Ocean Harvest Technology
Group Plc ("OHT or "the Company")
Interim Results for six
months ended 30 June 2024
Ocean Harvest Technology Group Plc
(AIM: OHT), specialists in researching, developing and selling
seaweed and ancillary products, announces its unaudited results for
the six month period ended 30 June 2024 ("the Period").
The Interim Report for the period
ended 30 June 2024 will be published on the Company's website today
at www.oceanharvesttechnology.com.
Financial Highlights
· Reported revenue down 46% to €0.95 million (H1 2023 €1.75
million). Significantly impacted by both OHT's largest OceanFeed
customer and largest single seaweed customer of 2023 not ordering
in the period
· Gross
margin 34.4% (H1 2023 35.8%) with underlying margin up year-on-year
excluding loss-making sale of aged single seaweed
inventory
· Adjusted EBITDA loss of €1.7 million (H1 2023 loss of €1.2 million) through lower revenue and gross
profit
· Cash
and cash equivalents at 30 June 2024 €1.1 million (30 June 2023
€4.7 million). The Company has €2.7 million of other current assets
including €1.7million of inventory at period end
· Additional funding of £1.5 million announced separately today
(as detailed below), providing the resource to drive significant
revenue growth into 2025
Operational Highlights
· New
Chief Commercial Officer Nico Stein joined OHT in Q1 and launched
new sales and marketing strategy in Q2
· Onboarding of two new Pet customers and further two
multi-species distributors in Europe, new multi-species distributor
in Latin America and an Aqua customer in India all having placed
orders in the Period
· Increasing investment in sales team with additional sales
resource added in LAM and APAC regions with further headcount
growth planned for late 2024 and early 2025
· Patent
granted covering a wide range of claims about the benefits of using
the Company's OceanFeed product in the diets of a range of
animals
· Positive commercial scale sow trial results delivered
demonstrating 5% profitability improvement for customers using
OceanFeed Swine
Post-period Highlights
· On 4
September 2024 the Company announced that Ashley Head was appointed
as Executive Chairman with immediate effect. After two years as
CEO, Mark Williams stepped down from the Board and the Company will
look to strengthen the Board and Executive team in the coming
months
· In
August 2024 the Company's largest OceanFeed customer resumed
ordering and OHT continue to have a strong relationship with this
substantial feed producer and broiler integrator
· Currently in discussion with several potential distributors in
South America and Asia
· As
announced separately today, the Company has conditionally raised
£1.5 million, before expenses, by way of the issue of Secured
Loan Notes and Warrants to certain existing Shareholders.
The net proceeds will be used to meet the
Company's immediate working capital requirements and provide the
capital to drive significant revenue growth into 2025
Conclusion and Outlook
· Reflecting the impact on FY 2024 of existing customer ordering
patterns and slower onboarding of new customers, the Company now
expects to report full year revenue of approximately €2.4 million.
Within that there is an expectation of positive organic revenue
growth in OceanFeed excluding the one year impact from the largest
customer
· Gross
margin from the sale of OceanFeed is expected to continue to
increase and is expected to be over 40% for the full year with
total margins expected to be over 37%
· The
Company is adequately funded through the loan note facility
announced today which gives it sufficient capital (alongside the
receivables purchase facility it put in place at the start of 2024)
to drive significant revenue growth into
2025.
Ashley Head, Executive Chairman of
Ocean Harvest Technology Group, commented:
"Despite the challenging first half
of FY24 the Period has been one of positive change for OHT with the
Company now being on a solid footing looking ahead to 2025 and
beyond. Trial data remains very positive and are pleased to
see the resumption of regular ordering from our largest customer
who remain an enthusiastic user of OceanFeed. The loan note
facility provides the Company with the financial stability it needs
to continue to implement the sales initiatives which the Board
expect to drive revenue growth and improvements in margin going
forward. We look forward with great confidence in our product and
expect to return to significant growth into 2025."
Executive Chairman's Statement
The first half of 2024 has been one
of disappointing performance and important change for OHT to lay
the groundwork for stronger performance in future. The Board
identified that the sales and marketing strategy required change
and improvement in order to enable OHT to deliver on the strong
growth potential that it believes it has. The performance in H1 has
also highlighted some of the weaknesses in the Company's prior
business model, particularly around customer concentration and long
sales cycles that these changes are intended to address. This has
involved Board and management changes and the implementation of
multiple new sales and marketing initiatives. The initial
results are encouraging, however, the benefits of these changes
take time to flow through and hence the Company is reporting a
disappointing set of financial results for 1H 2024.
Sales strategy
The Company announced in January
that Nico Stein was appointed as the new Chief Commercial Officer
for the Company. Subsequently, a number of the existing sales team
have been replaced, the Company has successfully recruited two new
sales people in Latin America and South East Asia and is planning
further additions, particularly in Europe. The Company is rapidly
expanding the number of countries it is in a position to sell into
and will continue to deepen and broaden the reach of the team in
the coming months.
OHT has identified specific regions
and segments of the global animal nutrition market where it
believes it has the greatest near term growth potential and has
increased its resources focussed on those opportunities. OHT
has also increased its use of indirect sales channels in a number
of regions to help it effectively access a wider geographic area
and, where appropriate, more mid and smaller sized customers.
It is expected that this will also help to reduce the concentration
of the company's customer base. Four
new distributors have been added year to date with
additional customers expected in the coming months. The Company has
been very pleased by the level of interest shown by a wide variety
of distributors that it has been engaging with and looks forward to
supporting their sales efforts going forward.
A key focus is on commercialising at
scale the strong performance data that the company has announced
with regards to egg laying hens, and subsequent to the period end,
sows. Whilst for many customers using OceanFeed is their first
experience with seaweed, in the Companion Animals sector the use of
individual seaweeds is more established, particularly for dogs and
horses. Here the sales strategy is focused on highlighting the many
benefits that our products have relative to existing seaweeds that
are typically used, particularly lower levels of heavy metals and
Iodine. As noted below, we are already starting to see some of
those efforts pay off and look forward to reporting further
progress on this at the full year results in March 2025.
The Board believes that these
changes and improvements will enable OHT to capitalise on its
enormous potential from the growing demand for sustainable and
natural ingredients which improve the profitability and
sustainability of feeding production animals. OceanFeed has
demonstrated benefits when used in multiple species of production
animals through improved growth rates and feed conversion
efficiency and lower mortality rates. OceanFeed also has a
lower carbon footprint than additives produced from land-based
plants and generates economic benefits in the communities where our
seaweed raw material is harvested.
Whilst the benefits of these
initiatives are not immediate, the Company has seen a number of
early benefits including the onboarding of three new pet food
customers in Europe which are using OceanFeed as a replacement for
traditional single seaweed products in their recipes, the
onboarding of a Greek distributor with initial new customers in
Poultry and Aqua, and the shipment of Aqua and Bovine product to a
new customer in India. The Company is also finalising
arrangements with several new European distributors and a Central
American distributor based in Mexico, who covers Central America
more broadly, and has made the first shipment of OceanFeed products
to that region.
The continuing increase in OHT's
gross margin % is further tangible evidence that OHT's OceanFeed
product is attracting customer support.
Supply Chain and R&D
Through the period the Company has
significantly reduced the volume of seaweed it has purchased in
line with the lower than expected sales volumes. OHT has been
actively engaged with its suppliers through the Period to ensure
the strong developments it has made in expanding its seaweed supply
chain in recent years can be maintained. With the recent
traction from the revised sales and marketing initiatives and an
improved sales volume outlook relative to H1, OHT is confident that
it will be able to keep its seaweed supply chain operating and
build up again to the previous volumes that it had been
sourcing.
The Company has continued to make
strong progress in its research trials and other intellectual
property development. A summary of the achievements during the
first half of 2024 include:
· The
completion in June of a large, commercial scale trial in sows and
the piglets from their litter. This trial demonstrated that
the use of OceanFeed Swine in Sow diets led to a statistically
significant increase in the number of live piglets in their
litter. The economic benefit of this is calculated to be
additional revenue of over $24 per sow per year under current
economic conditions, which OHT believes results in an approximate
5% improvement in profit per sow for the groups of sow farming
customers it is targeting. OHT sees this providing significant
commercial benefits and opportunity for sales growth.
· Academic research which has shown that, in addition to the
long demonstrated pre-biotic effect of using OceanFeed, its
inclusion in diets also leads to improvements in anti-inflammatory,
antioxidant and pathogen-binding properties to commercially
beneficial levels. OHT has seen a positive response from new
customer targets to the evidence of these additional
benefits.
· OHT
was granted a broad patent protecting the claim that its OceanFeed
seaweed blend causes a pre-biotic effect and can lead to higher
growth rates, improve feed efficiency and lower mortality.
Importantly this patent covers the application in a wide range of
animal species as well as a wide range of potential product
formulations.
In addition to these achievements,
the Company has large-scale trial work in progress at research
institutes demonstrating the effect of OceanFeed in the diets of
salmon, which is an industry facing many challenges, as well as in
dairy and beef cattle which is expects to report during the second
half of 2024.
Board
OHT has made several changes to its
Board since the start of 2024. In March both Hadden Graham
and Tom Onions stepped down from the Board by not seeking
re-election at the Company's AGM. As mentioned above, Gerina
Eberl-Hancock and Riaan VanDyk were appointed to the Board
as non-executive directors, and
both bring considerable relevant industry experience along with
sales and marketing skills. Subsequent to the period end,
Ashley Head was appointed as Executive Chairman on 3 September
following the resignation of Mark Williams as
CEO.
Funding
The Company has conditionally raised
£1.5 million, before expenses, by way of the issue of secured loan
notes and warrants to certain existing Shareholders.
The net proceeds will be used to meet the
Company's immediate working capital requirements and provide the
capital to drive significant revenue into 2025.
The Secured Loan Notes will be
issued following approval of the Resolutions by Shareholders at the
General Meeting and the satisfaction of all conditions
precedent. In order to meet the short-term cash requirements of the Company
prior to the General Meeting and
the satisfaction of all conditions precedent, it
is intended two of the Noteholders will make up to £0.4m available
immediately through an on-demand term loan at an interest rate
of 12.5%. Following Shareholder approval of the
Resolutions, the Secured Loan Notes will be issued along with the
Warrants and the balance of the £1.5 million will be available to be drawn
down.
Outlook
In its trading update of 23 July
2024 ("Trading Update"), OHT detailed multiple new initiatives that
were implemented in early 2024 to drive growth of its OceanFeed
product into its substantial target markets. Whilst the major
benefits of these initiatives are not immediate, the Company has
already seen a number of early indications of success including
greater momentum in onboarding new customers from a wider range of
species, geographies and sales channels and enabling shorter sales
cycles.
OHT has a highly concentrated
customer base that means the actions of a handful of customers have
had a material impact on revenues. As detailed in the trading
update of July, neither the Company's largest OceanFeed customer
nor its largest single seaweed customer from 2023 had placed any
orders in 1H2024. In addition to existing customer revenues, the Company's previous FY 2024 outlook was
reliant on quickly commercialising successful trials outcomes and
expanding distribution channels which have been slower to realise
than forecast.
Reflecting the impact on FY 2024 of
existing customer ordering patterns and slower onboarding of new
customers, the Company now expects to report full year revenue of
circa €2.4 million. Within that there is an expectation of
positive organic revenue growth in OceanFeed excluding the one-year
impact from the largest customer. The Company is pleased to now
report that this customer resumed orders in August 2024.
Gross margin from the sale of
OceanFeed is expected to continue to increase and is expected to be
over 40% for the full year. The Company is adequately funded
through the loan note facility announced today which gives it
sufficient capital (alongside the receivables purchase facility it
put in place at the start of 2024) to drive revenue growth into
2025.
Looking forward, OHT believes that
2025 will be a year of substantial revenue growth with greater
revenue visibility from the changes made in its sales and marketing
strategy which are resulting in:
1. targeting
the highest opportunity segments in each specific region and
market
2.
significant investment in sales and marketing resource and
headcount in target regions
3.
increasing breadth of customer base with reduced customer
concentration risk
4. improved
customer intelligence and longer term visibility of usage / demand
requirements
5. increased
use of distributors with faster customer onboarding and reduced
reliance on long trial periods
The trial data and customer feedback
remain extremely positive as regards OceanFeed and we look forward to returning to significant
growth given the substantial size of the market
opportunity.
Financial Summary
The Company has prepared the
following financial summary, in addition to the attached financial
statements. This summary shows its product revenue and separates
the other revenue it records which is a reimbursement of shipping
arranged by OHT on behalf of its customers and on which it does not
charge a margin. Adjusted EBITDA excludes IPO costs, share based
payments, other income/expenses. 2023 comparatives in the table
below are updated to reflect this definition.
|
|
Six months
to
|
Six months
to
|
Year ended
|
|
|
30-Jun-24
|
30-Jun-23
|
31-Dec-23
|
|
|
€'000
|
€'000
|
€'000
|
|
Product revenue
|
831
|
1,576
|
3,029
|
|
Other revenue
|
120
|
177
|
339
|
|
Reported revenue
|
951
|
1,754
|
3,368
|
|
|
|
|
|
|
Cost of goods sold
|
665
|
1,190
|
2,230
|
|
Gross Profit
|
286
|
564
|
1,138
|
|
Gross Margin %
|
34.4%
|
35.8%
|
37.6%
|
|
|
|
|
|
|
Overheads excluding IPO costs, share
based payments, depreciation and finance costs
|
(1,988)
|
(1,789)
|
(3,321)
|
|
|
|
|
|
|
Adj
EBITDA
|
(1,702)
|
(1,225)
|
(2,183)
|
|
|
|
|
|
|
Finance expense
|
(22)
|
(77)
|
(66)
|
|
Depreciation &
Amortisation
|
(127)
|
(35)
|
(226)
|
|
Other
|
(219)
|
6
|
(55)
|
|
|
|
|
|
|
Adjusted Earnings
|
(2,070)
|
(1,331)
|
(2,530)
|
|
|
|
|
|
|
IPO transaction costs
|
-
|
(754)
|
(763)
|
|
Share based payments
|
(61)
|
(97)
|
(185)
|
|
|
|
|
|
|
Profit (loss) before tax
|
(2,131)
|
(2,182)
|
(3,478)
|
Revenue
Reported revenue declined 46% to
€0.95 million (H1 2023 €1.75 million) as a result of the Company's
largest OceanFeed customer from 2023 and its largest single seaweed
customer not placing any orders in 1H 2024. Other volumes increased
year-on-year with higher OceanFeed pricing through annualisation of
2023 price increases and higher prices realised with new
customers.
Profitability
The Company recorded gross profit of
€0.29 million in the first half vs €0.56 million achieved in the
first half of last year. Total gross margin of 34% on product
revenue in H1 is a decline vs 36% and 38% recorded in H1 and full
year 2023 respectively. Total margins have been negatively impacted
by one-off loss-making sales of aged single seaweed inventory, with
underlying margins increasing year-on-year benefitting from the
increases in OceanFeed average selling prices and improved customer
mix. We believe that we will be able to further improve gross
margin as we scale the business further.
EPS
Basic loss per share of €0.016 has
reduced from a loss of €0.023 in June 2023.
Cash Flow
The company has a cash balance of
€1.1 million at 30 June 2024 compared to €4.7 million at 30 June
2023, following proceeds of the March 2023 IPO. Apart from funding
the company's losses, the historic build in inventory has been the
single largest use of cash and whilst that currently leaves the
company with excess inventory, it smoothes the path for the Company
to accelerate revenue growth in future.
Ashley Head
Executive Chairman
Unaudited Condensed Consolidated
Statement of Total Comprehensive Income
for the interim period ended 30 June
2024
|
|
Note
|
Six months
to
30 Jun 2024
|
Six months
to
30 Jun 2023
|
Year ended 31 Dec
2023
|
|
|
|
(Unaudited)
|
(Unaudited)
|
(Audited)
|
|
|
|
€
|
€
|
€
|
|
|
|
|
|
|
|
Product revenue
|
|
831,415
|
1,576,332
|
3,029,327
|
|
Other revenue
|
|
120,037
|
177,478
|
338,319
|
|
Total revenue
|
|
951,452
|
1,753,810
|
3,367,646
|
|
Cost of sales
|
|
(665,407)
|
(1,189,624)
|
(2,229,858)
|
|
Gross profit
|
|
286,045
|
564,186
|
1,137,788
|
|
|
|
|
|
|
|
Other operating income
|
|
-
|
19,930
|
50,327
|
|
Administrative expenses
|
|
(2,395,206)
|
(1,935,142)
|
(3,836,933)
|
|
Operating loss
|
|
(2,109,161)
|
(1,351,026)
|
(2,648,818)
|
|
|
|
|
|
|
|
Finance expense
|
|
(21,569)
|
(77,074)
|
(65,504)
|
|
IPO transaction cost
|
|
-
|
(753,885)
|
(763,315)
|
|
Loss before taxation
|
|
(2,130,730)
|
(2,181,985)
|
(3,477,637)
|
|
|
|
|
|
|
|
Taxation
|
|
-
|
-
|
71,639
|
|
Loss for the period
|
|
(2,130,730)
|
(2,181,985)
|
(3,405,998)
|
|
|
|
|
|
|
|
Other comprehensive income
|
|
|
|
|
|
Item that may be subsequently
reclassified to profit or loss:
|
|
|
|
|
|
Currency translation
differences
|
|
140,027
|
496
|
12,159
|
|
Total comprehensive loss, net of tax
|
|
(1,990,703)
|
(2,181,489)
|
(3,393,839)
|
|
|
|
|
|
|
|
Total comprehensive loss for the period attributable to owners
of the parent
|
|
(1,990,703)
|
(2,181,489)
|
(3,393,839)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share - basic and diluted (cent)
|
5
|
(0.016)
|
(0.023)
|
(0.031)
|
|
|
|
|
|
|
The above condensed consolidated
statement of total comprehensive income relates to continuing
operations for the Group.
4. Critical accounting judgements and
estimates
The preparation of the condensed
consolidated interim financial statements requires Directors to
make judgements, estimates and assumptions that affect the
application of accounting policies and the reported amounts of
assets and liabilities, income and expense. Actual results may
differ from these judgements and estimates.
In preparing these condensed
consolidated 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 that applied to the statutory audited consolidated
financial statements for the year ended 31 December 2023
5. Loss per share
The calculation of basic and diluted
loss per share is based upon the loss of attributable to equity
holders divided by the weighted average number of shares in issue
during the period.
The loss incurred by the Group means that the
effect of any outstanding options would be anti-dilutive and is
ignored for the purposes of the diluted loss per share
calculation.
|
|
Six months
to
30 Jun 2024
(Unaudited)
€
|
Six months to
30 Jun 2023
(Unaudited)
€
|
Year ended
31 Dec 2023
(Audited)
€
|
|
Loss for the period from continuing
activities
|
(2,130,730)
|
(2,181,985)
|
(3,405,998)
|
|
|
|
|
|
|
|
Six months
to
30 Jun 2024
(Unaudited)
No
|
Six months
to
30 Jun 2023
(Unaudited)
No
|
Year ended
31 Dec 2023
(Audited)
No
|
|
Weighted average number of ordinary
shares
|
125,855,697
|
94,073,289
|
110,095,106
|
|
|
|
|
|
|
|
Six months
to
30 Jun 2024
(Unaudited)
€
|
Six months
to
30 Jun 2023
(Unaudited)
€
|
Year ended
31 Dec 2023
(Audited)
€
|
|
Basic and diluted loss per
share
|
(0.016)
|
(0.023)
|
(0.031)
|
6. Intangible assets
|
|
Patents and
licenses
€
|
Development
costs
€
|
Total
€
|
|
Cost
|
|
|
|
|
At 1 January 2024
|
29,696
|
189,761
|
219,457
|
|
Additions
|
2,713
|
-
|
2,713
|
|
Exchange differences
|
-
|
(1,689)
|
(1,690)
|
|
At 30 June 2024
|
32,409
|
188,072
|
220,481
|
|
|
|
|
|
|
Amortisation
|
|
|
|
|
At 1 January 2024
|
14,139
|
21,110
|
35,249
|
|
Charge for the period
|
3,614
|
22,596
|
26,210
|
|
Exchange differences
|
(220)
|
448
|
228
|
|
At 30 June 2024
|
17,533
|
44,154
|
61,687
|
|
|
|
|
|
|
Net book
|
|
|
|
|
At 30 June 2024
(Unaudited)
|
14,876
|
143,918
|
158,794
|
|
At 31 December 2023
(Audited)
|
15,557
|
168,651
|
184,208
|
Development costs are internally
generated intangible assets associated with the development of
Group's products.
7. Leases
In May 2024 the Group entered into a
new lease agreement in relation to the warehouse located in
Vietnam. The lease term is 3 years. The Group has adopted an
incremental borrowing rate of 13.52%. The incremental borrowing
rate includes an additional risk premium on a lease based in
Vietnam and denominated in Vietnamese Dong (VND).
|
|
Leasehold
property
€
|
Total
€
|
|
Cost
|
|
|
|
At 1 January 2024
|
668,305
|
668,305
|
|
Additions
|
404,748
|
404,748
|
|
Exchange rate differences
|
2,814
|
2,814
|
|
At 30 June 2024
|
1,075,867
|
1,075,867
|
|
|
|
|
|
Amortisation
|
|
|
|
At 1 January 2024
|
627,813
|
627,813
|
|
Charge for the period
|
62,664
|
62,664
|
|
Exchange rate differences
|
7,099
|
7,099
|
|
At 30 June 2024
|
697,576
|
697,576
|
|
|
|
|
|
Net book
|
|
|
|
At 30 June 2024
(Unaudited)
|
378,291
|
378,291
|
|
At 31 December 2023
(Audited)
|
40,492
|
40,492
|
Right of use
asset
|
|
Leasehold
property
€
|
Total
€
|
|
Cost
|
|
|
|
At 1 January 2024
|
47,614
|
47,614
|
|
Additions
|
404,748
|
404,748
|
|
Interest expenses
|
10,167
|
10,167
|
|
Lease payments
|
(76,522)
|
(76,522)
|
|
Exchange adjustments
|
(3,733)
|
(3,733)
|
|
At 30 June 2024
(Unaudited)
|
382,274
|
382,274
|
|
|
|
|
Lease
liability
8. Share-based payment
schemes
The Group operates two employee
share option schemes that are accounted for as equity-settled
share-based payments, which are detailed in the annual report for
the year ended 31 December 2023.
In April 2024, the Company granted
1,385,857 options each to Chris Scott, the Group's Chief Financial
Officer and Nico Stein, the Group's Chief Commercial Officer under
the Share Option Plan with the same vesting conditions as the
existing options.
The number of new options granted
equals to the number of options that have either been forfeited
since the IPO or are due to be forfeited in 2024 by employees
leaving the Company.
The total charge for the period
ended 30 June 2024 in respect of the two options schemes was
€61,092 (2023: €nil) and was recognised in the Statement of
Comprehensive Income.
9. Significant events after the
reporting date
The Company has conditionally raised
£1.5 million , before expenses, by way of the issue of
Secured Loan Notes and Warrants to certain existing Shareholders.
The net proceeds will be used to meet the Company's immediate
working capital requirements and provide the capital to drive
revenue in 2025.
