TIDMPHC
RNS Number : 9907B
Plant Health Care PLC
10 April 2017
RNS
10 April 2017
PRELIMINARY RESULTS 2016
Plant Health Care (AIM: PHC), a leading provider of novel
patent-protected biological products to the global agriculture
markets, announces its preliminary results for the full year ended
31 December 2016.
2016 Highlights
-- Revenue of approximately $6.3 million; sales in the United States decreased by approximately $1.1million, due to
our distributors having excess year-end inventories in the United States. Growth outside the United States was
15% in constant currency
-- Harpin <ALPHA><BETA> sales outside the United States increased by approximately 23%. Harpin <ALPHA><BETA> and
Myconate(R) products represented 59% of sales in 2016 (2015: 57%)
-- Gross margin was steady at 62% in 2016
-- Cash and investments at 31 December 2016 was $10.1 million.
-- New distribution agreements signed during the second half of 2016 show potential for growth in Commercial sales
in 2017
-- In August 2016, the Company successfully raised GBP7.4 million ($9.7 million)
-- Trials with Innatus(TM) 3G in 2016 continued to show good results, in Plant Health Care's own trials and in field
trials run by partners
-- We are on track for the first competitive licensing process to conclude in early 2018
-- Two new PREtec peptide platforms - T-Rex 3G and Y-Max 3G - have been presented to selected industry players.
First agreements are in place and field trials have begun
Chris Richards, Executive Chairman & Interim CEO,
commented:
"In 2016, Plant Health Care continued to show strong progress
towards our key strategic objectives. Our New Technology, which is
focused on the discovery and early development of novel proprietary
biological solutions using the Group's PREtec platform, made
enormous progress. Our evaluation partners generated strong field
data with Innatus 3G during 2016. It has been rewarding to see
their enthusiasm building, as they come to understand the power of
our technology and its potential value to them. We now have
expanded programmes of evaluation in place for 2017, as our
partners focus their attention on preparing for the planned
competitive licensing process of first rights to Innatus 3G in
early 2018.
Beyond Innatus 3G, we had originally intended only to advance
with one new PREtec platform; the active encouragement of our
partners and the strength of our supporting data persuaded us to
advance with two: T-Rex 3G and Y-Max 3G. These are now attracting
the interest of other companies. We are aiming to enter into at
least one revenue-generating licence during 2017.
We were clearly disappointed by the sales performance of the
Commercial segment. This was entirely due to several of our
distributors having excess year-end inventories in the USA.
Elsewhere, sales growth continued to be encouraging. Solid progress
was made in developing sales with existing distributors and we
continue to develop relationships with new distributors, with whose
support we anticipate a resumption of rapid sales growth in 2017
and beyond.
In August, we completed an equity raise which generated $9.7
million, largely from existing investors. We anticipate that
existing cash reserves, together with forecast commercial revenues
and cost savings already put in place, will now fund the business
at least until the end of 2018. As a result, we are confident that
the next 18 months will see a step change in the position of Plant
Health Care."
Inside information
This announcement contains inside information which is disclosed
in accordance with the Market Abuse Regulation.
For further information, please contact:
Plant Health Care plc
Christopher Richards, Executive Chairman & Interim Chief
Executive Officer Tel: +1 919 926 1600
Liberum Capital Limited (NOMAD)
Clayton Bush/Chris Clarke Tel: +44 (0) 20 3100 2000
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 towards
natural systems and biological products for plant care and soil and
water management.
Chairman's letter
Overview
Plant Health Care is a leading provider of proprietary
agricultural biological products and technology solutions focused
on improving crop performance.
This has been a challenging year for the Group commercially,
with reduced sales due to higher than expected inventories with our
distributors in the United States of America ("USA"). Outside the
USA, sales grew at 15% in constant currency. Progress with the
Group's innovation has continued to accelerate in a most impressive
manner. Our evaluation partners for Innatus 3G, our first platform
of PREtec bio-rational peptides, have reported promising results,
positioning us well for the first planned auction of rights to that
platform in early 2018. In addition, we have launched two new
platforms of PREtec to potential partners, T-Rex 3G and Y-Max 3G,
which have been well received.
We report here separately the two areas of focus for the
business: New Technology and Commercial. We are organised in these
two lines of business and report our Commercial business in three
geographic segments - Americas, Mexico and Rest of World. We report
our New Technology business in a single segment.
New Technology
New Technology is focused on the discovery and early development
of novel proprietary biological solutions using the Group's PREtec
science and technology capabilities (PREtec signifies Plant
Response Elicitor technology). These new technologies will mainly
be developed into final products in partnership with agricultural
industry companies active downstream, who will take them to market;
the Group would then receive licence payments on these sales. We
intend to work with major agrochemical companies for the larger
arable crops such as corn and soybean; for specialty crops, such as
regional crops and fruits and vegetables, we will work with a wider
range of partners.
New Technology made remarkable progress during the year, under
the leadership of our Chief Science Officer ("CSO"), Dr. Zhongmin
Wei.
We continue to deepen our understanding of our first family of
PREtec peptides, Innatus 3G. Having synthesised a large number of
Innatus 3G peptides and shown them to have differentiated
properties, we have been further modifying their structure to
optimise performance against various parameters: physical, chemical
and biological. In parallel, our scientific studies, including our
understanding of Innatus 3G's mode of action, have advanced to the
point where we can confidently describe Innatus 3G as a distinct
technology platform. This is a significant milestone.
Our laboratory, glasshouse and field trials, and a number of
other trials run for us by university groups and other specialists,
confirm that peptides from Innatus 3G can be customised to deliver
targeted agronomic benefits, such as resistance to attack by fungi,
stronger root growth and improved recovery from the effects of
drought. All of these benefits increase crop yield.
Our peptides have been shown to be compatible with standard
agricultural applications, such as seed treatment and foliar
sprays, and to work with different genetic strains of crops.
Innatus 3G peptides can enhance the performance of established
chemical and biological products, and resistant crop varieties. In
some instances peptides on their own perform as effectively as
significant commercial products currently on the market.
This flexibility will allow Innatus 3G to be positioned by
future licensees as complementary to their own product ranges.
Innatus 3G peptides can bring them benefits such as performance
improvement, resistance management and the environmental and
regulatory advantages of being bio-rational products. Such benefits
are considered by our evaluation partners to be of significant
commercial value.
Following presentation of Innatus 3G to potential major industry
partners in the latter part of 2014, four evaluation agreements
were signed during 2015. During 2016, our partners had the
opportunity to establish field trials with peptides from the
Innatus 3G family, as well as to study them in the laboratory and
glasshouse. We have been encouraged by the progress which our
partners have reported to us, from those 2016 trials. Their
results, based in some cases on field trials much larger in
geographic scale than those we have conducted, are broadly
comparable with our own. This is powerful confirmation of
biological performance in the field.
It has been rewarding to see our partners' enthusiasm building
through the year, as they come to understand the power of our
technology and its potential value to them. All four evaluation
partners have now extended the terms of their contracts. We are
currently preparing for an expanded programme of evaluation of
these products during 2017 and planning for the competitive
licensing process of first rights to Innatus 3G in early 2018.
At the start of 2016, we set the objective of presenting a
second family of PREtec technology to prospective partners.
Progress during the year was such that we presented two: T-Rex 3G
and Y-Max 3G. These families of peptides are different from one
another and from Innatus 3G. We confidently describe them as
separate technology platforms. They are covered by different
patents and show distinctive performance profiles. Underlying this
there are important differences in their modes of action.
T-Rex 3G is a platform of peptides with enhanced activity
against nematodes, which are destructive soil pests. Y-Max 3G is a
platform of bio-stimulant peptides which offer increased vigour and
yield. These two platforms have now been presented to potential
partners, which include both the existing evaluation partners and
other agrochemical companies. Initial reaction has been
encouraging. The first evaluation agreements have been signed and
partner trials have begun.
In the field we have run our largest scale trials to date,
demonstrating crop yield improvements for the fourth successive
year. Through a network of universities and specialist contractors,
we have conducted numerous glasshouse studies and shown that PREtec
peptides can elicit powerful plant defence responses against a
variety of commercially significant pests and diseases. These
trials and studies continue to inform the evaluation work being
conducted by our partners. Their ability to replicate our results
in their own studies is a major driver of their growing confidence
in the value of our technology.
Our laboratory in Seattle continues its work to characterise
further families of PREtec peptides and to secure intellectual
property rights on them. At the same time, we are working
intensively on optimising our first three peptide platforms, to
ensure physicochemical stability and compatibility with
conventional agrochemical products. In addition, laboratory scale
studies are delivering encouraging results on production
methodology, which reinforces our conviction that peptides from
PREtec can be manufactured cost-effectively by fermentation.
Finally, we are exploring accelerated regulatory pathways for
future products.
Reflecting the speed of progress in New Technology, we have
further increased our investment in research and development
("R&D"). In 2016, we invested $4.5 million in R&D, an
increase of 9% over 2015. The New Technology team in Seattle now
works with excellent new growth rooms and is well equipped to
complete the studies we have planned for 2017. We continue to
devote considerable resources to our intellectual property ("IP")
and are confident that we are building effective protection around
our proprietary technology.
Commercial
Our Commercial business sells our proprietary products worldwide
through distributors and also distributes complementary third-party
products in Mexico.
Overall sales in 2016 were $6.3 million, a reduction of 16% over
2015 (8% in constant currency). This reduction was due to several
of our distributors having excess year-end inventories; sales in
the USA were down by $1.1 million as a result. Outside the USA,
sales grew by 15% in constant currency.
In the USA, on ground sales by our largest distributor in the
Pacific North West grew in 2016. However, this growth was lower
than anticipated and was compounded by decreased sales into a
depressed soybean market in the Midwest. As a result, our USA
distributors ended the season with significant inventories which
resulted in decreased sales in the final quarter of 2016.
Outside the USA, sales of Harpin <ALPHA><BETA>
increased by 41% in constant currency. For example, sales in Spain
grew by 86%. However, the launch of Harpin
<ALPHA><BETA> in sugar cane in Brazil has been delayed;
a new commercial strategy is under development to enter this
critical market and we expect first sales in 2018. In Mexico, sales
grew by 9% in local currency but this translated into a decrease of
8% in US dollars. In Mexico, the launch of Harpin
<ALPHA><BETA>, to replace the first generation Harpin
product Messenger, resulted in a 49% increase in sales in Mexican
pesos.
New distribution arrangements were signed during 2016, which
will help to support sales growth in 2017 and beyond.
Sales of our proprietary products Harpin and Myconate in 2016
represented 59% of sales (2015: 57%) and Gross Margin was steady at
62%.
Board changes
At the end of November 2016, Paul Schmidt stepped down as CEO
and left the Group. The Board asked me to step in as Interim CEO
from that time. The Board reviewed these arrangements in early 2017
and has requested that I continue as Interim CEO for the time
being. The Board will review the situation periodically and may
initiate a search for a new CEO in due course.
In November 2016, James Ede-Golightly resigned from the Board,
due to pressure of other commitments. William ("Bill") M. Lewis
took over from James as Chair of the Remuneration Committee.
I would like to take the opportunity to thank both Paul and
James for their contributions to the Board since 2013.
Outlook
Agriculture markets continued to be depressed during 2016, with
high grain stocks ensuring that commodity prices remain low. The
agrochemical market is estimated to have declined a further 2% in
2016. The first signs of an improvement emerged in the latter part
of 2016, particularly with strengthening prices of soybean, but
corn and wheat prices have shown no improvement. Many agrochemical
companies reported sales growth in the last quarter of 2016. Even
in depressed agrochemical markets, however, we believe that growers
in key markets will continue to adopt agricultural biological
products which increase their productivity. Based on various
reports, we expect growth in the demand for biological products to
increase at approximately 10% per annum from 2016 to 2020. Despite
the set-back in sales in 2016, we remain confident with respect to
the growth prospects for Harpin <ALPHA><BETA>.
All our established evaluation partners have extended the terms
of their evaluation agreements into 2018. This, and their
expressions of interest in Innatus 3G are encouraging signals for
the competitive licensing process we plan for early 2018. In
addition, we are targeting a revenue-generating licence for one of
our PREtec technologies during 2017.
Plant Health Care has a clearly defined strategy, which we are
implementing effectively. We anticipate that existing cash
reserves, together with forecast commercial revenues and cost
savings already put in place, will now fund the business at least
until the end of 2018. As a result, we are confident that the next
two years will see a step change in the position of Plant Health
Care.
In closing, I would like to thank the entire Plant Health Care
team for all their hard work during the year. Strong results come
from great people, working towards shared goals. As Interim CEO, I
am proud of the Group's impressive team of highly motivated
professionals, in whom I have the greatest confidence.
Dr. Christopher Richards
Executive Chairman & Interim Chief Executive Officer
Strategic report
We are a leading provider of proprietary agricultural biological
products and technology solutions focused on improving crop
performance by activating a growth response in plants and
bolstering plant defence mechanisms against both abiotic stresses,
such as drought and extreme temperatures, and biotic stresses, such
as fungal diseases or pest infestation. We are organised in two
lines of business: New Technology and Commercial.
Our New Technology business focuses on the deployment of our
proprietary Plant Response Elicitor technology, or PREtec, to
invent and develop short chains of amino acids, or peptides, which
we intend to out-license. We are focused on commercialising this
technology by partnering with leading agriculture companies to
accelerate its adoption in key geographic and crop markets. PREtec
enables the custom design and creation of peptides to achieve
targeted responses in specific crops, including both row and
specialty crops. Responses include improving a plant's ability to
grow efficiently, increasing its yield, bolstering its responses to
stresses such as drought and enhancing its resistance to external
factors, such as diseases and certain pests. Currently, four of the
six largest global agriculture companies are evaluating Innatus 3G,
our first peptide platform developed from PREtec. All four of these
are actively interested in evaluating one or more of our next two
platforms - T-Rex 3G and Y-Max 3G and first trials have begun.
Our Commercial business focuses on selling proprietary
biological products that are applied to soil, seeds or plants to
improve the plant's health and yield by enhancing its nature
physiological processes. Our proprietary products are primarily
categorised as biofertilisers and bio-stimulants, which we believe
are the most rapidly growing segments in the biological industry.
Our current product portfolio is mainly based on our proprietary
Harpin technology, which is proven to trigger growth and
self-defence mechanisms within plants to drive better performance.
Through field trials we have commissioned or through those
conducted by our distributors, we have demonstrated results in a
number of crops: our second generation Harpin
<ALPHA><BETA> products have created yield increases of
approximately 3% to 5% in U.S. corn and soybeans while improving
plant growth, resistance to abiotic stress and protection against
certain pathogens. Our products are complementary to and compatible
with existing crop protection products and methods, promoting
further adoption.
Our Commercial business sells our proprietary products worldwide
through distributors (which accounted for 59% of our revenues in
2016) and distributes complementary third-party products (which
accounted for 41% of our revenues in 2016) in Mexico. Our
proprietary products have treated millions of acres to date across
multiple significant, global agricultural markets, including the
USA, Mexico and Europe. We report our Commercial business in three
geographic segments - Americas (which accounted for 23% of our
revenues in 2016), Mexico (which accounted for 51% of our revenues
in 2016) and Rest of World (which accounted for 26% of our revenues
in 2016).
The Board believes that our innovative and value-added line of
biological products helps satisfy the growing global demand for
efficient, effective and environmentally-responsible products to
increase crop yields and overall plant health. We believe that our
products can compete effectively in the market today against
conventional agrochemical products, fertilisers and other
bio-stimulants. We also believe that they are more sustainable than
the competing traditional fertilisers and growth promotors on the
market today. We have screened, identified and developed our novel
biological products and technologies and validated their efficacy
in improving plant health leading to higher yields. Through our
significant investment in R&D, we have a scientific-based
understanding of our products' mode of action (the functional
change that occurs at the cellular level), which enables us to
design and produce a diverse range of protein-based biologicals to
provide significant value for growers.
Our products and technologies
Harpin <ALPHA><BETA>
Our Harpin <ALPHA><BETA> products are well
established in both the seed and foliar treatment markets and can
be used to treat over 40 different types of crops. Harpin
<ALPHA><BETA> is registered for use in 13 countries. We
currently focus on products that treat row crops as well as
high-value specialty crops. We have three principal Harpin
<ALPHA><BETA> products: N-Hibit, a seed treatment
application for row crops; ProAct, a foliar application for row
crops; and Employ, a foliar application for specialty crops. Each
of these products can be applied in conjunction with conventional
agrochemicals or seed treatments. During the year ended 31 December
2016, we derived 53% (2015: 45%) of our revenues from our Harpin
<ALPHA><BETA> products, for which we have a number of
current patents that expire between 2017 and 2027. Manufacture and
formulation of Harpin <ALPHA><BETA> is contracted out
by us and remains under our control. PHC owns the high-yield
fermentation process, the formulations, the registrations and the
brand.
Myconate
Our Myconate product is a soil treatment that increases
mycorrhizal colonisation of roots by over 50%, aiding early-stage
plant growth and important nutrient access. This essentially
provides the plant with a larger root system so that it can grow
under conditions that normally would inhibit growth, such as
drought, nutrient deficiency, chemical residues and soil salinity.
Myconate is available in powder and liquid forms and can be applied
effectively as a seed coating, an in-furrow application or mixed
with fertiliser. During the year ended 31 December 2016, we derived
5% (2015: 6%) of our revenues from our Myconate products, for which
we have a number of current patents that expire between 2018 and
2031.
PREtec
PREtec is our science and technology capability based on our
extensive experience, knowledge and IP in plant response elicitor
technology. Inspired by natural proteins found in plants and plant
pathogens, we are able to identify families of peptides (chains of
amino acids) that can provide various agronomic benefits for
farmers. We have the expertise to modify the peptides sequences in
order to customise the performance. This includes optimizing
physical and chemical stability, so they are stable in mixtures
with agrochemicals. We can also modulate the biological performance
of peptides in various ways, for example to make them better at:
inducing resistance to pests and diseases in crop plants, improving
the tolerance of plants to drought, or accelerating root
growth.
We have screened hundreds of peptide variants and have engaged
in greenhouse and field testing of dozens of promising novel
peptides. We currently have four 3G peptide platforms in various
development phases. By platform we mean a family of related peptide
designs, all patent protected. 3G signifies third generation, and
indicates that these are small peptides. In addition we have fourth
generation, or 4G platforms, which are applications of DNA or RNA
forms of PREtec for various genetic uses in agriculture and plant
breeding.
Innatus 3G was our first platform. It delivers a range of
disease and yield benefits to growers. It is under evaluation with
four of the largest agricultural corporations. Their field testing
and other technical evaluation is well advanced. Our 3G peptides
are designed to be combined with standard crop protection
applications through both seed treatment and foliar applications to
improve plant health.
T-Rex 3G is a platform developed to protect crop plants against
pest nematodes. It also shows good effects in limiting the loss of
yield caused by drought stress. Y-Max 3G behaves more like a
bio-stimulant, promoting vigour and yield by regulating growth
genes in the plant. T-Rex 3G and Y-Max 3G were introduced to
selected partners in the latter part of 2016. First evaluation
agreements have been signed and third party trials had begun before
the end of the year.
We are in the early stages of development of our 4G peptide
platforms. The first platform entails the incorporation of genetic
sequences in the plant that allow the plant to express peptides
internally.
Financial summary
A summary of the financial results for the twelve months to 31
December 2016 with comparatives for the previous financial year is
set out below:
2015
2016 $'000
$'000
Revenue 6,329 7,508
Gross Profit 3,893 4,683
Operating loss (11,350) (7,776)
-------- -------
Finance income (net) 50 93
-------- -------
Net loss for the year (11,217) (7,720)
-------- -------
Revenue
Revenues in 2016 decreased by 16% to $6.3 million (2015: $7.5
million) as a result of our distributors in the USA market having
excess inventory at year-end. However, sales outside the USA
remained fixed at $4.9 million (2015: $4.9 million). The gross
margin remained steady at 62% of sales in 2016.
Operating expenses
Operating expenses increased to $15.2 million from $12.5
million. The three factors driving the increase were increased
investment in New Technology up 6% to $5.0 million, costs
associated with evaluating the possibility of a USA listing of
$1.25 million (2015: nil) and a (non-cash) decrease in the value of
Sterling loans from our UK subsidiary, due the significant
depreciation of the Pound in JuneJuly of $1.5 million (2015: $0.25
million). Costs of approximately $1.25 million (2015: nil)
associated with a potential USA listing have been charged to
Administration during 2016. A decision whether to proceed with a
listing will be dependent upon the achievement of key operational
and financial milestones and subject to market conditions.
Administration costs also include $1.5 million (2015: $0.25
million) of non-cash expenses associated with the decrease in the
value of loans from our UK subsidiary.
Expenditure within New Technology increased $0.3 million to $5.0
million in 2016 (2015: $4.7 million). The increase was due to the
hiring of additional R&D staff and increased contract research
costs. The Group expects that our R&D costs will further
increase as we continue to invest in the development of our PREtec
platform.
In addition, we have set out in Note 6 the separate category of
expenditure relating to Business Development, which decreased to
$1.0 million in 2016 (2015: $1.2 million). This relates to reduced
expenditures for regulatory and registration and other costs
relating to customer support, market research and the negotiation
of commercial agreements.
Unallocated corporate expenses increased to $4.4 million (2015:
$2.0 million). The increase was attributable to costs associated
with a USA listing and the decrease in the value of Sterling loans
from our UK subsidiary due to the depreciation of the Pound.
Cash position and liquidity
As of 31 December 2016 the Group had cash and investments of
$10.1 million (2015: $8.4 million).
The primary components of the cash movements during 2016 was the
conclusion of a net fund raise of $9.7 million and the net sales of
investments of $2.1 million (2015: $5.3 million) which will be used
to invest in the New Technology business and fund operations,
outflows of $0.4 million (2015: $0.9 million) from new equipment
and facilities for R&D and operating cash outflow of $9.1
million (2015: $7.5 million).
Key performance indicators ("KPIs")
The Group uses a range of performance measures to monitor and
manage the business effectively. These are both financial and
non-financial. The most significant relate to Group financial
performance and to the Group's progress in driving the two pillars
of its strategy.
The KPIs for financial performance of the Commercial area and
for the Group as a whole include revenue, gross profit and margin,
and operating profit/loss. These KPIs indicate the volume of work
the Group has undertaken, as well as the efficiency with which this
work has been delivered.
The KPIs for financial performance for the year ended 31
December 2016, with comparatives for the year ended 31 December
2015, are set out below;
2016 2015
Revenue ($'000) 6,329 7,508
Gross profit ($'000) 3,893 4,683
Gross profit margin (%) 61.5 62.4
Operating loss ($'000) (11,350) (7,776)
In addition, an important KPI is the movement in revenue
achieved from the sale of our proprietary products. These movements
are shown below, separating out the product revenue from the
receipt of license/milestone payments and other one-off payments,
which are less predictable and tend to distort the product sales
growth.
Proprietary sales (excluding licensing revenue)
2016 2015
--------------- ------ ------
$'000 $'000
--------------- ------ ------
Americas 1,424 2,278
--------------- ------ ------
Mexico 734 643
--------------- ------ ------
Rest of World 1,603 1,364
--------------- ------ ------
Total 3,761 4,285
--------------- ------ ------
The KPIs for non-financial performance relate to the Group's
technologies and include the number and nature of relationships
realised with partners, and progress along the mutually agreed
paths to commercial launch of products.
The Board continues to monitor the progress of its R&D
activities and expenditures. As each research project advances,
specific progress is reported to the Board and costs against budget
are monitored. We anticipate refining the KPIs for R&D as each
project develops.
In addition, the Business Development activities of the Group
are assessed against our success in developing specific evaluation
and commercial arrangements with third parties for the exploitation
of our proprietary products.
Principal risks and uncertainties
Our business is subject to a number of potential risks and
uncertainties, including those listed below. The occurrence of any
of these risks may materially and adversely affect our business,
financial condition, results of operations and future prospects. We
manage and mitigate these risks by executing on the strategy
described above.
Financial and liquidity risk
-- We have a history of losses since inception, anticipate continuing to incur losses in the future and may not
achieve or maintain profitability.
-- We expect to require additional financing in the future and may be unable to obtain such financing on favourable
terms or at all, which could force us to delay, reduce or eliminate our research, development or commercial
activities.
Technology and commercialisation risk
-- Our PREtec out-licensing strategy is in an early stage and depends on evaluation partners converting their
declared interest into formal commercial offers. .
-- We are subject to risks relating to product concentration due to the fact that we derive substantially all of our
revenues from our Harpin <ALPHA><BETA> and Myconate product lines and from the sale of third-party products.
-- We may be unable to establish or maintain successful relationships with third-party distributors and retailers,
which could materially and adversely affect our sales.
-- We have a limited number of sales and marketing personnel and will need to expand our sales and marketing
capabilities to grow revenues from our commercial products.
-- While a number of patents have been filed to date, we may be unable to secure adequate protection for the
intellectual property covering our new technology and product candidates, or develop and commercialise these
product candidates without infringing the intellectual property rights of third parties.
Regulatory and legal risk
-- If we are unable to obtain regulatory approvals, or to comply with ongoing and changing regulatory requirements,
it could delay or prevent sales of our commercial products or impede the development of potential products.
-- If we use PREtec in trait development, our technologies and product candidates will face more stringent
regulatory regimes.
-- If we are unable to comply with regulations applicable to our facilities and procedures and those of our
third-party manufacturers, our research and development or manufacturing activities could be delayed, limited or
prevented.
Credit risk
-- The majority of our net sales are credit sales that are made primarily to customers whose ability to pay is
dependent, in part, upon the economic strength of the industry and geographic areas in which they operate, and
the failure to collect or timely collect monies owed from customers could materially and adversely affect our
financial condition.
Personnel
-- Our future growth and ability to compete depend on retaining our key personnel and recruiting additional
qualified personnel.
Financial instruments
The Group uses various financial instruments, including cash,
short-term investments of investment grade notes and bonds, and
items such as trade receivables and trade payables that arise
directly from its operations.
On behalf of the Board
Dr. Christopher Richards
Executive Chairman & Interim Chief Executive Officer
10 April 2017
Consolidated statement of comprehensive income for the year
ended 31 December 2016
2016 2015
Note $'000 $'000
Revenue 4 6,329 7,508
Cost of sales (2,436) (2,825)
Gross profit 3,893 4,683
Research and development
expenses (4,485) (4,105)
Business development expenses (954) (1,155)
Sales and marketing expenses (2,518) (2,715)
Administrative expenses (7,286) (4,484)
Operating loss 5 (11,350) (7,776)
Finance income 7 52 95
Finance expense 7 (2) (2)
Loss before tax (11,300) (7,683)
Income Tax credit/(expense) 8 83 (37)
Loss for the year attributable
to the equity holders of
the parent company (11,217) (7,720)
Other comprehensive income:
Items which will or may
be reclassified to profit
or loss:
Exchange difference on
translation of foreign
operations 1,393 111
Total comprehensive loss
for the year attributable
to the equity holders of
the parent company (9,824) (7,609)
========= ========
Basic and diluted loss
per share 9 $(0.11) $(0.11)
========= ========
Consolidated statement of financial position at 31 December
2016
2016 2015
Note $'000 $'000
Assets
Non-current assets
Intangible assets 10 2,162 2,435
Property, plant and equipment 1,236 1,183
Trade and other receivables 11 131 100
--------- ---------
Total non-current assets 3,529 3,718
--------- ---------
Current assets
Inventories 1,245 1,391
Trade and other receivables 11 3,284 4,582
Investments 5,349 7,491
Cash and cash equivalents 4,727 948
--------- ---------
Total current assets 14,605 14,412
--------- ---------
Total assets 18,134 18,130
--------- ---------
Liabilities
Current liabilities
Trade and other payables 12 2,088 3,061
Finance leases 13 8 8
---------
Total current liabilities 2,096 3,069
--------- ---------
Non-current liabilities
Finance leases 13 7 16
--------- ---------
Total non-current liabilities 7 16
--------- ---------
Total liabilities 2,103 3,085
--------- ---------
Total net assets 16,031 15,045
========= =========
Share capital 2,237 1,236
Share premium 79,786 71,040
Foreign exchange reserve 893 (500)
Accumulated deficit (66,885) (56,731)
--------- ---------
Total equity 16,031 15,045
========= =========
The consolidated financial statements were approved and
authorised for issue by the Board on 10 April 2017.
Consolidated statement of changes in equity for the year ended
31 December 2016
Foreign
Share Share exchange Accumulated
capital premium reserve Deficit Total
$'000 $'000 $'000 $'000 $'000
Balance at
1 January
2015 1,234 70,895 (611) (49.871) 21,647
--------- --------- ---------- ------------ ---------
Loss for
year - - - (7,720) (7,720)
Exchange
difference
arising on
translation
of foreign
operations - - 111 - 111
--------- --------- ---------- ------------ ---------
Total comprehensive
income/(loss) - - 111 (7,720) (7,609)
Shares issued - 42 - - 42
Share-based
payments - - - 860 860
Options exercised 2 103 - - 105
Balance at
31 December
2015 1,236 71,040 (500) (56,731) 15,045
Loss for
year - - - (11,217) (11,217)
Exchange
difference
arising on
translation
of foreign
operations - - 1,393 - 1,393
--------- --------- ---------- ------------ ---------
Total comprehensive
income/(loss) - - 1,393 (11,217) (9,824)
Shares issued 1,001 8,746 - - 9,747
Share-based
payments - - - 1,063 1,063
Options exercised - - - - -
--------- --------- ---------- ------------ ---------
Balance at
31 December
2016 2,237 79,786 893 (66,885) 16,031
========= ========= ========== ============ =========
Consolidated statement of cash flows for the year ended 31
December 2016
2016 2015
Note $'000 $'000
Cash flows from operating
activities
Loss for the year (11,217) (7,720)
Adjustments for:
Depreciation 359 164
Amortisation of intangibles 10 273 272
Share-based payment expense 1,063 860
Finance income 7 (52) (95)
Finance expense 7 2 2
Income taxes (credit)/expense (83) 37
Decrease/(increase) in trade
and other receivables 1,145 (1,931)
(Gain)/loss on disposal
of fixed assets (14) 14
Decrease/(increase) in inventories 146 (307)
(Decrease)/increase in trade
and other payables (973) 1,229
Income taxes paid 205 (37)
Net cash used in operating
activities (9,146) (7,512)
---------- ----------
Investing activities
Purchase of property, plant
and equipment (469) (1,063)
Sale of property, plant 71 -
and equipment
Finance income 7 52 95
Purchase of investments (7,918) (8,933)
Sale of investments 10,060 14,217
Net cash provided by investing
activities 1,796 4,316
---------- ----------
Financing activities
Finance expense 7 (2) (2)
Issue of ordinary share
capital 9,747 42
Exercise of options - 105
Repayment of finance lease
principal (9) (10)
Net cash provided by financing
activities 9,736 135
---------- ----------
Net increase/(decrease)
in cash and cash equivalents 2,386 (3,061)
Effects of exchange rate
changes on cash
and cash equivalents 1,393 111
Cash and cash equivalents
at beginning of period 948 3,898
---------- ----------
Cash and cash equivalents
at end of period 4,727 948
========== ==========
Notes forming part of the Group financial statements for the
year ended 31 December 2016
1. Annual Report
The financial information set out in this document does not
constitute the Company's statutory accounts for 2015 or 2016.
Statutory accounts for the years ended 31 December 2015 and 31
December 2016 have been reported on by the Independent Auditor. The
Independent Auditor's Reports on the Annual Report and Financial
Statements for each of 2015 and 2016 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 2015 have been
filed with the Registrar of Companies. The statutory accounts for
the year ended 31 December 2016 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 1 Scott Place, 2 Hardman Street, Manchester M3 3AA and from the
Company's website www.planthealthcare.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 2016. The principal accounting
policies adopted are unchanged from those used in the preparation
of the statutory accounts for the period ended 31 December 2015.
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 thousands of 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 rates used to convert British Pounds to US
Dollars at 31 December 2016 and 2015 were 1.2336 and 1.4802,
respectively, and the average exchange rate for the years then
ended were 1.3548 and 1.5284, respectively.
The functional currency of the parent company is US Dollars.
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") and as adopted by the European Union and
those parts of the Companies Act 2006 which apply to companies
preparing their financial statements under IFRSs.
Amounts are rounded to the nearest thousand, unless otherwise
stated.
In 2015, the Group changed its operating and reportable segments
to align with the way its business is currently managed and to
better reflect its evolving research and development activities.
Therefore, the Group discloses New Technology as a separate
operating and reportable segment. Additional information about the
Group's operating and reportable segments is included in Note
6.
Basis of measurement
The consolidated financial statements have been prepared on a
historical cost basis, except for financial instruments designated
at fair value through the profit and loss.
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 2016 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
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 Group has decided not to adopt
early.
Basis of consolidation
These consolidated financial statements incorporate the
financial statements of the Group and the entities controlled by
the Group. Control exists when the Group has (i) power over the
investee, (ii) exposure, or rights, to variable returns from its
involvement with the investee, and (iii) the ability to use its
power over the investee to affect the amount of the investor's
returns. The financial statements of subsidiaries are included in
the consolidated financial statements from the date that control
commences until the date that control ceases. All significant
intercompany transactions, balances, revenues and expenses have
been eliminated.
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.
Revenue
The Group recognises revenue at the fair value of consideration
received or receivable. Sales of goods to external customers are at
invoiced amounts less value added tax or local tax on sales. The
Group currently generates revenue solely within its Commercial
business through the sale of its proprietary and third-party
products, as well as from granting certain licenses for the use of
its intellectual property. Revenue from the sale of goods is
recognised when all the following conditions have been
satisfied:
-- the significant risks and rewards of ownership of the goods have been transferred to the buyer;
-- the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor
effective control over the goods sold;
-- the amount of revenue can be measured reliably;
-- it is probable that the economic benefits associated with the transaction will flow to the Group; and
-- the costs incurred or to be incurred in respect of the transaction can be measured reliably.
The Group typically transfers significant risks of ownership and
title in the products upon shipment of goods from one of its
locations. After the Group transfers title and ships goods to the
customer, it typically does not retain significant involvement nor
does it have effective control over the goods sold. Therefore, if
all other revenue recognition criteria are met, revenue is
recognised upon shipment of the goods to the customer. Payment
terms range from 30 to 270 days depending on the local custom. This
applies to both proprietary and third-party products.
In the limited situation where the Group offers a product rebate
to the customer, it records the fair value of the product rebate as
a reduction to product revenue. An accrued liability for these
product rebates is estimated and recorded at the time the revenues
are recorded.
License/milestone payment 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 and the collection of the resulting receivable is
reasonably assured. To date the Group has not achieved the
performance obligations for any milestone payments.
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 for
acquisitions before 1 January 2010. For business combinations
completed on or after 1 January 2010, direct costs of acquisition
are recognised immediately as an expense.
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.
Expenditure 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.
Development expenditure not satisfying the above criteria and
expenditure on the research phase of internal projects are
recognised in profit or loss.
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. The Group has
not capitalised any development costs to date.
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.
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.
Foreign currency
Foreign currency transactions of individual companies are
translated into the individual company's functional currency at the
date of transaction. Any differences are recognised in profit or
loss.
At the year end, non-functional currency monetary assets and
liabilities are translated at the year-end rate with the
differences being recognised in the 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.
Operating segments
Operating segments are reported in a manner consistent with the
internal reporting provided to the Group's chief operating decision
maker (CODM). The CODM, who is responsible for allocating resources
and assessing performance of the operating segments, has been
identified as the Chief Executive Officer.
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. Investments are designated as at
fair value through profit and loss upon initial recognition when
they form part of a group of financial assets which is actively
managed and evaluated by key management personnel on a fair value
basis in accordance with the Company's documented investment
strategy that seeks to improve the rate of return earned by the
Company on its excess cash while providing unrestricted access to
the funds. The Company's investments 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
The Group operates a number of equity-settled, share-based
payment plans, under which it receives services from employees and
non-employees as consideration for the Company's equity
instruments, in the form of options or restricted stock units
("awards"). The fair value of the award is recognised as an
expense, measured as of the grant date using a binomial option
pricing model. The total amount to be expensed is determined by
reference to the fair value of instruments granted, excluding the
impact of any service and non-market performance vesting
conditions. Non-market vesting conditions are included in
assumptions about the number of options that are expected to vest.
The total expense is recognised over the vesting period, which is
typically the period over which all of the specified vesting
conditions are to be met.
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 lower of fair value and 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
over the shorter of useful economic life and lease term.
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:
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 is based upon a
weighted average cost method. The Group compares the cost of
inventory to its net realisable value and writes down inventory to
its net realisable value, if lower than its cost. Cost comprises
all costs of purchase and all other costs of conversion. Net
realisable value is the estimated selling price in the ordinary
course of business, less applicable variable selling expenses. The
inventory provision is based on which products have been determined
to be obsolete.
Deferred tax
Deferred tax assets and liabilities are recognised where the
carrying amount of an asset or liability in the statement of
financial position 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 joint arrangements 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.
3. Critical accounting estimates and judgments
In preparing its financial statements, the Group makes certain
estimates and judgments regarding the future. Estimates and
judgments are continually evaluated based on historical experience
and other factors, including expectations of future events that are
believed to be reasonable under the circumstances. In the future,
actual experience may differ from estimates and assumptions. The
estimates and judgments that have a risk of causing a material
adjustment to the carrying amounts of assets and liabilities within
the next financial year are discussed below.
Revenue
The Group recognises revenue at the fair value of consideration
received or receivable. Sales of goods to external customers are at
invoiced amounts less value added tax or local tax on sales. The
Group currently generates revenue solely within its Commercial
business through the sale of its proprietary and third party
products, as well as from granting certain licenses for use of its
intellectual property.
Sale of goods
Revenue from the sale of goods is recognised when all of the
following conditions have been satisfied:
-- the significant risks and rewards of ownership of the goods
have been transferred to the buyer;
-- the Group retains neither continuing managerial involvement
to the degree usually associated with ownership nor effective
control over the goods sold;
-- the amount of revenue can be measured reliably;
-- it is probable that the economic benefits associated with the
transaction will flow to the Group; and
-- the costs incurred or to be incurred in respect of the
transaction can be measured reliably.
The Group typically transfers significant risks of ownership and
title in the products upon shipment of goods from one of its
locations. After the Group transfers title and ships goods to the
customer, it typically does not retain significant involvement nor
does it have effective control over the goods sold. Therefore, if
all other revenue recognition criteria are met, revenue is
recognised upon shipment of the goods to the customer. Payment
terms range from 30 to 270 days depending on the local custom.
In the limited situation where the Group offers a product rebate
to the customer, it records the fair value of the product rebate as
a reduction to product revenue. An accrued liability for these
product rebates is estimated and recorded at the time the revenues
are recorded.
Licensing arrangements and milestone payments
In addition to the sale of goods, the Group has also granted a
limited number of intellectual property licenses to other
biotechnology and agricultural companies. The terms of the Group's
licensing agreements require delivery of an intellectual property
license for use of the Group's intellectual property in either
research only, or in research and commercial development of
biological products. Payments to the Group under these arrangements
may include up-front payments and payments based on the achievement
of certain milestones.
Non-refundable upfront payments are generally received upon
signing of a licensing agreement. All non-refundable upfront
payments received or to be received under these arrangements are
recognised when IAS 18 revenue recognition criteria are met, they
are receivable; they are non-refundable; and provided they are in
substance consideration for a completed separate earnings
process.
Milestone payments are recognised as revenue when the
performance obligations, as defined in the contracts, are achieved.
These milestone payments are generally tied to a specific
performance condition and are recognised in full when the
performance obligation is met. To date, the Group has not achieved
the performance obligations for any milestone payments.
Impairment of goodwill
The Group tests whether goodwill has suffered any impairment on
an annual basis. The recoverable amount is determined based on
value-in-use calculations. The use of this method requires the
estimation of future cash flows and the choice of a discount rate
in order to calculate the present value of the cash flows. Actual
outcomes may vary. Additional information on carrying values is
included in Note 10.
Impairment of intangible assets (excluding goodwill)
At the end of the financial period, the Group reviews the
carrying amounts of its definite lived intangible assets to
determine whether there is any indication that those assets have
suffered any impairment loss. If any such indication exists, the
recoverable amount of the asset is estimated to determine the
extent of the impairment loss (if any).
Recoverable amount is the higher of fair value less costs to
sell and value in use. In assessing the value in use, the estimated
future cash flows are discounted to their net present value using a
pre-tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset.
If the recoverable amount of an asset is estimated to be less
than its carrying amount, the carrying amount of the asset is
reduced to its recoverable amount. An impairment loss is recognised
immediately within administrative expenses in the consolidated
statement of comprehensive income. Additional information on
carrying values is included in Note 10.
Inventory
The Group reviews the net realisable value of, and demand for,
its inventory on a periodic basis to provide assurance that
recorded inventory is stated at the lower of cost or net realisable
value. Factors that could impact estimated demand and selling
prices include timing and success of future technological
innovations, competitor actions, supplier prices and economic
trends. Changes in these factors that differ from management's
estimates can result in adjustment to the carrying value and
amounts charged to income in specific periods.
Provisions
Whilst there are currently no provisions or contingent
liabilities, in accordance with IFRS, the Group recognises a
provision where there is a present obligation from a past event, a
transfer of economic benefits is probable and the amount of costs
of the transfer can be estimated reliably. Application of these
accounting principles to provisions estimated requires the Group's
management to make determinations about various factual and legal
matters beyond its control. The Group reviews outstanding events,
developments in legal proceedings if any, and other situations that
could indicate an obligation at each reporting date, in order to
assess the need for provisions and disclosures in its financial
statements. Among the factors considered in making decisions on
provisions are the nature of the event, including, where
applicable, litigation, claim or assessment, potential costs
expected to be incurred related to the event, litigation, claim or
assessment, the progress of matters in the event (including the
progress after the date of the financial statements but before
those statements are issued), the opinions of legal advisers or
other specialists, where applicable, experience on similar events
and any decision of the Group's management as to how it will
respond to the event, litigation, claim or assessment.
In instances where the criteria for recognising a provision are
not met, a contingent liability may be disclosed in the notes to
the financial statements. Obligations arising in respect of
contingent liabilities that have been disclosed, or those which are
not currently recognised or disclosed in the financial statements,
could have a material effect on the Group's financial position.
4. Revenue
2016 2015
Revenue arises from: $'000 $'000
Proprietary products 3,761 4,535
Third-party products 2,568 2,973
Total 6,329 7,508
======= =======
5. Operating loss
2016 2015
Note $'000 $'000
Operating loss is arrived
at after charging/(crediting):
Share-based payment charge 1,063 860
Depreciation 359 164
Amortisation of intangibles 10 273 272
Operating lease expense 446 420
(Gain)/loss on disposal of
property, plant and equipment (14) 14
Costs associated with abandoned 1,247 -
USA listing
Employee termination costs 267 -
Foreign exchange losses 1,927 473
======= =======
Auditor's remuneration:
Amounts for audit of parent
company and consolidation 68 116
Amounts for audit of subsidiaries 29 49
Amounts for other services - 427
Total auditor's remuneration 97 592
======= =======
Of the $427K of other services in 2015, $213K fees are within
other receivables and prepayments at 31 December 2015 (2016:
$nil).
6. Segment information
The Group's Chief Operating Decision Maker (CODM) views, manages
and operates the Group's business segments according to its
strategic business focuses-Commercial and New Technology. The CODM
further analyses the results and operations of the Group's
Commercial business on a geographical basis; and therefore the
Group has presented separate geographic segments within its
Commercial business below: Commercial-Americas (North and South
America, other than Mexico); Commercial-Mexico; and Commercial-Rest
of World. The Group's Commercial segments are focused on the sale
of biological products and are the Group's only revenue generating
segments. The Group's New Technology segment is focused on the
research and development of the Group's PREtec platform.
The Group has aggregated its United Kingdom and Spain operating
segments into its Commercial-Rest of World reportable segment.
These two operating segments have been aggregated into the Rest of
World reportable segment in accordance with guidance in IFRS 8 as
the nature of the products sold, production processes, type of
customer, and distribution method are similar. In addition,
economic characteristics, including primarily long-term
profitability and economic factors in the agricultural industry
impacting the pricing of and demand for the Group's products, have
been assessed and it has been determined that these operating
segments (Spain and the United Kingdom) share similar economic
characteristics.
Below is information regarding the Group's segment loss
information for the year ended:
2016
Rest Total New
of Commercial Technology
Americas Mexico World Elimination $'000 $'000 Total
$'000 $'000 $'000 $'000 $'000
Revenue*
Proprietary
product sales 1,424 734 1,603 - 3,761 - 3,761
Third-party
product sales 53 2,513 2 - 2,568 - 2,568
Inter-segment
product sales 1,252 - - (1,252) - - -
---------- --------- ---------- ------------- ------------ ------------ ----------
Total revenue 2,729 3,247 1,605 (1,252) 6,329 - 6,329
---------- --------- ---------- ------------- ------------ ------------ ----------
Group
consolidated
revenue 2,729 3,247 1,605 (1,252) 6,329 - 6,329
---------- --------- ---------- ------------- ------------ ------------ ----------
Cost of sales (1,556) (1,620) (512) 1,252 (2,436) - (2,436)
Research and
development - - - - - (3,868) (3,868)
Business
development (954) - - - (954) - (954)
Sales and
marketing (916) (733) (869) - (2,518) - (2,518)
Administration (293) (206) (1,233) - (1,732) (220) (1,952)
Non-cash expenses:
Depreciation (33) (53) (7) - (93) (266) (359)
Amortisation (255) - (18) - (273) - (273)
Share-based
payment (295) (5) - - (300) (631) (931)
Segment
operating
(loss) / profit (1,573) 630 (1,034) - (1,977) (4,985) (6,962)
Corporate
expenses
**
Wages and
professional
fees (2,494)
Administration*** (1,894)
------------------------
Operating loss (11,350)
Finance income 52
Finance expense (2)
------------------------
Loss before
tax (11,300)
========================
* Revenue from one customer within the Americas segment totalled
$1,024,000, or 16% of Group revenues.
Revenue from one customer within the ROW segment totalled
$835,000, or 13% of Group revenues
** These amounts represent public company expenses for which
there is no reasonable basis by which to allocate the amounts
across the Group's segments.
*** Includes net share-based payment expense of $132,000
attributed to corporate employees who are not affiliated with any
of the Commercial or New Technology segments.
Other segment
Information:
Rest
of Total New
Americas Mexico World Eliminations Commercial Technology Total
$'000 $'000 $'000 $'000 $'000 $'000 $'000
Segment assets 12,963 1,966 2,115 - 17,044 1,090 18,134
Segment liabilities 1,527 164 92 - 1,783 320 2,103
Capital expenditure 1 79 2 - 82 387 469
2015
Rest Total New
of Commercial Technology
Americas Mexico World Elimination $'000 $'000 Total
$'000 $'000 $'000 $'000 $'000
Revenue*
Proprietary
product
sales 2,528 643 1,364 - 4,535 - 4,535
Third-party
product
sales 77 2,870 26 - 2,973 - 2,973
Inter-segment
product sales 1,510 4 60 (1,574) - - -
---------- -------- -------- -------------- ------------ --------------------- ----------
Total revenue 4,115 3,517 1,450 (1,574) 7,508 - 7,508
---------- -------- -------- -------------- ------------ --------------------- ----------
Group
consolidated
revenue 4,115 3,517 1,450 (1,574) 7,508 - 7,508
---------- -------- -------- -------------- ------------ --------------------- ----------
Cost of sales (1,963) (1,781) (655) 1,574 (2,825) - (2,825)
Research and
development - - - - - (3,852) (3,852)
Business
development (1,155) - - - (1,155) - (1,155)
Sales and
marketing (1,272) (837) (606) - (2,715) - (2,715)
Administration (297) (226) (811) - (1,334) (281) (1,615)
Non-cash expenses:
Depreciation (32) (40) (5) - (77) (87) (164)
Amortisation (255) - (17) - (272) - (272)
Share-based
payment (129) (4) - - (133) (526) (659)
Segment operating
(loss) / profit (988) 629 (644) - (1,003) (4,746) (5,749)
Corporate
expenses
**
Wages and
professional
fees (806)
Administration*** (1,221)
-------------------
Operating loss (7,776)
Finance income 95
Finance expense (2)
-------------------
Loss before tax (7,683)
===================
* Revenue from one customer within the Americas segment totalled
$1,524,000, or 20% of Group revenues.
** These amounts represent public company expenses for which
there is no reasonable basis by which to allocate the amounts
across the Group's segments.
*** Includes net share-based payment expense of $201,000
attributed to corporate employees who are not affiliated with any
of the Commercial or New Technology segments.
Other segment
Information:
Rest
of Total New
Americas Mexico World Eliminations Commercial Technology Total
$'000 $'000 $'000 $'000 $'000 $'000 $'000
Segment assets 13,654 1,822 1,691 - 17,167 963 18,130
Segment liabilities 2,441 183 69 - 2,693 392 3,085
Capital expenditure 88 94 16 - 198 865 1,063
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.
Geographic Information
The Group operates in three principal countries - the United
Kingdom (country of domicile), the United States and Mexico.
The Group's revenues from external customers by location of
operation are detailed below:
Year Ended Year Ended
31 December 31 December
2016 2015
Amount Percent Amount Percent
$'000 $'000
United Kingdom $ 1,280 20 $ 1,191 16
United States 1,477 23 2,605 35
Mexico 3,247 51 3,513 47
All other 325 6 199 2
Total $ 6,329 100% $ 7,508 100%
The Group's non-current assets by location of assets are
detailed below:
Year Ended Year Ended
31 December 31 December
2016 2015
Amount Percent Amount Percent
$'000 $'000
United Kingdom $ 26 1 $ 35 1
United States 3,297 94 3,489 94
Mexico 193 4 141 4
All other 13 1 26 1
Total $ 3,529 100% $ 3,691 100%
7. Finance income and expense
2016 2015
$'000 $'000
Finance income
Interest on deposits and
investments 52 95
======== ========
Finance expense
Interest on finance leases (2) (2)
======== ========
8. Tax (credit)/expense
2016 2015
$'000 $'000
Current tax on profit for
the year (50) 43
Deferred tax - origination
and reversal of timing differences (33) (6)
--------- ---------
Total tax (credit)/expense (83) 37
========= =========
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:
2016 2015
$'000 $'000
Loss before tax (11,300) (7,683)
Expected tax credit based
on the standard rate of corporation
tax in the UK of 20% (2015:
20.25%) (2,260) (1,555)
Disallowable expenses 57 162
Share-based payment expense
per accounts 213 174
Prior period R&D credit (242) (160)
Losses available for carryover 2,268 1,463
Losses utilised in the year - (530)
Capital allowances in excess
of amortisation (83) (84)
Other temporary differences (36) 567
Actual tax (credit)/charge
for the year (83) 37
========= =========
Deferred tax asset Deferred
taxation
$'000
At 1 January 2016 27
Charged to the profit and loss
account 33
-----------
At 31 December 2016 60
===========
The deferred tax asset comprises of sundry timing
differences.
At 31 December 2016, the Group had a further potential deferred
tax asset of $24,192,000, which includes tax losses available to
carry forward of $23,593,000 (being actual federal, foreign and
state losses of $90,780,000) arising from historical losses
incurred and other timing differences of $599,000. This deferred
tax asset has not been recognised in the financial statements on
the basis that there is insufficient certainty about the timing and
availability of suitable profits to utilise these losses.
9. Loss per share
Basic loss per ordinary share has been calculated on the basis
of the loss for the year of $11,217,000 (2015: loss of $7,720,000)
and the weighted average number of shares in issue during the
period of 100,369,025 (2015: 71,737,885).
Equity instruments of 8,383,332 (2015: 8,433,332), which
includes share options, the Value Creation Plan and the 2015
Employee Share Option Plan 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 operations for the year.
10. Intangible assets
Trade
name and
Licenses customer
Goodwill and registrations relationships Total
$'000 $'000 $'000 $'000
Cost
Balance at 1 January
2015 1,620 3,342 159 5,121
Additions - externally
acquired - - - -
Balance at 31 December
2015 1,620 3,342 159 5,121
----------- ------------------- --------------- -------
Additions - externally
acquired - - - -
Balance at 31 December
2016 1,620 3,342 159 5,121
----------- ------------------- --------------- -------
Accumulated amortisation
Balance at 1 January
2015 - 2,255 159 2,414
Amortisation charge
for the year - 272 - 272
Balance at 31 December
2015 - 2,527 159 2,686
----------- ------------------- --------------- -------
Amortisation charge
for the year - 273 - 273
Balance at 31 December
2016 - 2,800 159 2,959
----------- ------------------- --------------- -------
Net book value
At 1 January 2015 1,620 1,087 - 2,707
=========== =================== =============== =======
At 31 December
2015 1,620 815 - 2,435
=========== =================== =============== =======
At 31 December
2016 1,620 542 - 2,162
=========== =================== =============== =======
The intangible asset balances have been tested for impairment
using discounted budgeted cash flows of the relevant cash
generating units. For the years ended 31 December 2015 and 2016,
cash flows are projected over a five-year period with a residual
growth rate assumed at 0%. For the years ended 31 December 2015 and
2016, a pre-tax discount factor of 16.4% and 15.0% has been used
over the forecast period for the years ended 31 December 2015 and
2016, respectively.
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
Commercial - Americas 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 three years. 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 licenses and
registrations.
11. Trade and other receivables
2016 2015
$'000 $'000
Current:
Trade receivables 3,124 3,581
Less: provision for impairment (51) (62)
------- -------
Trade receivables, net 3,073 3,519
Other receivables and prepayments 211 908
Tax receivable - 155
Current trade and other receivables 3,284 4,582
------- -------
Non-current:
Trade receivables 71 73
Less: provision for impairment - -
Deferred tax asset 60 27
------- -------
Non-current trade and other receivables 131 100
======= =======
3,415 4,682
======= =======
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:
2016 2015
$'000 $'000
Balance at the beginning of the
year 62 55
Provided 10 12
Receivables written off as uncollectible (11) (3)
Foreign exchange (10) (2)
Balance at the end of the year 51 62
======= =======
The gross value of trade receivables for which a provision for
impairment has been made is $52,000 (2015: $98,000).
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.
2016 2015
$'000 $'000
Current 2,617 3,303
Past due:
Up to 30 days 13 3
31 to 60 days 84 14
61 to 90 days 259 163
Greater than 90 days 100 36
Total 3,073 3,519
======= =======
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
2016 2015
$'000 $'000
Current:
Trade payables 491 1,651
Accruals 1,542 1,392
Taxation and social security 53 16
Income tax liability 2 2
------- -------
2,088 3,061
======= =======
13. Finance leases
(a) Current borrowings
2016 2015
$'000 $'000
Finance leases 8 8
======= =======
(b) Non-current borrowings
2016 2015
$'000 $'000
Finance leases 7 16
======= =======
Finance lease obligations are secured by retention of title to
the relevant equipment and vehicles.
(c) Due date for payment:
The contractual maturity of the Group's financial liabilities on
a gross basis is as follows:
Trade and
other payables Finance
leases
2016 2015 2016 2015
$'000 $'000 $'000 $'000
In less than
one year 1,261 2,415 8 8
In more than
one year, but
less than two
years - - 7 16
1,261 2,415 15 24
======== ======== ======= =======
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 give no assurance that any forward-looking
statements will prove correct.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR IRMPTMBTMBBR
(END) Dow Jones Newswires
April 10, 2017 02:00 ET (06:00 GMT)
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