Results for the Year Ended 31 December 2016

Released : 10 Apr 2017 07:00

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 αβ sales outside the United States increased by approximately 23%. Harpin αβ and Myconate® 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 £7.4 million ($9.7 million)
  • Trials with Innatus™ 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 αβ increased by 41% in constant currency.  For example, sales in Spain grew by 86%.  However, the launch of Harpin αβ 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 αβ, 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 αβ. 

 

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 αβ 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 αβ

Our Harpin αβ 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 αβ 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 αβ 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 αβ products, for which we have a number of current patents that expire between 2017 and 2027. Manufacture and formulation of Harpin αβ 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:

 

 

2016

$'000

2015

$'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 June\July 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 αβ 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

 

Note

2016

$'000

 

2015

$'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

                                                                                                                                                            

 

Note

2016

$'000

 

2015

$'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

 

 

 

Share capital

$'000

Share premium

$'000

Foreign

exchange

reserve

$'000

Accumulated Deficit

$'000

Total

$'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

           

 

Note

2016

$'000

2015

$'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 and equipment

 

71

-

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

Revenue arises from:

2016

$'000

2015

$'000

 

 

 

Proprietary products

3,761

4,535

Third-party products

2,568

2,973

 

 

 

Total

6,329

7,508

 

 

5.   Operating loss

 

 

 

Note

2016

$'000

2015

$'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 USA listing

 

1,247

-

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

 

Americas

$'000

 

 

Mexico

$'000

 

 

Rest of World

$'000

 

 

 

Elimination

$'000

 

 

Total

Commercial

$'000

 

 

New

Technology

$'000

 

 

Total

$'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:

 

Americas

$'000

 

 

     Mexico

     $'000

 

 

      Rest of World

        $'000

 

Eliminations

$'000

 

 

 

Total Commercial

$'000

 

 

 

New Technology

$'000

 

 

Total

$'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

 

 

 

 

 

 

Americas

$'000

 

 

 

 

 

 

Mexico

$'000

 

 

 

 

 

Rest of World

$'000

 

 

 

 

 

 

Elimination

$'000

 

 

 

 

 

 

Total

Commercial

$'000

 

 

 

 

 

 

New

Technology

$'000

 

 

 

 

 

 

Total

$'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:

 

Americas

$'000

 

 

     Mexico

        $'000

 

 

      Rest of World

        $'000

 

Eliminations

$'000

 

 

 

Total Commercial

$'000

 

 

 

New Technology

$'000

 

 

Total

$'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 2016

 

31 December 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 2016

 

31 December 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

$'000

 

 

2015

$'000

Finance income

 

 

Interest on deposits and investments

52

95

 

 

 

Finance expense

 

 

Interest on finance leases

(2)

(2)

 

 

 

 

 

8.   Tax (credit)/expense

 

 2016

 $'000

 2015

 $'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

 $'000

 2015

 $'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

 

 

Goodwill

$'000

Licenses and registrations

$'000

Trade name and customer relationships

$'000

Total

$'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

$'000

2015

$'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

$'000

2015

$'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

$'000

2015

$'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

$'000

2015

$'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

$'000

2015

$'000

 

 

 

Finance leases

8

8

 

(b)  Non-current borrowings

 

 

2016

$'000

2015

$'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

$'000

2015

$'000

2016

$'000

2015

$'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
 
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