchase of a property in Braintree, Essex by Benchmark Vaccines Limited for £130,000. The property
was previously rented to Benchmark Vaccines Limited at arms-length.
The following balances are payable at the end of the reporting period:
Benchmark Holdings Limited Executive Pension scheme
Purchase of own shares
2014
£000
11
2013
£000
-
There have been no purchases of own shares in the year ended 30 September 2014. In the prior year 1,404 shares were repurchased
for £274,000 from a former Director of the Company.
156
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Benchmark Holdings Annual Report 2014 | Financial Statements | Notes forming part of the financial statements
157
34 Related party transactions (continued)
Dividends paid to Directors
37 Notes supporting statement of cash flows
Cash and cash equivalents for purposes of the statement of cash flows comprises:
Group
Cash at bank and in hand
Bank overdrafts
Cash and cash equivalents
Company
Cash at bank and in hand
Cash and cash equivalents
2014
£000
16,511
-
2013
£000
3,250
(1,504)
16,511
1,746
14,078
14,078
418
418
Dividends declared in the year amounted to £165,000 (2013: £401,000) of which a total of £160,000 (2013: £397,000) was paid to
the Directors of the Company on 6 December 2013. The amounts paid are analysed below:
R J Bonney
P A Cook
D I Cox
R Layton
J M Muirhead
M D F Pye
P J Southgate
2014
£000
2013
£000
39
13
8
39
14
39
8
96
32
21
96
35
96
21
160
397
The Company is controlled by the shareholders. There is no single controlling party.
35 Events after the reporting date
On 18 December 2014 the Company announced that it had acquired the entire issued share capital of SalmoBreed AS (“SalmoBreed”)
and 89.45 per cent. of the issued share capital of Stofnfiskur HF (“Stofnfiskur”) (the “Acquisitions”) and that it had placed 82,353,000
new Ordinary Shares in the Company at 85 pence per share (“the Placing”), raising gross proceeds of £70 million to fund the
Acquisitions and to increase the vaccine manufacturing capacity of its BioCampus facility in Edinburgh.
SalmoBreed is a leading salmon genetics company founded in 1999 based in Norway. SalmoBreed specialises in identifying and
developing genetic material which improves areas such as growth, disease resistance and product quality.
Stofnfiskur is a salmon breeding company founded in Iceland in 1991 which differentiates itself through its ability to supply eggs outside
the natural salmon breeding season allowing the salmon farming operations to optimise their efficiency.
The combination of SalmoBreed and Stofnfiskur will create what the Directors believe will be a world leading salmon and aquaculture
breeding business and the world’s second largest salmon egg producer. Benchmark Genetics Limited will be formed, creating a fourth
business division for the Company.
The consideration for SalmoBreed comprises an initial payment of NOK 205,000,000 (approximately £19.5m) and up to an additional amount of
NOK 30,000,000 (approximately £2.9m) under an earn-out over three years upon the satisfaction of certain performance conditions.
The consideration for 89.45 per cent. of Stofnfiskur comprises an upfront payment of approximately £21.8m with up to an additional
amount of approximately £9.0m under an earn-out over three years. The Company may seek to purchase additional shares in Stofnfiskur
to increase its shareholding.
The fair value of the assets and liabilities acquired in both of these acquisitions has not yet been finalised.
The Company has identified significant synergies between the Acquisitions, which are a complementary fit within the existing Benchmark
business as breeding technology is one of the primary drivers of efficient production, disease management and sustainability. The
technology used in genetics and breeding also function within the same fundamental biology currently being exploited in the Company’s
Animal Health and Sustainability Science divisions.
The Acquisitions reflect Benchmark’s continued commitment to the aquaculture industry, which now supplies more animal protein to the
global market than beef. The Acquisitions also represent a long-term platform to expand into other aquaculture markets such as tilapia,
catfish, grouper, sea bass, sea bream and shrimp.
The Company intends to use up to £10m of the Placing proceeds to expand and accelerate the development of its vaccine manufacturing
facility in Edinburgh in response to continued growth in its vaccine division, increased requirements to satisfy its pipeline and demand of
contract manufacture business and the additional specialist capacity required to manufacture the HypoCat vaccine.
36 Contingent liabilities
There is a full cross guarantee in respect of borrowings of other Group undertakings. Total borrowings of other Group undertakings at
30 September 2014 were £443,000 (2013: £4,293,000).
Benchmark Holdings plc Annual Report 2014 | Glossary
159
G L O S S A R Y
3Es
AGM
AIM
CAGR
CEO
CFO
CGU
COO
CPD
Defra
Environment, Ethics & Economics —
Benchmark's framework for sustainability
Annual General Meeting
Alternative Investment Market
LTIP
M&A
Mydiavac®
Long-term incentive plan
Mergers and Acquisitions
Benchmark’s vaccine used against
Chlamydia in sheep
Compound Annual Growth Rate
PD
Pancreas Disease
Chief Executive Officer
PondDtox®
Chief Financial Officer
Cash Generating Unit
Chief Operating Officer
Continuous Professional Development
Department for Environment, Food
and Rural Affairs
QCA Code
qPCR
QTL
Benchmark’s water treatment used
in fin-fish aquaculture
Quoted Companies Alliance Code —
outlining best practice for
quoted companies
Quantitative polymerase chain reaction —
a diagnostic tool
Qualititative trait loci - DNA containing /
linked to genes that underlie a
quantitative trait
EBITDA
Earnings before interest, tax,
depreciation and amortisation
R&D
Research & Development
EMI scheme
Enterprise Management Incentive scheme
Salmosan®
SIP
STM
Benchmark's market-leading sea
lice treatment
Share Incentive Plan
Science, technical and medical —
referring to the publishing market
Trading Activities Operations which generate earnings
in the current period
Trading EBITDA
EBITDA from Trading Activities
VLP
Virus like particle
EU GMP
EU Good Manufacturing Practice
FAO
FAWC
FY
Food and Agriculture Organisation
Farm Animal Welfare Committee
Financial Year
Histopathology
Diagnosis and study of disease
HypoPet
HypoCat™
HypoPet AG, a swiss research company
based at the University of Zurich
A breakthrough vaccine for cats which
neutralises the primary cause of human
allergic reaction to cats
IFRS
International Financial
Reporting Standards
Investing Activities 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
IP
IPO
Intellectual Property
Initial Public Offering
A D V I S E R S
Nominated Adviser and Broker:
Cenkos Securities
6.7.8 Tokenhouse Yard
London
EC2R 7AS
Auditor: BDO LLP
Regent House
Clinton Avenue
Nottingham
NG5 1AZ
Registrars: Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6DA
Lawyers: Travers Smith LLP
10 Snow Hill
London
EC1A 2AL
Bankers: Lloyds Bank
1st Floor
Butt Dyke House
33 Park Row
Nottingham
NG1 6GY
Financial Advisers:
Equity Strategies
84 Brook Street
Mayfair
London
W1K 5EH
Information regarding forward-looking statements
This document includes statements that are, or may be deemed to be, “forward-looking statements”. These forward-looking statements
can be identified by the use of forward-looking terminology, including the terms “believes”, “estimates”, “plans”, “projects”, “anticipates”,
“expects”, “intends”, “may”, “will”, or “should” or, in each case, their negative or other variations or comparable terminology, or by
discussions of strategy, plans, objectives, goals, future events or intentions. These forward-looking statements include all matters that are
not historical facts. They appear in a number of places throughout this document and include, but are not limited to, statements regarding
the Company’s intentions, beliefs or current expectations concerning, among other things, its business, results of operations, financial
position, prospects, growth, product pipeline, strategies and the industry in which it operates. By their nature, forward-looking statements
involve risk and uncertainty because they relate to future events and circumstances and are not guarantees of future performance. The
actual results may differ materially from those described in, or suggested by, the forward-looking statements contained in this document.
Any forward-looking statements in this document reflect only the Directors’ and the Company’s current intentions or beliefs. Subject to the
requirements of the AIM Rules, the Disclosure and Transparency Rules and any other applicable law or regulation, Benchmark explicitly
disclaims any obligation or undertaking publicly to release the result of any revisions to any forward-looking statements in this document that
may occur due to any change in Benchmark’s expectations or to reflect events or circumstances after the date of this document.
Benchmark Holdings plc
Benchmark House
8 Smithy Wood Drive
Sheffield
S35 1QN
t. +44 (0)1142 409939
w. benchmarkplc.com
e. info@benchmarkplc.com