19th Sep 2005 07:01
Plant Health Care PLC19 September 2005 Plant Health Care plc Interim Results for the six months ended 30 June 2005 Plant Health Care plc ("PHC" or "the Company"), a leading provider of naturalproducts for plants and soil, announces its interim results for the six monthsended 30 June 2005. The Company listed on the AIM market of the London Stock Exchange in July 2004raising £5.4 million net of expenses. Highlights •Turnover increased by 5% to $4.8 million (2004: $4.5 million) •Gross profit $2.2 million (2004: $1.9 million) - Gross profit margin increased to 45.2% (2004: 42.6%) •Loss before tax $1.8 million (2004: $1.1 million) •Major US distribution deals signed with: - John Deere Landscapes - Symbiot - Ewing Irrigation •Mexico and European businesses grow 47% and 40% respectively •New products launched to enhance offering to customers •Changing legislation increasing market potential for non-chemical products Commenting on the results, CEO John Brady said, "We are pleased with ouroperational performance this year as our strategy to cement long-term allianceswith the top-tier distributors in our key markets begins to bare fruit. Costs inthe period have been higher than expected, due mainly to a necessary investmentin infrastructure to enable us to fulfill the business that we are now winning.We have already seen our margins increase on the back of these investments andwe expect to put these one-time challenges behind us as we enter the second half of 2005. "We are seeing a healthy level of sales growth in the beginning of the secondhalf of the year, which will be helped by our enhanced product offering. We willcontinue to focus on organic growth and cost control, as well as technologyacquisition opportunities that will enlarge our product portfolio and increaseour distribution reach." Plant Health Care plc Tavistock CommunicationsJohn Brady, CEO Jeremy Carey/Christian Taylor-Wilkinson19-22 September Tel: 020 7920 3150 Tel: 020 7920 3150Thereafter: 001 603 525 3702 Email: [email protected] Plant Health Care plc Interim Results for the six months ended 30 June 2005 Chairman's Statement I am pleased to report that PHC continues to make substantial progress towardsits goal of becoming the world's leading provider of natural products to promoteplant growth and health. Major new distribution agreements in the United Statesprovide the platform for significant growth in that major market to match thatnow being seen in our Mexican and European markets. Our brand is increasinglyrecognised and we continue to develop and license new products for future marketpenetration and growth. Financial Results Turnover for the six months ended 30 June 2005 was $4.8 million (2004: $4.5million) and despite a rise in gross margins from 42.6% to 45.2% the net lossfor the period was $1.8 million (2004: loss of $1.1 million). This was largelyas a result of a rise in administrative expenses to $4 million (2004: $2.7million) reflecting the increased costs of being a listed company as well as thesubstantial investments made in our sales and marketing capabilities to generatefuture growth. Net cash outflow for the period was $2.3 million, resulting in cash balances at30 June 2005 of $2.5 million. The Directors believe that, taking into account the expected revenues from the new contracts and proposed lines of credit, the Company has adequate resources to fund its financial needs. The Directors have not declared an interim dividend. New distribution channels Following successful test marketing of an innovative marketing concept in thelandscaping industry, the Company signed a 10 year distribution agreement withJohn Deere Landscapes (JDL) in August. This makes the Company the exclusiveprovider of all biological products to JDL's 300+ wholesale landscapedistribution centres. Additionally JDL and PHC will together offer an exclusive,innovative, industry-wide three-year tree and shrub warranty programme thatincorporates the use of PHC's Tree Saver product. The agreement calls forminimum purchases of $40 million over the life of the agreement in order for JDLto maintain exclusivity. The Company is now also the exclusive provider of natural products to theSymbiot network of landscape contractors and distributors. This allows PHCaccess to the entire Symbiot community which numbers approximately 500contractors and a large number of distributors. In September the Company announced the addition of Ewing Irrigation as adistributor of the Company's turf, landscape and water management productsthrough their network of 150 stores. Ewing Irrigation is one of the largestdistributors to golf courses in the US. This completes another step in theCompany's plan to form strategic alliances with large multi-branch distributors. The above agreements have all commenced in the last two months and provide uswith a great deal of confidence regarding the growth to come in our US business. In Mexico the Company signed up several new distributors in 2004 and these havecontributed to an overall increase in sales for the first half of the year ofover 47% in that territory. In Europe new operations and agents in Spain, Italy and Greece are beginning tocomplement strong sales growth in existing markets in the UK and Holland.Overall our European business is approximately 40% up on sales against thecomparable period in 2004. In October last year, we announced an agreement with the Scotts Company forconsumer product development and commercialisation. Market research conducted byScotts has indicated a positive demand for our products among consumers.However, we continue to experience delays in receiving orders from Scotts. We nolonger anticipate any revenue from this agreement in 2005 and remain uncertainas to the likely level of revenue in 2006. Nevertheless, we are confident thatthe potential loss of revenue in 2005 and 2006 will be more than compensated forby sales achieved under our other new agreements. Brand recognition It is the intention of your Board that the name "Plant Health Care" will becomerecognised on a worldwide basis as representing the world's leading company innatural plant care. First steps have included the standardisation of our productnaming and packaging to promote the "Plant Health Care" name and we will takefurther actions to promote this goal as we grow and develop. Development of new products PHC has introduced several new products into the market in 2005. In Europe wehave launched the Sentry and Pre-Tect lines of products in response to customerdemand for natural solutions in the agricultural markets. Sentry is used for thetreatment of mildew and mould on leaf crops. Pre-Tect is a foliar feed productthat increases the growth of salad crops while also increasing shelf life by twoto five days. Both of these products are expected to provide immediate sales andafter successful commercialisation of these products in Europe they will berolled out in Mexico and the US. The Company has instituted approximately sixty trials in nine countries for itsMyconate product. Every major seed and seed coating company is participating inthe trials. As with any new product, the trialing and testing stage is veryimportant. Initial harvest of the treated crops will commence in late summer toearly autumn and results will begin to become available toward the end of theyear. The Company is very excited about the potential Myconate offers andexpects to begin regional commercialisation in 2006 followed by larger scalerollouts in 2007. The Company is also in discussions with several other biological based companiesabout either forming strategic alliances or the out-right acquisition of theirtechnologies. Operating controls The Company is committed to doing everything it can to meet its internal goalson product gross margins and cost control to ensure that our targeted salesgrowth delivers increased profits for the Company. To that end, we have recentlymade some organisational changes and implemented a new SAP financial system thatallows for more effective operational control, reduces the financial reportingefforts and improves decision-making and organisational effectiveness. Outlook The fundamentals of our industry are stronger than ever. Legislation iscontinually being enacted around the globe to limit or eliminate the use ofsynthetic chemicals. As an example, Mexico has recently passed legislation thatprohibits the use of chemicals on the grow-in of new golf courses. In the UK,approximately 100 synthetic chemicals will not be reissued registration permits.France is also in the process of restricting the use of a large number ofsynthetic chemicals traditionally utilised in the agricultural industry. Thesetypes of actions are taking place around the globe and more rigorously in thehighly industrialised countries. These legislative dynamics combined with PHC'sability to deliver products that are significant improvements over existingofferings position the Company for a dynamic future. The Board is confident in the future of the Company and believes that the newdistribution agreements and product offerings provide a solid base for revenuegrowth. Albert FischerChairman19 September 2005 Plant Health Care plcUnaudited Consolidated Profit and Loss AccountFor the Six Months Ended 30 June 2005 Six months Six months Year ended to to 31 30 June 30 June December 2005 2004 2004 Note $,000 $,000 $,000 Turnover 4,763 4,534 8,611Cost of sales 2,612 2,601 4,952 ----------------------------- Gross profit 2,151 1,933 3,659 Administrative expenses 3,959 2,703 6,284 ------------------------------ Operating loss 4 (1,808) (770) (2,625) Other interest receivable andsimilar income 34 - 44Interest payable and similarcharges (46) (284) (299) ------------------------------ Loss on ordinary activitiesbefore taxation (1,820) (1,054) (2,880) Taxation - - (52) ------------------------------ Loss on ordinary activitiesafter taxation (1,820) (1,054) (2,932) Minority interest (3) 7 (14) ------------------------------ Loss for the period (1,823) (1,047) (2,946) ============================== Basic and diluted loss per share 3 6.01c 8.33c 14.00c ============================== All amounts relate to continuing activities. Plant Health Care plcUnaudited Consolidated Statement of Total Recognised Gains and LossesFor the Six Months Ended 30 June 2005 Six months Six months Year ended to to 31 30 June 30 June December 2005 2004 2004 Note $,000 $,000 $,000 Loss for the period (1,823) (1,047) (2,946)Exchange translationdifferences on consolidation (20) - 43 ------------------------------ Total recognised gains andlosses for the period (1,843) (1,047) (2,903) ============================== Plant Health Care plcUnaudited Consolidated Balance SheetAt 30 June 2005 30 June 30 June 31 December 2005 2004 2 004 $,000 $,000 $,000Fixed assetsIntangible assets 2,809 243 2,810Tangible assets 727 376 453 ------------------------------ 3,536 619 3,263 ------------------------------ Current assetsStocks 1,211 919 1,124Debtors 2,805 1,394 2,192Cash at bank and in hand 2,478 11,229 4,812 ------------------------------ 6,494 13,542 8,128 Creditors falling due within oneyear (2,770) (3,600) (1,771) ------------------------------ Net current assets 3,724 9,942 6,357 ------------------------------ Total assets less currentliabilities 7,260 10,561 9,620 Creditors: amounts falling dueafter one year (692) (125) (615) ------------------------------ Net assets 6,568 10,436 9,005 ============================== Capital and reservesCalled up share capital 541 538 538Share premium 10,818 10,253 10,700Merger reserve 11,195 12,013 11,913Profit and loss account (16,152) (12,551) (14,309) ------------------------------ Shareholders' funds 6,402 10,253 8,842 Minority interests (equity) 166 183 163 ------------------------------ 6,568 10,436 9,005 ============================== Plant Health Care plcUnaudited Consolidated Cash Flow StatementFor the Six Months Ended 30 June 2005 Six months Six months Year ended to to 31 30 June 30 June December 2005 2004 2004 Note $,000 $,000 $,000 Net cash outflow from operating activities 6 (2,052) (180) (3,256) Returns on investments andservicing of finance Interest paid (16) (148) (205)Interest received 34 - 44 ------------------------------ Net cash outflow from returns oninvestments and servicing of finance 18 (148) (161) ------------------------------ Taxation - - (45) ------------------------------ Capital expenditure andfinancial investmentPurchase of tangible fixed assets (344) (38) (217) Purchase of intangible and other assets (24) (36) (37) ------------------------------ Net cash outflow from capitalexpenditure and financial investment (368) (74) (254) ------------------------------ Acquisition of subsidiary Purchase of subsidiary undertaking - - (1,986)Purchase of minority interest shares 5 (10) - - ------------------------------ Net cash outflow fromacquisition of subsidiary (10) - (1,986) Cash outflow before financing (2,412) (402) (5,702) ------------------------------ FinancingIssuing of ordinary share capital - 10,594 10,386 Exercise of warrants - 17 205 Increase of convertible debt - 775 775Issue of new finance leases 91 - 25Redemption of loan stock - (82) (1,000)Repayment of notes payable - - (173)Repayment of finance leases-capital (13) (8) (39) ------------------------------ 78 11,296 10,179 ------------------------------(Decrease)/increase in cash (2,334) 10,894 4,477 ============================== Plant Health Care plcNotes to Unaudited Financial Information30 June 2005 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 2005 and 30 June 2004 are unaudited.The comparative figures for the financial year ended 31 December 2004 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 2004. The interim accounts were approved by theDirectors on 19 September 2005. 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 Basis of Consolidation On 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. Immediately following the share for share exchange the shares of Plant HealthCare plc were admitted to trading on AIM. On the same date 13,461,538 shareswere placed at 52p. The unaudited consolidated accounts for the comparative period to 30 June 2004have been prepared on a proforma basis, as though the share for share exchangeand the placing had occurred on 30 June 2004, rather than 6 July 2004. 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. PlantHealth Care Inc. would then be brought into the group from 30 June 2004 on aproforma basis. However, this would portray the combination as an acquisition ofPlant Health Care Inc. and would, in the opinion of the directors, fail to givea true and fair view of the substance of the business combination. Accordingly,the directors 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 foreach comparative period comprise the results of Plant Health Care Inc. plusthose of Plant Health Care plc from 30 June 2004, the proforma acquisition date. 3 Basic and diluted loss per share Basic loss per share for the six months ended 30 June 2005 has been calculatedon the basis of the loss for the period of $1,823,000 and the average number ofshares in issue during the period of 29,975,380. The basic loss per share disclosed for each comparative period was calculated bythe weighted average number of the ordinary shares of Plant Health Care Inc., inissue during the relevant periods, as adjusted to reflect the exchange ratio of3 for 2 from shares of Plant Health Care Inc., to Plant Health Care plc. The effect of all potential ordinary shares is not dilutive. 4 Operating loss Six months Six months Year ended to to 31 30 June 30 June December 2005 2004 2004 $,000 $,000 $,000 This is arrived at after charging:Depreciation 71 48 150Amortisation 25 54 41Exchange rate effects - 88 -Bad debt expense (release) 32 - (6)IPO costs - 229 247Provision for plant relocation 180 - 189 5 Subsidiary Undertakings On 15 April 2005 Plant Health Care, Inc., a majority-owned subsidiary of theGroup, announced a proposal to effect a reverse stock split of each outstandingshare of its common stock by which each 10,001 shares of its common stock wouldbecome one share. The reverse split was approved and became effective on 25April 2005. For some stockholders of Plant Health Care, Inc., the reverse split resulted inan entitlement to fractional shares. As part of the proposal, the Companyexercised its legal right to compulsory purchase and will make $676,000 in cashpayments for such fractional shares. This has increased the percentage of thatCompany owned by the Group from 92.2% to 96.8%. The payment amount was calculated at the IPO price for Plant Health Care plc(£0.52 per share), adjusted for the 3 for 2 exchange ratio offered by PlantHealth Care plc in the share exchange transactions executed during the periodended 31 December 2004. $10,000 has been paid for the purchase of fractionalshares for the period to 30 June 2005. The remaining balance owed is included increditors falling due within one year. 6 Reconciliation of operating loss to net cash inflow from operating activities Six months Six months Year ended to to 31 30 June 30 June December 2005 2004 2004 $,000 $,000 $,000 Operating loss (1,808) (770) (2,625)Adjust for non-cash items:Depreciation 71 48 150Amortisation of intangibles 25 53 36Gain on sale of fixed assets (1) - - (Increase)/decrease in stocks (87) (129) (257)(Increase)/decrease in debtors (612) 29 (751)Increase/(decrease) in creditors 381 589 191Exchange movements (21) - - ------------------------------ Net cash outflow from continuingactivities (2,052) (180) (3,256) ----------------------------------Net cash outflow from operatingactivities (2,052) (180) (3,256) ================================== This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
PHC.L