Half year results

For immediate release 6 March 2017

Plant Impact plc

("Plant Impact" or the "Company" and,

together with its subsidiaries, the "Group")

Half year results for the six months ended 31 January 2017

Good progress on geographic expansion and product development

Plant Impact plc (AIM: PIM) leads R&D in crop enhancement technology to create products that growers can rely on to increase the yield and quality of their crops. Today the Group is pleased to announce its results for the six months ended 31 January 2017.

Financial highlights: six months of continued growth plus a strong balance sheet

· Revenue £4.9m (2016: £4.2m) up 17%; assisted by favourable foreign exchange

· Gross profit increased 18% to £3.9m (2016: £3.3m)

· Cash balance at period end of £6.0m (31 July 2016: £5.6m, 31 January 2016 £8.6m)

Operational highlights: progress on multiple fronts

· Sales of Veritas® to Brazil in line with expectations

o Brazil nearing end of main crop soybean growing season; dry bean and second crop upcoming

· First sales of Veritas®/Fortalis® into Argentina, Paraguay and Bolivia

· Good growth in second season of Banzai™ cocoa yield enhancement product

· Significant progress in development of next soybean products. Potential for launch next season

· Post period end, launch announced of Fortalis® in the USA - first sales expected in Q3

David Jones, Chairman of Plant Impact, commented: "During the first half of the year Plant Impact achieved progress on each of the strategic initiatives that the Company is pursuing. We enter the second half of the year with much to do and an encouraging set of prospects to deliver."

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Chairman's Statement

The Board is pleased to report continued progress in the six months ended 31 January 2017 on each of our strategic goals of commercialising existing products, expanding geographic coverage and developing new products. 

Commercial Update

Our flagship soy yield enhancement product, Veritas®, continues to gain commercial traction in Brazil, with orders for the 2016/17 growing season from our partner Bayer CropScience ("BCS") increasing 40% over the prior growing season and achieving our expectations. As previously announced we have been investing significantly in an in-season marketing campaign to drive grower adoption of the product. As of the date of this announcement, the application season in the main soybean crop is largely complete, and many regions are beginning to harvest. It is too early to assess the full impact of the campaign, but early indications are that grower adoption rates of the product are significantly up on the prior year. However, we are closely monitoring progress of this year's campaign, as a difficult credit environment for growers in the important Cerrado growing region suggests that final usage of the product may be below the campaign targets we have with BCS. We continue to work closely with BCS and by early June we will have a clear picture of the results of the campaign.

During the period we extended the commercialisation of Veritas® in South America with sales of the product through BCS into Paraguay and Bolivia. In addition, with BCS, we launched a second generation of the product, Fortalis®, which is being sold initially in Argentina in a test-marketing region. Sales into these regions met our initial expectations in the period and we are now working with our partners to ensure a strong grower experience in this first growing season to ensure a good base from which to drive future adoption.

On 22 February 2017 we announced the launch of Fortalis® in the USA, another significant strategic step forward for our Company. In the USA we are commercialising the product directly with three of that market's leading distributors; Helena Chemical Company, GROWMARK, and the Van Diest Supply Company. The Board is pleased with the distribution reach provided by these partners, enabling us to reach 100% of the soybean growers in the market. Our decision to market Fortalis® directly to the distribution channel reflects the different commercial landscape in the USA compared with Brazil and Argentina, and particularly the opportunity to pair Fortalis® with fungicides marketed by several of the leading manufacturers in the US market. We will begin shipments of Fortalis® to the USA over the coming months in time for the forthcoming growing season. 

Although soy related products remain our core focus we continued to make progress in other areas. This is the second year of commercial sales of Banzai™, Plant Impact's cocoa crop enhancement product, sold through Arysta LifeScience in West Africa. Shipments made to date have been in line with expectations and significantly up on last year. We are seeing good progress in grower adoption of Banzai™, particularly in Cameroon, where our strategy of partnering with cocoa processors is generating early interest. We will be conducting research and field demonstration trials with a number of cocoa processors and chocolate companies over this growing season which could lead to an expansion in the use of the product in future seasons. 

As announced in the last Annual Report, we scaled back aspirations for our horticultural products sold mainly in Europe. Here, the season has not yet started. However off-season sales in the first half of our financial year were more than double those in the prior year, which gives us confidence that we will be able to achieve the target of stabilisation of revenues in this sector. 

Research and Development Progress

Research and Development remains at the core of Plant Impact, with over 25% of our employees dedicated full time to developing new technologies and products and almost everyone in the Group engaged part-time in R&D activities of some form. Product development in the crop enhancement (CE) industry is a multi-year activity, albeit significantly faster when compared with development cycles for classic agro-chemicals or new seeds. It takes at least five years to bring a CE product from concept to launch. Plant Impact has a full pipeline of soy and wheat products that we are developing and they are at various stages across the development cycle.

In research for soy products, we have been working to extend the crop enhancement portfolio with two new products planned: a soy seed treatment product ("S1"); and a foliar spray for the early growing cycle of that crop ("F1"). We are conducting final trials with one of these products in the current South American growing season and if results are positive we could have a product to launch in the 2017/18 campaign year. The other product is also in advanced trials, however we expect it will need a further season of optimisation, but that could launch as early as the first half of our 2018/19 financial year. Based on our market share aspirations and pricing plans we believe the market potential of these two products at full maturity could be at least as big as that of the Veritas®/Fortalis® product family already launched. Subsequent soy products to complete a full portfolio are at an earlier development stage, with field trials underway to select and optimise chemical compounds to deliver our technical objectives.

We have been steadily increasing our R&D activities for wheat crop enhancement products following the March 2015 fund-raising. Our focus so far has been on a product that will support the early establishment of wheat following planting. We are now at late stage field trials with prototypes of this product and subject to the outcome of these trials would anticipate having a commercial product ready to launch in the next two seasons. 

Other wheat products are at an earlier development stage. In the recent period we increased activity with the inception of a joint research project into developing technology for a yield enhancement product focused on heat stress that we are running in conjunction with Rothamsted Research Institute and Lancaster University.

In support of our R&D activities, in February 2017 we launched the Plant Impact Quality Standard. This industry leading initiative is designed to provide further credibility to our R&D activities, setting a standard for product efficacy, innovation, safety and compliance. 

As reported in last year's Annual Report, in October 2016 we received product registration for TGT-101 ("Bug-Oil") from the California Department of Pesticide Regulation. Following this important progress, the Board has decided to look at options for realising value for the historic investments made in this product. We have appointed advisers who have the mandate to maximise the value of the asset to the Company including considering a sale of or licence to the associated underlying intellectual property. The process is at an early stage and is not expected to complete this financial year.

Financial Performance

Throughout this review, references to adjusted results means the results before, where applicable, share-based payments and restructuring costs.

Revenue in the period was £4.9m (2016: £4.2m), with the increase principally due to the relative weakness of Sterling compared with the US Dollar in which most sales are invoiced. The revenue was achieved despite lower shipments of the Veritas® product to Brazil compared with the first half last year, as in this 2016/17 growing season our customer BCS is following a through-season delivery schedule rather than receiving the whole season's order in our Q1 and Q2 as in previous years. This means that unlike last year, we currently still have material shipments to make in the next few weeks for the second Brazilian soybean crop and the follow-on dry-bean season. These shipments will benefit revenue by around £2m in the second half of the financial year.

Shipments of Veritas® to Brazil made up around 75% of revenue in the period compared to around 90% in the first half of last year. Additional revenue in the period was achieved from initial sales of Veritas® and Fortalis® to Argentina, Paraguay and Bolivia, and also from increased second season sales of Banzai™ to West Africa. Revenue from sales of product to Northern Hemisphere markets was minimal in the period, reflecting the seasonal timing.

The weakness in Sterling also helped gross profit increase to £3.9m (2016: £3.3m) with gross margin remaining strong at 79% (2016: 79%). 

Continued investment in commercial resources and R&D projects that largely took place progressively across last year meant that despite the increased gross profit in the period, the business reported an adjusted operating loss of £0.3m (2016: adjusted operating profit £0.6m). After taking account of share-based payment charges of £0.5m (2016: £0.4m) and restructuring costs associated with the refocusing of the European business of £0.2m (2016: nil), the operating loss was £1.0m (2016: operating profit £0.2m).

Adjusted operating expenses increased to £4.2m (2016: £2.8m) due mainly to the planned increases in headcount that took place over the last year. Excluding seasonal temporary staff, the permanent full-time equivalent headcount at 31 January 2017 is 64 compared to 47 at 31 January 2016 and 60 at 31 July 2016. The increase in headcount over the last six months has primarily been to support commercial sales and marketing activities in Argentina. In addition in Brazil we added temporary seasonal staff to the Veritas® field team and funded an enhanced advertising and promotion campaign that in total will cost us around £0.5m over the full year.

In total the Group spent £1.8m on research and development activities (2016: £1.1m). Of this cash investment, £1.0m (2016: £0.9m) was expensed through the Income Statement with £0.8m capitalised in intangible assets (2016: £0.2m). 

The continued investment in R&D has generated a research and development tax credit of £0.3m, in line with the same period last year. 

The cash balance at 31 January was £6.0m (31 July 2016: £5.6m; 31 January 2016: £8.6m). The increase since the year end reflects the unwinding of working capital that existed at that period end from the initial shipments for the 2016/17 growing season in Brazil that had been made just prior to the last financial year end, plus receipt of UK tax credits of £1.0m relating to our 2015 and 2016 financial years.

Outlook

In Q3 we will make the remainder of the Veritas® shipments to Brazil for the 2016/17 growing season. In the past three financial years we have also shipped a portion of the Veritas® volumes required for the following growing season in Brazil in the final quarter of the financial year. The size and timing of shipments this year will be dependent on the inventory in BCS's distribution channel which, in turn, will be determined by the grower usage of the product in the 2016/17 soybean and dry bean growing season. We will have visibility of that outcome and BCS's plans by early June.

Our expectations for second half revenue also include the US launch of Fortalis®, additional volumes of Banzai™ and the remainder of our European business. As planned, expenses will continue to increase, with further investment in the commercial programmes to support these markets, as well as a full resourcing of our R&D work streams.

During the first half of the year we achieved progress on each of the strategic initiatives that the Company is pursuing and we enter the second half of the year with much to do and an encouraging set of prospects to deliver. 

Dr David Jones

Chairman

3 March 2017

Plant Impact plc

Unaudited Group Statement of Comprehensive Income

For the six months ended 31 January 2017

All results are from continuing activities.

The notes are an integral part of these unaudited consolidated six month results.

Plant Impact plcUnaudited Group Statement of Financial PositionAt 31 January 2017

Plant Impact plcUnaudited Group Statement of Changes in EquityFor the six months ended 31 January 2017

Plant Impact plcUnaudited Consolidated Statement of Cash FlowsFor the six months ended 31 January 2017

Notes to the Unaudited Consolidated Interim Financial Statements

 1. Nature of operations and general information

The principal activity of the Group is to develop and market crop enhancement products to deliver yield and quality benefits for growers.

Plant Impact plc is the Group's ultimate parent company. It is incorporated and domiciled in the United Kingdom. The address of Plant Impact plc's registered office, which is also its principal place of business, is Rothamsted, West Common, Harpenden, Hertfordshire, AL5 2JQ, United Kingdom. Plant Impact plc's shares are quoted on AIM, a market operated by London Stock Exchange plc.

Plant Impact plc's unaudited consolidated six month results are presented in Pounds Sterling (£), which is also the functional currency of the parent company. All values are rounded to the nearest thousand ('000) except where otherwise indicated. 

These unaudited consolidated half year results have been approved for issue by the Board of Directors on 3 March 2017.

The financial information set out in this unaudited consolidated six month results statement does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The Group's statutory financial statements for the year ended 31 July 2016, prepared under IFRS as adopted in the EU, have been filed with the Registrar of Companies. The auditor's report on those financial statements was unqualified and did not contain any statement under Section 498(2) and (3) of the Companies Act 2006.

2. Basis of preparation

These unaudited consolidated results are for the six months ended 31 January 2017. They have not been prepared in accordance with IAS 34, Interim Financial Reporting. They do not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 July 2016.

The Group's existing financial resources together with contractual arrangements with certain economic partners in different geographical areas provide a sound platform for launching the Group's products and generating future sales and revenues. As a consequence, the Directors believe that the Group is well placed to manage its business risks successfully despite the current uncertain economic outlook.

The Group's forecasts and projections, which have been prepared to 31 July 2018, including sensitivity analysis, and taking account of reasonably possible changes in performance show that the Group should be able to operate within the level of its current cash resources.

After making enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the unaudited consolidated interim financial statements.

These unaudited consolidated interim financial statements have been prepared in accordance with the accounting policies used in the preparation of the audited annual financial statements for the year ended 31 July 2016, and those expected to be adopted in the next annual financial statements for the year to 31 July 2017.

The accounting policies have been applied consistently throughout the Group for the purposes of preparation of these unaudited consolidated interim financial statements.

3. Segmental analysis - revenue 

The Group monitors its business based on geography. Segmental analysis of revenue for the six months ended 31 January 2017 was as follows:

4. (Loss)/profit per ordinary share

The calculations of (loss)/profit per ordinary share are based on the following (losses)/profits and weighted average number of shares in issue during the period: