Final Results

RNS Number : 9344A

Plant Health Care PLC

26 March 2013

 



RNS

26 March 2013

PLANT HEALTH CARE PLC

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

Preliminary Results for the twelve months ended 31 December 2012

Plant Health Care (AIM / CISX: PHC.L), a leading provider of novel patent protected biological products to the global agriculture markets, announces its results for the year ended 31 December 2012.

Operational Highlights

·      Continued commercial traction with Harpin αβ , including 3.5m acres of soya treated with N-Hibit and extensive sales of ProAct for foliar treatment

·      Research and distribution agreements for Harpin αβ with Arysta LifeScience, Makhteshim Agan North America and ASP-Chile

·      Strong field trials results throughout 2012; US drought demonstrated efficacy of N-Hibit (Harpin αβ seed treatment brand) on yield improvement in tough environments

·      Promising small scale field trials of six third generation Harpin candidate products indicate the potential to develop a Harpin platform

Financial Highlights

·      Revenues broadly flat at $7.8m (2011: $7.9m)

·      Sales of Harpin αβ and Myconate increased to 34% of group revenue (2011: 30%)

·      Gross margins increased to 55% of sales (2011: 52%) due to increased contribution from Harpin and Myconate in the sales mix

·      Operating expenses reduced by 3% to $10.8m (2011: $11.2m)

·      Operating loss reduced by 9% to $6.5m (2011: $7.1m)

Fundraising and Board Changes

Plant Health Care also announced today:

·      Appointment of Paul Schmidt, an experienced agrochemical executive, who led the transformation of the biologicals company Merck/EMD Crop Bioscience, to succeed John Brady as CEO from 2 April 2013. John Brady will continue to support the Company as a non-executive director

·      Michael Higgins, currently non-executive Chairman of AIM quoted Ebiquity and Deputy Chairman of the Quoted Companies Alliance, to be appointed as Senior Independent Director and Chair of the Audit Committee following the Company's AGM

·      Proposed fundraising of £13.4m ($20.3m) before expenses to support increased research and development investment to unlock the potential of the Harpin platform and to ramp-up sales of existing products.

Dr Christopher Richards, Chairman of PHC, commented: "The capital raising plan that we are announcing today will allow Plant Health Care to make the focused investment that is required to realise the potential of the Harpin platform and to ramp up sales of existing products.  This is the start of an exciting new chapter of the development of Plant Health Care. 

"I would like to thank John Brady for his unstinting efforts in nurturing the opportunity that Plant Health Care now sees before it. I am delighted to welcome Paul Schmidt as CEO from 2 April 2013; Paul has the experience needed to take the Company to its next stage of life and a track record of success in the biologicals sector. Our long-term vision is to establish Plant Health Care as a highly profitable technology licensing business, embedded in the global agrochemical industry, earning most of its income as royalties and licensing fees."

For further information, please contact:

Plant Health Care plc
Dr Christopher Richards, Chairman	On the day Tel: [phone]
John Brady, Chief Executive Officer	On the day Tel: [phone]
	Thereafter: Tel: [phone]
Stephen Weaver, Finance Director	Tel: [phone] x151
Nomura Code Securities	Tel: [phone]
Chris Collins / Clare Terlouw / Chris Golden
Powerscourt	Tel: [phone]
Paul Durman / Nick Dibden / Sophie Moate

About Plant Health Care plc: Plant Health Care plc ("Plant Health Care") is a leading provider of patent protected biological products aimed at the agriculture industry that are environmentally beneficial. Through the commercialisation of these products, Plant Health Care is capitalising on current long-term trends toward natural systems and biological products for plant care and soil and water management.

Chairman's statement

After eight months as Chairman of Plant Health Care, I can confidently say that this is a company with highly promising technology and at a turning point in its development.  Despite limited resources, Plant Health Care has achieved early market adoption of its lead product, the second-generation Harpin αβ. The plans that we are announcing today will enable us to accelerate the development of third-generation Harpin products to meet the demands of today's agriculture market, as well as to accelerate the sales of Harpin αβ and Myconate.  We now intend to execute this new strategy with discipline, focus and energy, to create real value for shareholders.

Today we have announced that John Brady will be stepping down as Chief Executive Officer to be succeeded by Paul Schmidt with effect from 2 April 2013.  John has provided outstanding leadership of the Company over the last 12 years and I would like to pay tribute to his enormous contribution.  Paul has extensive experience in the agriculture industry and a proven track record of success in the biologicals sector; I am confident that Paul is the right leader to drive the implementation of our new strategy.

Review of 2012

We reported some significant milestones in 2012, with increased sales in the field, a distribution deal signed with ASP-Chile, a subsidiary of Agrium Inc, development agreements signed with Makhteshim Agan North America ("MANA") and Arysta LifeScience and many highly promising field trial results.

2012 was a challenging year for US farmers due to the major drought, which significantly reduced yields. Under these difficult conditions, both Harpin αβ and Myconate achieved excellent results in the field, both in trials and in commercial use. In trials carried out by the Company's distributor, Direct Enterprises Inc. ("DEI") and evaluated by an independent contract researcher, yield increases in soybean, corn and wheat crops of 4.2 per cent ("%"), 8.3% and 3.2%, respectively, were demonstrated, representing a return on investment to farmers of more than 20 fold.  Reflecting these continuing strong field results, the number of acres of seed treated with N-Hibit in the USA increased more than 200% in the past year, from 1.1 million acres in 2011 to 3.5 million acres in 2012, representing some 4% of the soya crop planted.

At the start of 2012, we announced a multi-year distribution agreement with ASP-Chile, a wholly-owned subsidiary of Agrium Inc, one of North America's largest fertiliser manufacturers, for the use of our Myconate and Harpin αβ products on all crops in Chile. Chile is an important market for our Company, with more than six million acres under production and a major supplier of off-season produce to Europe and North America. This was followed in April with the signing of an agreement with MANA to evaluate Harpin αβ with select MANA technologies. In the same month, we signed a research agreement with Arysta LifeScience to evaluate Harpin αβ commercially as a foliar spray in combination with a number of Arysta LifeScience's products.

At the start of the second half of the year, we announced trial results that demonstrated that potatoes, when treated with a foliar Harpin αβ treatment while still in the field, produced a 4.4% greater marketable yield at harvest and a reduced loss in long-term (7-8 month) storage, from 4.6% in the untreated to 1.9% in the treated tubers. In September, we announced that Insect Science, the Company's South African distributor for Harpin αβ and Myconate, had reported significant progress with our Harpin αβ foliar and Myconate seed treatment programmes for the 2013 maize crop season.

Over the last three years, the Company has made modest investments to research the potential to develop new products based on Harpin.  In 2011, 28 third-generation Harpin products were synthesised and tested in the green-house; of these, six were selected for small scale field trials in 2012.  The results of these tests indicate that there is very exciting potential to develop a significant number of third-generation Harpin products, with substantial advantages over the current Harpin αβ product.

Myconate was launched in 2008 and, as such, it remains at an earlier stage of commercialisation than Harpin αβ, with approximately 200,000 treated acres of crops. We had a successful season of trials in 2012 and, as a result, will begin to ship commercial quantities of Myconate into the cereal, potato and vegetable industries in 2013.

The non-exclusive agreement signed with Incotec, the world's largest vegetable seed treatment company, in July 2011 to develop Myconate in conjunction with existing seed treatments is now in its second year and testing continues in several countries around the world, involving many crop targets.

We have completed successful Myconate trials in Brazil. Based on these results, we have entered into a trial programme with a leading fertiliser company and, if successful, we expect a launch of a combined fertiliser/Myconate product by 2016.

Since the year end, we have announced an agreement with Dalgety Agra Polska to sell Myconate for seed treatment and foliar application in Poland.

Further to our strategic update and fundraising announced today, it is our intention to continue to roll out our Myconate product commercially, building on the established momentum. However it is not the Board's intention to invest in further research for this product.

Other products

Plant Health Care derived 65% of revenue in 2012 from distribution of a range of fertiliser and other crop treatment products, mainly to vegetable and fruit farmers, through its operations in Mexico and some EU markets.

These businesses have established valuable market positions and generate cash for Plant Health Care.  However, the directors believe the growth potential of these businesses is limited and they represent only local contributions to driving the global partnership sales of the Company's priority technologies.  The directors therefore see these businesses as non-core and, consistent with the Company's disposal of its US landscape and retail business in January 2011, the Board has decided to divest such operations as and when the opportunity arises to do so on attractive terms.  Any future divestment projects will ensure that the Company retains all rights to Harpin and Myconate.

Financial summary

A summary of the financial results for the twelve months to 31 December 2012, with comparatives for the previous financial year, is set out below:

	2012	2011
	$'000	$'000
Revenue	7,752	7,853
Gross Profit	4,270	4,114
Operating loss from continuing operations	(6,530)	(7,053)
Gains on disposal of discontinued operations	-	2,110
Loss on discontinued operations	-	(74)
Finance income (net)	80	75
Net loss for the year	(6,505)	(5,099)
Cash/liquid short-term investments at 31 December	7,705	13,798

Revenues in 2012 were broadly flat on 2011 at $7.8m (2011: $7.9m). Sales were $2.6m for Harpin and Myconate, the balance being generated by our distribution businesses. The geographic distribution of sales was consistent with the prior year, with 51% of sales originating from our European sales offices and 49% coming from Mexico and the United States. A partnership agreement for foliar Harpin αβ, which was expected to be completed by the end of 2012 and which would have added significantly to the revenues for the year, was delayed.  This agreement is now expected to be completed shortly.

Sales of Harpin and Myconate have increased as a percentage of total sales in the past year to 34% (2011: 30%).  This trend is expected to continue in 2013 and accelerate as the inventory overhang resulting from sales made to Monsanto in 2009 is liquidated by DEI.  DEI's success is expected to result in new sales of Harpin αβ in late 2013 for the 2014 North American crop season. The sales by DEI in 2012 would, if recognised as revenue by Plant Health Care, have generated additional sales close to $2.7m, with a gross margin of approximately $2m.

The gross margin increased to 55% of sales in 2012, an improvement from 52% in 2011, as a result of an increased contribution from Harpin αβ and Myconate in the sales mix. 

Operating expenses were reduced by 3%, the fifth consecutive year of operating cost decreases, to $10.8m (2011: $11.2m), while spending on R&D and business development of $2.1m was comparable to the previous year (2011: $2.2m).

Fundraising and strategy update

Today the Company is announcing that we propose to raise £13.4m ($20.3m) before expenses by means of a Placing and a Subscription of New Ordinary Shares. This fundraising will be subject to the approval of shareholders at a general meeting that will be held on 15 April 2013.

Years of hard work by Plant Health Care's management and personnel have developed a company which enjoys significant product intellectual property ("IP") (mainly the Harpin αβ and Myconate products) and which has established sound footholds in its initial markets. The Board has stepped back and thought deeply about the strengths of the Company, and the additional work and investment required which, in its view, can enable Plant Health Care to fulfil its potential. Consequently, we are proposing to raise money to fund the expansion of the R&D programme for the Harpin product platform and commercialisation of existing products. While this strategy is an evolution rather than a revolution of the previous strategy, its implementation in a focused, effective manner will require change and it will require investment. 

To date, research into the Harpin platform has been carried out with a modest budget.  With the promising results achieved over the past two years, the Board believes that a substantial increase in R&D spend is now justified and necessary to take the platform to the next stage. The third generation of product candidates to be derived from the Harpin platform are smaller polypeptides that resemble the amino acid sequence of the active sites in the second-generation Harpin proteins.  Target profiles have been designed for potential third-generation Harpin products, which would be more specific and/or more active than Harpin αβ.  The targets include nematode control, disease control, drought resistance and the potential to enhance the efficacy of agrochemical products. In 2011, we synthesised 28 third-generation Harpins which, based on earlier data, were expected to match these targets. The 28 products were tested in the laboratory, and six were selected for further testing.  These further tests indicated that the approach is valid and the Company now has candidate products for different crops with better performance than Harpin αβ.  The next stage will be to carry out detailed evaluation of these candidates against the target profiles.

In order to accelerate the evaluation of third-generation Harpin candidates, the Company intends to expand its R&D centre in Seattle, employ new scientists and technicians, enlarge the glasshouses and take on new key staff.  The Company will use contract service laboratories to synthesise the proteins and will use a combination of contract research organisations and in-house resources to conduct the performance evaluation work.

This investment will be funded through a combination of existing cash assets (cash and liquid short-term investments of $7.7m at 31 December 2012), and through this proposed fundraising. 

At the same time, the Company will invest in the momentum created behind its existing Harpin αβ and Myconate products, to drive short-term revenues. Our long-term vision is to establish Plant Health Care as a highly profitable technology licensing business, embedded in the global agrochemical industry, earning most of its income as royalties and licensing fees.

Further details of the fundraising can be found in the Circular distributed to shareholders today and also posted to the Company's website.

Board changes

During the year, Dr. Dominik Koechlin announced that, for personal reasons, he had decided to retire from his position as Chairman of Plant Health Care and to step down from the Board.  Sam Wauchope, the Company's Senior Independent Director, very kindly took over as Chairman on an interim basis until I joined the Company, as Chairman, on 1 August 2012.  I would like to place on record our thanks to Dominik for his important contribution over two years as Chairman and to Sam for stepping forward in that interim period.

After 12 years as Chief Executive Officer of Plant Health Care, John Brady has decided it is time to step down from the day-to-day running of the business.  I wish to put on record our appreciation of all that John has done for Plant Health Care; this Company is very much his personal creation.  I am delighted that we are retaining John's services as a non-executive director, in which role we will continue to benefit from his invaluable experience.

I am pleased to welcome Paul Schmidt as the Company's new Chief Executive effective from 2 April 2013. Paul has extensive experience of the agrochemical industry, in Bayer Crop Science and its predecessor companies, including his role as Head of New Business Ventures.  He then led the transformation of EMD Crop Bioscience, a biologicals products company, and sold the business in February 2011 to Novozymes for $275m.  I am convinced that Paul has the right qualities to lead Plant Health Care to the next level.

Sam Wauchope, having served as a non-executive director for nine years, four of them as Senior Independent Director, will step down  on 2 April 2013. I would like to pay tribute to Sam, and acknowledge the contribution he has made to the Company over his time on the Board.

Michael Higgins will join the Company as a new non-executive director following the Company's AGM on 9 May 2013.  He is currently non-executive Chairman of AIM quoted Ebiquity plc and Deputy Chairman of the Quoted Companies Alliance.  Michael also works with, and invests in a number of early-stage businesses.  Michael was a Senior Adviser at KPMG following ten years as a Partner.  Prior to KPMG, he was a Director at Charterhouse Bank, worked at Saudi International Bank and qualified as an accountant with Price Waterhouse (now PricewaterhouseCoopers).

Update from year end and outlook

Partnerships are an important source of future revenue for Plant Health Care.  We are involved in multiple discussions with industry partners who are interested in commercialising our products and intellectual property, and in particular our Harpin αβ and Myconate platforms.  Plant Health Care remains confident that it can deliver substantial value to shareholders through the successful implementation of its partnership agreements.  Nonetheless, the Board recognises that the precise timing of agreements and revenues can be subject to a number of uncertainties, such as the outcome of field trials and the progress of registration processes for new products.

As per our announcement on 11 March 2013, the Board has resolved to adopt a more cautious approach to budgeting for future revenues from its partnership discussions.  We believe this should give investors a better understanding of Plant Health Care's prospects in the short and medium terms.

The Board anticipates good growth in partnership revenues in the current year and in 2014, but at lower levels than currently indicated by market forecasts.

Earlier this year, Plant Health Care entered into a multi-year distribution agreement with Dalgety Agra Polska to market the Company's Myconate for both seed treatment and foliar application in Poland.  This agreement follows several years of successful trials in Poland, which is an important producer of corn, potatoes and wheat.  The agreement will generate revenues in the current financial year.

Additionally, Germains, the largest independent sugar beet seed treatment company in the world, has been evaluating the use of Harpin αβ as a sugar beet seed treatment, both in the greenhouse and the field, since September 2010.  These tests have shown that the advantages brought by Harpin αβ to the performance of sugar beets are sufficient to warrant commencement of large-scale trials in the USA during 2012.  Registrations to allow these trials are either in place or being prepared for the start of the season.  This decision to move to the next stage of testing has triggered a milestone payment to the Company.

The partnership agreement for foliar Harpin αβ, referenced in the January 2013 trading update, is expected to be completed shortly.

As strengthened by the net proceeds of the fundraising announced today, the directors view with confidence the financial and trading prospects for the Group, for the current financial year and the foreseeable future.

I would like to thank my fellow directors and our advisers, our shareholders and our employees for their contributions over the past year and encourage everyone to look forward to the future with confidence.

Dr Christopher Richards                         

Chairman                                                         

26 March 2013                                                  

Consolidated statement of comprehensive income for the year ended 31 December 2012

	Note	2012 $'000		2011 $'000
Revenue	3	7,752		7,853
Cost of sales		(3,482)		(3,739)
Gross profit		4,270		4,114
Distribution costs		(2,996)		(3,129)
Research and development expenses		(2,064)		(2,248)
Administrative expenses		(5,740)		(5,790)
Operating loss	4	(6,530)		(7,053)
Finance income	6	84		82
Finance expense	6	(4)		(7)
Loss before tax		(6,450)		(6,978)
Income tax expense	7	(55)		(157)
Net loss from continuing operations		(6,505)		(7,135)
Profit of discontinued operations, net of tax		-		2,036
Loss for the year		(6,505)		(5,099)
Other comprehensive gain/(loss)
Exchange difference on translation of foreign operations		140		(127)
Total comprehensive loss for the year		(6,365)		(5,226)
Net loss attributable to:
Owners of the parent		(6,573)		(5,141)
Non-controlling interest		68		42
		(6,505)		(5,099)
Total comprehensive loss attributable to:
Owners of the parent		(6,433)		(5,268)
Non-controlling interest		68		42
		(6,365)		(5,226)
Basic and diluted loss per share	8	$(0.12)		$(0.10)
Basic and diluted loss per share from continuing operations	8	$(0.12)		$(0.13)

Consolidated statement of financial position at 31 December 2012

	Notes	2012 $'000		2011 $'000
Assets
Non-current assets
Intangible assets	9	3,252		3,505
Property, plant and equipment		235		280
Trade and other receivables	10	156		602
Total non-current assets		3,643		4,387
Current assets
Inventories		1,729		1,674
Trade and other receivables	10	3,477		3,364
Investments		4,204		4,892
Cash and cash equivalents		3,501		8,906
Total current assets		12,911		18,836
Total assets		16,554		23,223
Liabilities
Current liabilities
Trade and other payables	11	2,327		2,748
Borrowings		12		10
Provisions		-		154
Total current liabilities		2,339		2,912
Non-current liabilities
Borrowings		48		-
Provisions		75		175
Total non-current liabilities		123		175
Total liabilities		2,462		3,087
Total net assets		14,092		20,136
Share capital		952		949
Share premium		50,624		50,476
Reverse acquisition reserve		10,548		10,548
Share-based payment reserve		2,780		2,610
Foreign exchange reserve		(580)		(720)
Retained earnings		(50,502)		(43,929)
		13,822		19,934
Non-controlling interests		270		202
Total equity		14,092		20,136

Consolidated statement of changes in equity at 31 December 2012

	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 2011	944	50,270	10,548	2,329	(593)	(38,788)	24,710	160	24,870
Loss for year	-	-	-	-	-	(5,141)	(5,141)	42	(5,099)
Exchange difference arising on translation of foreign operations	-	-	-	-	(127)	-	(127)	-	(127)
Total comprehensive income	-	-	-	-	(127)	(5,141)	(5,268)	42	(5,226)
Shares issued	3	141	-	-	-	-	144	-	144
Share-based payments	-	-	-	281	-	-	281	-	281
Options exercised	2	65	-	-	-	-	67	-	67
Balance at 31 December 2011	949	50,476	10,548	2,610	(720)	(43,929)	19,934	202	20,136
Loss for year	-	-	-	-	-	(6,573)	(6,573)	68	(6,505)
Exchange difference arising on translation of foreign operations	-	-	-	-	140	-	140	-	140
Total comprehensive income	-	-	-	-	140	(6,573)	(6,433)	68	(6,365)
Shares issued	1	88	-	-	-	-	89	-	89
Share-based payments	-	-	-	170	-	-	170	-	170
Options exercised	2	60	-	-	-	-	62	-	62
Balance at 31 December 2012	952	50,624	10,548	2,780	(580)	(50,502)	13,822	270	14,092

Consolidated statement of cash flows for the year ended 31 December 2012

	Note	2012 $'000	2011 $'000
Cash flows from operating activities
Loss for the year		(6,505)	(5,099)
Adjustments for:
Depreciation		152	171
Amortisation of intangibles	9	275	252
Share-based payment expense		170	281
Finance income	6	(84)	(82)
Finance expense	6	4	7
Income taxes expense		55	157
(Increase)/decrease in trade and other receivables		(477)	4,560
Decrease/(increase) in finance lease receivables		535	(535)
Profit on sale of discontinued operations, net of tax		-	(3,319)
Increase in inventories		(9)	(41)
(Decrease)/increase in trade and other payables		(438)	64
(Decrease)/increase in provisions		(254)	22
Income taxes paid		(131)	(71)
Net cash used in operating activities		(6,707)	(3,633)
Investing activities
Purchase of property, plant and equipment		(156)	(19)
Expenditure on externally-acquired intangible            assets	9	(22)	(193)
Disposal of discontinued operations, net of cash		400	4,330
Finance income	6	84	82
Purchase of investments		(1,980)	(3,243)
Sale of investments		2,656	3,333
Net cash provided by investing activities		982	4,290
Financing activities
Interest paid	6	(4)	(7)
Issue of ordinary share capital		89	144
Exercise of options		62	66
Increase in borrowings		61	-
Repayment of borrowings		(11)	(43)
Net cash provided by financing activities		197	160
Net (decrease)/increase in cash and cash equivalents		(5,528)	817
Effects of exchange rate changes on cash
and cash equivalents		123	35
Cash and cash equivalents at beginning of period		8,906	8,054
Cash and cash equivalents at end of period		3,501	8,906

Notes forming part of the Group financial statements for the year ended 31 December 2012

1.   Annual Report

The financial information set out in this document does not constitute the company's statutory accounts for 2011 or 2012. Statutory accounts for the years ended 31 December 2011 and 31 December 2012 have been reported on by the Independent Auditors. The Independent Auditors' Reports on the Annual Report and Financial Statements for each of 2011 and 2012 were unqualified 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 2011 have been filed with the Registrar of Companies. The statutory accounts for the year ended 31 December 2012 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.plantheathcare.com

 
The financial information set out in these preliminary results has been prepared using the recognition and measurement principles of International Accounting Standards, International Financial Reporting Standards and Interpretations adopted for use in the European Union (collectively Adopted IFRSs). The accounting policies adopted in these preliminary results have been consistently applied to all the years presented and are consistent with the policies used in the preparation of the statutory accounts for the period ended 31 December 2012. The principal accounting policies adopted are unchanged from those used in the preparation of the statutory accounts for the period ended 31 December 2011. New standards, amendments and interpretations to existing standards, which have been adopted by the group have not been listed, since they have no material impact on the financial statements.

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.  The exchange rate used to convert British Pounds to US Dollars at 31 December 2012 was 1.6168 and the average exchange rate for the year was 1.5876.

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 2012 adopted by the Group

A number of new and amended standards have become effective since the beginning of the year.  None of the new amendments are expected to materially affect the Group.

Standards, amendments and interpretations to published standards not yet effective

There are a number of new standards and amendments to and interpretations of existing standards which have been published and are not yet mandatory and which the Company has decided not to adopt early.

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.

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.

Going concern

In consideration of the Group's current resources and review of financial forecasts and projections, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future.  No material uncertainties that may cast significant doubt about the ability of the Company to continue as a going concern have been identified by the directors.  Accordingly, the directors continue to adopt the going concern basis in preparing the Annual Report and Accounts.

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 Group has no remaining obligations to perform under a non-cancellable contract which permits the user to act freely under the terms of the agreement.  For sales of goods that are subject to bill and hold arrangements this means:

Ø The goods are complete and ready for delivery;

Ø The goods are separately identified from the Group's other inventory and are not used to fulfil any other orders; and

Ø The customer has requested that the goods not be delivered.

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:

Ø it is technically feasible to develop the product for it to be sold;

Ø adequate resources are available to complete the development;

Ø there is an intention to complete and sell the product;

Ø the Group is able to sell the product;

Ø sale of the product will generate future economic benefits; and

Ø 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.

Financial instruments

Trade receivables collectible within one year from date of invoicing are recognised at invoice value less provision for amounts the collectibility 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: lessee

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.

Leased assets: lessor

Where assets are leased to a third party and give rights approximating to ownership (finance leases), the assets are treated as if they had been sold outright.

Lease payments are analysed between capital and interest components so that the interest element of the payment is credited to the profit and loss account over the period of the lease and represents a constant proportion of the balance of capital repayments outstanding.  The capital part reduces the amounts owed by the lessee.

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:

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:

Ø the initial recognition of goodwill;

Ø 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

Ø 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.

3. Revenue

Revenue arises from:	2012 $'000	2011 $'000
Sale of goods	7,752	7,853

4. Operating loss

	2012 $'000	2011 $'000
Operating loss is arrived at after charging:
Share-based payment expense	170	450
Depreciation	152	171
Amortisation of intangibles	275	252
Operating lease expense	356	333
Foreign exchange losses/(gains)	15	(24)
Auditor's remuneration:
Fees payable to the Company's auditor and its associates for the audit of the Company's annual accounts	60	59
Fees payable to the Company's auditor and its associates for other services: Audit of the Company's subsidiaries	27	26
Total auditor's remuneration	87	85

5. Segment information

The Group views, manages and operates its business according to geographical segments.  Revenue is generated from the sale of agricultural products across all geographic segments.

2012	USA $'000	Mexico $'000	Europe $'000	Elimination $'000	Total $'000
Revenue*
External sales	698	3,092	3,962	-	7,752
Inter-segment sales	1,230	16	-	(1,246)	-
Total revenue	1,928	3,108	3,962	(1,246)	7,752
Segment operating profit/ (loss)	(3,965)	373	245	(8)	(3,355)
Unallocated public company and corporate expenses**					(3,175)
Operating loss					(6,530)
Finance income					84
Finance expense					(4)
Loss before tax					(6,450)

* Revenue from one customer totals $976,000, which is greater than 10% of the Group's revenue.  This customer purchases goods from the European segment.

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

Other segment information:

		USA $'000	Mexico $'000	Europe $'000	Unallocated/ Eliminations $'000	Total $'000
Segment assets		11,362	1,700	3,492	-	16,554
Segment liabilities		1,540	388	534	-	2,462
Capital expenditure		67	1	88	-	156
Non-cash expenses:
Depreciation		83	29	40	-	152
Amortisation		258	-	17	-	275
Share-based payment		72	25	12	61	170

2011	USA $'000	Mexico $'000	Europe $'000	Elimination $'000	Total $'000
Revenue
External sales	831	3,033	4,013	-	7,877
Inter-segment sales	846	-	-	(846)	-
Total revenue	1,677	3,033	4,013	(846)	7,877
Discontinued operations					(24)
Consolidated revenue					7,853
Segment operating profit/       (loss)	(4,466)	322	280	37	(3,827)
Unallocated public company and corporate expenses*					(3,300)
Discontinued operations					74
Operating loss					(7,053)
Finance income					82
Finance expense					(7)
Loss before tax					(6,978)

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

Other segment information:

	USA $'000	Mexico $'000	Europe $'000	Unallocated/ Eliminations $'000		Total $'000
Segment assets	17,899	1,477	3,847	-		23,223
Segment liabilities	1,833	498	756	-		3,087
Capital expenditures	-	1	18	-		19
Non-cash expenses:
Depreciation	95	32	44	-		171
Amortisation	246	-	6	-		252
Share-based payment	2444	31	22	153		450

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 USA.

6. Finance income and expense

	2012 $'000	2011 $'000
Finance income
Interest on deposits and investments	84	82
Finance expense
Interest on finance leases	4	7

7. Tax expense

	2012  $'000	2011  $'000
Current tax as profit for the year	7	125
Deferred tax - origination and reversal of timing differences	48	32
Total tax expense	55	157

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:

	2012  $'000	2011  $'000
Loss before tax - continuing operations	(6,450)	(6,978)
Profit before tax - discontinued operations	-	2,036
	(6,450)	(4,942)
Expected tax credit based on the standard rate of corporation tax in the UK of 24.5% (2011: 26.5%)	(1,580)	(1,310)
Disallowable (income)/expenses	28	(25)
Share-based payment expense per accounts	41	74
Share-based payment expense per tax returns	(6)	-
Losses available for carryover	1,507	1,454
Losses utilised in the year	(2)	(96)
Amortisation of intangibles	14	(29)
Other temporary differences	5	57
Movement in deferred tax	48	32
Actual tax charge for the year	55	157

At 31 December 2012, the Group had a potential deferred tax asset of $17,719,000, which includes tax losses available to carry forward of $16,824,000 (being actual federal, foreign and state losses of $61,600,000) arising from historical losses incurred and other timing differences of $895,000.

Deferred tax liability	Deferred taxation  $'000
At 1 January 2012	89
Charged to the profit and loss account	48
At 31 December 2012	137

The deferred tax liability comprises sundry timing differences.

8. Loss per share

Basic loss per ordinary share has been calculated on the basis of the loss for the year of $6,505,000(2011: loss of $5,099,000) and the weighted average number of shares in issue during the period of 53,261,442 (2011: 53,063,707).  Basic loss per share from continuing operations has been calculated with a numerator of $6,505,000 loss (2011: $7,135,000 loss) and basic earnings per share from discontinued operations has been calculated with a numerator of $2,036,000 earnings for 2011. 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 3,434,500 (2011: 4,121,165), 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.

9. Intangible assets

	Goodwill $'000	Licenses and registrations $'000	Trade name and customer relationships $'000	Total $'000
Cost
Balance at 1 January 2011	1,620	3,102	159	4,881
Additions - externally acquired	-	193	-	193
Balance at 31 December 2011	1,620	3,295	159	5,074
Additions - externally acquired	-	22	-	22
Balance at 31 December 2012	1,620	3,317	159	5,096
Accumulated amortisation
Balance at 1 January 2011	-	1,158	159	1,317
Amortisation charge for the year	-	252	-	252
Balance at 31 December 2011	-	1,410	159	1,569
Amortisation charge for the year	-	275	-	275
Balance at 31 December 2012	-	1,685	159	1,844
Net book value
At 31 December 2011	1,620	1,885	-	3,505
At 31 December 2012	1,620	1,632	-	3,252

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 0%.

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 USA 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. Licenses and registrations have a weighted average remaining amortisation period of 6 years.

10. Trade and other receivables

	2012 $'000	2011 $'000
Current:
Trade receivables	3,053	4,128
Less: provision for impairment	(76)	(1,537)
Trade receivables, net	2,977	2,591
Other receivables and prepayments	500	595
Lease receivable	-	178
Current trade and other receivables	3,477	3,364
Non-current:
Trade receivables	156	245
Less: provision for impairment	-	-
Trade receivables, net	156	245
Lease receivable	-	357
Non-current trade and other receivables	156	602
	3,633	3,966

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:

	2012 $'000	2011 $'000
Balance at the beginning of the year	1,537	1,560
Provided	4	99
Receivables written off as uncollectible	(1,506)	(10)
Unused amounts reversed	(25)	(16)
Foreign exchange	66	(96)
Balance at the end of the year	76	1,537

The gross value of trade receivables for which a provision for impairment has been made is $130,788 (2011:  $1,620,401).

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.

	2012 $'000	2011 $'000
Current	3,102	3,270
Past due:
Up to 30 days	151	345
31 to 60 days	138	133
61 to 90 days	185	60
Greater than 90 days	57	158
Total	3,633	3,966

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

11. Trade and other payables

	2012 $'000	2011 $'000
Trade payables	685	808
Accruals	1,384	1,619
Deferred income	7	21
Taxation and social security	88	125
Income tax liability	26	86
Deferred tax liability	137	89
	2,327	2,748

12. 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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