OHT Ocean Harvest Technology Group Plc

23 July 2024

Ocean Harvest Technology Group plc

("OHT", the "Company", or the "Group")

Trading Update

Ocean Harvest Technology Group plc (AIM: OHT), a leading researcher, developer and supplier of proprietary blended seaweed products as functional additives for the global animal feed industry, provides a trading update following the end of the first half of the year.

Summary:

·      OHT has spent much of the first half of 2024 implementing new initiatives to realise the sales growth potential of its OceanFeed patented blended seaweed product into its substantial target markets. The appointments of Nico Stein as the new Chief Commercial Officer, a number of new sales people and two new Directors with relevant industry experience are some of these initiatives. The Company is seeing early traction from this through the onboarding of new customers and distributors (seven new customers in 1H and two further new ones in July) which we expect to drive growth in 2025.

·      The Gross margin on the Company's core OceanFeed product increased in 1H 2024 to 41% (38% in 1H 2023).

·      Whilst the Group has made excellent progress operationally, reported revenue for 1H 2024 is expected to be approximately €950,000 which is 46% lower than reported revenue for 1H 2023.  This fall is more than accounted for by the fact that OHT's two largest customers of 2023 have yet to order product this financial year.  Otherwise, Product Revenue was up circa 15% in 1H 2024.

·      As a consequence, OHT now expects to report materially lower revenue in 2024 than previously forecast.  Due to the concentrated nature of the Company's existing customer base and some uncertainty over ordering cycles, the Company intends to provide further guidance on outlook with its 1H 2024 results in September.

Significant progress in Sales and Marketing

The Company has made a number of changes to better access a wider geographic area and, where appropriate, increase the use of indirect sales channels.  This will give cost-effective access to many more mid and smaller sized customers globally, helping to increase overall market coverage and margins, and will reduce dependence on a concentrated base of larger customers.

The appointment of Nico Stein as Chief Commercial officer in February, the hiring of new sales resource in Latin America and South East Asia and the recent appointment of the two new Independent Non-executive Directors with substantial industry experience are all part of this expanded sales and marketing effort and OHT believes they will all help the Company fulfil its significant growth potential over the medium term.

As a result, the Company is seeing significant early traction, including the onboarding of two 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, the shipment of aqua and bovine product to a new customer in India and bovine product to a new customer in Bangladesh.  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 is preparing its first shipment of OceanFeed products to that region.

The Company expects these initiatives to help drive growth in 2025 and beyond and is encouraged by the significant progress to date.

1H 2024 Revenue and Margins

The Company's largest OceanFeed customer had regular and growing ordering patterns in 2020 through to 2023, which unfortunately led to excess inventory of OceanFeed product.  Consequently, this customer has paused orders whilst they reduce the excess although remains an enthusiastic user of the product and OHT is in ongoing discussions with a view to the customer broadening its use of OceanFeed across their operations.  This may ultimately lead to increased demand in the future and the customer intends to resume orders in 2025. OHT expects to have more clarity on this when it reports its interim results in September.

In addition, the Company's largest single seaweed customer purchased over 70% of its total 2023 volume in 1H 2023 and is yet to order product this financial year which significantly impacts the year-on-year comparison at the half year stage. OHT remains in discussion with this customer about future sales and will provide greater clarity in September.

Notwithstanding the above, gross margin from sales of OceanFeed has continued to rise, exceeding 41% in 1H 2024 as compared to 38% in 1H 2023.  However, the margin recorded on single seaweeds is expected to be negative in 1H 2024 due to some aged stock clearance which will reduce overall 1H Gross Margin to just under 35% as compared to 36% in 1H 2023.

Outlook for 2024 and beyond

With the 1H 2024 performance described above, the Company expects to report full year 2024 revenue which is materially lower than expectations.  The Company will provide a further update on its progress with key customers, new customer business and guidance on its outlook for future years at the time of its interim results announcement in September.

Whilst lower revenue will also reduce the cashflow for 2024 below the level previously expected, the Company has access to additional funding through its largely undrawn working capital facility of up to €2 million, subject to the Company's trade receivables balance.

The Board remains positive on the growth outlook for OHT. The awareness and interest in the OceanFeed product from animal feed and animal producing customers are growing as the market continues to seek solutions to global economic and sustainability challenges.  OHT's patented OceanFeed seaweed blend has demonstrated multiple benefits for its customers and is rare in being an all natural and highly sustainable solution.  The Board is pleased with the early traction from the sales and marketing hires and initiatives taken in 1H 2024 and looks forward to updating the market in September, along with its 1H 2024 results.

Mark Williams, CEO of Ocean Harvest Technology Group, commented:

"OHT is continuing to bring on new customers and we are pleased with the early contribution to this from our new Chief Commercial Officer, sales team and non-executive Directors.  We are confident that the disappointing financial impact of our largest OceanFeed customer not ordering product in 2024 will be rectified for 2025. We expect our patented OceanFeed product to generate increased market traction on the back of the recent sales initiatives and further positive trial data through H2 2024, this will drive the business towards its significant potential in 2025 and beyond."

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The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation ("MAR") EU no.596/2014. Upon the publication of this announcement via Regulatory Information Service ("RIS"), this inside information is now considered to be in the public domain. 

Notes to Editors

Ocean Harvest Technology Group plc is a global leader in the development and commercialisation of value adding proprietary products from blending multiple species of seaweed. The Company provides a range of natural additives focused on improving animal performance and the sustainability of the feed chain, through its unique and proven proprietary seaweed blends. The Company sources its seaweed globally, utilising sustainable and socially responsible harvesting of largely wild blooming seaweed species.  Its products are produced in its facility in Vietnam and sold into the $40bn animal feed additive sector in multiple markets across the world.

For more information, please visit www.oceanharvesttechnology.com.