Ocean Harvest Technology Group [LON:OHT], the Berkshire-based animal-feeds-from-seaweed company published its interim results to end-June this week.
One of The Armchair Trader’s ‘One to Watch’ stocks we reported on the AIM-listed company’s progress about six months ago, as the feeds company was starting to build up its trial pipeline, expecting trials worth some EUR10m this year and was expanding its sales into Southeast Asia.
Since then, Ocean Harvest has received positive data back from its commercial-scale sow trial for swine feed. Blended feed added to the food of pregnant sows increased the number of piglets born by 3% and born alive by 3.2%. It also helped the mummy pigs increase their body weight post-partum (fat piggies are a good thing for farmers) and improved their milk quality, which is good for the piglets.
The trial involved 800 sows running a non-Ocean Harvest feed cohort against a group of pigs that did not have the additives incorporated into their diets. The aim was to prove the benefits of including Ocean Feed supplements to commercial farmers. The trial concluded that the addition of Ocean Harvest supplements could add USD24 (GBP17.90) profit per sow, an uptick of 5% per unit. The company believes that this provides new sales opportunities in sow and piglet markets, with sows being the optimum market – as mummy pigs eat more than baby pigs.
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Mark Williams, the company’s CEO said at the time: “The performance benefits resulting in a profitability improvement of roughly 5% for the producer in this trial presents OHT with a significant ability to grow its swine business […] We believe that this roughly triples OHT’s addressable market for its OceanFeed Swine product.”
Departures and arrivals in the boardroom
Williams was joined in the boardroom by two new executives in May, with Gerina Eberl-Hancock and Riaan Van Dyk joining as non-executive directors. Eberl-Hancock joined from a sales and marketing capacity in the European food industry and Van Dyk, also a sales and marketing specialist has previous experience in life sciences. Last month Ocean Harvest appointed Ashley Head as executive chairman. However, the above was one of Williams’ last public statements as he stepped down as chief executive and Ocean Harvest is now in the hunt for a new CEO.
As previously reported Ocean Harvest is quite a new addition to the Alternative Investment Market, having only joined the index in April 2023. The company was established in 2005. Based in Theale, Berkshire, with operations in Vietnam, the company produces animal feeds from seaweed, primarily harvested in South East Asia. The company has been around since 2005 and its products are used to feed swine, ruminants, poultry, horses, in aquaculture and petfood.
As reported, Ocean Harvest is a way off being profitable and this wasn’t helped by the feed company’s biggest OceanFeed customer from 2023 not ordering any new product in the year to end-June. However, the customer started ordering again last month. Nevertheless, this knocked Ocean Harvest’s 1H24 revenue back 46% to EUR950,000 (GBP790,300), down from EUR1.75m the year previously.
Gross margin at 34.4% was behind the 35.8% from 1H23, but the overall picture saw underlying margin up year-on-year but dragged back by the loss-making sale of aged single seaweed. All-in however, on an adjusted EBITDA-basis Ocean Harvest’s loss increased to EUR1.7m, up from a loss of EUR1.2m the year previously. Losses were more than expected.
Early-stage company with future potential
Ocean Harvest is not in any trouble right now. It’s an early-stage company, in the throes of rolling-out its products, investing heavily in R&D and building up its sales force. The company is investing in its sales force to push into Latin America, has secured two new distributors in Europe and a customer in India for its fish food supplements.
Ocean Harvest had EUR1.1m of cash in the bank – albeit down from EUR4.7m at the end of June in 2023, but with EUR2.7m of assets including inventory of EUR1.7m. The company also secured GBP1.5m of new funding in loan notes and warrants yesterday (30th September) before expenses. However, the new funding is dependent on a positive vote at a General Meeting.
The warrants entitle noteholders to subscribe for one ordinary share at the exercise price of 11p moving up to 14p from the fifth anniversary of the warrant instrument. The secured loan notes have a tenor of four-years and provide for the grant of security to noteholders over certain company assets. Interest on the principal amount of the secured loan notes is 12.5% a year, on top of an arrangement fee of 3.5% and a commitment fee of 0.75% a year each anniversary date. Ocean Harvest has the option to issue another GBP0.5m of secured loan notes if need be.
Ocean Harvest’s shares opened trading this week (30th September) at 10.06p, down 6.4% from a year ago but up 5.9% year-to-date. The company has a market capitalisation of GBP13.2m. The company is still an early play at the first stage of its growth story. But with the demand for animal proteins set to rise, it could still become a valuable company in the next decade.
