TIDMPHC

RNS Number : 3730W

Plant Health Care PLC

23 April 2021

Plant Health Care plc

Results for the year ended 31 December 2020

Plant Health Care(R) (AIM: PHC), a leading provider of novel patent-protected biological products to the global agriculture markets, is pleased to announce its preliminary results for the full year ended 31 December 2020, together with an update on the impact of Covid-19 on the business.

2020 highlights

Commercial

-- Revenue was $6.6 million (2019: $6.4 million), 3% increase on the prior year, 10% in constant currency*.

   --     The Commercial Business was EBITDA and cash positive for the first time. 

-- In-market sales in the US and Brazil doubled in 2020; product adoption points to strong revenue growth ex PHC.

   --     In-market distributor inventory reduced by more than $1 million. 
   --     Market access: 30 million hectares. 
   --     Harpin <ALPHA><BETA> in-market sales doubled in core markets. 

PREtec products

-- Saori(TM) (PHC279), the first product from the PREtec platform, was registered as a seed treatment for soybeans in Brazil.

   --     PHC279 was submitted for registration in the USA. 
   --     $20 million invested in PREtec platform since 2012. 

-- A Joint Development Agreement was signed with Wilbur-Ellis for the development of four PREtec products in specialty crops in the USA.

   --     Low-cost manufacture of PREtec peptides was demonstrated at the pilot scale. 
   --     The first patents on PREtec were granted by the US Patent Office. 
   --     The Group has a rich pipeline from the PREtec platform. 

Group

   --     Cash used in operations reduced to $2.5 million (2019: $4.4 million). 
   --     Adjusted LBITDA ** improved to $3.3 million (2019: $3.8 million). 

-- Cash and cash equivalents including investments at 31 December 2020 were $4.1 million (2019: $2.4 million).

-- The Company successfully raised GBP3.6 million ($4.4 million) through the issuance of new ordinary shares in March 2020 and a further GBP6.6 million ($9.1 million) in March 2021.

   *     Constant currency is defined below. 

** Adjusted LBITDA: Loss before Interest, tax, depreciation, amortisation, share-based payments and intercompany foreign exchange.

Richard Webb, Chairman comments:

I am proud to report that Plant Health Care rose to the challenge in this most challenging of years. Our staff adapted swiftly and creatively to find effective ways to work around the global restrictions caused by Covid-19. Despite all the disruption, we delivered year on year revenue growth in 2020. Operating cost savings were also delivered, and a further improvement in working capital over 2020.

The outcome was that our commercial operations were EBITDA and cash positive for the first time. In a year when revenues grew and our development programme accelerated, PHC still reduced cash burn by more than expected. We ended the year with over $4 million of cash equivalents and investments in hand. This is a great credit not only to the Executive leadership, but also to our loyal and hard-working staff in five countries.

Covid-19 brought about many work and personal life challenges. We took early and decisive management action during the onset of Covid-19. The Group decided early on to look after its employees and customers to minimize disruption to the business and ensure that the long-term goals of the Group are unaffected. As part of several governmental assistance programs, the Group received $0.3 million from the Paycheck Protection Program in the USA and $0.1 million in Spain. The Group experienced minimal disruption from Covid-19 globally, where domestic demand for fruits and vegetables and the Peso devaluation held back sales growth.

Agricultural input companies faced mixed fortunes in 2020, but world opinion is swinging strongly in support of novel and sustainable solutions to helping farmers to preserve their soils, increase crop yields and quality, and reduce carbon and residue footprints. PHC is a pioneer in this sector, and after investing $20 million in new technology over the past eight years, we now have a broad portfolio of benign biologicals close to launch.

In agriculture, long dominated by harsh chemical fertilisers and pesticides, our patented PREtec is a disruptive technology. It acts, not directly on pests, diseases or soils, but on the plants themselves, to boost their defences and improve yield, vigour and harvest quality. We call our products "vaccines for plants". Tiny protein fragments mimic natural signals in the environment, and stimulate the plants to defend themselves, to build stronger, and to lay down more seeds and biomass. PREtec rapidly biodegrades, but its beneficial effects persist. The resulting deeper roots sequester more carbon to the soil, the higher yields require no additional fertiliser, and in sugar cane the surge converts to over 20% more biofuel produced per hectare.

Our success in getting registrations in Brazil ahead of expectation shows that international regulatory authorities recognise the benefits and benign profile of our new products. PREtec registrations are advancing in Brazil and North America - it is our ambition to address Europe next, as the largest biologicals market in the world.

In March 2020 we completed a $4.4 million fundraise at 8p per share in the teeth of an emerging international crisis and stock market downturn. Post year end, in March 2021 we completed a $9.1 million (net of costs) fundraise at 14p per share, to finance accelerated PREtec product launches and address opportunities in Europe.

During 2020, Board meetings and the AGM moved to a remote format, which is not ideal but works well. AMBA Secretaries Limited took over the role of PHC Company Secretary in July 2020, and the Board is benefiting from her deep experience.

For further information, please contact:

Plant Health Care plc

   Richard Webb, Non-executive Chairman    Tel: +1 919 926 1600 
   Arden Partners plc (Nomad and Broker)    Tel: +44 (0) 20 7614 5900 

John Llewellyn-Lloyd / Benjamin Cryer / Nick Wright (Corporate Finance)

James Reed-Daunter (Equity sales)

   Cenkos Securities plc - Joint Broker      Tel: +44 (0) 20 7391 8900 

Neil McDonald / Peter Lynch

Company website: www.planthealthcare.com

Chief Executive Officer's statement

Plant Health Care had a year of substantial progress, in both the Commercial Business and in the development of the very exciting PREtec New Technology. Global agriculture needs sustainable products more than ever; Plant Health Care intends to contribute to this effort with outstandingly cost-effective products. This progress builds on the clear strategic direction established in recent years, with momentum maintained in spite of the disruption of Covid-19 to so many aspects of life.

Fundraise

We were delighted in March 2021 to receive the support of shareholders for a fundraise. We raised $9.1 million (net of costs) to finance accelerated PREtec product launches and address growth opportunities in Europe.

Commercial Business - in-market sales accelerating

In the Commercial Business, in-market sales of Harpin <ALPHA><BETA> in our three core growth markets in the USA and Brazil doubled. We now have close relationships with the major distributors who are our partners in these markets and work with them to drive customer adoption of the product. Improved visibility of in-market sales led us to reduce in-market inventory of Harpin <ALPHA><BETA> by more than $1 million. As a result, reported sales of Harpin <ALPHA><BETA> ($3.9 million) substantially under-state progress in developing grower demand for this outstanding product. Revenue growth of 10% in constant currency (3% in US$) to $6.6 million would have been significantly higher.

Harpin <ALPHA><BETA> sales in the Brazilian sugar cane market in 2020 was three times that of 2019, driven by consistent yield increases well in excess of 20% and a Return on Investment (ROI) for growers of more than 14x. As we track monthly sales, we have seen product adoption accelerate. We increased our investment in field promotion in sugar cane in the second half of 2020, which should help to bring the benefits of Harpin <ALPHA><BETA> to new users over the coming years.

In the USA, Harpin <ALPHA><BETA> performed very well as a seed treatment in corn in 2020, consistently delivering stronger early plant growth. With in-market sales 1.8 times those in 2019, we are confident of continued growth in the coming years.

Also in the USA, we are delighted by the progress with our new partner Wilbur-Ellis in specialty crops. Wilbur-Ellis is not only a very large distributor with nationwide reach; they are also focused on bringing the benefits of biological products to growers, through their highly skilled agronomists in the field. This capability is delivering increased sales in crops where Harpin <ALPHA><BETA> was already established. With the launch of Harpin <ALPHA><BETA> into almonds and grapes in California, we anticipate further growth to come.

In Europe, sales to new markets compensated for the impact of Covid-19; sales increased by 24% (22% in constant currency). However, reduced demand for domestic fruits and vegetables in the pandemic adversely affected sales in Mexico; in particular, we were unable to raise prices to compensate for the devaluation of the Mexican peso. Sales in Mexico nonetheless came close to target in local currency.

PREtec New Technology - progress towards first product launches

After eight years and an investment in excess of $20 million, we are enormously excited by the prospect of the first product launch from the PREtec platform. Saori(TM), the new name for PHC279 in Brazil, will be introduced to Brazilian soybean growers in the second half of 2021. The current pipeline of PREtec products is targeting markets with a current value of more than $5 billion; we are set on a highly ambitious plan. With outstanding grower benefits and an excellent sustainability profile, we are confident of a bright future for PREtec products.

The Brazilian authorities registered Saori in an astonishingly short 13 months from the date of our submission. As we report later, the 'early read' from this season's trials with Saori demonstrate again the substantial benefits of the product for growers. Our focus in 2021 will be on getting Saori trialed by as many 'early adopters' as possible, with the limited product volumes available this year; this will provide a good base for accelerated product adoption in 2022 and beyond.

In the USA, we were delighted to conclude a Joint Development Agreement with Wilbur-Ellis for the development and commercialisation of four PREtec peptides in specialty crops. The regulatory submission of PHC279 was made to the Environmental Protection Agency (EPA) of the USA in late 2020; we expect registration to be granted in the second half of 2022, with a succession of product launches following.

The PREtec product pipeline is building well, with substantial progress in bringing forward the next products. PHC949 is showing exceptional promise for control of nematodes; we expect to make a submission for this product to the EPA during 2021, with first sales in 2023. Hard on its heels comes PHC404, a powerful biostimulant,and other products will follow.

Substantial progress has been made towards establishing low-cost manufacture of PREtec peptides at a commercial scale. While the launch of Saori is being met from pilot scale manufacture, we anticipate concluding long term toll manufacturing arrangements during the course of 2021.

Impact of Covid-19

Covid-19 impacted growers of fruits and vegetables globally, as supply chains rushed to adapt to the closing of food service industries such as restaurants and canteens. In the first months of the pandemic, this caused significant disruption to companies supplying inputs for these crops, including Plant Health Care. However, with the exception of Mexico, growth in demand for Harpin <ALPHA><BETA> was such that the impact on the Company's revenue was limited. The Company's ability to promote the use of our products through field days, technical visits and promotional events was significantly constrained; while remote contacts were used extensively, we cannot rule out some impact on future growth.

The ravages of Covid-19 did not leave Plant Health Care's team untouched. Like everyone else around the world, PHC employees faced substantial additional challenges, alongside ensuring the safety of family, customers and colleagues. This required substantial change to work patterns, especially making it hard for our field promotion teams to engage with customers. While I am pleased to report that the handful of PHC employees who contracted Covid-19 have all made a full recovery, we continue to monitor the development of the virus closely; new variants and variable lockdown regimes will present challenges throughout 2021 and, most likely, beyond.

*Constant currency

We evaluate our results of operations on both an as reported and a constant currency basis. The constant currency presentation, which is a non-IFRS measure, excludes the impact of fluctuations in foreign currency exchange rates. We believe providing constant currency information provides valuable supplemental information regarding our results of operations, consistent with how we evaluate our performance. We calculate constant currency percentages by converting our prior-period local currency financial results using the current period exchange rates and comparing these adjusted amounts to our current period reported results.

Summary and outlook

Plant Health Care is well positioned for growth in 2021. In our core markets, Harpin <ALPHA><BETA> is gaining traction together with very strong distributor partners. The prices of agricultural commodities have bounced back to the highest level for many years; growers will be investing more in their crops and may be willing to try new, yield-enhancing products.

The PREtec product pipeline looks stronger every time we look at it. Our first product launch, Saori(TM) in Brazil, is a pivotal moment for the Group. With regulatory submissions in the USA and in South America, the schedule of product launches is taking shape, with profitable sales building from there. The recent fund-raise will allow us to invest, to accelerate this growth, not only in the Americas but also to enter Europe, the largest market in the world for sustainable agriculture.

Supporting this growth is an exciting challenge for the Plant Health Care team. As we grow, the team is increasing in size, but we remain a small team of high-performing professionals, around the world. The global team is increasingly sharing ideas for product development and growth, learning from each other. What works for citrus and fruit in Spain, often works also in the USA; exceptional results on golf courses in the UK offers learnings for the much larger market in the USA; seed treatment in Brazil and the USA can teach much to Europe. I am highly privileged to lead this outstanding team.

I would like to thank the entire Plant Health Care team for all their hard work during the year. As CEO, I am proud of the Group's impressive team of highly motivated professionals, in whom I have the greatest confidence.

Commercial Business

Overall sales in 2020 were $6.6 million, an increase of 3% (10% in constant currency *) compared with 2019 ($6.4 million). Sales by region are listed in the table below:

 
                 2020   2019      Growth   CC Growth 
                $'000  $'000  Percentage  Percentage 
--------------  -----  -----  ----------  ---------- 
North America   1,657  1,715         -3%         -3% 
South America     527    416         27%         64% 
EMEAA           1,213    975         24%         22% 
Mexico          3,214  3,330         -3%          7% 
--------------  -----  -----  ----------  ---------- 
 

Sales of core Harpin <ALPHA><BETA> products increased by 7% (13% in constant currency). Harpin <ALPHA><BETA> represented 56% of sales in 2020 (2019: 59%).

Although Sales in North America were flat year-over-year because of a one-time sale in 2019, in-market sales of our two distributors in corn and specialty crops grew substantially. In corn, in-market sales of Harpin <ALPHA><BETA> reached 650,000 acres, some 1.8 times those in 2019; this resulted in substantial reduction in the inventory held by our distributor. Moreover, the product is delivering impressive results; data from independent Seedsman Association (IPSA), an independent agency, showed yield increases of up to 5%. This creates a strong base for future sales growth. In specialty crops (fruits and vegetables), sales to Wilbur-Ellis doubled. We also achieved a registration for Harpin <ALPHA><BETA> in California, for use on the important almond and citrus crops; Wilbur-Ellis will launch Employ into those crops in 2021. Sales ex Plant Health Care in 2020 were $1.7 million (2019: $1.7 million); we estimate that distributor inventory in North America decreased by approximately $400k.

In-market sales to sugar cane in Brazil grew 3 times in 2020 versus 2019 levels due to continued adoption of our proprietary product H2Copla in the sugar cane market. The H2Copla product is gaining traction rapidly, due to consistent yield increases of more than 23%. During 2020, we reviewed with our partner, Coplacana, the plans for promoting H2Copla in the field, following the first 18 months of sales since launch in 2018. We have agreed increased resources dedicated to the product, which should drive further sales increases in the future. Sales ex-PHC in Brazil increased 27% in 2020 (64% in constant currency) to $0.5 million (2019: $0.4 million).

Sales in EMEAA increased to $1.2 million due to further growth into the citrus market and expansion into the Chile market. Sales in Spain increased by 33% to $0.9 million (2019: $0.7 million). In South Africa, sales continued to be hit by drought and the Group decided not to make any sales in order to further reduce in-market inventory.

Sales in Mexico decreased 3% to $3.2 million (increased 7% in constant currency). Sales of Harpin <ALPHA><BETA> decreased by 9% (increased by 1% constant currency). The decrease in sales can be attributed to the devaluation of the Peso and decreased domestic demand of fruits and vegetables.

New Technology

PREtec - New Technology

After an investment of more than $20 million since 2012, Plant Health Care's PREtec (Plant Response Elicitor Technology) platform has now generated a strong pipeline of blockbuster products; the first product from this pipeline, Saori, was registered in Brazil in January 2021. The Group is currently focusing on three products targeting very large market opportunities with a value of more than $5 billion. Further products are under evaluation.

What is PREtec?

PREtec is a novel, environmentally friendly approach to growing crops more sustainably. PREtec peptides can be thought of as 'vaccines for plants' - they stimulate plants' natural defence systems and result in improved crop yield and quality. Derived from naturally occurring proteins, PREtec peptides present a broad opportunity to develop novel crop protection and yield-enhancing products. Plant Health Care has filed more than 40 patents on PREtec, the first three of which have now been granted by the US Patent Office.

Growth opportunities

In November, the Company announced a Joint Development Agreement with Wilbur-Ellis for the commercialization of four PREtec products in US specialty crops (fruits and vegetables). This collaboration brings together the development and marketing strengths, as well as decades of agriculture knowledge of Wilbur-Ellis, especially in biological products, with Plant Health Care's industry-leading expertise on PREtec peptides. As one of the largest US distributors of crop protection products and with its focus on innovative products for specialty crops markets, Wilbur-Ellis is an ideal partner to launch PREtec into the US specialty crops market. Multiple PREtec products are being evaluated, initially focusing on improving disease and nematode control, and plant stress tolerance. The parties are committed to rapidly moving new products through the development process in order to make this novel technology available to growers as soon as possible.

In Brazil, regulatory authorities approved PHC279 (subsequently branded Saori(TM)) for sale in soybeans. Saori will be used as a seed treatment; trials over the last three years have shown excellent early vigour and disease control, resulting in significantly increased crop yield. There is an extensive field-testing program underway in the 2020/21 season, which has confirmed these outstanding grower benefits. Plant Health care is in discussion with several leading crop protection companies regarding the distribution of Saori. Many of these companies have planted their own soybean trials to independently confirm the performance of Saori.

The Group is planning the commercial launch of Saori during the second half of 2021. Initial sales will specifically focus on early adopters of novel technologies within the sustainable agricultural markets. There are 38 million Hectares of soy planted in Brazil, on which growers spend some $2.5 billion on controlling disease. Significant penetration of this market is expected over the coming years.

Europe represents an excellent market opportunity for PREtec. Increasingly stringent environmental and safety regulations across the EU have resulted in many heavily used products having their registrations cancelled, often leaving growers without viable solutions to manage their crops. Moreover, the EU has set out targets to further reduce agrochemical usage, through the 'Farm to Fork' framework, which aims to promote the adoption of sustainable agriculture. As a result, Europe is expected to see rapid growth in the market for biostimulants and biocontrols over the next decade and is already recognized as the largest global market for plant biostimulants and one of the largest markets for biocontrol solutions. Plant Health Care has started to conduct trials in the EU and the UK, as a first step to entering this very large market.

Target markets

PREtec peptides are targeting markets with global agchem sales of more than $5 billion. These markets are split by crops (Corn, Soy, etc.), geographies (US, Brazil, Europe) and mode of application (seed treatment or foliar spray) providing a number of specific opportunities. The average yield increases (5%+) achieved with PREtec in large acreage row crops is one easily identifiable point of potential value of PREtec to the industry and highlights how valuable even a small market share could be.

The opportunity for Saori in Brazil (and LATAM more generally) to prevent and treat disease (especially Asian Soybean Rust or (ASR) is very large. ASR, caused by the fungus Phakopsora pachyrhizi, is a devastating disease which can lead to crop yield loss of up to 90%. Brazilian soybean farmers spent US$2.85 billion on disease control in the 2019/20 season, approximately 90% of which was for ASR control. The Group has also observed significantly improved early plant growth and enhanced early season disease control in Saori testing, suggesting that Saori may add value beyond the ASR control opportunity. Being adopted for use on even a single-digit percentage of the available soybean hectares in Brazil would generate millions of dollars in annual Saori sales.

In addition to the opportunities discussed elsewhere for PREtec in specialty crops in the US via its collaboration with Wilbur-Ellis, the Company is pursuing development in the US of PHC279 as a: (1) a fungicide booster in which the peptide is added to existing chemical fungicides to improve the spectrum of disease control in potatoes and other row crops, (2) a foliar micronutrient, in which PHC279 improves nutrient uptake by corn and soy plants to improve yield, and (3) as a seed treatment to fight soil-borne disease and increase yields in soybeans. In Brazil, PHC is also exploring the opportunity for PHC279 as a foliar product to enhance disease control and yield in sugarcane.

PHC414 is a biostimulant that has demonstrated reliable performance in a variety of crops. As such, the Group anticipates that the product will be regulated as a fertilizer in some countries and is being targeted at the quality and yield characteristics of the global fruit and vegetable market.

PHC949 is being developed for the control of nematodes in row crops and specialty crops in the US and LATAM. Recent field studies indicate that PHC949 offers improved nematode control characteristics relative to current leading chemical products whether it is applied via foliar application or as a seed treatment.

The global nematicides market size was estimated to be valued at USD 1.3 Billion in 2019 and is projected to reach USD 1.6 Billion by 2025. Vegetables accounted for the largest share of the nematicides market globally in 2018 and North America was the largest market, driven by use on soybean, corn, and cotton crops. PHC949 is expected to find applications in US and Brazilian soy crops as well as US, Brazilian and European vegetable crops.

Registrations

Saori(TM) was approved for commercial use as a seed treatment for the prevention and control of ASR. The approval process was completed by the three responsible Brazilian regulatory agencies in just over one year. This rapid approval is a testimony to the safety profile of Saori and the urgency the Brazilian government attaches to making new sustainable solutions available for soybean growers in order to reduce reliance on traditional, less safe, chemical fungicides. The company is currently planning to pursue regulatory approval for Saori in the other important South American soybean growing markets, including Argentina and Paraguay.

In the US, PHC279 was submitted for approval to the EPA as a biopesticide in February 2021. This submission starts the clock on an eighteen-month review process that is expected to permit PHC279 to be used for the prevention and treatment of a variety of agronomically important diseases in a wide range of row crops and specialty crops. Given PHC's prior success achieving registration for the similar product, PHC398, approved earlier in the year by the EPA, the Group anticipates by the EPA in the second half of 2022.

Also in the US, PHC404 was registered in 2020 under the brand ZARAgrow(TM) for use as a fertilizer in California.

In 2021 the Group plans to submit an application to the EPA for approval of PREtec peptide PHC949 for use in row crops and specialty crops for the control of soil nematodes. Assuming the review process proceeds as expected, the US launch of PHC949 could occur in early 2023.

In Europe, a variety of PREtec products are being evaluated, both as plant protectants for enhanced disease control and as biostimulants in row crops and specialty crops. In 2021, the Group intends to ramp up the PREtec development program substantially.

Intellectual Property Protection of PREtec:

Innovation is at the heart of what Plant Health Care does every day and having a strong position protecting its intellectual property is critical to its success. Plant Health Care has filed more than 50 patent applications worldwide for its PREtec peptide technology since 2012. In 2020, the Group announced that its first seven US PREtec patents were granted by the US Patent and Trademark Office (USPTO). These patents provide protection for a wide range of PREtec peptides and their use in agricultural production. Additional patents are expected to be granted in 2021, including the first foreign patents corresponding to the US patents. These patents provide robust barriers to potential competitors and will enable the Company to pursue strategic and opportunistic out-licensing opportunities.

Financial summary

Jeffrey Hovey, Chief Financial Officer

A summary of the financial results for the year ended 31 December 2020 with comparatives for the previous financial year is set out below:

 
                                    2020     2019 
                                   $'000    $'000 
-------------------------------  -------  ------- 
Revenue                            6,611    6,436 
Gross profit                       3,683    3,602 
                                     56%      56% 
Operating loss                   (3,568)  (4,127) 
Finance income (net)                 264      285 
Net loss for the year 
 before tax                      (3,304)  (3,842) 
Adjusted LBITDA                  (3,304)  (3,814) 
Cash equivalents & investments     4,149    2,421 
-------------------------------  -------  ------- 
 

Revenues

Revenues in 2020 increased by 3% to $6.6 million (2019: $6.4 million). On a constant currency basis revenue increased 10% or $0.6 million driven by strong growth in the sugar cane and citrus markets in Brazil and Spain, respectively. The gross margin was steady at 56% (2019: 56%) despite a cost increase in Harpin due to the US tariffs with China. The Group was able to maintain our margin versus 2019 levels due to increased Harpin sales in several regions.

The Group has three separate reporting segments as set out below.

Americas

This segment includes activities in both North and South America but is exclusive of Mexico.

External revenue in the Americas segment increased 2% to $2.2 million (2019: $2.1 million). The increase in revenue was primarily due to further expansion into the specialty crop market through our partner Wilbur-Ellis. Revenue in the Americas is predominantly from Harpin <ALPHA><BETA> sales.

Mexico

A significant portion of the Group's revenue comes from Mexico. Revenue from the Mexican segment decreased 3% (increase of 7% in constant currency) to $3.2 million (2019: $3.3 million). This was due to reduced domestic demand for fruits and vegetables and the devaluation of the Peso as a result of the Covid-19 pandemic. Revenue in Mexico includes sales of Harpin <ALPHA><BETA>, Myconate and third-party products.

Rest of World

External revenue in the Rest of World segment increased 24% (22% in constant currency) to $1.2 million (2019: $1.0 million). The increase was primarily due to a sales increase of 33% (30% in constant currency) in Spain due to further growth into the citrus market and expansion into Chile. Revenue in the Rest of World segment is predominantly from Harpin <ALPHA><BETA> and nominal Myconate sales.

The Group's revenue, gross margin and LBITDA is weighted towards the second half of the financial year.

Gross margin

Gross margin remained steady at 56% (2019: 56%). The Group experienced a cost increase in Harpin due to the US tariffs with China but was able to maintain margin versus 2019 levels due to increased Harpin sales in several regions.

Operating expenses

The Group has maintained strict control of cash operating expenses, which decreased to $7.3 million (2019: $7.4 million). The main contributors were reduced Sales and Marketing spend at $2.9 million (2019: $3.2 million) offset by increased spend in New Technology of $2.3 (2019: $2.1 million).

Unallocated corporate expenses decreased $0.1 million to $0.2 million (2019: $0.3 million). The decrease was attributable to the increase in the value of Sterling loans from our UK subsidiary due to the appreciation of the Pound.

Adjusted LBITDA*, a non-GAAP measure, decreased by $0.5 million to $3.3 million primarily due to improved gross profit of $0.1 million and reduced spend in Sales and Marketing $0.3 million offset by increased spend in New Technology $0.2 million. The LBITDA in 2020 also improved due to the receipt of $0.3 million from the Paycheck Protection Program in the USA and a Covid loan of $0.1 million from the Spanish government.

 
                                   2020     2019 
                                  $'000    $'000 
------------------------------  -------  ------- 
Operating loss                  (3,568)  (4,127) 
Depreciation/amortisation           639      778 
Share-based payment expense         596      318 
Intercompany foreign exchange 
 gains                            (971)    (783) 
Adjusted LBITDA                 (3,304)  (3,814) 
------------------------------  -------  ------- 
 

* Adjusted LBITDA: loss before interest, tax, depreciation, amortization, share based payments and intercompany foreign exchange.

Balance sheet

At 31 December 2020 and 2019, investments, cash and cash equivalents were $4.1 million and $2.4 million respectively. Cash remains a primary focus for the Group. Cash used in operations decreased to $2.5 million (2019: $4.4 million) primarily due to improved working capital through increased collections, increased accounts payable and proceeds of $0.3 million from the Paycheck Protection Program in the United States and a Covid loan of $0.1 million from the Spanish government.

Inventory ($3.6 million), accounts receivable ($3.1 million), and payables ($1.3 million) were comparable to the prior year ($3.0 million, $3.6 million and $0.8 million, respectively) with the exception of large trade payable balance with our manufacturer of Harpin <ALPHA><BETA> (2020: $0.5 million; 2019: nil).

Translation of the results of foreign subsidiaries for inclusion within the consolidated Group results resulted in an exchange loss of $1.2 million recorded within Other Comprehensive Income and Foreign Exchange Reserves (2019: loss of $0.8 million).

Cash flow and liquidity

Net cash used in operations was $2.5 million (2019: $4.4 million). The decrease is due to reduced losses and improvement in working capital through increased collections and payables management.

Net cash used by investing was $1.2 million in 2020 (2019: $0.1 million). The Group holds surplus cash in several bond and money market funds. The movement in these funds was used to further invest in the New Technology business and fund the Commercial business.

Net cash provided by financing activities was $4.2 million (2019: $2.6 million). The increase was primarily due to the March 2020 equity raise of $4.4 million.

Going concern

In assessing whether the going concern basis is appropriate for preparing the 2020 Annual Report, the Directors have utilised its detailed forecasts, which take into account its current and expected business activities, its cash and cash equivalents balance and investments of $4.1 million. The principal risks and uncertainties the Group faces and other factors impacting the Group's future performance were considered. Analysis of the going concern position is detailed in the Directors' Report in the Annual Report and Note 2 to this announcement.

Consolidated statement of comprehensive income

for the year ended 31 December 2020

 
                                                                     2020     2019 
                                                            Note    $'000    $'000 
----------------------------------------------------------  ----  -------  ------- 
Revenue                                                        4    6,611    6,436 
Cost of sales                                                     (2,928)  (2,834) 
----------------------------------------------------------  ----  -------  ------- 
Gross profit                                                        3,683    3,602 
Other income                                                          289        - 
Research and development expenses                                 (2,963)  (2,775) 
Sales and marketing expenses                                      (2,876)  (3,144) 
Administrative expenses                                           (1,701)  (1,810) 
----------------------------------------------------------  ----  -------  ------- 
Operating loss                                                 5  (3,568)  (4,127) 
Finance income                                                        295      323 
Finance expense                                                      (31)     (38) 
----------------------------------------------------------  ----  -------  ------- 
Loss before tax                                                   (3,304)  (3,842) 
Income tax credit                                                      80      158 
----------------------------------------------------------  ----  -------  ------- 
Loss for the year attributable to the equity holders 
 of the parent company                                            (3,224)  (3,684) 
Other comprehensive income 
Items which will or may be reclassified to profit 
 or loss: 
Exchange (loss)/gain on translation of foreign operations         (1,211)    (792) 
----------------------------------------------------------  ----  -------  ------- 
Total comprehensive loss for the year attributable 
 to the equity holders of the parent company                      (4,435)  (4,476) 
----------------------------------------------------------  ----  -------  ------- 
Basic and diluted loss per share                               7  $(0.01)  $(0.02) 
----------------------------------------------------------  ----  -------  ------- 
 

Consolidated statement of financial position

at 31 December 2020

 
                                          2020      2019 
                                Note     $'000     $'000 
------------------------------  ----  --------  -------- 
Assets 
Non-current assets 
Intangible assets                  8     1,625     1,649 
Property, plant and equipment              246       475 
Right-of-use assets                        970       416 
Trade and other receivables        9       303       150 
------------------------------  ----  --------  -------- 
Total non-current assets                 3,144     2,690 
------------------------------  ----  --------  -------- 
Current assets 
Inventories                              3,567     2,960 
Trade and other receivables        9     2,778     3,412 
Tax receivable                             251       335 
Investments                              3,167     1,964 
Cash and cash equivalents                  982       457 
------------------------------  ----  --------  -------- 
Total current assets                    10,745     9,128 
------------------------------  ----  --------  -------- 
Total assets                            13,889    11,818 
------------------------------  ----  --------  -------- 
Liabilities 
Current liabilities 
Trade and other payables                 2,118     1,406 
Borrowings                                  33         - 
Lease liabilities                          400       353 
------------------------------  ----  --------  -------- 
Total current liabilities                2,551     1,759 
------------------------------  ----  --------  -------- 
Non-current liabilities 
Borrowings                                 193         - 
Lease liabilities                          583       107 
------------------------------  ----  --------  -------- 
Total non-current liabilities              776       107 
------------------------------  ----  --------  -------- 
Total liabilities                        3,327     1,866 
------------------------------  ----  --------  -------- 
Total net assets                        10,562     9,952 
------------------------------  ----  --------  -------- 
Share capital                            3,605     3,030 
Share premium                           92,520    88,647 
Foreign exchange reserve               (1,271)      (61) 
Accumulated deficit                   (84,292)  (81,664) 
------------------------------  ----  --------  -------- 
Total equity                            10,562     9,952 
------------------------------  ----  --------  -------- 
 

Consolidated statement of changes in equity

for the year ended 31 December 2020

 
                                                                   Foreign 
                                                Share     Share   exchange  Accumulated 
                                              capital   premium    reserve      deficit    Total 
                                                $'000     $'000      $'000        $'000    $'000 
-------------------------------------------  --------  --------  ---------  -----------  ------- 
Balance at 1 January 2019                       2,586    86,126        731     (78,298)   11,145 
-------------------------------------------  --------  --------  ---------  -----------  ------- 
Loss for the year                                   -         -          -      (3,684)  (3,684) 
Exchange difference arising on translation 
 of foreign operations                              -         -      (792)            -    (792) 
-------------------------------------------  --------  --------  ---------  -----------  ------- 
Total comprehensive income/(loss)                   -         -      (792)      (3,684)  (4,476) 
Shares issued net of issue costs                  444     2,521          -            -    2,965 
Share-based payments                                -         -          -          318      318 
-------------------------------------------  --------  --------  ---------  -----------  ------- 
Balance at 31 December 2019                     3,030    88,647       (61)     (81,664)    9,952 
-------------------------------------------  --------  --------  ---------  -----------  ------- 
Loss for the year                                   -         -          -      (3,224)  (3,224) 
Exchange difference arising on translation 
 of foreign operations                              -         -    (1,210)            -  (1,210) 
-------------------------------------------  --------  --------  ---------  -----------  ------- 
Total comprehensive income/(loss)                   -         -    (1,210)      (3,224)  (4,434) 
Shares issued net of issue costs                  575     3,873          -            -    4,448 
Share-based payments                                -         -          -          596      596 
-------------------------------------------  --------  --------  ---------  -----------  ------- 
Balance at 31 December 2020                     3,605    92,520    (1,271)     (84,292)   10,562 
-------------------------------------------  --------  --------  ---------  -----------  ------- 
 

Consolidated statement of cash flows

for the year ended 31 December 2020

 
                                                                  2020     2019 
                                                         Note    $'000    $'000 
-------------------------------------------------------  ----  -------  ------- 
Cash flows from operating activities 
Loss for the year                                              (3,224)  (3,684) 
Adjustments for: 
Depreciation                                                       277      358 
Depreciation of right-of-use assets                                338      373 
Amortisation of intangibles                                 8       24       43 
Share-based payment expense                                        596      318 
Finance income                                                   (295)    (323) 
Finance expense                                                     31       38 
Foreign exchange (loss)/gain                                   (1,015)    (824) 
Income taxes credit                                               (80)    (158) 
Decrease in trade and other receivables                            598      155 
Gain on disposal of fixed asset                                   (11)        - 
(Increase)/Decrease in inventories                               (607)       15 
Increase/(Decrease) in trade and other payables                    711    (941) 
Income taxes received                                              165      223 
-------------------------------------------------------  ----  -------  ------- 
Net cash used in operating activities                          (2,492)  (4,407) 
-------------------------------------------------------  ----  -------  ------- 
Investing activities 
Purchase of property, plant and equipment                         (15)    (132) 
Sale of property, plant and equipment                               11       20 
Finance income                                                     159       56 
Purchase of investments                                        (2,756)  (1,940) 
Sale of investments                                              1,404    1,859 
-------------------------------------------------------  ----  -------  ------- 
Net cash provided by investing activities                      (1,197)    (137) 
-------------------------------------------------------  ----  -------  ------- 
Financing activities 
Finance expense                                                    (4)      (3) 
Payment of lease liability                                       (389)    (420) 
Issue of ordinary share capital                                  4,449    2,695 
Borrowings                                                         174        - 
-------------------------------------------------------  ----  -------  ------- 
Net cash provided by financing activities                        4,230    2,542 
-------------------------------------------------------  ----  -------  ------- 
Net increase / (decrease) in cash and cash equivalents             541  (2,002) 
Cash and cash equivalents at the beginning of period               457    2,459 
Effects of exchange rates on cash held                            (16)        - 
-------------------------------------------------------  ----  -------  ------- 
Cash and cash equivalents at the end of the period                 982      457 
-------------------------------------------------------  ----  -------  ------- 
 

Notes forming part of the Group financial statements

for the year ended 31 December 2020

1. Basis of preparation

The financial information set out in this document does not constitute the Group's statutory accounts for the years ended 31 December 2019 or 2020. Statutory accounts for the years ended 31 December 2019 and 31 December 2020, which were approved by the directors on 22 April 2021, have been reported on by the Independent Auditors. The Independent Auditor's Reports on the Annual Report and Financial Statements for each of 2019 and 2020 were unqualified, did not draw attention to a matter by way of emphasis in the year ended 31 December 2020 but did draw attention to a matter by way of emphasis for the year ended 31 December 2019, being going concern 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 2019 have been filed with the Registrar of Companies. The statutory accounts for the year ended 31 December 2020 will be delivered to the Registrar of Companies in due course and will be posted to shareholders shortly, and thereafter will be available from the Group's registered office at c/o DWF LLP, 1 Scott Place, 2 Hardman Street, Manchester, England, M3 3AA and from the Group's website: https://www.planthealthcare.com/investors

The financial information set out in these results has been prepared using the recognition and measurement principles of International Accounting Standards, International Financial Reporting Standards and Interpretations in conformity with the requirements of the Companies Act 2006. The accounting policies adopted in these results have been consistently applied to all the years presented and are consistent with the policies used in the preparation of the financial statements for the year ended 31 December 2019, except for those that relate to new standards and interpretations effective for the first time for periods beginning on (or after) 1 January 2019. There are deemed to be no new standards, amendments and interpretations to existing standards, which have been adopted by the Group, that have had a material impact on the financial statements.

2. Accounting policies

Reporting currency

While the functional currency of the parent company is Sterling, the group's financial statements have been presented in US Dollars. The directors believe this better reflects the underlying nature of the business, and primarily due to the US being the country whose competitive forces and regulations impact this business. The exchange rates used for translation are as reported below:

 
              Rates 
              as of 
        31 December 
       ------------  ------  ------  ------ 
                GBP    Peso    Euro   Reals 
-----  ------------  ------  ------  ------ 
2019         1.3185  0.0529  1.1215  0.2485 
2020         1.3649  0.0503  1.2264  0.1924 
-----  ------------  ------  ------  ------ 
 
 
         Average 
        exchange 
           rates 
       ---------  ------  ------  ------ 
             GBP    Peso    Euro   Reals 
-----  ---------  ------  ------  ------ 
2019      1.2767  0.0519  1.1194  0.2537 
2020      1.2834  0.0468  1.1414  0.1958 
-----  ---------  ------  ------  ------ 
 

Going concern

In assessing whether the going concern basis is an appropriate basis for preparing the 2020 Annual Report, the Directors have utilised its detailed forecasts which take into account its current and expected business activities, its cash and cash equivalents balance and investments of $4.1 million as shown in its balance sheet at 31 December 2020, the principal risks and uncertainties the Group faces and other factors impacting the Group's future performance.

The consolidated financial statements have been prepared on a going concern basis. The directors have at the time of approving the financial statements, a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. The Covid-19 pandemic has so far had limited impact on our business and the board believes that the business is able to navigate through the continued impact of the pandemic due to the strength of its customer proposition, statement of financial position and the net cash position of the group. The current economic conditions continue to create uncertainty, particularly over (a) the level of customer and potential customer engagement; and (b) the level of new sales to new customers. The pandemic has had a widespread impact economically, with potential for causing delays in contract negotiations and/or cancelling of anticipated sales and an uncertainty over cash collection from certain customers.

As a consequence, various sensitivity analyses have been performed to reflect a variety of possible cash flow scenarios and also to consider the likelihood of this scenario occurring. This assessment has also included the group's actual cash holdings as of the date of the approval of these financial statements, which include funds received through an equity raise in March 2021 of $9.1 million (net of costs). Overall, these cash-flow forecasts, which cover a period of at least 12 months from the date of approval of the financial statements, foresee that the group will be able to operate within its existing facilities. Nevertheless, there is a risk that the group will be impacted more than expected by reductions in customer confidence. If sales and settlement of existing debts are not in line with cash flow forecasts, the directors have the ability to identify cost savings if necessary, to help mitigate the impact on cash outflows. Having assessed the principal risks and the other matters discussed in connection with the going concern statement, the directors have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. For these reasons, they continue to adopt the going concern basis of accounting in preparing the financial information.

3. Critical accounting estimates and judgements

In preparing its financial statements, the Group makes certain estimates and judgements regarding the future. Estimates and judgements 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 judgements 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. When the Group makes product sales under contracts/agreements these will frequently be inclusive of rebate/support payments or a financing component where judgement can be required in the assessment of the transaction price.

Recoverability of trade receivables

The Group applies both the simplified and general approaches under IFRS 9 to measure expected credit losses using a lifetime expected credit loss provision for trade receivables. Under the simplified approach, expected credit losses on a collective basis, trade receivables are grouped based on credit risk and aging. Given the Group has a low history of default limited judgement is required for trade receivables in this grouping.

The Group then separately reviews those receivables with payment terms over 180 days using the general approach. Under this approach judgements are required in the assessment of the risk and probability of credit losses and the quantum of the loss in the event of a default. The Group has debtors with a gross value (before provisioning but after the assessment of financing components) of $0.6 million within this grouping.

4. Revenue

 
                         2020    2019 
Revenue arises from:    $'000   $'000 
---------------------  ------  ------ 
Proprietary products    3,984   3,770 
Third-party products    2,627   2,666 
---------------------  ------  ------ 
Total                   6,611   6,436 
---------------------  ------  ------ 
 

The following table gives an analysis of revenue according to sales with payment terms of less than or more than 180 days.

Year to 31 December 2020

 
                Sales contracts  Sales contracts 
                   with payment     with payment 
                     terms less    terms greater 
                       than 180         than 180 
                           days             days  Total 
Segment                   $'000            $'000  $'000 
--------------  ---------------  ---------------  ----- 
Mexico                    3,214                -  3,214 
Americas                  2,017              167  2,184 
Rest of World             1,213                -  1,213 
--------------  ---------------  ---------------  ----- 
                          6,444              167  6,611 
--------------  ---------------  ---------------  ----- 
 
 
                                                Sales contracts  Sales contracts 
                                                   with payment     with payment 
                                                     terms less    terms greater 
                                                       than 180         than 180 
                                                           days             days  Total 
Timing of transfer of goods                               $'000            $'000  $'000 
----------------------------------------------  ---------------  ---------------  ----- 
Point in time (delivery to port of departure)             6,166              167  6,333 
Point in time (delivery to port of arrival)                 278                -    278 
----------------------------------------------  ---------------  ---------------  ----- 
                                                          6,444                -  6,611 
----------------------------------------------  ---------------  ---------------  ----- 
 

Year to 31 December 2019

 
                Sales contracts  Sales contracts 
                   with payment     with payment 
                     terms less    terms greater 
                       than 180         than 180 
                           days             days  Total 
Segment                   $'000            $'000  $'000 
--------------  ---------------  ---------------  ----- 
Mexico                    3,330                -  3,330 
Americas                  1,394              737  2,131 
Rest of World               848              127    975 
--------------  ---------------  ---------------  ----- 
                          5,572              864  6,436 
--------------  ---------------  ---------------  ----- 
 
 
                                                Sales contracts  Sales contracts 
                                                   with payment     with payment 
                                                     terms less    terms greater 
                                                       than 180         than 180 
                                                           days             days  Total 
Timing of transfer of goods                               $'000            $'000  $'000 
----------------------------------------------  ---------------  ---------------  ----- 
Point in time (delivery to port of departure)             5,536              737  6,273 
Point in time (delivery to port of arrival)                  36              127    163 
----------------------------------------------  ---------------  ---------------  ----- 
                                                          5,572              864  6,436 
----------------------------------------------  ---------------  ---------------  ----- 
 
 
Financing component of sales contracts                 $'000 
-----------------------------------------------------  ----- 
At 1 January 2020                                        144 
Financing components recognised                            9 
Financing components unwound to the income statement   (144) 
-----------------------------------------------------  ----- 
At 31 December 2020                                        9 
-----------------------------------------------------  ----- 
 

5. Operating loss

 
                                                                  2020    2019 
                                                                 $'000   $'000 
---------------------------------------------------------  ---  ------  ------ 
Operating loss is arrived at after charging/(crediting): 
Share-based payment charge                                         596     318 
Depreciation                                                       277     358 
Depreciation of right-of-use assets                                338     373 
Amortisation of intangibles                                         24      43 
Operating lease expense                                             26      41 
Gain on disposal of property, plant and equipment                 (11)    (20) 
Impairment of trade receivables                                  (123)      85 
Employee termination costs                                           -      63 
Foreign exchange gains                                           (971)   (784) 
Other income*                                                    (289)       - 
--------------------------------------------------------------  ------  ------ 
Auditor's remuneration: 
Amounts for audit of parent company and consolidation              100     101 
Amounts for audit of subsidiaries                                   45      44 
--------------------------------------------------------------  ------  ------ 
Total auditor's remuneration                                       145     145 
--------------------------------------------------------------  ------  ------ 
 

* Under the U.S. Department of Treasury CARES Act, the company was eligible for the Paycheck Protection Program (PPP) loan. All provisions of the loan were satisfied as laid out in the CARES Act, making the company eligible for a 100% forgiveness of the $289,000 loan received.

6. Segment information

The Group's 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 Rest of World segment includes the results of the United Kingdom and Spanish subsidiaries, which together operate across Europe and South Africa. 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.

Below is information regarding the Group's segment loss information for the year ended:

 
                                                        Rest 
                                                          of                     Total          New 
                                  Americas   Mexico    World  Elimination   Commercial   Technology     Total 
2020                                 $'000    $'000    $'000        $'000        $'000        $'000     $'000 
--------------------------------  --------  -------  -------  -----------  -----------  -----------  -------- 
Revenue* 
Proprietary product sales            2,165      613    1,206            -        3,984            -     3,984 
Third-party product sales               19    2,601        7            -        2,627            -     2,627 
Inter-segment product sales          1,383        -      634      (2,017)            -            -         - 
--------------------------------  --------  -------  -------  -----------  -----------  -----------  -------- 
Total revenue                        3,567    3,214    1,847      (2,017)        6,611            -     6,611 
--------------------------------  --------  -------  -------  -----------  -----------  -----------  -------- 
Cost of sales                      (2,109)  (1,746)  (1,090)        2,017      (2,928)            -   (2,928) 
Other income**                         289        -        -            -          289            -       289 
Research and development                 -        -        -            -            -      (2,135)   (2,135) 
Sales and marketing                (1,318)    (664)    (735)            -      (2,717)        (257)   (2,974) 
Administration                       (722)    (224)      (8)            -        (954)        (144)   (1,098) 
Non-cash expenses: 
Depreciation                          (98)     (68)     (16)            -        (182)        (443)     (625) 
Amortisation                          (18)        -      (5)            -         (23)            -      (23) 
Share-based payment                   (49)        -     (36)            -         (85)        (381)     (466) 
--------------------------------  --------  -------  -------  -----------  -----------  -----------  -------- 
Segment operating (loss)/profit      (458)      512     (43)            -           11      (3,360)   (3,349) 
Corporate expenses:*** 
Wages and professional fees                                                                           (1,146) 
Administration****                                                                                        927 
--------------------------------  --------  -------  -------  -----------  -----------  -----------  -------- 
Operating loss                                                                                        (3,568) 
Finance income                                                                                            295 
Finance expense                                                                                          (31) 
--------------------------------  --------  -------  -------  -----------  -----------  -----------  -------- 
Loss before tax                                                                                       (3,304) 
--------------------------------  --------  -------  -------  -----------  -----------  -----------  -------- 
 

* Revenue from one customer within the Americas segment totalled $950,000, or 14% of Group revenues. Revenue from one customer within the Mexico segment totalled $1,293,000 or 20% of Group revenues.

** Under the U.S. Department of Treasury CARES Act, the company was eligible for the Paycheck Protection Program (PPP) loan. All provisions of the loan were satisfied as laid out in the CARES Act, making the company eligible for a 100% forgiveness of the $289,000 loan received.

*** 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 $130,000 attributed to corporate employees who are not directly affiliated with any of the Commercial or New Technology segments.

Other segment Information

 
                                           Rest 
                                             of                      Total          New 
                      Americas   Mexico   World  Eliminations   Commercial   Technology   Total 
                         $'000    $'000   $'000         $'000        $'000        $'000   $'000 
--------------------  --------  -------  ------  ------------  -----------  -----------  ------ 
Segment assets           8,574    2,269   2,135             -       12,978          911  13,889 
Segment liabilities      1,447      597     307             -        2,351          976   3,327 
Capital expenditure         42        1       1             -           44            4      48 
--------------------  --------  -------  ------  ------------  -----------  -----------  ------ 
 
 
                                                       Rest 
                                                         of                     Total          New 
                                  Americas   Mexico   World  Elimination   Commercial   Technology     Total 
2019                                 $'000    $'000   $'000        $'000        $'000        $'000     $'000 
--------------------------------  --------  -------  ------  -----------  -----------  -----------  -------- 
Revenue* 
Proprietary product sales            2,109      689     972            -        3,770            -     3,770 
Third-party product sales               22    2,641       3            -        2,666            -     2,666 
Inter-segment product sales            844        -     368      (1,212)            -            -         - 
--------------------------------  --------  -------  ------  -----------  -----------  -----------  -------- 
Total revenue                        2,975    3,330   1,343      (1,212)        6,436            -     6,436 
--------------------------------  --------  -------  ------  -----------  -----------  -----------  -------- 
Cost of sales                      (1,583)  (1,704)   (759)        1,212      (2,834)            -   (2,834) 
Research and development                 -        -       -            -            -      (2,031)   (2,031) 
Business development                     -        -       -            -            -            -         - 
Sales and marketing                (1,530)    (883)   (731)            -      (3,144)            -   (3,144) 
Administration                       (651)    (233)   (153)            -      (1,037)        (193)   (1,230) 
Non-cash expenses: 
Depreciation                          (97)     (87)    (11)            -        (195)        (540)     (735) 
Amortisation                          (38)        -     (5)            -         (43)            -      (43) 
Share-based payment                   (62)        -    (32)            -         (94)        (188)     (282) 
--------------------------------  --------  -------  ------  -----------  -----------  -----------  -------- 
Segment operating (loss)/profit      (986)      423   (348)            -        (911)      (2,952)   (3,863) 
Corporate expenses:** 
Wages and professional fees                                                                          (1,026) 
Administration****                                                                                       762 
--------------------------------  --------  -------  ------  -----------  -----------  -----------  -------- 
Operating loss                                                                                       (4,127) 
Finance income                                                                                           323 
Finance expense                                                                                         (38) 
--------------------------------  --------  -------  ------  -----------  -----------  -----------  -------- 
Loss before tax                                                                                      (3,842) 
--------------------------------  --------  -------  ------  -----------  -----------  -----------  -------- 
 

* Revenue from one customer within the Americas segment totalled $675,000, or 10% of Group revenues.

Revenue from one customer within the Mexico segment totalled $1,243,000 or 19% 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 $36,000 attributed to corporate employees who are not directly affiliated with any of the Commercial or New Technology segments.

 
                                                  Rest 
                                                    of                      Total          New 
                             Americas   Mexico   World  Eliminations   Commercial   Technology   Total 
 Other segment information      $'000    $'000   $'000         $'000        $'000        $'000   $'000 
---------------------------  --------  -------  ------  ------------  -----------  -----------  ------ 
Segment assets                  7,367    1,915   1,972             -       11,254          564  11,818 
Segment liabilities               967      434     137             -        1,538          328   1,866 
Capital expenditure                78       38       -             -          116           16     132 
---------------------------  --------  -------  ------  ------------  -----------  -----------  ------ 
 

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 US and Mexico.

The Group's revenues from external customers by location of operation are detailed below:

 
                   Year ended      Year ended 
                   31 December     31 December 
                      2020            2019 
                 --------------  -------------- 
                   Amount          Amount 
                    $'000     %     $'000     % 
---------------  --------  ----  --------  ---- 
United Kingdom        285     4       271     4 
United States       1,657    25     1,715    27 
Mexico              3,214    49     3,330    52 
All other           1,455    22     1,120    17 
---------------  --------  ----  --------  ---- 
Total               6,611   100     6,436   100 
---------------  --------  ----  --------  ---- 
 

The Group's non-current assets by location of assets are detailed below:

 
                   Year ended      Year ended 
                   31 December     31 December 
                      2020            2019 
                 --------------  -------------- 
                   Amount          Amount 
                    $'000     %     $'000     % 
---------------  --------  ----  --------  ---- 
United Kingdom          7     -        11     - 
United States       2,734    91     2,430    90 
Mexico                208     7       209     8 
All other             195     2        40     2 
---------------  --------  ----  --------  ---- 
Total               3,114   100     2,690   100 
---------------  --------  ----  --------  ---- 
 

7. Loss per share

Basic loss per ordinary share has been calculated on the basis of the loss for the year of $3,224,000 (2019: loss of $3,684,000) and the weighted average number of shares in issue during the period of 245,268,691 (2019: 178,031,230).

Equity instruments of 22,953,802 (2019: 18,098,134), which includes share options, the 2015 Employee Share Option Plan and the 2017 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.

8. Intangible assets

 
                                                                       Trade 
                                                    Licences            name 
                                                         and    and customer 
                                    Goodwill   registrations   relationships   Total 
                                       $'000           $'000           $'000   $'000 
---------------------------------  ---------  --------------  --------------  ------ 
Cost 
Balance at 1 January 2019              1,620           3,342             159   5,121 
Additions - externally acquired            -               -               -       - 
---------------------------------  ---------  --------------  --------------  ------ 
Balance at 31 December 2019            1,620           3,342             159   5,121 
Additions - externally acquired            -               -               -       - 
---------------------------------  ---------  --------------  --------------  ------ 
Balance at 31 December 2020            1,620           3,342             159   5,121 
---------------------------------  ---------  --------------  --------------  ------ 
Accumulated amortisation 
Balance at 1 January 2019                  -           3,270             159   3,429 
Amortisation charge for the year           -              43               -      43 
---------------------------------  ---------  --------------  --------------  ------ 
Balance at 31 December 2019                -           3,313             159   3,472 
Amortisation charge for the year           -              24               -      24 
---------------------------------  ---------  --------------  --------------  ------ 
Balance at 31 December 2020                -           3,337             159   3,496 
---------------------------------  ---------  --------------  --------------  ------ 
Net book value 
At 1 January 2019                      1,620              72               -   1,692 
---------------------------------  ---------  --------------  --------------  ------ 
At 31 December 2019                    1,620              29               -   1,649 
---------------------------------  ---------  --------------  --------------  ------ 
At 31 December 2020                    1,620               5               -   1,625 
---------------------------------  ---------  --------------  --------------  ------ 
 

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 2019 and 2020, cash flows are projected over a five-year period with a residual growth rate assumed at 0%. For the years ended 31 December 2019 and 2020, a pre-tax discount factor of 14.9% and 14.5% has been used over the forecast period.

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.

Licences and registrations

These amounts represent the cost of licences 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 licence or registration. Impairment is reviewed and tested according to the method expressed above. Licences 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 licences and registrations.

9. Trade and other receivables

 
                                            2020    2019 
                                           $'000   $'000 
----------------------------------------  ------  ------ 
Current 
Trade receivables                          2,494   3,497 
Less: provision for impairment              (84)   (264) 
----------------------------------------  ------  ------ 
Trade receivables, net                     2,410   3,233 
Other receivables and prepayments            368     179 
----------------------------------------  ------  ------ 
Current trade and other receivables        2,778   3,412 
----------------------------------------  ------  ------ 
Non-current 
Trade receivables                            164       - 
Less: provision for impairment              (15)       - 
----------------------------------------  ------  ------ 
Trade receivables, net                       149       - 
Other receivables                             69      62 
Deferred tax asset                            85      88 
----------------------------------------  ------  ------ 
Non-current trade and other receivables      303     150 
----------------------------------------  ------  ------ 
                                           3,081   3,562 
----------------------------------------  ------  ------ 
 

The trade receivable current balance represents trade receivables with a due date for collection within a one-year period. The other receivable non-current balance represents lease deposits.

The Group applies the IFRS 9 simplified approach to measuring expected credit losses for sales contracts with 180 days or fewer payment terms. To measure expected credit losses on a collective basis, trade receivables and contract assets are grouped based on similar credit risk and aging. The expected loss rates are based on the aging of the receivable, past experience of credit losses with customers and forward-looking information. An allowance for a receivable's estimated lifetime expected credit losses is first recorded when the receivable is initially recognised, and subsequently adjusted to reflect changes in credit risk until the balance is collected. In the event that management considers that a receivable cannot be collected, the balance is written off.

Sales contract receivables provided on terms greater than 180 days are at first discounted to recognise the financing component of the transaction and then assessed using the "general approach". Under this approach, the Group models and probability weights a number of scenarios based on their assessment of the credit risk and historical expected losses.

 
                                     Considered    Considered 
                                          under         under 
                                 the simplified   the general 
                                       approach      approach 
                                          $'000         $'000 
------------------------------  ---------------  ------------ 
Trade receivables                         2,036           622 
Expected credit loss assessed               (2)          (97) 
------------------------------  ---------------  ------------ 
                                          2,034           525 
------------------------------  ---------------  ------------ 
 

The receivables considered under the general approach relate to one customer in the Americas segment and one customer in the Rest of World segment. The key considerations in the assessment of the provision were the probability of default, expected loss in the event of default and the exposure at the point of default.

The maximum exposure to credit risk at the reporting date is the fair value of each class of receivables set out above.

Movements on the provision for impairment of trade receivables are as follows:

 
                                             2020    2019 
                                            $'000   $'000 
-----------------------------------------  ------  ------ 
Balance at the beginning of the year          264     186 
Provided                                        -     161 
Receivables written off as uncollectible     (42)    (85) 
Unused amounts reversed                     (123)       - 
Foreign exchange                                -       2 
-----------------------------------------  ------  ------ 
Balance at the end of the year                 99     264 
-----------------------------------------  ------  ------ 
 

The net value of trade receivables for which a provision for impairment has been made is $0.6 million (2019: $1.6 million).

The following is an analysis of the Group's trade receivables, both current and past due, identifying the totals of trade receivables which are not yet due and those which are past due but not impaired.

 
                         2020    2019 
                        $'000   $'000 
---------------------  ------  ------ 
Current                 2,199   2,401 
Past due: 
Up to 30 days               8       - 
31 to 60 days               -       9 
61 to 90 days               -      11 
Greater than 90 days      352     812 
---------------------  ------  ------ 
Total                   2,559   3,233 
---------------------  ------  ------ 
 

10. Subsequent events

In March of 2021, the Company successfully completed an equity raise which generated $9.1 million (net of costs) from new and existing investors. The Company issued 50,397,913 ordinary shares at 14p per share.

11. Cautionary statement

This document contains certain forward-looking statements relating to Plant Health Care plc (the "Group"). The Group considers any statements that are not historical facts as "forward-looking statements". They relate to events and trends that are subject to risk and uncertainty that may cause actual results and the financial performance of the Company to differ materially from those contained in any forward-looking statement. These statements are made by the Directors in good faith based on information available to them and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.

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END

FR UURWRASUSUAR

(END) Dow Jones Newswires

April 23, 2021 02:00 ET (06:00 GMT)

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