15 December 2021

OTAQ plc

("OTAQ", or the "Company")

Interim Results for six months to 30 September 2021

OTAQ (LSE: OTAQ), the marine technology products and solutions group for the global aquaculture and offshore oil and gas industries, announces results for the six months to 30 September 2021.

Highlights:

  • Revenues for six months to 30 September 2021 of £1.8m (H1 FY21: £2.0m)
  • Restructuring of senior management team to increase focus on sales led strategy, including appointment of new Chief Commercial Officer
    o Positioned to enter new markets with new products and technologies
  • Actively engaged with Marine Scotland regarding regulation of ADDs in Scottish waters
  1. Result of ADD trial anticipated in Q1 2022
  1. Long term supply contracts with certain customers now ended
    1. On-goingdiscussions with Subpesca, the Chilean regulatory authority
    1. Phase one of trial in Tasmania completed
  • 288 Sealfence units rented by Chilean customers in the period
  • Tracker technology obtained following the ROS Technology acquisition in November 2020
    1. Clear pathway to commercialisation with prototypes delivered to a customer and trials being successfully completed
  • OceanSense 4 and Lander (seabed survey device) with first sales made for each product
  • Investment in Blue Lion Labs, a Canadian plankton detection business, to license its technology and develop plankton detection systems for use in the salmon market and other finfish sectors

Post-Period Highlights

  • Successful conclusion of a six-month ADD trial with a major Chilean salmon farmer
  • Multi-yearsupply agreement signed to support Minnowtech's launch into Asia
  • 27 OTAQ sonars delivered to Minnowtech by end of December 2021 and an order placed for 100 more
    to be delivered in Q4
    o Increased visibility in the shrimp market highlighting strength of broadened portfolio
  • Order for tracking technology secured with expectation of around 600 units to be delivered to
    this customer in H2
    o Expected to lead to further sporting event tracking opportunities

Commenting on the results and prospects, Phil Newby, Chief Executive at OTAQ, said: "This was an extremely busy period for the Group - with the focus on commercialisation, product development and securing orders with a view to underpinning revenue visibility on the back of an increased product suite and routes to market.

"We have an exceptional technology set and are seeing increased demand in a growing number of geographies. The team has secured a number of new contracts and we believe that the momentum expected in the second half of the financial year will provide the basis for a step change as we move into the next financial period and beyond."

Contacts:

OTAQ PLC

Via Walbrook

Alex Hambro, Non-Executive Chairman

Phil Newby, Chief Executive Officer

Matt Enright, Chief Financial Officer

Dowgate Capital Ltd (Broker & Adviser)

020 3903 7715

David Poutney/James Serjeant

Nicholas Chambers/Russell Cook

Walbrook PR Ltd

Tel: 020 7933 8780 or Otaq@walbrookpr.com

Tom Cooper/Nick Rome/Nicholas Johnson

0797 122 1972 or 07748 325 236 or 07884 664 686

About OTAQ:

OTAQ is a highly innovative marine technology company focused on the marine aquaculture, offshore energy, renewables and oceanographic research sectors. It operates in four worldwide locations: Lancaster, Aberdeen and Ulverston in the UK and Puerto Montt in Chile.

OTAQ's marine technology portfolio includes a market-leading intelligent acoustic deterrent system, Sealfence, designed to protect marine-based aquaculture sites from predation, with multiple systems deployed in Scotland, Chile, Finland and Russia.

The Company's Oceansenseleak detection systems have a global reputation as the industry standard solution and have been deployed successfully on hundreds of jobs. OTAQ's Dragonfish laser measurement system is fast becoming recognised as one of the most accurate underwater precision laser measurement systems available. OTAQ also has significant experience in the design and manufacture of underwater connectors, penetrators and communication systems.

It seeks to develop and continuously improve its products using its specialist mechanical, electronic and software engineers with decades of experience in bringing underwater technology products to market. Concurrently, OTAQ seeks to expand its technology portfolio through acquisitive growth, with the aim of further expanding its aquaculture and offshore product offering.

OTAQ is proud to be fully ISO 9001:2015 accredited through DNV-GL. ISO 9001 is an internationally recognised quality management system and demonstrates OTAQ's commitment to consistency, continual improvement and customer satisfaction. The certification also demonstrates its ability to consistently deliver products and services to market whilst meeting statutory and regulatory requirements by applying an effective quality management system.

Summary

The Group presents its unaudited interim results for the period to 30 September 2021.

These interim results are presented against the backdrop of an uncertain regulatory environment in the Scottish salmon market, OTAQ's historically core market, due to an ongoing regulatory review by Marine Scotland, which has resulted in the ending of long-term rental contracts with certain customers. Accordingly, revenue has declined 10% compared with the same period last year to £1.8m, resulting in an adjusted EBITDA loss of £0.2m. Despite this, the Board believes that once the Marine Scotland position is concluded, indicated to be around the end of the first calendar quarter in 2022, the Group can deliver on the long-term strategic goals it has set out to deliver in order to realise OTAQ's potential and significantly increase shareholder value. The focus is to develop the Scotland salmon market, drive growth in Chile, leverage the fledgling Minnowtech investment in shrimp that is now revenue producing, and develop other new markets and products. Offshore and Connectors are in healthy positions to deliver double digit revenue growth this year and beyond. The product development team has also demonstrated its capabilities with several key new products delivered, including the Minnowtech shrimp sonar unit, and new Offshore products. The expected launch of the harmful algal bloom detection system in 2023 is expected to be of significance.

In August 2021 Richard Beesley joined the Group as Chief Commercial Officer and his appointment completes the senior management team and now gives the required resource and experience to allow a more committed and focussed sales approach. This is integral to the Group's strategy of penetrating new markets with new products and technologies.

Covid-19

OTAQ has adapted to the new working environments under Covid-19 precautions. The Connectors division was impacted in the first months of the period through labour shortages and supply chain disruption but has recovered well in the final four months. Travel restrictions, that are now being lifted, have made business development more problematic but there are signs this is ending with Chile allowing international visitors from the beginning of November and a recent Offshore trade show being well attended.

Strategy

The Group's strategy is to build a business of significance within the aquaculture industry focussed on helping aquaculture farmers, including salmon and other aquatic species, to become more productive by helping them overcome environmental challenges in their operations and become more efficient through the use of data and technology. The investment in Minnowtech LLC has given the Group visibility over the opportunities within the shrimp market and the Group is looking to further develop its presence in the shrimp sector.

The Group is also now actively exploring its opportunities in Norway, the world's largest salmon market, with a view to determining whether launching its operations there in 2022 is feasible.

Acquisitions

Acquisitions form a key part of the Group's development strategy. In May 2021, OTAQ invested USD 300,000 in Blue Lion Labs LLC, a Canadian plankton detection business, for a 10% equity stake and a cooperation and licensing agreement to license its technology and develop plankton detection systems for use in the salmon market and other finfish sectors. Harmful algal blooms on salmon farms are a growing problem as the world's ocean temperatures rise; economically it is a very serious problem for the global aquaculture industry with often very catastrophic losses resulting from algal blooms. There is therefore a very strong appetite for technology that alleviates this issue.

Innovation

Chris Hyde has now led all innovation for over a year following his appointment as Chief Technology Officer. New product launches have been delivered with the successful key development of Minnowtech LLC's sonar achieved. The tracker technology acquired following the ROS Technology acquisition in November 2020 was fully commercialised in this period with prototypes delivered to a customer and trials being successfully completed. The product development team will now look to develop this technology for use in related markets whilst the

business completes delivery in the second half of the year of around 600 units to the first customer. Other product launches include OceanSense 4 and Lander (seabed survey device) with first sales made against each product.

The development of the Live Plankton Analysis System (LPAS), intended to give salmon and other finfish farmers early warning of potentially catastrophic harmful algal blooms, is continuing with an expected launch in 2023. This project has been enhanced by the investment in and cooperation agreement signed with Blue Lion Labs LLC.

Regulation

Regulation of the 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 standards in the industry and rewarding those who have invested in their technology and the biological science behind it. The result will be a respected industry which limits the risk of under-invested competitors undermining competition.

As already detailed, OTAQ is actively engaged with Marine Scotland around regulation in Scottish waters but is also continuing discussions with Subpesca, the comparable Chilean authority. Phase one of a trial in Tasmania has been completed.

The Group also believes that Sealfence is compliant with the updated United States Marine Mammals Protection Act which will be fully enacted in January 2022. This will potentially open up the business development opportunities in North America and Norway as salmon exports to the USA are required to comply with the act which requires no marine animals to be harmed in the farming of salmon.

Trading

Aquaculture revenue has been adversely impacted in the period at £0.9m (H1 2020: £1.2m) and against £2.6m in the full year to 31 March 2021. The aquaculture division has suffered from the challenges of Covid-19 travel restrictions and the uncertainty in the Scottish market resulting from the Marine Scotland regulatory review. However, despite ongoing travel restrictions, progress has been made in Chile with 288 (30 September 2020:

  1. Sealfences units being rented by Chilean customers at the end of the period. The successful conclusion in October 2021 of a six-month trial with a major Chilean salmon farmer has resulted in discussions about a further rollout to the customer's sites. Chile also expects to see the final quarter launch of OTAQ's mooring inspection offering, which will utilise the Offshore division's Dragonfish laser measurement device, to provide a required service to ensure salmon farm moorings are operating as expected.

The Offshore division has performed well during the period with new product launches of OceanSense 4 and the seabed survey product, Lander, helping revenue to grow to £0.4m (H1 2020: £0.3m). The new products launched by the Offshore division, as well as the OceanSense agreement, are expected to help the division achieve double digit growth for the full year to 31 March 2022 of around £0.9m (2021: £0.5m).

The Connectors division moved into larger premises in November 2020 which has provided the required facility to help the division grow. Unfortunately, Connectors was impacted in the first two months of the year due to Covid-related supply issues and labour shortages but has recovered well in the final four months to achieve Revenue of £0.4m (H1 2020: £0.5m) and following several significant customer orders, is on track to exceed the sales of £0.9m achieved in the year to March 2021.

OTAQ's investment in the shrimp industry through Minnowtech LLC will see additional revenue in the second half of the year with 27 sonars delivered to Minnowtech by December 2021 and an order placed for 100 more to be delivered in Q4. This will deliver over £0.2m of revenue. Minnowtech's business plans forecast rollout of a high three figure number of sonars, which will be supplied by OTAQ, in the 2022 calendar year.

Financial Highlights for the six months to 30 September 2021

Group

2021

2020

Change

£'000

£'000

%

Revenue

1,821

2,031

(10.3%)

Gross profit

826

1,139

(27.4%)

Adjusted EBITDA*

(171)

385

(144.2%)

Net cash **

(1,286)

1,132

(213.6%)

*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:

2021

2020

£'000

£'000

Operating loss

(747)

(157)

Amortisation of intangible assets

120

69

Covid-19 grant

-

108

IFRS 16 depreciation

77

43

Depreciation on property, plant and equipment

379

322

Adjusted EBITDA

(171)

385

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

30 Sep 21

30 Sep 20

£'000

£'000

Cash and cash equivalents

1,160

1,939

Non-current lease liabilities

(321)

(277)

Current lease liabilities

(155)

(114)

Non-current financial liabilities

(1,607)

-

Current financial liabilities

(353)

-

Current deferred payment for acquisition

(187)

(270)

Non-current deferred payment for acquisition

-

(153)

Income tax asset

177

7

Net (debt) / cash

(1,286)

1,132

Adjusted EBITDA declined to a loss of £0.2 million from £0.4m in 2020. This decline resulted from lower Revenue in the period but also a change in the sales mix as higher EBITDA-contributing aquaculture revenue was replaced in part with lower margin product sales. There was additionally no grant in this period as there was in 2020 (2020: £0.1m). Overheads increased in part due to increased research costs incurred that have been required in order to gain regulatory approval for the Tasmanian salmon market as well as ongoing research costs supporting the Marine Scotland review.

The net debt position of £1.3m is a result of the losses generated in the period as well as continued development of the Group's research and development portfolio. Investment in Sealfence units has also continued as a result of the commitment to new Sealfences made in the first half of the previous financial year. In order to facilitate the development of the Group's Live Plankton Analysis System (LPAS), an investment in Blue Lion Labs LLC, a Canadian company with specialty in plankton detection, was made in May 2021 for USD 300,000.

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Hertsford Capital plc published this content on 15 December 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 17 December 2021 11:58:05 UTC.