Chairman’s Statement

Summary

The Group is pleased to present its first set of interim results as a plc which have been delivered against the complexities of the Covid-19 pandemic.

Despite a challenging six months due to the pandemic, revenue has increased by 16% to £2.03m compared with the prior period (H1 2019: £1.80m) and adjusted EBITDA* has increased by 22% to £0.39m (H1 2019: £0.32m). Whilst these results were impacted by restricted operations and opportunities for business development, the Group remains focussed on delivering the long-term strategic goals it has set in order to realise OTAQ’s potential and significantly increase shareholder value. The focus remains on further growing our customer base, expanding into new geographies, and developing new products - with the ultimate goal of diversifying revenue streams.

This strategic objective is demonstrated by the progress made during the eight months since listing. The Group has developed and launched new products, invested in the USA-based aquaculture innovator Minnowtech LLC and post period-end acquired the trade and assets of ROS Technology. The research and development team has been strengthened by appointing Chris Hyde to the role of Chief Technology Officer and work continues to deliver the key aquaculture projects developing new products in the fields of biomass measuring and plankton detection.

Additionally, the Group is delighted to welcome Matt Enright who joined the Board on 26 June 2020 as Chief Financial Officer and Company Secretary.

Covid-19

The Covid-19 pandemic has impacted Group operations; however, the workforce has successfully adapted to Covid-safe working environments as well as working from home. Investments have been made in remote-working infrastructure enabling the Group to adapt and as such be able to successfully fulfil customer orders and requirements.

Conversely, business development activities have been constrained by global restrictions on travel meaning that the Group’s pursuit of growth opportunities in new markets are not progressing as quickly as anticipated. However, the Group remains excited about its ability to pursue these opportunities as and when travel restrictions are eased.

Trading

Aquaculture revenue has shown some progress in the period at £1.3m (H1 2019: £1.05m) and against £2.1m reported for the full year to 31 March 2020. The Aquaculture division, which represents 59% of Group revenue, is underpinned by long-term deployment of SealFence units at customer sites. We have continued to install new units in Scotland and a new location, Ireland, during the period but not to the extent we originally envisaged. Chile, in particular, has been more problematic due to significant travel restrictions imposed by the Chilean government during the period in response to the Covid-19 pandemic. 

In addition, we have also delivered direct sales of SealFence units to customers in the Faroe Islands. The launch of the SealFence portable product also resulted in additional sales in October and is expected to deliver further revenue in the full financial year.

The Offshore division has performed in line with the prior year with revenue of £0.30m (H1 2019: £0.34m) and against £0.62m in the full year to 31 March 2020 which was augmented through product sales rather than core rentals. Future performance in that division looks uncertain given the reduced market for rental of the flagship product, OceanSense. New product development being undertaken by the Offshore division is intended to increase non-rental revenue.

The Connectors division moved into larger premises in November 2020 which will support future growth in the division. Connectors has performed in-line with expectations for the year with revenue of £0.50m (H1 2019: £0.36m for four months post-acquisition).

Strategy

The Group’s strategy is to build a business of significance within the aquaculture industry focussed on enabling salmon producers, and farmers of other aquatic species, to become more productive by helping them overcome environmental challenges in their operations and generate efficiencies through the use of data and technology.

Acquisitions

A key part of the strategy, acquisition-led development, has made progress during the period. The strategic alliance with Minnowtech LLC, announced in June 2020, allows OTAQ not only to maintain a shareholding in an exciting aquaculture technology innovator but also contribute expertise in commercialising new technologies.

Post period end on 7 November 2020, The Group acquired the trade and assets, including key customer contracts and the core intellectual property, of ROS Technology Limited. The acquisition will be revenue generating and EBITDA enhancing for the remainder of the year and beyond.  ROS Technology Limited was set up by Dr Peter Robinson, the founder of OTAQ and inventor of the SealFence technology, as a vehicle for him to apply his expertise in electronics and mechanical design. This acquisition not only enhances the financial performance of the Group but also reunites Peter’s knowledge and experience with the OTAQ R&D team.

Innovation

Additional focus has been given to the R&D department with Chris Hyde appointed as Chief Technology Officer to lead the team. This was complemented by Dr Peter Robinson joining the Group through the ROS Technology acquisition. Chris and Peter have considerable expertise and experience within the aquaculture market. Chris will lead the delivery of the biomass and plankton projects, and the Group is pleased to report significant progress has been made regarding these projects with additional infrastructure put in place to support the successful delivery.

Regulation

Regulation of the aquaculture industry worldwide is still evolving due to the introduction of novel technologies and the demands of governing bodies who oversee food standards. OTAQ believes that clear regulation is a positive force in aquaculture, maintaining high standards in the industry and rewarding those who have invested in their technology. The benefit of regulatory standards being implemented ensures the maintenance of a respected industry and mitigates the risk of under-invested competitors undermining competition and threatening the marine environment.  It remains, however, that many markets have yet to define their regulatory policy in the field of aquaculture technology, and specifically deterrent technologies.  

In this regard, the Scottish fish farming industry, in which OTAQ’s SealFence technology is widely deployed awaits the outcome of a review of acoustic deterrent devices (ADDs) and their environmental impact.  OTAQ remains confident that its products are environmentally benign, with the added benefit that the nature of its products also means that they would be adaptable to comply with any variations in technical specifications if required. Until the Scottish Parliament has reviewed the scientific evidence on the environmental impact of ADDs (scheduled for March 2021), there will remain an element of uncertainty in the further development of this important market.

The Group is also increasingly confident that the SealFence product is compliant with the updated United States Marine Mammals Protection Act. This will potentially open up business development opportunities in North America and the rest of the world as salmon exports to the USA are forced to comply with the act.

Financial Highlights

*EBITDA (earnings before income, tax, depreciation, share option charges and amortisation) is reconciled from the statutory operating loss per the consolidated statement of comprehensive income as follows:

**Net cash is reconciled from the statutory cash position per the consolidated statement of financial position as follows:

Adjusted EBITDA grew to £0.39 million from £0.32m in 2019. This improvement was driven by the overall revenue growth to £2.03m. The adjusted EBITDA profit margin improved to 19% from an adjusted EBITDA operating profit margin of 18% in 2019. 

The reduction in the Net cash position to £1.13m from £2.86m is in line with management expectations as current financial liabilities of £0.49m have been repaid in the period to 30 September 2020 as well as the payment of professional fees in the period relating to the reverse takeover of Hertsford Capital plc and additional placing that took place on 31 March 2020 as shown in the Condensed Consolidated Statement of Cash Flows with £0.86m related to trade payables and other payables.

Outlook

As per the trading update dated 29 October 2020, the Group expects to report revenue of £4.0m and adjusted EBITDA of £0.5m for the year to 31 March 2021.

Whilst Covid-19 is expected to continue to impact operations and business development for the remainder of the financial year we believe that the Group is well placed to return to a normal level of operations and business development activities once travel restrictions are lifted. Furthermore, we believe that the business will be in a strong position to further grow its market share once the regulatory requirements across its target markets are clarified.

While trading conditions have been impacted by wider issues, we remain excited by the potential to diversify revenue streams both geographically and through further enhancing our product portfolio. Importantly, the business remains well placed to trade through this period of uncertainty and take advantage of strong growth opportunities as conditions allow.

Alex Hambro
Non-Executive Chairman
26 November 2020

Condensed Consolidated Statement of Comprehensive Income

Condensed Consolidated Statement of Changes in Equity

Condensed Consolidated Statement of Cash Flows

NOTES TO THE FINANCIAL STATEMENTS

The notes are available in the printable pdf of the results. To download it, please click here