26th Sep 2006 07:02
Plant Health Care PLC26 September 2006 Embargoed until 7.00 26 September 2006 Plant Health Care plc ("PHC" or "the Company") Interim Results for the six months ended 30 June 2006 Plant Health Care plc, a leading provider of natural products for plants andsoil, announces its interim results for the six months ended 30 June 2006. Plant Health Care was established in 1995 in Pittsburgh (Pennsylvania) in theUnited States. Its products are aimed at the landscape, agriculture and landreclamation industries. The Directors believe the products are bothenvironmentally beneficial and on the whole, more cost effective than syntheticchemical alternatives. Through the commercialisation of these products, PlantHealth Care is capitalising on current long-term trends toward natural systemsand biological products for plant care and soil and water management. Highlights •Encouraging results from extended Myconate trials - now expect significant commercial sales in 2007 - ahead of commercialisation milestones •Significant progress in agriculture - Pre-Tect trials in US - OPF registration in US - strong sales in Mexico - opening of US agriculture division •Record first half sales for the fifth year in a row - against a general reduction in sales across the industry •Turnover increased by 4% to $5.0 million (2005: $4.8 million) •Gross profit increased 8% to $2.3 million (2005: $2.2 million) - gross profit margin 46.6% (2005: 45.2%) •EBIT loss before tax $2.1 million (2005: loss $1.8 million) •Successful fundraising of $12.1 million (£6.5 million) to support commercialisation of Myconate and associated working capital requirements Plant Health Care plc Tavistock CommunicationsJohn Brady, CEO Jeremy Carey Christian Taylor-Wilkinson26-28 September Tel: 020 7920 3150 Tel: 020 7920 3150Thereafter: 001 603 525 3702 Email:[email protected] Plant Health Care plcInterim Results for the six months ended 30 June 2006 Another Record Half-------------------I am pleased to announce results for the six months to 30 June 2006. PlantHealth Care continues to make great strides towards its goal of becoming thepre-eminent supplier of natural products to the agricultural and landscapingcommunities. Sales of $5.0 million are up 4% compared to the same period lastyear, the fifth year in a row that it has posted record first half sales, withgross profit up by 8%. This result was achieved despite adverse weatherconditions, which has affected the agricultural supply industry as a whole. In May the Company completed a secondary placing raising $11.1 million (£6.0million), net of expenses, for the commercialisation of Myconate, PHC'sproprietary product line for enhancing yields of agricultural crops. The placingwas met with great enthusiasm and enabled us to widen our shareholder base. PHC has made significant progress in a number of areas in the first half of theyear; the continuing strong results of our Myconate tests and ongoingdiscussions regarding Myconate's commercialisation with major chemical and seedcompanies; the successful trials in the US of our Pre-Tect shelf life extensionproduct; and strong sales increases in our Mexican and Reclamation units. Financial Results-----------------Turnover for the six months ended 30 June 2006 increased to $5.0 million (2005:$4.8 million) and gross margins increased to 46.6% (2005: 45.2%). The netoperating loss for the period was $2.1 million (2005: loss of $1.8 million).This increased loss was largely as a result of the rise in administrativeexpenses to $4.5 million (2005: $4.0 million) reflecting the substantialinvestments in our sales and marketing capabilities to generate future growth inour current markets, the development of Myconate markets and relateddistribution outlets. Operating cash outflow for the period was $2.2 million, but with the benefit ofthe $11.1 million net proceeds from the placing in May, cash balances at 30 June2006 were $10.6 million, a strong position from which to develop further thebusiness. Operational review------------------Sales in our US based landscape business were behind expectations primarily dueto one of the coldest and wettest springs on record in the eastern part of theUS, followed by a prolonged hot dry period. The division also experiencedtechnical problems implementing the JDL Tree Warranty programme at the vendorlevel which were largely out of our control and which have now been rectified. In May, the Company announced an agreement with Horizon, one of North America'sleading provider of services to the "green" market. The deal expands PHC'sdistribution network into the US landscape, golf, irrigation and watermanagement markets and adds a further 43 outlets in nine US states. Mexico enjoyed an excellent first half growing season, which resulted in a 38%sales increase over the first half of 2005. This growth was fuelled by theaddition of new customers and increased uptake of products by existingdistributors. In Europe, sales volumes were slightly below the same period in2005, but this was partially offset by increased prices across the productrange. PHC's Reclamation unit had a strong first half-year reporting a 37% salesincrease over the same period of 2005. New contracts and the addition of a newre-vegetation service drove sales in this operation. Myconate--------We have expanded our Myconate trials to include larger production-level trialsto be carried out by independent parties throughout the world, adding furthervarieties of agricultural crops to the trials. Early progress reports show thatMyconate, entirely in line with the Company's expectations, is producingsignificantly enhanced yields under these varied circumstances. The Company identified earlier this year as a preferred route to thecommercialisation of Myconate, a licensing agreement with a major chemical orseed company in 2008, preceded by an extensive testing programme in 2006 and2007. So far, in line with the Company's milestones, as set out earlier in theyear, it has concluded product evaluation agreements with five majoragribusiness conglomerates, with the view to developing commercialisationavenues with which to fully realise the economic potential of Myconate. This hasnow led to advanced negotiations with some major seed coating companies, wellahead of the timeline that we were expecting earlier in the year. The Board nowhopes to announce its first licensing and distribution agreement in 2007, a yearearlier than previously anticipated. The outlook for commercial sales of Myconate in 2007 is also strong. Both majordistribution companies in Europe and commercial farming operations in NorthAmerica have indicated strong interest to use Myconate for the 2007 plantingseason. Pre-Tect--------Following the success of Pre-Tect in Europe we have now concluded final,independent testing of our Pre-Tect product in the US lettuce market with veryimpressive results. Field tests on Red and Romaine lettuce resulted in a shelflife increase of six days over non-treated lettuce. On the basis of these trialswe have implemented a testing programme with the major lettuce farmers in the USas part of our next step to exploit this market. We are also engaged in businessdiscussions with large US grocery chains, to endorse this product treatment tospeed its successful adoption. We expect to see meaningful sales of this productin the US in 2007. New Products and Markets------------------------PHC has introduced several new products and entered new markets that representexcellent sales growth potential. Organic Plant Food (OPF) received officialcertification in July, making it available for sale in the US. This product is acorner stone of our agricultural sales effort in Europe and we will follow thesame sales approach in the US. We believe the market potential for OPF isexcellent due to the organic farming efforts in North America being concentratedin just a few regions, such as California, which will allow us to achieve asignificant penetration impact with a limited sales force. We have signed an exclusive distribution agreement in Northern Europe for a newall natural soil sterilent as a replacement for the synthetic methyl bromide,which will be removed from usage following government legislation pending asuitable substitute. This product is now well received by growers and willincrease our product in-line particularly in the field crop sector. We have alsoseen dramatic effects in the sports turf markets and vegetable markets. TheCompany has applied for Organic registration on the product which will open anew market for PHC in Europe and potentially the US. In our continuing efforts to penetrate the organic markets, PHC has developed anorganic mycorrhizal fungi product for sale into the vegetable markets. Thisproduct received official organic certification from the Organic MaterialsReview Institute (OMRI) in May. We have already made sales of this product intothe Mexican vegetable markets and are now marketing it into the California andFlorida organic vegetable markets. Finally, in May the Company established its first distributor in the People'sRepublic of China. Initially, PHC will target China's 'green industry' with theproducts available within 11 Chinese provinces, covering the area betweenBeijing and Shanghai. The venture is a 5 year renewable agreement and is part ofthe Chinese government's US$61 billion Environmental and BeautificationProgramme which it has recently announced. Outlook-------Whilst the agricultural supply industry as a whole experienced reduced salesover the same period last year, largely as a consequence of adverse weatherconditions, PHC achieved a modest increase in same period sales. It has beenPHC's long term strategy to manage its operational risk, made necessary fromworking within a weather related business, by diversifying geographically andacross a broad range of products. With weather improving in mid-summer aroundthe globe, a strong second-half growing season in Spain and Mexico, as well asthe increased traction of our new products we are beginning to see a pick-up insales, and, with margins being maintained, we are confident of a satisfactoryresult for the full year. It is with great anticipation we work towards realising the potential ofMyconate. Demand for agricultural crops is being driven by the growth in sizeand affluence of the global population, as well as from a dramatic rise in theuse of renewable fuels for which corn and soy are the feedstock materials. As aresult, carryover stocks of such commodities remain low, providing support tocrop prices and overall farm fundamentals, from which Myconate can benefit.This, combined with the advanced stage of our discussions with testing partnersfor a commercialisation strategy, gives us great confidence in the future ofthis product as a cornerstone of PHC's growth through 2007 and beyond. ALBERT FISCHERCHAIRMAN25 September 2006 Plant Health Care plc Unaudited Consolidated Profit and Loss Account For the Six Months Ended 30 June 2006 Six months Six months Year to 30 June to 30 June ended 2006 2005 31 December 2005 as restated as restated Note $,000 $,000 $,000 Turnover 4,975 4,763 10,223 Cost of sales (2,656) (2,612) (5,219) -------------------------------------- Gross profit 2,319 2,151 5,004 Administrative expenses (4,468) (3,971) (7,874) -------------------------------------- Operating loss 6 (2,149) (1,820) (2,870) Other interest receivable andsimilar income 78 34 64Interest payable and similar charges (254) (46) (96) -------------------------------------- Loss on ordinary activitiesbefore taxation (2,325) (1,832) (2,902) Taxation - - (121) -------------------------------------- Loss on ordinary activitiesafter taxation (2,325) (1,832) (3,023) Minority interest (4) (3) (27) -------------------------------------- Loss for the period (2,329) (1,835) (3,050) ======================================Basic and diluted loss per share 3 (7.0)c (6.1)c (10.2)c ====================================== All amounts relate to continuing activities. Plant Health Care plc Unaudited Consolidated Statement of Total Recognised Gains and Losses For the Six Months Ended 30 June 2006 Six months Six months Year to 30 June to 30 June ended 2006 2005 31 December 2005 as restated as restated Note $,000 $,000 $,000 Loss for the period (2,329) (1,835) (3,050) Exchange translationdifferences on consolidation 85 (20) (21) -------------------------------------- Total recognised gains andlosses for the period (2,244) (1,855) (3,071) ====================================== Plant Health Care plc Unaudited Consolidated Balance Sheet At 30 June 2006 Note 30 June 30 June 31 December 2006 2005 2005 $,000 $,000 $,000 as restated as restated Fixed assetsIntangible assets 2,741 2,809 2,769Tangible assets 812 727 790 -------------------------------------- 3,553 3,536 3,559 -------------------------------------- Current assets Stocks 2,476 1,211 1,582 Debtors 2,613 2,805 2,989 Short term investments 258 - 252 Cash at bank and in hand 10,563 2,478 894 -------------------------------------- 15,910 6,494 5,717 Creditors: amounts falling due within one year (4,662) (2,770) (3,332) -------------------------------------- Net current assets 11,248 3,724 2,385 -------------------------------------- Total assets less current liabilities 14,801 7,260 5,944 Creditors: amounts falling due after one year (506) (692) (523) -------------------------------------- Net assets 14,295 6,568 5,421 ====================================== Capital and reservesCalled up share capital 730 541 542Share premium 21,761 10,818 10,847Merger reserve 11,181 11,195 11,195Share option reserve 2 76 36 51Profit and loss account (19,647) (16,188) (17,404) --------------------------------------Shareholders' funds 14,101 6,402 5,231 Minority interests (equity) 194 166 190 -------------------------------------- 14,295 6,568 5,421 ====================================== Plant Health Care plc Unaudited Consolidated Cash Flow Statement For the Six Months Ended 30 June 2006 Six months Six months Year ended to 30 June to 30 June 31 December 2006 2005 2005 Note $,000 $,000 $,000 Net cash outflow from operating activities 7 (2,229) (2,052) (2,833) Returns on investments andservicing of finance Interest paid (252) (16) (85) Interest received 78 34 64 --------------------------------------- Net cash outflow from returns oninvestments and servicing offinance (174) 18 (21) --------------------------------------- Taxation (84) - (39) --------------------------------------- Capital expenditure and financialinvestment Purchase of tangible fixed assets (149) (344) (549) Proceeds on sale of fixed assets 6 - 21 Purchase of intangible and other assets - (24) - Purchase of short term investments (6) - (252) --------------------------------------- Net cash outflow from capital expenditure and financial investment (149) (368) (780) --------------------------------------- Cash outflow before financing (2,636) (2,402) (3,673) --------------------------------------- Financing Issuing of ordinary share capital 11,049 - - Exercise of warrants 1 - - Issue of new borrowings 1,301 91 98 Repayment of borrowings (26) (13) (148) Repurchase of minority interest's shares by subsidiary (20) (10) (309) --------------------------------------- 12,305 68 (359) ---------------------------------------Increase/ (Decrease) in cash 9,669 (2,334) (4,032) ======================================= Plant Health Care Notes to Unaudited Financial Information 30 June 2006 1 Basis of Preparation The financial information set out in this report does not constitute fullaccounts for the purposes of Section 240 of the Companies Act 1985. The interimaccounts for the six months ended 30 June 2006 and 30 June 2005 are unaudited.The comparative figures for the financial year ended 31 December 2005 are notthe Company's statutory accounts for the financial year but are abridged fromthose accounts which have been reported on by the Company's auditors, whosereport was unqualified. The interim accounts have been prepared on the basis ofthe accounting policies set out in the annual financial statements of the Groupfor the year ended 31 December 2005, except as discussed in Note 2 below. Theinterim accounts were approved by the Directors on 26 September 2006. The results are reported under UK GAAP and presented in US dollars. Thedirectors believe that it is more appropriate to use US dollars as the currencyfor presentation, given that the majority of the group's operations aredenominated in that currency. 2 Share-based Payment (a) Adoption of Financial Reporting Standard 20: 'Share-based Payment' Effective 1 January 2006 the Company adopted FRS 20 'Share-based Payment'. FRS20 requires the recognition of equity-settled share-based payments at fair valueat the date of grant, and the amortisation of that value over the expectedperiod to the exercise of the instrument. Prior to the adoption of FRS 20, theCompany did not recognise the financial effect of share-based payments untilsuch payments were settled. In accordance with the provisions of the Standard, the policy has been appliedto grants of share options (which constitute equity-settled share-basedpayments) that were granted after 7 November 2002 and had not yet vested at 1January 2005. For the interim period ended 30 June 2006, the change in accounting policy hasresulted in an increase in the loss for the period of $25,000. At 30 June 2006,the total share option reserve amounted to $76,000. The standard requires that the Company restate comparative information. For thesix months ended 30 June 2005, the increase in the loss for this period is$12,000 and for the year ended 31 December 2005, the increase in the loss forthis year is $27,000. (b) Accounting policy The Company issues share options to certain employees. Such options areclassified as equity-settled share-based payments and as such are measured atfair value (excluding the effect of non-market-based vesting conditions) at thedate of grant. The fair value determined at the date of grant is expensed on astraight-line basis over the vesting period, based on the Company's estimate ofthe shares that will eventually vest and adjusted for the effect ofnon-market-based vesting conditions. Fair value is measured by the binomialoption pricing model. (c) Share options outstanding The Company issues share options under the Plant Health Care plc UnapprovedShare Option Scheme 2004, which includes a 10 year maximum term for optionsgranted and vesting of options in usual circumstances no earlier than the thirdanniversary from the date of grant. At the time of its admission to AIM, theCompany also agreed to honour outstanding options under the Plant Health Care,Inc 2001 Equity Incentive Plan, which provided that the term and the vestingrequirements of the options be set by the Board of Directors. No further optionshave been or will be issued under that Plan. The movement on share options during the six month period ended 30 June 2006 andto the date of this report are as follows: Number of Weighted share average options exercise price Outstanding at 1 January 2006 4,810,996 43p Awarded 181,470 87pLapsed (103,000) 62p -------------- Outstanding at 30 June 2006 4,889,466 44p Exercised (60,000) 37p -------------- Outstanding at 26 September 2006 4,829,466 44p ============== The weighted average share price at the date of exercise for the share optionsexercised was 89p. The options outstanding at 30 June 2006 have a weighted average remaining lifeof 6.7 years and the range of the exercise price is 37p to 123p. (d) Valuation of share options issued Valuation of the share options granted during the period was as follows: 22 June 11 April 2006 2006 Share options granted 50,000 131,470Weighted average fair value 59p 42p Assumptions used in measuring fair value: Weighted average share price 106p 74p Exercise price 123p 74p Expected volatility 57% 57% Option life 10 years 10 years Expected vesting period 4.5 years 4.5 years Expected dividend yield Nil Nil Risk free interest rate 4.77% 4.42% The expected volatility was determined by reference to the Company's historicshare price for the prior two years and historic volatility of two comparativecompanies. The expected vesting period reflects market based performance conditions forthese options. Fair values were calculated using the binomial option pricing model. 3 Basic and Diluted Loss per Share Basic loss per share for the six months ended 30 June 2006 has been calculatedon the basis of the loss for the period of $2,329,000 and the average number ofshares in issue during the period of 33,327,537. The effect of all potential ordinary shares is not dilutive. 4 Financial Instruments On 6 January 2006, the Company entered into a revolving credit agreement thatprovided for $2,000,000 in borrowings with a provision that allowed, based onthe cyclical needs of the business, an increase in borrowing capacity to$2,720,000. The agreement had a maturity date of one year from the date it wasentered into. As of 30 June 2006 $795,000 in borrowings were outstanding under the agreement.Borrowings under the agreement were based on the eligible accounts receivableand inventory of certain of the Group's US subsidiaries. They were secured bysubstantially all of the assets of those subsidiaries and guaranteed by PlantHealth Care, Inc. Interest on the outstanding borrowings for the period wascharged at prime rate, as published in the Wall Street Journal, plus 8 percent. On 7 July 2006, the Company terminated the revolving credit agreement and repaidthe outstanding balance. 5 New Shares Issued in Period On 5 May 2006 the Company raised GBP 6,500,000 (before expenses) by way of aplacing of 10,000,000 new ordinary shares at a price of 65 pence per share.Following completion of the Placing, the issued share capital increased to40,180,222 fully paid ordinary shares. The new ordinary shares represented 24.9% of the issued share capital at the date of admission. The net proceeds of theplacing will be used to develop the market for Myconate and to satisfy thegeneral working capital requirements of the Group. 6 Operating Loss Six months to Six months to Year ended 30 June 30 June 31 December 2006 2005 2005 $,000 $,000 $,000This is arrived at after charging:Depreciation 123 71 190Amortisation 50 25 41Share based payment expense 25 12 27Placement costs 63 - -Provision for plant relocation 100 180 280 7 Reconciliation of Operating Loss to Net Cash Outflow from Operating Activities Six months to Six months to Year ended 30 June 30 June 31 December 2006 2005 2005 $,000 $,000 $,000 Operating loss (2,149) (1,820) (2,870)Adjust for non-cash items: Depreciation 123 71 190 Amortisation of intangibles 50 25 41 Share based payment expense 25 12 27 Gain/(loss) on sale of fixed assets (2) (1) 1 (Increase) in stocks (894) (87) (458)(Increase)/decrease in debtors 394 (612) (830)Increase in creditors 224 360 1,066 ---------------------------------------Net cash outflow from operating activities (2,229) (2,052) (2,833) ======================================= -ends- This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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