Benchmark Holdings Regulatory News (BMK)

28 June 2016

BENCHMARK HOLDINGS PLC

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

INTERIM RESULTS 2016

INVE ACQUISITION COMPLETES GLOBAL PLATFORM

Benchmark, the international biotechnology and food chain sustainability business announces its Interim Results for the six months ended 31 March 2016 (the "period").

Financial Highlights:

· Revenue increased by 142% to £48.0m (H1 2015: £19.8m). Like for like sales, excluding businesses acquired in either 2016 or 2015, increased 42% to £13.3m (H1 2015: £9.4m).

· EBITDA from Trading Activities1 grew by £8.3m to £9.5m (H1 2015: £1.2m)

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

o Funded via successful £219m (gross) equity raise

o $70 million revolving credit facility secured to support the equity raise and the enlarged group's working capital needs

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

· Operating loss of £15.2m (H1 2015: £4.0m) after increase of investing activities to £18.8m (H1 2015: £3.6m), including £11.8m of expensed acquisition and integration costs

· Expensed R&D increased by 150% to £6.0m (H1 2015: £2.4m)

· £8.3m invested in new vaccine manufacturing capacity at Braintree and marine R&D facilities at Ardtoe

Operational highlights:

· Progress made on key strategic investment objectives:

o Transformative acquisition of INVE Aquaculture in December 2015, more than doubled the size of the Group's operations

o Continued investment in scientific research and development resources, and encouraging progress in the development pipeline

· INVE integration progressing well with first operational synergies realised

· Braintree manufacturing facility expected to enter commissioning by September 2016

· First sales of new products in Animal Health and Breeding & Genetics

· Recovery of market share for Salmosan®/Byelice® in Chile with some discounting of selling price

· Challenging first half for Breeding & Genetics due to temporary border closure and the impact of El Niño on climatic conditions

· Product pipeline of 85 products, with a potential addressable market of £742m per annum

· Good progress with HypoCat product development

Alex Hambro, Chairman of Benchmark, said: "The integration of INVE Aquaculture into the Benchmark Group has transformed the business and largely completes our divisional structure. The benefit of securing diversified revenue streams is becoming increasingly apparent and we expect further revenue streams to materialise during the remainder of this calendar year as our product development pipeline matures and benefits are reaped from the capital expended upgrading Braintree's vaccine production facility and Ardtoe's aquaculture trials facilities."

For further information, please contact:

Benchmark Holdings plc Tel: 020 7920 3150

Malcolm Pye, CEO

Roland Bonney, COO

Rachel Aninakwah, Communications

Numis Securities Tel: 020 7260 1000

Michael Meade / Freddie Barnfield (Corporate Finance)

James Black (Corporate Broking)

Tavistock Tel: 020 7920 3150

Matt Ridsdale / Niall Walsh

Notes to Editors:

Founded in 2000, Benchmark represents a new model in sustainable business development. Over the last decade it has built a successful group of companies on the economics of a sustainable food chain. The Group is growing in response to a rapidly increasing demand for sustainable food chains, and in particular for seafood, from both mature and emerging markets.

Benchmark is an ethical group with an explicit policy based on the "3E's" definition of a sustainable business - ethics, environment and economics - which guides its strategy and operations. The Group has five divisions: Advanced Animal Nutrition which provides cutting edge nutritional products and services to the aquaculture industry and is a world leader in the feeding of the larval stages of shrimp and marine fish production, Breeding and Genetics which comprises a world-leading Salmon and aquaculture breeding business, Animal Health which researches, manufactures and markets medicines and vaccines particularly for aquaculture, Sustainable Science which researches and informs sustainable development in the food industry, and Technical Publishing which effects technology transfer through online publishing and education. Benchmark operates internationally with offices in England, Scotland, Belgium, Ireland, Norway, Iceland, USA, Brazil, China, Moscow, India, Thailand and Chile. As at 1 May 2016, Benchmark employs 881 people.

For further information on Benchmark please visit www.benchmarkplc.com

1. EBITDA from Trading Activities excludes costs relating to Investing Activities from reported IFRS numbers. Investing Activities comprise exceptional restructuring costs of £0.3m (H1 2015: £0.0m), acquisition costs of £11.8m (H1 2015: £0.1m net credit), pre-operational expenses for new ventures of £0.5m (H1 2015: £1.1m) and research and development expenditure of £6.0m (H1 2015: £2.4m).

CHAIRMAN'S STATEMENT

I am pleased to report the Group's Interim Results for the period to 31 March 2016.

We have made significant progress in a busy first half of the 2016 financial year as we continue to develop and diversify Benchmark into a group which comprehensively serves the needs of our customers whilst also providing us with multiple revenue streams by sector, technology and geography.

As noted in the 2015 annual report, we completed the transformative acquisition of INVE Aquaculture Holdings BV ("INVE") in December 2015 which more than doubled the scale of the group's operations. INVE now forms the Advanced Animal Nutrition division. The consideration for the acquisition was $342m (c.£230m) which was funded through a combination of an equity raise and drawdown of a new debt facility.

The integration of INVE is progressing well, with a solid performance from the new division in the first half and the first operational synergies with the rest of the Benchmark Group now being realised. I am pleased to see the quality of our divisional management teams come to the fore as the synergies available to the enlarged group are exploited.

Our strategy of diversification is showing its importance, with the strong performance of the Advanced Animal Nutrition division and the improved performance of the Animal Health division compared to H1 2015, compensating for the impact of the well-documented issues faced by the Breeding and Genetics division arising from the temporary closure of the Chilean border to Icelandic salmon eggs. The Chilean border finally reopened to imports of salmon eggs from Iceland in early March, but the four month closure caused the division's sales to fall behind our expectations. This sales shortfall was compounded by environmental factors in Chile linked to El Niño, however, taking into account the results of the other divisions, the Group remained on track overall.

Our pipeline of new technologies and products remains a focus, and first sales of a new aquaculture vaccine for sea bass were made in June 2016. The product, which is targeted at the Mediterranean market, has been developed, is manufactured and will be distributed entirely by the Group, with customer liaison being managed by the INVE team; an example of the operational synergies mentioned above. Furthermore, the investment in the new vaccine manufacturing facilities at Braintree and aquaculture trials facilities at Ardtoe are coming online in the next few months, providing the vital infrastructure required to deliver the Group's development portfolio.

Results

Revenue for the period increased by 142% to £48.0m (H1 2015: £19.8m; FY 2015: £44.2m), with the bulk of the growth (£20.6m) arising from three months of trading from the INVE acquisition. The acquisitions completed in the financial year 2015 (the companies acquired to create the Breeding and Genetics division and Improve International held within the Technical Publishing division) have also contributed for a full six months in H1 2016. As a result of the difficult trading conditions faced by the Breeding and Genetics division, revenues in the six month period were £10.7m compared to £9.8m for three months in H1 2015.

Excluding acquisitions, underlying sales increased by 42% mainly due to the improved performance in the Animal Health division. The introduction of new volume supply agreements and rewards for customer loyalty in response to the increased competition for Byelice (Salmosan) have shown improvement in revenues in both Chile and Norway.

Operating costs relating to Trading Activities (excluding amortisation and depreciation) in the first half doubled from the comparative period to £11.5m (H1 2015: £5.7m; FY 2015: £13.7m), with £3.4m of the increase coming from the newly created Advanced Animal Nutrition division. The remainder of the increase reflects the inclusion of financial year 2015 acquisitions for a full period and increased activity within the Animal Health division. Following the INVE acquisition, group headcount at the half year was 855 (30 September 2015: 402).

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

EBITDA from Trading Activities in the first six months was £9.5m, an increase of £8.3m compared to H1 2015, with the bulk of the growth again arising from the post-acquisition profits of the Advanced Animal Nutrition division of £7.1m. The Animal Health division saw an increase in Trading EBITDA to £2.0m (H1 2015: £0.5m loss; FY 2015: £2.1m profit) as sales have recovered against the low volumes in the comparative period.

Earnings per share from Trading Activities of 0.94p is up on last year by 1.47p (H1 2015: loss per share from Trading Activities 0.53p; FY 2015 loss per share 1.13p).

The Group's statutory IFRS earnings (including both Trading and Investing Activities), set out in the Consolidated Income Statement, show an EBITDA loss for the first half of £9.1m (H1 2015: loss of £2.2m; FY 2015: loss £7.2m). Basic and diluted earnings per share are both losses of 3.09p per share (H1 2015: basic and diluted loss per share of 2.49p; FY 2015: basic and diluted loss per share of 5.96p).

EBITDA from Trading Activities excludes from reported IFRS numbers those costs that relate to Investing Activities. Costs relating to Investing Activities (excluding depreciation and amortisation) have increased by £15.2m to £18.6m in the period (H1 2015: £3.4m; FY 2015: £9.7m). Investment costs in the period comprise acquisition and integration costs of £11.8m (H1 2015: net credit of £0.1m; FY 2015: costs of £1.3m), exceptional restructuring costs of £0.3m (H1 2015: £nil; FY 2015: £0.2m), pre-operational expenses for new ventures of £0.5m (H1 2015: £1.1m; FY 2015: £1.6m) and research and development expenditure of £6.0m (H1 2015: £2.4m; FY 2015: £6.6m). As well as the increase relating to the continued focus on R&D activity in progressing the Group's pipeline of innovative products and technologies, which has expanded following recent acquisitions, the main impact is from the costs incurred on the transformative acquisition of INVE in December 2015. Total net costs of £12.4m were incurred on the acquisition, £4.4m of which related to the raising of new equity to fund the acquisition and which was therefore offset against share premium account. The remaining £8.0m of acquisition and integration costs included within the income statement is after a gain of £3.7m made on a foreign currency instrument entered into to fix the exchange rate for the US dollar consideration paid on the acquisition which is included in finance income. Acquisition and integration costs in H1 2015 were a net credit due to similar foreign currency differences on the acquisitions of SalmoBreed and StofnFiskur producing a gain of £1.9m.

After all of the above, the Group made an operating loss of £15.2m in the period (H1 2015: £4.0m loss; FY 2015: £11.6m loss).

On 30 December 2015 the Company raised gross proceeds of £186m through the placing of 215,922,141 new ordinary shares, the proceeds of which together with a further 38,635,671 new ordinary shares issued on 31 December 2015 formed part of the consideration for the acquisition of INVE.

Strategy and markets

Benchmark now has five divisions operating in four growing global markets which are the fundamental building blocks of a sustainable food chain.

· Aquaculture is the fastest growing livestock sector with CAGR of 5.1%, and at $119bn is now a larger market than beef (source: FAO). The breeding and genetics market within aquaculture is estimated to be $1.5bn, and the market for specialist nutritional products for marine fish, shrimp and tilapia $2.0bn.

· The animal health market, including diagnostic, medicated feed and veterinary services is estimated at between $92bn-$102bn, with the animal medicines and vaccines sector estimated at around $22bn. This is currently projected to grow at a CAGR of 5.7% per annum (source: Vetnosis).

· Sustainability consulting is a $13.8bn market growing at between 4%-5% per annum. The market is categorised as strategic consulting services ($1.2bn) and technical sustainability consulting ($12.6bn) (source: Verdantix)

· The Science technical and medical publishing market, a $26bn global market is projected to grow at a CAGR of 4.2% (source: Outsell).

We have now completed the process of creating a scalable Group structure which serves customers and shareholders through its five operating divisions. The businesses acquired last financial year are well integrated, and the integration of INVE is progressing to plan. This acquisition has further solidified the Group's diversification of its income streams, has expanded the product pipeline and opened up new potential synergies within the enlarged group. Management is focussed on exploiting these synergies to maximise growth within all of its divisions.

Operations

Animal Health Division

The Animal Health division has seen significant improvement in year on year sales of Salmosan / Byelice with total revenue and contribution ahead of the first half of last year. EBITDA from Trading Activities for the division was a profit of £2.0m (H1 2015: loss of £0.5m; FY 2015: profit of £2.1m).

The extension of the division's vaccine manufacturing capacity at its Braintree site is almost complete, with the new Braintree Biotech Building expected to enter commissioning by September 2016. Benchmark Vaccines Ltd has successfully won a new companion animal vaccine toll manufacturing contract with a global animal health company.

The division's product development pipeline continues to progress and is one of the strongest in the aquaculture arena, comprising 56 products covering a total addressable market of approximately £578m per annum. Work on the pipeline products and technologies is accelerating as we continue to integrate the necessary expertise and resources to exploit the pipeline's full potential. R&D costs (including amortisation of acquired R&D assets) of £4.5m, all of which have been expensed as the criteria for capitalising development costs had not been met, have been invested in the product pipeline in the period (H1 2015: £2.3m). The development of a new sea lice treatment continues to plan and sales of trial batches have commenced of the first of our new aquaculture vaccines. This vaccine will target marine fish production in the Mediterranean and the INVE sales team is assisting with customer introductions. There is good progress with the HypoCat product development.

Breeding and Genetics Division

In line with guidance provided at year end, the Breeding and Genetics division experienced a difficult first half as a result of the closure of the Chilean border to Icelandic salmon eggs. Recovery was slower than anticipated, aggravated by lower stocking in the Chilean industry in response to environmental challenges, with sales significantly impacted. Despite the inclusion of a full six months' results in H1 2016 for the businesses acquired in December 2014 and July 2015, EBITDA from Trading Activities fell by £1.3m to £1.8m (H1 2015: £3.1m; FY 2015 £4.6m).

In order to ensure active management of future threats related to biosecurity and satisfy anticipated growth in demand for its products the division is close to completing a study into the feasibility of building a land based production facility in Norway.

The division has made good progress with the launch of new products in the period. Of particular note was the announcement of a major breakthrough in genetic breeding programmes for Pancreas Disease (PD) and sea lice resistance through Genomic Selection. Whilst this method is already recognized in genetic science for other species, and can provide a more accurate and safer selection than by using traditional methods, Genomic Selection has never been used in aquaculture before. Benchmark believes that the use of this method can provide a significant advancement in developing resistance to both PD and sea lice in salmon, and thus provide significant savings for the industry. The division's pipeline of products now includes 10 products with an addressable market of £45m.

Advanced Animal Nutrition Division

The division was formed, following the acquisition of INVE, mid-way through the period and has performed well, with EBITDA from Trading Activities at £7.1m. The management team is working closely with the Benchmark Operations Board and the integration is proceeding to plan with the first phase of operational synergies being realised. A new group wide key account management programme has been initiated and opportunities to utilise INVE's market leading distribution network are being developed. The Benchmark and INVE R&D teams are coordinating their work on product development in order to maximise opportunities for combined nutrition and health products. Customer response to the acquisition has been extremely positive, with their support being demonstrated by the number of new enquiries about the Group's offering of genetics, nutrition and animal health products rising sharply from new customers and new product sectors. Work is also underway to incorporate Benchmark's primary stage algal feed business, TomAlgae, into the INVE sales, marketing and R&D structure. Good progress has been made with INVE's pipeline of new products with 6 achieving first sales in the period.

The division's pipeline now includes 19 products with an addressable market of £119m.

Sustainability Science Division

The Sustainability Science division continues to provide consultancy and R&D services through its expertise across all parts of the food chain and its working research farms and sites, helping our partners grow and source food more efficiently and ethically. Significant investment has been completed in the period at Ardtoe, Scotland and the new aquaculture trials facilities are coming online to provide the vital infrastructure to deliver the Group's development portfolio.

The division completed its reorganisation in the period and has realigned its cost base with the services it provides. As a result, EBITDA from Trading Activities improved by £0.2m to a small loss of £0.1m (H1 2015: loss £0.3m; FY 2015: loss £0.5m).

Technical Publishing Division

The Technical Publishing Division, which provides access to expertise, education and knowledge transfer for people and businesses in the agriculture, aquaculture, veterinary and global food supply chain industries, has shown improved performance in the period compared to prior year. Improve International (acquired in February 2015) is now fully integrated and continuing to develop its position as Europe's number one provider of continuing professional development to vets. EBITDA from Trading Activities for the half year rose to £0.3m (H1 2015: £0.1m; FY 2015: £0.3m). The Aquaculture UK business (acquired in June 2015) held its flagship industry technical conference in May 2016 with record attendances.

Funding

On 30 December 2015, the Group secured a revolving credit facility with a 5 year term of up to $70m in order to provide part of the funding required for the acquisition of INVE and to support working capital for the enlarged group. The facility is secured on certain of the Group's assets and attracts interest at a variable rate based on LIBOR plus a margin which is dictated by the performance of the Group. As at 31 March 2016 $55m of the revolving credit facility had been drawn down. The balance of the facility remains available to fund working capital and small scale capital projects, with leverage and interest cover covenants to be tested on a quarterly basis.

Cashflow and Net Cash

Net cashflow from operations was an outflow of £8.9m (H1 2015: outflow £5.2m; FY 2015 outflow £9.0m) due to the loss in the period, which includes the significant investing activities outlined above, and increased working capital demands of the enlarged group. Cashflows were dominated by the proceeds of the share placing in December 2015, in which gross proceeds of £186m (£181m net of costs) were raised. All of the proceeds raised were used to fund the acquisition of INVE in the period, together with some of the receipts from the new debt facility entered into in December 2015. The balance of the purchase price was settled by the issue of new shares.

Capex in the period totalled £11.2m as investment nears completion on the new manufacturing plant at Braintree and the marine research facilities at Ardtoe, Scotland (H1 2015; £2.7m; FY 2015: £14.0m).

Cash at period end stood at £23.0m and borrowings drawn under the rolling credit facility, net of debt raising costs, stood at £37.6m giving the group a net debt position of £14.6m.

Taxation

There was a tax credit in the period of £1.3m (H1 2015: charge £0.5m; FY 2015: charge £0.4m). There were overseas tax charges in the Breeding and Genetics division of £0.3m and in the Advanced Animal Nutrition division of £0.6m, offset by deferred tax credits on the reversal of temporary differences, mainly on intangible assets arising on consolidation from recent acquisitions. No deferred tax assets have been provided on the losses made in the period.

Dividend

No dividends have been paid or proposed in the six months to 31 March 2016. The Board will review the Group's position again at the full year end.

Outlook

The group remains on track for the full year despite the fact that El Niño has had an impact on the climate in South East Asia and Latin America and the algal bloom in Chile has reduced total salmon biomass across the Chilean industry. Such climatic changes always have the potential to significantly influence sales of aquaculture health products, salmon eggs or advanced nutrition, and the board continues to monitor the situation.

The long term drivers of growth in the group's sectors are clearly positive. The recent expansion through targeted acquisition now allows Benchmark to leverage synergies by offering an integrated package of products and services to its customers, and key account management is being introduced to strengthen the group's ability to exploit the significant opportunities in the markets it serves.

As a result of the considered investment made in our product pipeline in recent years, we have a portfolio of technology of considerable value. The product pipeline, combined with our world class research and manufacturing facilities, underpins our future growth potential and are sources of considerable confidence for the board.

The board is currently assessing the impact of the result of the UK's EU membership referendum. Whilst the decision to leave the EU will affect UK trade agreements and relevant European business related legislation, there are more short term factors affecting companies like Benchmark. While the group operates in many territories, most of its operations and sales do not involve EU countries, so the impact on trading of the result of the referendum will largely be mitigated. The most immediate impact relevant to Benchmark is that on the UK currency. With a large proportion of the group's sales transacted in US dollars, volatile GBP exchange rates may lead to increased exchange gains or losses, albeit these will be hedged by raw materials sourced in US dollars and by Benchmark's US dollar denominated borrowing facility.

I would like to thank our shareholders for their continued support and look forward to updating you again on the full year results.

The Hon. Alexander Hambro

Chairman

28 June 2016

We have been engaged by the company to review the condensed set of financial statements in the half-yearly report for the six months ended 31 March 2016 which comprises the consolidated income statement, the consolidated statement of comprehensive income, the consolidated balance sheet, the consolidated statement of changes in equity, the consolidated cash flow statement and the related explanatory notes. We have read the other information contained in the half-yearly report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

The half-yearly report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly report in accordance with the AIM Rules.

The annual financial statements of the group are prepared in accordance with IFRSs as adopted by the EU. The condensed set of financial statements included in this half-yearly report has been prepared in accordance with the recognition and measurement requirements of IFRSs as adopted by the EU. 

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly report based on our review.

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly report for the six months ended 31 March 2016 is not prepared, in all material respects, in accordance with the recognition and measurement requirements of IFRSs as adopted by the EU and the AIM Rules.

Ian Beaumont

for and on behalf of KPMG LLP

Chartered Accountants

1 Sovereign Square, Sovereign Street, Leeds, LS1 4DA

28 June 2016

The notes on pages 15 to 26 are an integral part of this interim consolidated financial information.

* To simplify presentation, the share based payment reserve was combined with the retained earnings reserve in the 6 months ended 31 March 2015.

1. Financial information

This announcement does not constitute statutory financial statements within the meaning of the Companies Act 2006 and the interim financial information included within has not been audited.

This information has been approved for issue by the Board of Directors of Benchmark Holdings plc, a company domiciled and incorporated in the United Kingdom.

Statutory accounts for the year ended 30 September 2015 were approved by the Directors on 1 February 2016 and delivered to the Registrar of Companies. The audit report received on those accounts was unqualified and did not contain any emphasis of matter paragraph nor any statement under Section 498 of the Companies Act 2006.

2. General information and basis of preparation

The financial information set out in these interim financial statements for the six months ended 31 March 2016 and the comparative figures for the six months ended 31 March 2015 are unaudited. They have been prepared in accordance with the recognition and measurement requirements of International Financial Reporting Standards (IFRS) and IFRIC interpretations issued by the International Accounting Standards Board (IASB) adopted by the European Union and the AIM Rules. They do not contain all the information required for statutory financial statements and should be read in conjunction with the consolidated financial statements of the Group for the year ended 30 September 2015, which have been prepared in accordance with IFRS as adopted by the European Union.

The interim financial statements comprise the financial statements of the Group and its subsidiaries at 31 March 2016. 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.

The interim 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.

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 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.

The following adopted IFRSs have been issued but have not been applied by the Group in these financial statements. Their adoption is not expected to have a material effect on the financial statements.

· IFRS 9: Financial Instruments (effective date 1 January 2018)

· IFRS 15: Revenue from Contract with Customers (effective date 1 January 2017)

· IFRS 16: Leases (effective date 1 January 2019)

· Annual Improvements to IFRSs - 2012-2014 Cycle: (effective date 1 January 2016)

The adoption of other standards is not expected to have a material effect on the financial statements.

A financial review of the business is included in the Chairman's Statement.

3. Share capital

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

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

4. Going concern

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Chairman's Statement.

The Directors have considered these factors, the likely performance of the business and possible alternative outcomes and the financing activities available to the Group. Having taken all of these factors into consideration, including the impact on covenants relating to the external borrowing facility, the Directors confirm that forecasts and projections indicate that the Group and its Parent Company have adequate resources for the foreseeable future and at least for the period of 12 months from the date of signing the half year report. Accordingly, the financial information has been prepared on the going concern basis.

5. Accounting policies

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

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

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total earnings.

The Group acquired INVE Aquaculture Group during the period and the accounting policies for that group are consistent with those already applied for the existing group. The estimates of useful economic lives of intangible assets, as shown in note 12, have been updated to reflect the newly acquired assets.

6. Estimates

The preparation of interim financial information requires management to make certain judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual amounts may differ from these estimates.

In preparing these interim financial statements the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those applied to the consolidated financial statements for the year ended 30 September 2015.

7. Segment information

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

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

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

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

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

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

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

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

Measurement of operating segment profit or loss

As outlined in note 5, 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 14.

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.

Six months ended 31 March 2016 (unaudited)

7. Segment information (continued)

Six months ended 31 March 2015 (unaudited)

12 months ended 30 September 2015 (audited)

8. Exceptional items

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.

Restructuring costs of £294,000 were incurred within the Sustainability Science Division during the period.

All exceptional items are included within operating costs on the face of the income statement.

9. Taxation

The reasons for the difference between the actual tax charge for the period and the standard rate of corporation tax in the United Kingdom applied to the result for the period are as follows:

10. 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.

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 for the period) based on the monetary value of the subscription rights attached to outstanding share options and warrants. The number of shares calculated above is compared with the number of shares that would have been issued assuming the exercise of the share options and warrants.

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, and outstanding warrants, as follows:

A total of 1,362,157 (H1 2015: 1,494,000; FY 2015: 2,401,186) potential ordinary shares have not been included within the calculation of statutory diluted earnings per share for the six months ended 31 March 2016 as they are antidilutive. However, these potential ordinary shares could dilute earnings per share in the future.

11. Property, plant and equipment