26th Apr 2005 07:01
Plant Health Care PLC26 April 2005 Embargoed until 7am 26 April 2005 Plant Health Care plc ("PHC" or "the Company") Preliminary Results for the full year ended 31 December 2004 PHC, a leading provider of natural products for plants and soil, announces itsmaiden preliminary results for the full year ended 31 December 2004. Highlights •The Company listed on the AIM market of the London Stock Exchange in July raising $10.3 million net of expenses •Sales growth of 6.5% to $8.6m as demand for natural products continues to grow •Net loss of $2.9m reflecting significant one-off costs and increased expenses as listed company, but also significant investment in developing sales and distribution capacity •This investment provides the platform for further growth and profitabilty from existing markets •Acquisition of VAMTech LLC has added powerful new technology and opens door to future penetration of agricultural row crop market worldwide •Alliance with The Scotts Company establishes route for PHC products to retail market •Year-end cash balance of $4.8m Commenting on the results, PHC Chairman, Albert Fischer said: "2004 was a veryimportant year for the company, and the substantial advancement made has createdan unparalleled platform in our industry from which to take the business forwardin 2005. "With our proprietary natural products and experienced management team, ourfocus is now to ensure that we build distribution further. In particular, we areconfident that we can grow sales substantially in our existing markets and moveforward on our path towards profitability. "Our new products have the potential to further build market share and to enternew market segments with unparalleled propositions for customers. We continueto develop our own sales channels as well as partnerships as possible routes tomarket and under new marketing concepts. "Against a background of rapidly increasing market acceptance for naturalsolutions for plants and soil, we are pleased with the progress and investmentsmade in the first quarter and are encouraged by the outlook for 2005 andbeyond." Plant Health Care plc Tavistock CommunicationsJohn Brady, CEO Jeremy Carey/Christian Taylor-Wilkinson26-29 April Tel: 020 7920 3150 Tel: 020 7920 3150Thereafter: +1 603 525 3702 Email: ctaylor-wilkinson@tavistock.co.uk 26 April 2005 Plant Health Care plc ("PHC" or "the Company") Preliminary Results for the full year ended 31 December 2004 Chairman's Statement This is Plant Health Care's first annual statement as a listed company, and Iwould like to take this opportunity to thank all of those shareholders who haveshown us support to bring us to where we are today. 2004 has been a year of significant development for the Plant Health Care group.In July PHC floated on the AIM market of the London Stock Exchange and raised$10.3m net of expenses in new equity. This new capital will be used to fund thedevelopment of both our product range and our target markets. We have alreadycompleted the acquisition of VAMTech LLC at a cost of $2.6m and strengthened oursales and distribution channels. Results for the year Turnover for the year increased by 6.5% to $8.6m. This growth was achieveddespite several setbacks, particularly from the very adverse weather conditionsin the USA at the end of 2004 and the loss of a major distributor who left themarket. An increased net loss of $2.9m reflected significant investment in thedevelopment of our sales and marketing capacity, as well as one-off costs on theflotation and the transfer of our manufacturing operation to a more efficientfacility; we also incurred increased costs arising from our new status as alisted company. Further analysis of the year is provided in the ChiefExecutive's report later in this announcement. No dividend is proposed. Development of the Company The Directors of PHC believe that it has the opportunity to become a leadingplayer in the fast developing global market for natural plant health products.Consumers are rapidly recognising the benefits of farming and gardeningnaturally; this increasing level of consciousness combined with governmentlegislation to remove potentially harmful synthetic products from the market iscreating a significant opportunity for PHC. A paradigm shift is taking place asour natural products perform at not only equal but higher standards thanconventional chemical products and at economically attractive prices. We have aunique product portfolio, and the Company is unaware of any other provider ofnatural products that has such a wide range of high-quality products in responseto this demand. We have well established sales channels to our current markets and in 2004 haveincreased the number of sales staff in the North American, Mexican and Europeanmarkets and opened a sales office in Spain. These investments will allow us tosecure further growth from our current markets. In October 2004 we acquired VAMTech, a company which owns a powerful compoundcalled Formononetin that significantly increases the yield of row crops such ascorn, wheat, soybeans and cotton. Formononetin is now being sold by PHC underthe trade name Myconate. This is PHC's first move into the row crop market andearly trials and market interest indicate this product will be one of our keysellers in the future. Myconate complements PHC's existing natural productline and the expansion into row crops presents a significant opportunity toincrease sales. The Company also entered into an exclusive long-term agreement for consumerproduct development and full commercialisation of PHC's natural products withThe Scotts Company, which is the world's leading supplier and marketer ofbranded consumer products for lawn and garden care. The impact of thisarrangement is expected to be significant from 2006 onwards. The Company's distribution channels combined with internal developmentcapability will allow us to acquire similar technologies which can easily beabsorbed into the Company's existing infrastructure. We will also continue toseek to acquire distribution rights to similar natural and biological productsand to develop sustained new relationships with distribution partners. Social responsibility The Company has a strong socially responsible culture. In 2005 the Company willlaunch a community involvement initiative whereby PHC, partnered with keycustomers, will undertake select community beautification projects. Thisinitiative utilises the time and talent of PHC employees and its products tocarry out our mission of enhancing the environment. Outlook The investments made into our sales and distribution channels provide theCompany with an opportunity for steady growth from the markets where it isalready established. In 2004 PHC sold products to 10 countries worldwide and weare confident that during 2005 we will achieve a wider distribution. Also, theintroduction of new and unique products which we develop, acquire or sourceunder licence will ensure a wide spectrum of offerings to satisfy customerneeds. I am pleased to report that the Company has four new products underdevelopment which we expect to be ready for distribution in late 2005. The acquisition of VAMTech and the relationship with Scotts both open doors tosubstantial growth in markets where we are not currently represented. However itshould be noted that significant revenues from these opportunities are likely tobegin only from 2006 onwards, with 2005 seeing only modest revenue as we developthese ventures. The Company is now on a sound financial footing and is committed to growing thebusiness both organically and through acquisitions. Plant Health Care isdedicated to providing a triple bottom line: profits for our investors, arewarding work atmosphere for our employees and an ecologically sustainableproduct for the environment. I would like to thank all our shareholders fortheir continued trust and support and our employees for their efforts inbuilding this Company. I look forward to reporting on our progress at the halfyear. Dr. Albert FischerChairman26 April 2005 Chief Executive's Review Financial Report Divisional salesPHC US sells to the arbour, landscaping, horticulture and sports turf markets inthe United States. 2004 sales of $5.2m represented an increase of 8% over 2003.This growth was fuelled by continued increasing demand for natural productsacross these markets and, in the second half, by the development of our salescapacity. The increase was also achieved in spite of several setbacks. The firsthalf of the year saw record rainfalls in the eastern part of the country. Latera total of five hurricanes struck Florida and the south eastern states. Inaddition, one of the Company's largest distributors in the turf marketunexpectedly announced the disposal of its operations east of the RockyMountains. PHC Reclamation uses mycorrhizal fungi technology for reforestation and thereclamation of lands disturbed by mining, construc-tion, fire, erosion and otheractivities. Although sales in 2004 were at the same level as 2003, 2005 hasstarted well with a major contract win from the Wyoming Department ofEnvironmental Quality to provide professional engineering and design servicesfor the reclamation of over 200 abandoned coal mine sites. This project has aninitial value of up to $510,000. PHC Reclamation was the 2004 recipient of thecoveted People's Choice Award for best national reclamation project presented bythe United States Department of the Interior, Office of Surface Mining. PHC Mexico focuses on the very significant commercial agriculture market in thatcountry. This division's 2004 sales were also at the same level as 2003. Onedisappointment related to a major contract which was postponed until 2005.During the year this operation restructured its sales channels and severalunderperforming distributors were eliminated. We are already seeing the benefitsof this improved sales channel. Sales in Europe increased 19% over 2003, surpassing the $1m mark. PHC's Europeanoperations had previously focused on the UK and Dutch markets; in 2004, due toincreasing demand and the potential for PHC's products in agriculture, anoperating subsidiary was established in Spain and new distributors were set upin Greece in 2004 and Italy in 2005. All three of these will begin to contributein 2005. Gross profitThe gross profit of $3.7m (2003: $3.7m) represented a gross margin percentage onsales of 42.5% (2003: 45.3%) The gross margin in the US was impacted by ournewly introduced early order program, which brought PHC into line with standardindustry practice and accelerated sales from February and March 2005 back into2004. In addition there were more sales of soil nutrient products than in 2003,and they carry a lower margin than some other product lines. A major marketingfocus for 2005 is on promoting our higher margin products to ensure growth insales is converted to growth in profitability. Following the transfer of ourmanufacturing facility to a newer and more efficient facility in April, weanticipate improved margins on our sales. Operating costsOperating costs increased from $4.5m in 2003 to $6.3m, reflecting theinvestments made to build future revenues, and the additional costs of becomingand operating as a public company, as well as certain significant one-off costs. During 2004 we made a number of additions to the sales force in the U.S., Mexicoand Spain. A general manager was hired for the U.S. operation. Additionaladvertising costs were incurred for the production of a Golf Guide, a LandscapeGuide, and a specifier CD for landscape architects as well as for supporting theadditional sales personnel. We invested considerable time and cost into securingand developing our relationship with The Scotts Company and invested in producttrials and on the recruitment process for a general manager for the newlyacquired VAMTech operation. The Company also experienced increases in expenses such as audit, legal,directors' fees and public relations fees related to being a quoted publiccompany. Such expenses will be a constant in our existence as a listed companybut should not need to grow in line with our projected sales growth. Approximately $0.25m of non-recurring costs related to our IPO were expensed. Inaddition a provision of $0.2m was made to cover the costs of transferring to ournew manufacturing facility. Cash positionPHC entered the year with net debt of $2.2m. The flotation allowed theconversion of some $2.1m of debt and related interest to equity, and raised afurther $10.3m in new cash for investment and working capital. At the close ofthe year, the Group had net cash in hand of $4.8m. AcquisitionsIn October 2004, PHC acquired VAMTech LLC for a consideration of $1.95m plusinterest free debt with a face value of $0.8m, payable over five years.VAMTech's key product Myconate specialises in the synthesis of Formononetin, acompound that stimulates the growth of mycorrhizal fungi already existing in thesoil. The acquisition included all technology and patents surrounding VAMTech'sproduction of Formononetin. A series of independent trials in six locations with differing soil and climaticcharacteristics were carried out in the United States on soybean and corn seedsby two professional research groups, Beck Hybrid and AgriBusiness Group. Yieldincreases of corn and soybean crops from seed treated with Myconate wereremarkable. Corn yields improved by up to 25% and soybean yields improved by upto 42%. The benefits were most apparent in those areas where soil quality waslow and the weather was poor. We believe that the acquisition opens the door to the row crop market which, dueto the relatively high cost of previous biological based products, has hithertobeen closed to the Company. Some fifty further trials are now being conductedacross the globe and the results of these in later 2005 will help establish ourinitial marketing priorities for this exciting new product. We also believe that there will be other opportunities to acquire companies orbusinesses which can bring additional products into the Group to promote throughour developing distribution capability. Other products will also be available tous through licensing arrangements. This expanded product portfolio will helpaccelerate the Group toward becoming the world's leading player in the naturalproduct market. Research and development During 2004, the Group continued its programme of development to create newformulations and applications from its core technology base. Amongst the moresignificant activities were: Decomposing soil bacteria were isolated from several golf courses in the US tobe used to develop a new PHC Dethatch product. The bacteria were tested forcellulose/lignin decomposition, and six functional species were identified.These have been mass produced and sufficient inoculant is available for fieldtesting this spring. Studies are currently underway in Florida testing the effectiveness of Palm Saver and new formulations of natural based palm fertilizers. Over 50 field tests in nine countries are currently underway with Myconate(R).Treatments involve different amounts on seed, drench applications and storageeffectiveness. These studies include important crops such as corn, cotton,soybean, tomato, sunflower, beans and various grasses. Relationship with Scotts In October 2004 PHC entered into an exclusive long-term agreement for consumerproduct development and commercialisation with The Scotts Company (Scotts).Scotts is the world's leading supplier and marketer of branded consumer productsfor lawn and garden care. The focus of the agreement combines PHC's expertise inmycorrhizal fungi and bacterial ingredient products with Scotts' expertise inconsumer retail product development. The alliance gives Scotts exclusiveconsumer market rights to use PHC's proprietary technology and plant products.We expect the benefits of this arrangement to begin to have a material impact onrevenues in 2006. The interim will be devoted to market research, refiningproduct specifications and working with Scotts to ensure a successful productlaunch. The partnership has the potential to create a major new market outletfor PHC in this important and growing segment of the natural products market. Staff It is with great sadness that we note the passing in November 2004 of Len Marrs,who had been President of PHC Reclamation from the founding of the Company.Christopher Walla, our lead engineer, has been appointed to take Len's place asPresident of PHC Reclamation. The Company continues to build its staff in two main areas: increasing our salesand marketing staff to allow expansion into new markets and territories andimproving the overall leadership capabilities of the Company. In the second half of the year, the Company added eight field sales people inthe United States, Mexico and Spain. In December, Martin Baumann was hired as General Manager of Plant Health CareU.S. In this capacity, he is responsible for the manufacturing operations in theUS as well as sales and marketing activities in the arbour, horticulture,landscaping and sports turf markets. I would like to take this opportunity to thank all of our staff for theirefforts and enthusiasm during 2004. Outlook We believe that the Plant Health Care Group is poised to become a dominantplayer in the green industry. The proceeds from the equity placing have giventhe Group the resources to invest and grow into new markets. Our investment insales and marketing over the last year is now beginning to increase the level ofenquiries that we are receiving. Our traditional markets are providing steady growth in the USA, Mexico andEurope. The Scotts agreement allows us access to the retail market from 2006onwards in a way that would not otherwise be possible. The VAMTech acquisitiongives us an exciting new product line with an avenue into the worldwide row cropmarket, currently estimated at 1.1 billion acres. The early trials of theVAMTech product, Myconate, have been very encouraging and we will be pushingthis product strongly into the agriculture market in the future. Finally, our Reclamation division is pursuing various proposals which we hopewill lead to new contracts in 2005, and we continue to evaluate opportunitiesfor further acquisitions or licences to increase our penetration of our targetmarkets. As a result we are extremely encouraged about the future of yourCompany. John BradyChief Executive Officer26 April 2005 Consolidated profit and loss account for the year ended 31 December 2004 Note 2004 2003 Unaudited Unaudited $'000 $'000 Turnover 3 8,611 8,082Cost of sales (4,952) (4,420) ----- ----- Gross profit 3,659 3,662 Administrative expenses (6,284) (4,539) ----- ----- Operating loss (2,625) (877) Other interest receivable and similar income 44 -Interest payable and similar charges (299) (366) ----- ----- Loss on ordinary activities before taxation (2,880) (1,243) Taxation (52) (70) ----- ----- Loss on ordinary activities after taxation (2,932) (1,313) Minority interest (14) (34) ----- ----- Loss for the period (2,946) (1,347) ===== ===== Basic loss per share 4 14.0c 10.2c ===== ===== Diluted loss per share 14.0c 10.2c ===== ===== All amounts relate to continuing activities. Included within administrative expenses is an amount of $109,000 relating to the operating results of the business aquired during the year. Consolidated statement of total recognised gains and losses 2004 2003 Unaudited Unaudited $'000 $'000 Loss for the financial year (2,946) (1,347) Exchange translation differences on consolidation 43 (49) ----- ----- Total recognised gains and losses for the year (2,903) (1,396) ===== ===== Consolidated balance sheet at 31 December 2004 2004 2003 Unaudited Unaudited $'000 $'000Fixed assetsIntangible assets 2,810 260Tangible fixed assets 453 386 ----- ----- 3,263 646 ----- -----Current assetsStocks 1,124 790Debtors 2,192 1,422Cash at bank and in hand 4,812 335 ----- ----- 8,128 2,547 ----- ----- Creditors: amounts falling due within one yearConvertible redeemable loan stock - (1,864)Other creditors (1,771) (1,640) ----- ----- (1,771) (3,504) ----- ----- Net current assets/ (liabilities) 6,357 (957) ----- ----- Total assets less current liabilities 9,620 (311) ----- ----- Creditors: amounts falling during after one yearConvertible redeemable loan stock - (363)Other creditors (615) (76) ----- ----- (615) (439) ----- ----- Net assets/ (liabilities) 9,005 (750) ===== =====Capital and reservesCalled up share capital 538 9Share premium 10,700 11,639Merger reserve 11,913 -Profit and loss account (14,309) (12,547) ----- ----- Shareholders' funds - equity 8,842 (899)Minority interests - equity 163 149 ----- ----- 9,005 (750) ===== ===== Company balance sheet at 31 December 2004 2004 Unaudited $'000Fixed assetsFixed asset investments 20,959 Current assetsDebtors 24Cash at bank and in hand 4,217 ----- 4,241 ----- Creditors: amounts falling due within one year (123) ----- Net current assets 4,118 ----- Total assets less current liabilities 25,077 ------ Net assets 25,077 ====== Capital and reservesCalled up share capital 538Share premium 10,700Merger reserve 14,453Profit and loss account (614) ------ Shareholders' funds - equity 25,077 ====== Consolidated cash flow statement for the year ended 31 December 2004 Note 2004 2003 Unaudited Unaudited $'000 $'000 Net cash outflow from operating activities 6 (3,256) (1,038) ------- ------- Returns on investments and servicing of financeInterest paid (205) (221)Interest received 44 - ------- ------- Net cash outflow from returns on investments and servicing of finance (161) (211) ------- ------- TaxationCurrent tax on foreign income for the year (45) (11) ------- ------- Capital expenditure and financial investmentPurchase of tangible fixed assets (217) (86)Purchase of licences (37) - ------- ------- Net cash outflow from capital expenditure and financial investment (254) (86) ------- ------- Acquisition of subsidiaryPurchase of subsidiary undertaking (1,986) - ------- ------- Cash outflow before financing (5,702) (1,346) ------- ------- FinancingIssuing of ordinary share capital for cash 10,308 -Exercise of warrants 205 -Increase of convertible redeemable loan stock 775 1,520Issue of new finance leases 25 -Redemption of loan stock (1,000) (36)Repayment of notes payable (173) -Repayment of finance leases - capital 39 (10) ------- ------- 10,179 1,474 ------- ------- Increase in cash 4,477 128 ======= ======= Notes forming part of the financial statements for the year ended 31 December2004 1. Statutory Information The financial information contained in this annoucement for the years ended 31December 2004 and 2003, does not consitute statutory financial statements withinthe meaning of section 240 of the Companies Act 1985. The statutory accounts forthe year ended 31 December 2004 will be finalised on the basis of the financialinformation presented by the directors in this unaudited preliminary annoucementand will be delivered to the Registrar of Companies following the company'sannual general meeting. The audit report for the year ended 31 December 2004 hasyet to be signed. 2. Basis of preparationThe financial statements have been prepared under UK GAAP and are presented inUS dollars. The directors believe that it is more appropriate to use US dollarsas a currency for presentation, given that the majority of the Group'soperations are denominated in that currency. Basis of consolidationOn 6 July 2004 Plant Health Care plc became the legal parent company of PlantHealth Care, Inc. in a share for share transaction. The former shareholders ofPlant Health Care, Inc became the majority shareholders of Plant Health Careplc. Further, the continuing operations and executive management of Plant HealthCare plc were those of Plant Health Care, Inc. Accordingly, the substance of thecombination was that Plant Health Care, Inc. acquired Plant Health Care plc in areverse acquisition. Under the requirements of the Companies Act 1985, it would normally be necessaryfor the consolidated accounts of Plant Health Care plc to follow the legal formof the business combination. In that case the pre-combination results would bethose of Plant Health Care plc, which would exclude Plant Health Care, Inc.Plant Health Care, Inc. would then be brought into the Group from 6 July 2004.However, this would portray the combination as an acquisition of Plant HealthCare, Inc., and would, in the opinion of the directors, fail to give a true andfair view of the substance of the business combination. Accordingly, thedirectors have adopted reverse acquisition accounting as the basis ofconsolidation in order to give a true and fair view. In invoking the true and fair override the directors note that reverseacquisition accounting is endorsed under International Financial ReportingStandard 3 and that the Urgent Issues Task Force of the UK's AccountingStandards Board considered the subject and concluded that there are instanceswhere it is right and proper to invoke the true and fair override in such a way. As a consequence of applying reverse acquisition accounting, the results for theperiod ended 31 December 2004 comprise the results of Plant Health Care, Inc.for the period ended 31 December 2004 plus those of Plant Health Care plc from 6July 2004, the acquisition date. The comparative figures are those of PlantHealth Care, Inc., using the principles of reverse acquisition accounting. 3. Segmental analysis 2004 2004 2004 2003 2003 2003 Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Turnover Pre-tax Net Turnover Pre-tax Net Profit/ assets/ Profit/ assets/ (Loss) (liabilities) (Loss) (liabilities) $'000s $'000s $'000s $'000s $'000s $'000s US 6,154 (1,471) 756 5,789 (751) (420)Mexico 1,365 123 628 1,375 136 476Europe 1,092 (66) (700) 918 115 (559)Group - (1,466) 8,321 - (743) (247) ------- ------- ------- ------- ------- ------- 8,611 (2,880) 9,005 8,082 (1,243) (750) ======= ======= ======= ======= ======= ======= 4. Loss per share Loss per ordinary share has been calculated using the weighted average number ofshares in issue during the relevant financial periods. The weighted averagenumber of equity shares in issue is 21,014,576 (2003 - 13,223,373) and the lossafter tax and minority interests is $2,946,000 (2003 - $1,347,000). The weightedaverage number of shares outstanding for 2003 and for 2004 prior to admission toAIM has been adjusted to reflect the exchange of shares of Plant Health Care,Inc for those of Plant Health Care plc. 5. Acquisitions On 12 October 2004 the Group acquired all of the membership interests of VAMTechLLC for a total of $1,950,000 paid by cash plus $775,000 of non-interest-bearingnotes. These notes have been recorded at a discounted present value of $660,000. In accounting for the acquisition, the fair value of the net assets has beenassessed and adjustments from book value have been made where necessary. Becausethe fair value of the net assets acquired has been determined to equal theconsideration paid for the acquisition, no goodwill has arisen. Theseadjustments are summarised in the following table: Fair Fair Book value value value adjustments to the group $'000s $'000s $'000s Fixed assetsIntangible assets 2,000 549 2,549Tangible assets 1 (1) - ------- ------- ------- 2,001 548 2,549 ------- ------- ------- Current assetsStocks 81 (3) 78Debtors 20 (1) 19 ------- ------- ------- 101 (4) 97Creditors: amount falling due within one year (226) 226 - ------- ------- ------- Net current assets/(liabilities) (125) 222 97 ------- ------- ------- Net assets 1,876 770 2,646 ======= ======= ======= $'000s Cash consideration (including expenses of $36,000) 1,986Present value of non-interest bearing notes 660 ------- Total consideration 2,646Net assets acquired (2,646) ------- Goodwill arising on acquisition - ======= 6. Reconciliation of operating profit to net cash outflow from operating activities 2004 2003 Unaudited Unaudited $'000s $'000s Operating loss (2,625) (877) Depreciation 150 138Amortisation of intangibles 36 40Gain on sale of fixed assets - 4(Increase)/decrease in stocks (257) (10)(Increase)/decrease in debtors (751) (498)Increase/(decrease) in creditors 191 150Exchange differences - 15 ------- ------- Net cash outflow from operating activities (3,256) (1,038) ======= ======= This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
PHC.L