Final Results

RNS Number : 5348B

Plant Health Care PLC

21 February 2011

 



For immediate release                                                                                        21 February 2011

PLANT HEATH CARE PLC

("Plant Heath Care" or the "Company")

Results for the year ended 31 December 2010

Plant Heath Care (AIM: PHC.L), a leading provider of naturally-derived products to the agriculture industry, announces its results for the year ended 31 December 2010.

Highlights:

•	Important new agreements signed with Syngenta, Legacy Seeds and Germains Seed Technology
•	Reclamation business sold in May 2010 and U.S. landscape and retail business in January 2011
•	Strong industry demand for Harpin and Myconate
•	Revenue of $7.1 million (2009: $16.7 million)
•	Gross profit of $3.6 million (2009: $11.1 million)
•	Gross margin of 51% (2009: 67%)
•	Operating loss of $7.9 million (2009: loss of $1.8 million)
•	Net loss of $7.6 million (2009: loss of $1.3 million)  and;
•	Cash and short-term investments at 31 December 2010 of $13.0 million (2009: $15.9 million)
	−	as of mid-February 2011 $18.2 million

Commenting on the results, Chief Executive John Brady said: "Plant Health Care is entirely focused on a strategy to license our IP-protected, yield-enhancing products to the world's largest agrichemical companies. Global agricultural productivity has been able to keep up with rising food demand over recent decades, but a rapidly growing emerging market population and income level has upset the balance. We have a product portfolio that is aimed at being a part of the solution by obtaining greater yields from new and existing agricultural land under all conditions."

"We have a significant research and development programme targeting both the further improvement of the utility of Harpin and the development of the next generation of products from our Harpin platform with several candidates showing great promise."

For further information please contact:

Plant Health Care plc
John Brady, Chief Executive Officer
Tel: [phone]
[e-mail]
Evolution Securities		Tavistock Communications
Tim Worlledge / Tim Redfern		Jeremy Carey/Simon Compton
Tel: [phone]		Tel: [phone]
[e-mail] [e-mail]		[e-mail] [e-mail]

Notes to editors:

About Plant Health Care plc: Plant Health Care plc ("PHC") is a leading provider of naturally derived products for plants and soil. Established in 1995 in Pittsburgh (Pennsylvania) in the United States, PHC currently has approximately 70 employees and has operations in the United States, Mexico, the United Kingdom, Spain and the Netherlands. The Company's ordinary shares have been quoted on the Alternative Investment Market ("AIM") of the London Stock Exchange since July 2004 and listed on the Official List of the Channel Islands Stock Exchange in February 2010 (ticker symbol/ mnemonic: PHC).

PHC's products are aimed at the agriculture industry and are environmentally beneficial. Through the commercialisation of these products, PHC is capitalising on long-term trends toward natural systems and biological products for plant care. Further information is available at: www.planthealthcare.com.

Plant Health Care plc

("Plant Health Care" or the "Company")

Results for the Year Ended 31 December 2010

Chairman's statement

Overview

I am pleased to report Plant Health Care's results for the year ended 31 December 2010.

The year under review included a number of important strategic developments which place Plant Health Care in a stronger position to achieve its goal of becoming one of the world's leading providers of natural technologies for the promotion of plant heath and growth. We entered into two new agreements with Syngenta Crop Protection (Syngenta) and others with Legacy Seeds (Legacy) and with Germains Seed Technology (Germains), which we expect to advance the Group's progress to commercialisation and revenues in the coming years.  We have sold our reclamation business in May 2010 and, since the year end, our US landscape and retail business in January 2011, for a total consideration of $5.1 million, in order to focus on the worldwide agriculture market and to strengthen our financial resources to achieve our strategic goals.  Nonetheless, our financial results were disappointing, primarily due to the much lower than expected level of Harpin sales to the Monsanto Company (Monsanto), which had a substantial amount of inventory carried forward from 2009.  We are pleased to report that Direct Enterprises (DEI), a leading distributor of seed treatments in the US, has acquired half of this excess stock and has undertaken to acquire the balance by the end of the year.

The challenge of providing enough food for an ever-increasing population continues to make headline news around the world. Improved agricultural productivity is the key to meeting the forecasted increase in demand for crops and governments around the world are becoming increasingly proactive in seeking products to help improve yields, as demonstrated by Plant Health Care's agreement with the Brazilian government to evaluate the efficacy and economic feasibility of Myconate in Brazilian agriculture, signed in May 2010.

Another driving factor behind the market in which Plant Health Care operates is the need to provide "greener crops" with a smaller environmental footprint.  Retailers and consumers have become more active in demanding lower levels of residual chemicals in their food and the soil in which it is grown. The need to minimise environmental impact has always been at the forefront of Plant Health Care's ethos; Harpin and Myconate products leave no residue in the soil or on the crop after harvest.

Our cash and liquid short-term investments balances as of mid-February 2011 are $18.2 million.  This strong liquidity position will allow the Group to develop and expand relationships with existing and new partners over the coming years, as well as to continue to invest in formulation and product development of its Harpin and Myconate technology platforms, while our revenue builds.

Financial results

Group sales from continuing operations were $7.1 million (2009: $16.7 million).  The reduction in sales was due primarily to Monsanto's excess inventory position, which resulted in an $8.2 million decline in Harpin sales to this customer. Additionally, the Group chose not to continue with its "early order" programmes in Europe and Mexico, which it has implemented in recent years, in order to establish improved pricing and terms of sale for the future.

Gross profit margin from continuing operations was 51% (2009: 67%) with the margin decline being due to the aforementioned reduction in Harpin off take by Monsanto. 

Operating expenses from continuing operations were $11.5 million (2009: $12.9 million), as the Group actively reduced administrative expenses, especially in the area of headcount and overall compensation, while increasing investment levels in field trials and product development.

The resulting operating loss from continuing operations was $7.9 million (2009: loss of $1.8 million). 

The net loss for the year was $7.6 million (2009: loss of $1.3 million).

Discontinued operations 

We announced, in May 2010, the sale of our reclamation business for a consideration of $0.4 million, and, in January this year, the sale of our US landscape and retail business for a consideration of $4.65 million.  These discontinued businesses contributed $0.1million to operating profit in 2010 (2009: loss of $0.6 million).

As was previously indicated, the Board believes that the returns from these businesses did not justify the financial capital and management resource that was required to operate them.  Moreover, the businesses are inherently low margin businesses and serve as a distraction of both time and resource from the much higher margin business of licensing the intellectual property estate that underpins our Harpin and Myconate technology platforms, thereby utilising the distribution reach of large multinational companies for getting product to market.

Partnerships

Following these disposals, management is able to focus on developing products for the worldwide agricultural market. Commercial exploitation will be achieved through existing and new partnerships with major industry players at multiple levels in the agricultural value chain who have the ability to achieve distribution of our technologies throughout the world. 

Having demonstrated success in our 2010 trial programme in large acreage crops, such as corn, soybeans and  potatoes, and in combination with widely-used chemicals, such as fungicides and herbicides, we believe even more strongly that commercialisation of our technologies will be achieved in the future.

Despite the decline in sales to Monsanto in 2010, the recent sale of Monsanto's inventory overhang is expected to have a positive impact on our future potential revenues from Harpin in the US.  We are actively engaged in a number of marketing and product development efforts to enhance and expand this commercial relationship. 

Two agreements were signed with Syngenta in 2010 to evaluate and potentially develop Harpin in a wide variety of crops and crop protection products. In 2011, Syngenta will be performing its first full year of testing on a wide variety of crops and enter its second year of trials with the world's largest crop protection product, glyphosate.  We also signed a four-year agreement with Legacy, one of the leading alfalfa seed companies in the US, granting them the exclusive rights to Harpin and Myconate for the alfalfa market in the US.  An exclusive agreement was signed with Germains, part of the Associated British Foods Group, to develop and market Plant Health Care's Harpin proteins as a seed treatment for sugar beets worldwide in combination with Germains' seed priming technologies.

Monsanto is one of the major and most influential agrichemical companies in the world.  For this reason, it remains an important partner for us and continues to promote Harpin to the downstream agriculture distribution market through a multi-year agreement with DEI to market Harpin.  We are also working with Monsanto on new and improved products.

Product development

Two areas are being targeted in our research and product development programme.  First, Plant Health Care is seeking to further improve the utility of its existing Harpin product for both its partners and its downstream grower customers.  Formulation development will further improve shelf life and ease of handling both on farm and in seed treatment facilities.  Developments in liquid formulations are already showing promise.  Secondly, we are investing in the development of the next generation of products from our Harpin technology platform.   These are Harpin versions with increased and more specifically targeted bioactivity, designed to contribute to an expanded suite of Harpin products for the future. Several candidates, with great promise to further increase yields in major crops, have already been identified and isolated in the greenhouse. Advanced field trials and development work on these new products will begin during 2011.

Current trading and outlook

As stated above, our strategy is to focus on rolling-out our IP-protected technology platforms with current and new partners during 2011.

Agrichemical companies are forever seeking enhanced product performance, product differentiation, and IP protection, all of which can be achieved by combining Myconate and Harpin with traditional crop protection products.  A more effective, more targeted product and extended patent life will prevent these products from becoming generics and suffering from a resultant drop in sale price.

It takes time, up to three years, for revenues to be generated from partnership arrangements whilst we work with our partners on the formulations and combinations and on trialling the products ahead of product launch. We recognise that during this period our revenues and profitability can be significantly impacted year-on-year until we have a more extensive portfolio of on-market products and a more consistent and diversified flow of partnership revenue. However, by focusing our business strategy, we have ensured that our cash position is strong and the combination of our product pipeline, strong market drivers and the good progress we are making with our partners and potential partners encourage us to look forward to the future with optimism and confidence in our ability to realise our strategy. 

In closing, I would like to thank the entire Plant Health Care team for their efforts in 2010 to position the Group for future success. 

Dominik Koechlin

Chairman

18 February 2011

Chief Executive's report

The period under review saw a number of positive developments for Plant Health Care. The sales of the US landscape and retail business and of the reclamation business will enable the Group to give its undivided attention to our core strategy of developing partnership arrangements for distributing its IP-protected technology in agriculture. The reclamation and US landscape and retail businesses did not offer shareholders exposure to the maximum potential of Harpin and Myconate due to their low growth and the significant amount of overhead required to guarantee market penetration. Partnering in agriculture offers the potential to reach much larger markets, more quickly, by becoming a component in partners' products with large existing market shares and international exposure.

Important new agreements have been signed with Syngenta, Germains, the Brazilian government and Legacy. The strength of existing relationships provides the Company with confidence in its plan to roll-out Harpin and Myconate across worldwide agriculture markets, as well as to attract new partners for further penetrating these global markets.

Technology partnering

Our strategy is to grow the Group by building a strong licensing base by entering into technology partnering agreements. Our Harpin and Myconate technology platforms are the keys to success for Plant Health Care. Harpin improves plant growth and crop yields, enhances disease resistance and improves post-harvest quality, whilst Myconate encourages plant growth and helps crops cope with drought and thereby enhances yield.

Harpin platform

In December 2008, a long-term commercial agreement was signed with Monsanto for the exclusive rights to commercialise Harpin seed treatment technology in corn, soybeans, cotton, canola and selected vegetables.  In 2009, Plant Health Care generated significant revenues from purchases of Harpin by Monsanto for their new product launch of Roundup Ready 2 Yield soybeans.  As noted in the Chairman's statement, DEI has purchased a large portion of Monsanto's existing inventory and has already moved a large portion of that product into the 2011 seed treatment and foliar markets.

Furthermore, Monsanto is also offering farmers the option to use Harpin as a standalone product for soybeans and cotton and, through its relationship with DEI, across all of its soybean seeds. This has greatly increased the possible market size to 35-40 million acres, although ultimate levels of market penetration will depend on a number of market forces that will play out over the next year. 

Syngenta has non-exclusive rights to commercialise Harpin in combination with glyphosate and other herbicides for all genetically modified herbicide resistant crops. A second agreement was signed with Syngenta during 2010 to evaluate and potentially develop Harpin in a wide variety of crops and in combination with some of its leading products. 2011 will mark the first full year of testing by Syngenta on a variety of crops.

In May 2010, a four-year agreement was signed with Legacy for the exclusive rights to develop Harpin and Myconate for use in the alfalfa market in the US.  Following trials in the first year, the second year of development trials has begun with a focus on non-irrigated, drought susceptible areas, a key strength of our Myconate product.

During 2010, Plant Health Care also signed an exclusive agreement with Germains to develop and market Plant Health Care's Harpin proteins as a seed treatment for sugar beets worldwide in combination with Germains' seed priming technologies. The combined treatments will have the potential to be used on all sugar beet, which annually occupy more than 10 million acres worldwide. Germains is the leading provider of priming treatments for sugar beet seed with a market share of over 40% in the US, over 35% in the Western and Central European markets and a strong presence elsewhere in the world.

Myconate platform

We are selling Myconate into the potato market in the UK and South Africa, where we have established a strong position.  We are using these successes as a launching platform for similar arrangements in major markets, such as the US and Eastern Europe.

Testing programmes for row crops and cereals are in place with a number of major agrichemical and seed companies and further technology partnering agreements are expected to be announced during 2011. 

Product development

With the bulk of agrichemicals sold in a liquid state, one of our key programmes has been the development of Harpin into a liquid commercial product.  We have made important strides in this area and are working with several large formulation companies to bring this project to a successful completion.

Plant Health Care is currently developing an enhanced and more potent Harpin product pipeline for the future. The first new products are expected to reach the market in three years and will provide enhanced growth activity, as well as more resistance to environmental stress. These new products will offer a quicker and less costly route to market compared with traditional synthetic chemistry.  Our research indicates that there is a potential for creating Harpins with greater activity, crop and environmental specificity and synergy with the key crop protection products.  We believe that this capability, deployed from our own financial resources and in collaboration with our partners, has the potential to generate a differentiated range of Harpin products that taps into the increasing groundswell of interest in active ingredients with a biological, as opposed to a chemical base.  Furthermore, this work broadens and reinforces our already extensive IP position in Harpins.

In April 2010, Plant Health Care announced the purchase of Bayer CropScience's Myconate intellectual property portfolio and the conclusion of the final details concerning the termination of its previous Myconate agreement. The acquisition of these rights further strengthens the IP surrounding Myconate and extends further the patent life for the product.

Other developments

In October 2010, Plant Health Care licensed its patent-pending Computer Automated Spatial Analysis (CASA) technology to XS, Inc., the North American industry leader for retail sales transaction data collection, analysis and online reporting for the seed, trait and crop protection chemical industry.  XS will begin to commercialise the technology in 2012 using Plant Health Care's AgVeritas™ trademark.   The technology was developed as a way for the Group to demonstrate to prospective licensing partners the on-farm yield benefit of our proprietary technologies.

Outlook

As a result of our recent disposals, Plant Health Care is entirely focused on a strategy that enables us to license our IP-protected, yield-enhancing products to the world's largest agrichemical companies. Global agricultural productivity has been able to keep up with rising food demand over recent decades, but a rapidly growing emerging market population and income level has upset the balance. Major changes are needed to grow more food on the same land area without damaging the environment. Plant Health Care has a corporate strategy and product portfolio that is aimed at being a part of the solution by obtaining greater yields from new and existing agricultural acres under all conditions, from the ideal to the most challenging.

John Brady

Chief Executive

18 February 2011

Consolidated statement of comprehensive income for the year ended 31 December 2010

	Note	2010  $'000		2009  $'000
				As restated  (Note 8)
Revenue	3	7,085		16,678
Cost of sales		3,496		(5,581)
Gross profit		3,589		11,097
Distribution costs		(3,133)		(2,737)
Research and development expenses		(2,166)		(1,658)
Administrative expenses		(6,165)		(8,530)
Operating loss	4	(7,875)		(1,828)
Finance income	6	239		1,203
Finance expense	6	(13)		(54)
Loss before tax		(7,649)		(679)
Income tax expense	7	(40)		(85)
Net loss from continuing operations		(7,689)		(764)
Profit/(loss) of discontinued operations, net of tax	8	136		(582)
Loss for the year		(7,553)		(1,346)
Other comprehensive (loss)/income:
Exchange difference on translation of foreign operations		(152)		95
Total comprehensive loss for the year		(7,705)		(1,251)
Net loss attributable to:
Owners of the parent		(7,559)		(1,331)
Non-controlling interest		6		(15)
		(7,553)		(1,346)
Total comprehensive loss attributable to:
Owners of the parent		(7,711)		(1,236)
Non-controlling interest		6		(15)
		(7,705)		(1,251)
Basic and diluted loss per share	9	$(0.14)		$(0.03)
Basic and diluted loss per share from continuing operations	9	$(0.15)		$(0.02)

Consolidated statement of financial position at 31 December 2010

 

	Note	2010  $'000		2009  $'000
Assets
Non-current assets
Intangible assets	10	3,564		4,045
Property, plant and equipment		476		688
Trade receivables	11	123		949
Total non-current assets		4,163		5,682
Current assets
Inventories		1,675		1,599
Trade and other receivables	11	7,581		13,576
Investments		4,982		3,729
Cash and cash equivalents		8,054		12,171
Total current assets		22,292		31,075
Assets in disposal groups classified as held for sale	8	1,949		-
Total assets		28,404		36,757
Liabilities
Current liabilities
Trade and other payables	12	2,615		4,493
Borrowings		42		62
Provisions		166		278
Total current liabilities		2,823		4,833
Non-current liabilities
Borrowings		10		59
Provisions		141		117
Total non-current liabilities		151		176
Liabilities directly associated with assets in disposal groups classified as held for sale		560		-
Total liabilities		3,534		5,009
Total net assets		24,870		31,748
Share capital		944		940
Share premium		50,270		49,934
Reverse acquisition reserve		10,548		10,548
Share-based payment reserve		2,329		1,842
Foreign exchange reserve		(593)		(441)
Retained earnings		(38,788)		(31,229)
		24,710		31,594
Non-controlling interests		160		154
Total equity		24,870		31,748

Consolidated statement of changes in equity at 31 December 2010

	Share capital $'000	Share  premium  $'000	Reverse acquisition reserve $'000	Share-based payment  reserve $'000	Foreign  exchange  reserve  $'000	Retained  earnings  $'000	Total  $'000	Non-  controlling  interests  $'000	Total  equity  $'000
Balance at 1 January 2009	821	34,102	10,548	1,220	(536)	(29,898)	16,257	169	16,426
Total comprehensive income	-	-	-	-	95	(1,331)	(1,236)	(15)	(1,251)
Shares issued	108	16,018	-	-	-	-	16,126	-	16,126
Share-based payments	-	-	-	622	-	-	622	-	622
Options and warrants exercised	11	510	-	-	-	-	521	-	521
Placement costs	-	(696)	-	-	-	-	(696)	-	(696)
Balance at 31 December 2009	940	49,934	10,548	1,842	(441)	(31,229)	31,594	154	31,748
Total comprehensive income	-	-	-	-	(152)	(7,559)	(7,711)	6	(7,705)
Shares issued	1	159	-	-	-	-	160	-	160
Share-based payments	-	-	-	487	-	-	487	-	487
Options exercised	3	177	-	-	-	-	180	-	180
Balance at 31 December 2010	944	50,270	10,548	2,329	(593)	(38,788)	24,710	160	24,870

Consolidated statement of cash flows for the year ended 31 December 2010

	Note	2010  $'000	2009  $'000
			As restated  (Note 8)
Cash flows from operating activities
Loss before tax		(7,553)	(1,346)
Adjustments for:
Depreciation		212	222
Amortisation of intangibles	10	244	510
Impairment of intangibles	10	272	-
Share-based payment expense		487	622
Finance revenue		(239)	(1,203)
Finance costs		13	58
Loss on sale of property, plant and equipment		-	66
Income taxes expense		40	85
Decrease/(increase) in trade and other receivables		5,225	(6,244)
(Increase)/decrease in inventories		(665)	954
Decrease  in trade and other payables		(1,183)	(927)
Decrease in provisions		(88)	(106)
Income taxes paid		(93)	(85)
Net cash  used in operating activities		(3,328)	(7,394)
Investing activities
Purchase of property, plant and equipment		(143)	(268)
Expenditure on externally-acquired intangible assets	10	(175)	(469)
Disposal of discontinued operations, net of cash		223	-
Finance revenue		239	1,203
Purchase of investments		(5,291)	(7,499)
Sale of investments		4,038	3,770
Net cash used in investing activities		(1,109)	(3,263)
Financing activities
Interest paid		(13)	(58)
Issue of ordinary share capital		160	15,441
Exercise of options and warrants		180	510
Repayment of borrowings		(69)	(200)
Net cash provided by financing activities		258	15,693
Net (decrease)/increase in cash and cash equivalents		(4,179)	5,036
Effects of exchange rate changes on cash
and cash equivalents		62	(117)
Cash and cash equivalents at beginning of period		12,171	7,252
Cash and cash equivalents at end of period		8,054	12,171

 

Notes forming part of the Group financial statements for the year ended 31 December 2010

1.   Annual Report

The financial information set out in this document does not constitute the company's statutory accounts for 2009 or 2010. Statutory accounts for the years ended 31 December 2010 and 31 December 2009 have been reported on by the Independent Auditors. The Independent Auditors' Report on the Annual Report and Financial Statements for 2009 was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 237(2) or 237(3) of the Companies Act 1985. The Independent Auditor's Report on the Annual Report and Financial Statements for 2010 was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

Statutory accounts for the year ended 31 December 2009 have been filed with the Registrar of Companies. The statutory accounts for the year ended 31 December 2010 will be delivered to the Registrar in due course and will be posted to shareholders shortly and thereafter will be available from the Company's registered office at The Broadgate Tower, 20 Primrose Street, London EC2A 2RS, and from the Company's website www.planthealthcare.com.

2.   Accounting policies

Reporting currency

The financial statements are presented in US dollars.  The directors believe that it is appropriate to use US dollars as the presentational currency for reporting, since the majority of the Group's transactions are conducted in that currency.

Basis of preparation

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards, International Accounting Standards and Interpretations (collectively IFRSs) issued by the International Accounting Standards Board (IASB) as adopted by the European Union and those parts of the Companies Act 2006 which apply to companies preparing their financial statements under IFRSs.

The principal accounting policies are set out below.  The policies have been applied consistently to all the years presented and on a going concern basis. 

Standards, amendments and interpretations to published standards effective in 2010 adopted by the Group

Amendments to IAS 27: Consolidated and Separate Financial Statements

This amendment affects in particular the treatment of non-wholly-owned subsidiaries.  Transactions which increase or decrease the group's interest in a subsidiary without altering control will no longer give rise to changes in the carrying value of the subsidiary's assets or liabilities (including its associated goodwill) and will not give rise to a gain or loss. Any difference between the consideration paid or received and the adjustment to the carrying value of the non-controlling interest will be recognised directly in equity. In addition, total comprehensive income must now be attributed to owners of the parent and to the non-controlling interests even if this results in the non-controlling interest having a deficit balance. Previously, unfunded losses in such subsidiaries would be attributed entirely to the group. 

The amendment does not require the restatement of previous transactions and has had no effect on the current financial year.

None of the other standards or amendments effective from periods beginning 1 January 2010 have a material impact on the financial statements.

Basis of consolidation

On 6 July 2004, Plant Health Care plc became the legal parent company of Plant Health Care, Inc. in a share-for-share transaction.  The former shareholders of Plant Health Care, Inc. became the majority shareholders of Plant Health Care plc.  Further, the continuing operations and executive management of Plant Health Care plc were those of Plant Health Care, Inc. 

This combination was accounted for as a reverse acquisition with Plant Health Care, Inc., the legal acquiree, being treated as the acquirer. Under this method the assets and results of Plant Health Care plc were combined with the assets, liabilities and results of Plant Health Care, Inc. from the date of combination. There was no adjustment to the carrying values of the assets and liabilities in Plant Health Care, Inc. to reflect their fair value at the date of combination. No goodwill arose on this combination.

Where the Company has the power, either directly or indirectly, to govern the financial and operating policies of another entity or business so as to obtain benefits from its activities, it is classified as a subsidiary. The consolidated financial statements present the results of the Company and its subsidiaries ("the Group") as if they formed a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full.

The consolidated financial statements incorporate the results of business combinations using the purchase method.  In the consolidated statement of financial position, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date.  The results of acquired operations are included in the statement of comprehensive income from the date on which control is obtained.  They are deconsolidated from the date control ceases.

Non-controlling interests

For business combinations completed on or after 1 January 2010 the Group has the choice, on a business combination by business combination basis, to initially recognise any non-controlling interest in the acquiree at either acquisition date fair value or, as was required prior to 1 January 2010, at the non-controlling interest's proportionate share of the acquiree's net assets. The group has not elected to take the option to use fair value in acquisitions completed to date.

From 1 January 2010, the total comprehensive income of non-wholly owned subsidiaries is attributed to owners of the parent and to the non-controlling interests in proportion to their relative ownership interests. Before this date, unfunded losses in such subsidiaries were attributed entirely to the group. In accordance with the transitional requirements of IAS 27 (2008), the carrying value of non-controlling interests at the effective date of the amendment has not been restated.

Revenue

Revenue comprises sales of goods to external customers and revenues generated through the commercialisation of the Group's technology (fee income). Sales of goods to external customers are at invoiced amount less value added tax or local taxes on sales and are recognised at the point that the customer takes legal title to the goods sold.  Fee income is recognised when the Company has no remaining obligations to perform under a non-cancellable contract which permits the user to act freely under the terms of the agreement. 

Goodwill

Goodwill is measured as the excess of the cost of an acquisition over the net fair value of the identifiable assets, liabilities and contingent liabilities, plus any direct costs of acquisition.

Goodwill is capitalised as an intangible asset with any impairment in carrying value being charged to administrative expenses in the consolidated statement of comprehensive income.  The Company performs annual impairment tests for goodwill at the financial year end.

Other intangible assets

Externally-acquired intangible assets are initially recognised at cost and subsequently amortised on a straight-line basis over their useful economic lives. The amortisation expense is included within administrative expenses in the consolidated statement of comprehensive income.

Intangible assets are recognised on business combinations if they are separable from the acquired entity or give rise to contractual or other legal rights, and are initially recognised at their fair value.

Expenditures on internally-developed intangible assets (development costs) are capitalised if it can be demonstrated that:

•	it is technically feasible to develop the product for it to be sold;
•	adequate resources are available to complete the development;
•	there is an intention to complete and sell the product;
•	the Group is able to sell the product;
•	sale of the product will generate future economic benefits; and
•	expenditure on the project can be measured reliably.

Capitalised development costs are amortised over the periods of the future economic benefit attributable to the asset. The amortisation expense is included within administrative expenses in the consolidated statement of comprehensive income.

Development expenditure not satisfying the above criteria and expenditure on the research phase of internal projects are recognised in profit or loss.

The significant intangibles recognised by the Group and their estimated useful economic lives are as follows:

Licenses	-	12 years
Registrations	-	5-10 years

Impairment of goodwill and other intangible assets

Impairment tests on goodwill are undertaken annually at the financial year-end.  Other non-financial assets are subject to impairment tests whenever events or changes in circumstances indicate that their carrying amount may not be recoverable.  Where the carrying value of an asset exceeds its recoverable amount (that is the higher of value in use and fair value less costs to sell), the asset is written down accordingly.

Impairment charges are included within administrative expenses in the consolidated statement of comprehensive income.  An impairment loss recognised for goodwill is not reversed.

Foreign currency

Foreign currency transactions of individual companies are translated into the individual company's functional currency.  Any differences are recognised in profit or loss.

On consolidation, the results of operations that have a functional currency other than US dollars are translated into US dollars at rates approximating to those ruling when the transactions took place. Statements of financial position are translated at the rate ruling at the end of the financial period. Exchange differences arising on translating the opening net assets at opening rate and the results of operations that have a functional currency other than US dollars at average rate are included within "other comprehensive income" in the consolidated statement of comprehensive income and taken to the foreign exchange reserve within capital and reserves.

Exchange differences recognised in profit or loss in Group entities' separate financial statements on the translation of long-term monetary items forming part of the Group's net investment in the overseas operation concerned are reclassified to other comprehensive income and accumulated in the foreign exchange reserve on consolidation.

On disposal of a foreign operation, the cumulative exchange differences recognised in the foreign exchange reserve relating to that operation up to the date of disposal are transferred to the consolidated statement of comprehensive income as part of the profit or loss on disposal.

Financial instruments

Trade receivables collectible within one year from date of invoicing are recognised at invoice value less provision for amounts the collectability of which is uncertain.  Trade receivables collectible after more than one year from date of invoicing are initially recognised at fair value, and subsequently carried at amortised cost using the effective interest rate method, less provision for impairment. 

Investments comprise short-term investments in notes and bonds having investment grade ratings.  These assets are actively managed and evaluated by key management personnel on a fair value basis in accordance with a documented investment strategy.  They are carried at fair value as determined by quoted prices on active markets, with changes in fair values recognised through profit or loss.

Cash and cash equivalents comprise cash on hand, demand deposits and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to insignificant risk of changes in value.

Trade and other payables are initially recognised at fair value and subsequently carried at amortised cost using the effective interest method.

Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.  The Group's ordinary shares are classified as equity instruments.

Employee benefits

The Group maintains a number of defined contribution pension schemes for certain of its employees; the Group does not contribute to any defined benefit pension schemes. The amount charged to profit or loss represents the employer contributions payable to the schemes for the financial period.

The expected costs of all short-term employee benefits, including short-term compensated absences, are recognised during the period the employee service is rendered.

Equity share-based payments

Share-based payments issued to employees include share options and stock awards under a long-term incentive plan. Equity-settled share-based payments are measured at fair value (excluding the effect of non-market-based vesting conditions) at the date of grant.  The fair value determined at the date of grant is recognised as an expense with a corresponding increase in equity on a straight-line basis over the vesting period, based on the Company's estimate of the shares that will eventually vest and be adjusted for the effect of non-market-based vesting conditions.

Leased assets

Where assets are financed by leasing agreements that give rights approximating to ownership (finance leases), the assets are treated as if they had been purchased outright.  The amount capitalised is the present value of the minimum lease payments payable over the term of the lease.  The corresponding lease commitments are shown as amounts payable to the lessor.  Depreciation on the relevant assets is recognised in profit or loss.

Lease payments are analysed between capital and interest components.  The interest element of the payment is charged to income over the period of the lease and is calculated so that it represents a constant proportion of the balances of capital repayments outstanding.  The capital element reduces the amounts payable to the lessor.

All other leases are treated as operating leases.  Their annual rentals are charged to income on a straight-line basis over the lease term.

Property, plant and equipment

Items of property, plant and equipment are initially recognised at cost. Cost includes the purchase price and costs directly attributable to bringing the asset into operation. Depreciation is provided to write off the cost, less estimated residual values, of all property, plant and equipment over their expected useful lives.  It is calculated at the following rates:

Leasehold improvements	-	over the lesser of the asset's useful life or the length of the lease
Production machinery	-	10 - 20% per annum
Office equipment	-	20 - 33% per annum
Vehicles	-	20% per annum

Inventories

Inventories are initially recognised at cost, and subsequently at the lower of cost and net realisable value.  Cost comprises all costs of purchase and all other costs of conversion.

Deferred tax

Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the balance sheet differs from its tax base, except for differences on:

•	the initial recognition of goodwill;
•	the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting nor taxable profit; and
•	investments in subsidiaries and jointly-controlled entities where the Group is able to control the timing of the reversal of the difference and it is probable that the difference will not reverse in the foreseeable future.

Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available against which the difference can be utilised.

The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the end of the financial period and are expected to apply when the deferred tax liabilities/(assets) are settled/(recovered).

Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities and when they relate to income taxes levied by the same tax authority and the Group intends to settle its current tax assets and liabilities on a net basis.

Provisions

Provisions are recognised for liabilities of uncertain timing or amount that have arisen as a result of past transactions and are discounted at a pre-tax rate reflecting current market assessments of the time value of money and the risks specific to the liability.

Non-current assets held for sale and disposal groups

Non-current assets and disposal groups are classified as held for sale when:

•	they are available for immediate sale;
•	management is committed to a plan to sell;
•	it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn;
•	an active programme to locate a buyer has been initiated;
•	the asset or disposal group is being marketed at a reasonable price in relation to its fair value; and
•	a sale is expected to complete within 12 months from the date of classification.

Non-current assets and disposal groups classified as held for sale are measured at the lower of:

•	their carrying amount immediately prior to being classified as held for sale in accordance with the Group's accounting policy; and
•	fair value less costs to sell.

Following their classification as held for sale, non-current assets (including those in a disposal group) are not depreciated.

The results of operations disposed during the year are included in the consolidated statement of comprehensive income up to the date of disposal.

A discontinued operation is a component of the Group's business that represents a separate major line of business or geographical area of operations or is a subsidiary acquired exclusively with a view to resale, that has been disposed of, has been abandoned, or that meets the criteria to be classified as held for sale.

Discontinued operations are presented in the consolidated statement of comprehensive income as a single line which comprises the post-tax profit or loss of the discontinued operation along with the post-tax gain or loss recognised on the re-measurement to fair value less costs to sell or on disposal of the assets or disposal groups constituting discontinued operations.

3.   Revenue

Revenue arises from:	2010 $'000	2009  As restated    $'000  (Note 8)
Sale of goods	6,389	11,126
Fee income	696	5,552
	7,085	16,678

4.   Operating loss

	Note	2010 $'000	2009 $'000
Operating loss is arrived at after charging:
Share-based payment expense		487	622
Depreciation		212	222
Amortisation of intangibles	10	244	510
Impairment of intangibles	10	272	-
Operating lease expense		528	520
Loss on disposal of property, plant and equipment		-	66
Foreign exchange losses		120	-
Auditor's remuneration:
Fees payable to the Company's auditor and its associates for the audit of the Company's annual accounts		88	89
Fees payable to the Company's auditor and its associates for other services: Audit of the Company's subsidiaries		58	83
Total auditor's remuneration		146	172

5.   Segment information

The segregation shown within the segment analysis below has been re-aligned to provide greater consistency with the manner in which management internally monitors and reports on the Group's performance.  The product segment includes the revenue and costs associated with the sale of all inventory items produced and sold by the Group.  The partnering segment includes the revenue and costs associated with all technology agreements pursued and entered into by the Group.

						Year ended  31 Dec  2010  US$'000	Year  ended  31 Dec  2009  US$'000
	Revenue
	Products					13,680	15,176
	Partnering					1,109	9,112
	Elimination of intra-Group revenue					(1,653)	(1,074)
						13,136	23,214
	Discontinued operations					(6,051)	(6,536)
	Consolidated revenue					7,085	16,678
	Segment operating loss
	Products					481	(73)
	Partnering					(3,955)	3,405
	Elimination					52	(80)
	Unallocated corporate expenses*					(4,316)	(5,657)
						(7,738)	(2,405)
	Discontinued operations					(137)	577
Consolidated operating loss						(7,875)	(1,828)

* These expenses relate to public company expenses, such as directors' fees, legal fees, share-based payment expense and other corporate expenses.

External revenue by location of customer is as follows:

2010	USA $'000	Mexico $'000	Europe and Other $'000	Total $'000
Revenue
External sales	1,502	2,431	3,152	7,085

2009	USA $'000	Mexico $'000	Europe and Other $'000	Total $'000
Revenue
External sales	10,312	2,640	3,726	16,678

Other segment information:

2010	Products $'000	Partnering $'000	Unallocated/ Elimination* $'000	Held for sale $'000	Total $'000
Segment assets	9,502	7,611	9,342	1,949	28,404
Segment liabilities	1,849	447	678	560	3,534
Capital expenditure	143	-	-	-	143
Non-cash expenses:
Depreciation	174	-	23	15	212
Amortisation	27	217	-	-	244
Share-based payment	46	181	233	27	487

2009	Products $'000	Partnering $'000	Unallocated/ Elimination* $'000	Held for sale $'000	Total $'000
Segment assets	12,789	9,808	14,160	-	36,757
Segment liabilities	3,616	253	1,140	-	5,009
Capital expenditure	249	-	19	-	268
Non-cash expenses:
Depreciation	193	-	29	-	222
Amortisation	293	217	-	-	510
Share-based payment	105	213	304	-	622

* These amounts represent intercompany amounts and public company expenses for which there is no reasonable basis by which to allocate the amounts across the Group's segments.

Segment assets include all operating assets used by a segment and consist principally of operating cash, receivables, inventories, property, plant and equipment and intangible assets, net of allowances and provisions. Segment liabilities include all operating liabilities and consist principally of trade payables and accrued liabilities.

Unallocated assets and liabilities include assets and liabilities attributable to the general entity, including cash and short-term investments, property plant and equipment, income tax payable, borrowings and trade payables and accrued expenses.

All material non-current assets are located in the US.

6.   Finance income and expense

	2010 $'000	2009 $'000
Finance income
Interest on deposits and investments	239	249
Exchange rate gains	-	954
	239	1,203
Finance expense
Finance leases	9	13
Notes payable	4	12
Unwinding of discount on provisions	-	29
Total interest expense	13	54

7.   Tax expense

The tax expense is comprised of corporation tax and income tax on profits and was $40,000 (2009: $85,000).  

The reasons for the difference between the actual tax charge for the year and the standard rate of corporation tax in the UK applied to profits for the year are as follows:

	2010   $'000	2009  $'000
Loss before tax - continuing operations	(7,649)	(679)
Profit/(loss) before tax - discontinued operations	136	(582)
	(7,513)	(1,261)
Expected tax credit based on the standard rate of corporation tax in the UK of 28% (2009: 28%)	(2,104)	(353)
Disallowable (income)/expenses	(72)	63
Utilisation of previously-unrecognised tax losses	-	(327)
Share-based payment expense per accounts	136	177
Share-based payment expense per tax returns	(420)	(184)
Losses in year not relieved against current tax	2,065	461
Amortisation of intangibles	(36)	(6)
Other temporary differences	471	254
Actual tax charge for the year	40	85

At 31 December 2010, the Group had a potential deferred tax asset of $15,005,000, which includes tax losses available to carry forward of $14,572,000 (being actual losses of $54,910,000) arising from historical losses incurred, anticipated tax relief on share-based payments of $213,000 and other timing differences of $220,000.

8.   Discontinued operations

In May 2010, the Group sold the trade, assets and liabilities relating to its subsidiary, PHC Reclamation, Inc.  In January 2011, it sold the trade and certain assets and liabilities of its US Landscape and Retail business.  The results of these businesses for 2010 are shown under "Profit/(loss) of discontinued operations, net of tax" in the Consolidated statement of comprehensive income.  In accordance with IFRS 5, the comparatives for the year ended 31 December 2009 are restated to reflect the same treatment of these businesses.

(a) PHC Reclamation: profit on disposal

In May 2010, the Group sold the trade and those assets and liabilities relating to its subsidiary, PHC Reclamation, Inc. for cash consideration of $225,000.

The post-tax loss on disposal of discontinued operations was determined as follows:

	2010  $'000
Cash received	225
Deferred consideration receivable	160
	385
Cash disposed of	(82)
Net assets disposed (other than cash):
Property, plant and equipment	(79)
Trade and other receivables	(292)
Trade and other payables and other financial liabilities	68
Profit on disposal of discontinued operations	-

During the year $80,000 of the deferred consideration was received.

(b) US landscape and retail: assets and liabilities classified as held for sale

The following major classes of assets and liabilities related to the US landscape and retail business have been classified as held for sale in the Consolidated statement of financial position as at 31 December 2010:

			Year ended 31 December 2010 $'000
Property, plant and equipment			64
Intangible assets			140
Trade and other receivables			1,180
Inventory			565
			1,949
Trade and other payables			560

Profit/(loss) on discontinued operations

(c) The profit/(loss) of both discontinued operations, net of tax, was determined as follows:

	Reclamation $'000	Landscape/retail  Business  $'000	Total  $'000
2010
Revenue	414	5,637	6,051
Expense other than finance costs	(420)	(5,494)	(5,914)
Finance costs	(1)	-	(1)
Tax expense	-	-	-
	(7)	143	136
2009
Revenue	1,306	5,230	6,536
Expense other than finance costs	(1,195)	(5,918)	(7,113)
Finance costs	(5)	-	(5)
Tax expense	-	-	-
	106	(688)	(582)

Earnings per share from discontinued operations		2010 $	2009  $
Basic earnings/(loss) per share		0.00	(0.01)
Diluted earnings/(loss) per share		0.00	(0.01)

(d) Cash flows on discontinued operations

Cash flows attributable to operating, investing and financing activities of the above discontinued operations equal:

		Year ended 31 December 2010 $'000	Year ended 31 December 2009 $'000
Operating inflows		71	103
Investing inflows		72	30
Financing inflows		-	-

9.   Loss per share

Basic loss per ordinary share has been calculated on the basis of the loss for the year of $7,553,000 (2009: loss of $1,346,000) and the weighted average number of shares in issue during the period of 52,800,972 (2009: 49,731,214).  Basic loss per share from continuing operations has been calculated with a numerator of $7,689,000 loss (2009: $764,000) and basic earnings/(loss) per share from discontinued operations has been calculated with a numerator of $136,000 (2009: $582,000 loss).  The weighted average number of shares used in the above calculation is the same as for total basic loss per ordinary share. Equity instruments of 3,683,998 (2009: 3,613,749), which includes share options and LTIPs, that could potentially dilute basic earnings per share in the future have been considered but not included in the calculation of diluted earnings per share because they are anti-dilutive for the periods presented.  This is due to the Group incurring a loss on continuing operations for the year.

10.  Intangible assets

	Goodwill $'000	Licenses  and  registrations  $'000	Trade name and  customer relationships $'000	Total  $'000
Cost
Balance at 1 January 2009	1,620	2,837	159	4,616
Additions - externally acquired	-	469	-	469
Balance at 31 December 2009	1,620	3,306	159	5,085
Additions - externally acquired	-	175	-	175
Less disposal group classified
as held for sale	-	(379)	-	(379)
Balance at 31 December 2010	1,620	3,102	159	4,881
Accumulated amortisation
Balance at 1 January 2009	-	506	24	530
Amortisation charge for the year	-	506	4	510
Balance at 31 December 2009	-	1,012	28	1,040
Amortisation charge for the year	-	233	11	244
Impairment	-	152	120	272
Less disposal group classified
as held for sale	-	(239)	-	(239)
Balance at 31 December 2010	-	1,158	159	1,317
Net book value
At 31 December 2009	1,620	2,294	131	4,045
At 31 December 2010	1,620	1,944	-	3,564

The intangible asset balances have been tested for impairment using discounted budgeted cash flows, a pre-tax discount rate of 18% and performance projections over five years with residual growth assumed at 2%.

Goodwill

Goodwill comprises of a net book value of $1,432,000 related to the 2007 acquisition of the assets of Eden Bioscience and $188,000 related to an acquisition of VAMTech LLC in 2004.  The entire amount is allocated to Harpin a cash generating unit within the Partnering segment.   No impairment charge is considered necessary, and no reasonable possible change in key assumptions used would lead to an impairment in the carrying value of goodwill. 

Licenses and registrations

These amounts represent the cost of licenses and registrations acquired in order to market and sell the Group's products internationally across a wide geography.  These amounts are amortised evenly according to the straight-line method over the term of the license or registration.  Impairment is reviewed and tested according to the method expressed above.  During the year, certain registrations were deemed to be impaired and were fully written down, including an impairment charge of $152,000.  This was due to the sale of the US landscape and retail business as discussed in Note 13.  The entire remaining value associated with licenses and registrations has been allocated to the Group's Partnering segment.

Trade name and customer relationships

These amounts represent the cost assigned to the trade names of products and customer lists acquired via the Eden acquisition.  As the Group executes its strategy to develop the Partnering segment by entering into licensing deals, often with exclusivity clauses, with major industry players, the value associated with the product names and customer lists has been determined to be impaired and an impairment charge of $120,000 has been recorded.

11.  Trade and other receivables

	2010  $'000	2009  $'000
Current:
Trade receivables	8,838	14,493
Less: provision for impairment	(1,560)	(1,578)
Trade receivables, net	7,278	12,915
Other receivables and prepayments	303	661
Current trade and other receivables	7,581	13,576
Non-current:
Trade receivables	123	949
Less: provision for impairment	-	-
Non-current trade and other receivables	123	949
	7,704	14,525

The trade receivable current balance represents trade receivables with a due date for collection within a one year period.  The trade receivable non-current balance represents the present value of trade receivables with a collection period that exceeds one year.  

Movements on the provision for impairment of trade receivables are as follows:

	2010  $'000	2009  $'000
Balance at the beginning of the year	1,578	805
Provided	75	799
Receivables written off as uncollectible	(20)	(26)
Reclassified as held for sale	(73)	-
Balance at the end of the year	1,560	1,578

The gross value of trade receivables for which a provision for impairment has been made is $3,139,000 (2009:  $4,314,000).

The maximum exposure to credit risk at the reporting date is the fair value of each class of receivables set out above.

The following is an analysis of the Group's trade and other receivables, both current and non-current, identifying the totals of trade and other receivables which are not yet due and those which are past due but not impaired.

	2010 $'000	2009 $'000
Current	3,557	13,424
Past due:
Up to 30 days	169	279
31 to 60 days	3,709	348
61 to 90 days	52	-
Greater than 90 days	217	474
Total	7,704	14,525

The main factors used in assessing the impairment of trade receivables are the age of the balances and the circumstances of the individual customer. 

12.  Trade and other payables

	2010 $'000	2009 $'000
Trade payables	842	1,368
Accruals	1,616	2,428
Deferred income	39	526
Taxation and social security	118	171
	2,615	4,493

13.  Subsequent Events

On 14 January 2011, the Group announced that it had completed the disposal of its US landscape and retail business to Lebanon Seaboard Corporation, Pennsylvania for a cash consideration of approximately $4.65 million.  As a result of the disposal, the Group realised a net profit of approximately $2.2 million after reorganisation costs and transaction expenses of approximately $1.1 million.  This net profit will be included within the 2011 financial results.

		$'000
Cash received		4,250
Deferred consideration receivable		400
Total consideration		4,650
Net assets disposed:
Property, plant and equipment		(64)
Inventory		(555)
Trade receivables		(1,135)
Intangible assets		(140)
Trade payables		563
		(1,331)
Reorganisation costs and transaction expenses		(1,109)
Pre-tax profit on disposal of discontinued operations		2,210

The reorganisation costs comprise severance costs of approximately $647,000  and costs related to the shut-down of the manufacturing facilities following the above sale of $156,000.  Transaction expenses comprise consulting and legal costs of $306,000.  

14.  Cautionary Statement

Plant Health Care has made forward-looking statements in this press release, including: statements about the market for and benefits of its products and services; financial results; product development plans; the potential benefits of business relationships with third parties; and business strategies. These statements about future events are subject to risks and uncertainties that could cause Plant Health Care's actual results to differ materially from those that might be inferred from the forward-looking statements. Plant Health Care can make no assurance that any forward-looking statements will prove correct. 

 

END

 

 

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