Plant Health Care plc
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From inventor to investor...
The inventor
Sometimes help comes from unexpected places. It was a power outage
that led Plant Health Care founder and Chief Scientist, Donald Marx, to an
important discovery in developing a unique, environmentally-friendly way to
foster plant growth.
Marx’s research career has been devoted to mycorrhizal fungi, which are vital
to plant health and have existed on plant roots for millions of years.
While with the USDA Forest Service in the 1960’s, he set up a greenhouse
experiment to grow these fungi on pine seedlings. One weekend, the power
went out, shutting off the greenhouse cooling system. When he arrived the next
morning, the temperature in the greenhouse had reached more than 130 F (55 C) and nearly all of the pine
seedlings had died — except one group. “Those seedlings inoculated with a speciﬁc fungus were thriving,” recalls
Marx. The fungus seemed to have enabled the plants to withstand the high temperatures.
Later, he found the same fungus growing on tree roots in unlikely environments, such as the acidic, hot and
hostile climates on strip mined coal spoils. Marx saw potential for it to be used to help reforest these
environmentally-stressed and drought-ridden areas.
By the mid -1970’s, his research team became the ﬁrst to develop an inoculant of the fungus that could be applied to
the roots of tree seedlings in nurseries. They found that, when these seedlings were planted on the adverse coal
spoils, they survived and grew normally, whereas seedlings without the fungus died within a month.
Following these initial successes, Marx tested the fungal technology in Africa, Mexico, South America, India,
Europe and in China and found that it signiﬁcantly increased the success of reforestation on cut-over and eroded
land. Marx also won numerous awards for his pioneering work, including Sweden’s prestigious Marcus
Wallenburg Prize, awarded to him by the King of Sweden for his research on tree mycorrhizae.
When Marx retired from the Forest Service in 1994, he put his vast knowledge on mycorrhizal fungi to good use in
founding Pittsburgh, Pennsylvania-based Plant Health Care. Working with Dr. Stephen Maul, whose company
(MycorrTech) was later merged with the Company, Dr. Ming Lin of Formosa Plastic and Dr. Michael Kernan of
Plant Health Care, they were able to mass produce these fungi for commercial use.
The team developed environmentally-friendly products with the fungi for use on plants in urban landscapes, turf,
ﬂower beds, nursery, forestry, mined-land revegetation and, most recently, agriculture. Today, one of the
Company’s core products uses patented Myconate
 technology to strengthen plant health by stimulating
mycorrhizal development and increasing yields. One of Plant Health Care’s ﬁrst achievements has been a
cooperation agreement with Bayer Crop Science to test the Myconate technology on certain agriculture crops.
In February 2007, the Company also acquired the rights to the Harpin technology from Eden Bioscience Corp.
Harpin proteins activate a plant’s natural ability to protect itself during growth with stress-defence responses.
The Myconate and Harpin technologies, says Marx, will “change the face of farming.” Meanwhile, he and his
technical team will continue to seek out other environmentally-friendly technologies that ﬁt with Plant Health Care’s
portfolio. But, who knows where he would be today if it hadn’t been for that power outage? Plant Health Care plc
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The farmer
More than 30 years of farming the High Plains of Texas has taught Ron Luker
the key to turning out a good crop.
“Get the soils right, get the roots healthy, and the rest will usually take care of
itself,” says Luker, who farms just over 1,000 acres, mostly cotton, near
Brownﬁeld, in north Texas. “There can be too much focus on the top half of the
cotton crop, when the real source of plant vigour and yield is the ground the crop
stands in,” he adds.
In his quest to build the best foundation for his crops, Luker focuses on enhancing
and balancing the health of the soil with environmentally-friendly products that
do not disturb the soil’s bio-ecology. This is a crop management philosophy that seems to be catching on these days,
and Plant Health Care’s products ﬁt that approach.
Luker, who graduated in agricultural engineering from Texas A&M, has always had a penchant for tinkering with the
latest technologies. But he prides himself not only on testing and adopting the most innovative, but also the most
low-impact farming technologies on his cotton ﬁelds.
He adds digested chicken manure to his liquid fertiliser, which is not only effective as a fertiliser but has allowed him
to cut his nitrogen use in half, sparing the soil. He also adds some calcium to the mix to help release phosphorus the
cotton leaves in the ground.
Luker is also using low-impact products to help him improve the soil. He says using a combination of Plant Health
Care’s N-Hibit
 and a natural nutrient blend on his crops last year signiﬁcantly increased plant yields and resulted in
fewer crops that got sick.
He uses the Company’s N-Hibit, for example, to help him manage nematodes, microscopic worms rampant in the
High Plains that can sap a cotton plant’s health.
“A lot of people underestimate the damage and yield loss nematodes cause in cotton,” says Luker. “I know they are
in my ﬁelds and that they have to be managed. We need new nematode tools that perform but don’t have toxicity
issues, and that are affordable.”
N-Hibit contains Harpin, a naturally occurring protein produced by bacteria that attack plants. The presence of
Harpin turns on internal plant signals that activate its natural self defence and growth systems as though the plant was
under attack. N-Hibit has been found to increase cotton plant yields by an average of 5.4% in replicated and
commercial ﬁeld trials.
Luker is also using some soil aids that are probably as old as the planet, including mycorrhizal fungi products. When
Luker plants his crop, the Texas farmer makes sure to water in products that increase fungi production. After decades
of use, modern agricultural techniques tend to strip away the natural bacteria and other microbes that make for
healthy soil. Plant Health Care has developed a full line of inoculants and soil nutrient formulations that help restore
this balance. These ancient fungi have a symbiotic relationship with roots, building tubes that greatly extend the
reach of roots so they can capture more water and nutrients in return for plant sugars.
Another key factor for Luker in growing cotton in the parched Southwest is that such fungi help cotton plants thrive
even at times of water scarcity. “Building more root mass and healthier soils helps less water do more for the crop,
and if we have abundant rainfall that will really bring the crop on,” he says. Plant Health Care plc
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The salesman
When Pius Floris heard Don Marx speak at a tree conference about the unknown
healing power of mycorrhizal fungi in Hilton Head, South Carolina more than a
decade ago, he knew the founder of Plant Heath Care was on to something.
Floris, who at the time ran Pius Floris Tree Care, his own chain of tree care
companies in the Netherlands, was highly intrigued by what Marx had to say
about the symbiotic relationship of mycorrhizal fungi and a variety of plants.
“Most people at that time misunderstood the role of mycorrhizal fungi,” says
Floris. “Few believed that they actually helped plants grow, acting like another
kind of fertiliser.” For the unconvinced, there was even a demonstration outside
the hotel of some thriving trees whose roots had already been treated with the fungi.
Excited, Floris decided to try taking strains of the ancient fungi back with him to the Netherlands to apply to trees
prone to diseases. He was thrilled by the results. “We found that the trees weren’t dying anymore after being
planted or transplanted.”
As the head of a business with some 200 employees and ten branches across the Netherlands, the trained tree
expert says he always sought to keep on top of innovations in plant care. This was clearly one of them and Floris was
soon importing fungi-based products from Plant Health Care to use in his tree care company.
Ultimately, he became so involved with the innovative range of products that Plant Health Care’s Chief Executive,
John Brady, asked Floris if he wanted to come over to the ‘other side’. Floris opened the Company’s ﬁrst ofﬁces in the
Netherlands and, in 2001, after selling his own company, came on board full-time as managing director in charge
of Dutch, German and Greek sales at Plant Health Care.
He and his sales team are now selling the Company’s products and services in several countries in Europe and the
Middle East, from northern Finland to sunny Sicily, in the areas of horticulture and for agricultural uses.
Whereas US customers tend to respond more to the message that mycorrhizal fungi help increase crop yield,
a big selling point for Europeans, he notes, is that Plant Health Care’s products can help farmers and horticulturists
save on pesticides, reducing the amount of harmful fertilisers applied to the ground.
Still, it takes a lot of educational work to get the message out, as some potential customers still have to be shown the
value of mycorrhizal fungi and other environmentally-friendly products. “People have been told for decades that
chemicals alone are the answer when a plant is sick,” he notes. “But that’s the same old recipe. You have to change
the mindset of the growers.” That’s why Floris’ sales team keeps busy not only in making sales calls, but also giving
presentations on the beneﬁts of the environmentally-friendly Plant Health Care technologies at growers’ groups
across Europe.
Floris says he is convinced that more and more customers will see the value in applying products to their crops that
will enable a more sustainable use of the land. “This is going to be the future of agriculture. These products will be
increasingly employed to reduce the amount of harmful chemicals used.” Plant Health Care plc
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The investor
As a homeopathic veterinary surgeon, Marc Baer takes a different view than a
conventional animal doctor on how to cure disease in horses, dogs or cats.
Homeopathy believes in using the body’s natural defence mechanisms to help
organisms regain their internal balance and thus cure disease, rather than
merely treating symptoms.
Baer views what Plant Health Care is doing as applying this same philosophy to
the plant world. “They are introducing sustainable methods to help individual
plants restore their equilibrium,” says the Swiss vet, one of the early investors in
the Company.
Baer invested his own funds in Plant Health Care as far back as 1996, when the Company was just a ﬂedgling
start-up. In spite of a successful IPO on London’s Alternative Investment Market (AIM) in 2004, Baer insists on
keeping his shares. “I have no intention of selling my stake. This is something I believe in.”
After coming into contact with founder Don Marx and Plant Health Care’s management, Baer decided that he liked
the team, the product and the Company’s philosophy towards the environment, which matches his own.
“We all need to be aware that we should look after our planet. Once it becomes too polluted, that will be difﬁcult
to ﬁx,” says Baer.
Just as homeopathic treatments seek to prevent disease from entering by keeping the living organism in good shape,
so do Plant Health Care’s products prevent plant sickness by allowing them to thrive, both by utilising mycorrhizal
fungi or the use of Harpin proteins. In doing so, they not only increase crop yield or let nursery plants thrive, but also
reduce the amount of chemical substances that must be used to combat sickness.
Baer has seen the results of Plant Health Care’s mycorrhizal fungi treatment at very close range. Several years ago,
he applied the Company’s mycorrhizal fungi mixture to the roots of a large but sickly beech tree that sprawls in his
front yard in the historic quarter of Zurich. Baer says the tree’s condition has markedly improved since doing so. Plant Health Care plc
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Contents
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6 Directors and advisors
7 Highlights
8 Chairman’s statement
10 Chief Executive’s report
14 Directors
16 Board committees
17 Corporate governance statement
20 Remuneration Committee report
26 Report of the directors
30 Statement of directors’ responsibilities
31 Independent auditors’ report
33 Consolidated income statement
34 Consolidated statement of recognised income and expense
35 Consolidated balance sheet
36 Consolidated cash ﬂow statement
37 Notes forming part of the Group ﬁnancial statements
69 Company balance sheet
70 Notes forming part of the Company ﬁnancial statements Plant Health Care plc
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Directors and advisors
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Directors Dr. Albert Fischer Non-executive Chairman
John Brady Chief Executive
Dr. Donald Marx Executive Director and Chief Scientist
Stephen Weaver Finance Director
Thomas Isler Senior Independent Director
Dr. Robert Chanson Non-executive Director
Samuel Wauchope Non-executive Director
Secretary Andrew C. Wood FCIS
Registered Ofﬁce Minerva House
5 Montague Close
London SE1 9BB
Company number 05116780
Auditors BDO Stoy Hayward LLP
55 Baker Street
London W1U 7EU
Company Solicitors Reed Smith Richards Butler LLP
Minerva House
5 Montague Close
London SE1 9BB
Registrars Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Brokers and
Nominated Advisor
Evolution Securities Limited
100 Wood Street
London EC2V 7AN Plant Health Care plc
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Highlights
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Plant Heath Care was established in 1995 in Pittsburgh (Pennsylvania) in the United
States. Its products are aimed at the agriculture, commercial landscaping and land
reclamation industries, through both direct sales and supply and distribution agreements
with major agrichemical industry partners. Plant Health Care’s products create
both environmental and economic beneﬁts for its customers and capitalise upon
long-term trends toward natural systems and biological products to promote plant
growth, health and yield.
Financial highlights ➢ Turnover up 34% to $18.3 million (2006: $13.7 million);
➢ Gross proﬁt up 37% to $8.4 million (2006: $6.1 million);
➢ Gross margin up from 44.7% to 45.6%
– due to upfront fee income from partners and entry into the higher margin
Harpin business;
➢ Loss, before exceptional costs, costs of share-based payments, interest and
taxation, of $4.4 million (2006: loss of $2.5 million);
➢ Net loss of $5.4 million (2006: loss of $3.0 million); and
➢ Net cash at 31 December 2007 of $9.8 million (2006: $3.7 million).
Operational highlights ➢ First Myconate manufacture and supply agreement signed with Bayer Cropscience
in January 2007
– exclusive for seed-coated corn, soybean, cotton and sunﬂower;
➢ In December 2007, agreement signed with Monsanto to evaluate, develop and
commercialise certain applications of the Harpin-based technology
– made possible by the acquisition of the Harpin intellectual property from
Eden Bioscience;
➢ Signiﬁcant contribution from US Agriculture division in its ﬁrst full year of operation;
➢ New share capital of $10 million raised in September; and
➢ Post year end: Steve Weaver appointed to the Board of Directors as Finance
Director on 28 March 2008. Plant Health Care plc
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Chairman’s statement
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Our core business is to provide natural products which promote plant growth, health and
yield with environmental care. There are few more topical issues in the markets today than
increased world population, the rapid growth of a sizeable middle class in emerging
economies demanding higher protein diets, and the drive for biofuels. These have all
contributed to higher demand levels for agricultural products than has ever been seen
before. At the same time, the availability of productive agricultural land in suitable climate
zones is becoming more limited. Despite signiﬁcant productivity increases from advances
in seeds, fertilisers, pest control and land management, the demand/supply balance is
being seriously tilted, crop prices are rising and strategic security concerns are being
aired. Major agriscience and agrichemical companies are responding to this by seeking
the next wave of technology innovation to further improve yields and re-establish balance,
in order to secure their own future proﬁtability.
Plant Health Care is very well positioned in this market environment, with the proven
capabilities of our IP-protected natural technologies, as evidenced by our two major
partnership deals with Bayer CropScience and Monsanto, for Myconate and Harpin,
respectively. We have set two strategic targets: growth and product development. Our
major target is to exploit our natural technologies through two sales channels: major
partnerships with signiﬁcant players who have the distribution and resources to achieve
wide penetration for our technologies in high volume row crops, and product sales through
major national distributors for more fragmented markets where we can be cost effective in
reaching customers. We also continue to pursue the strategy of securing and developing
innovative natural technologies and products with a high level of intellectual property
protection for plant growth, health and yield, which can fulﬁl the above market demand.
An overview of 2007 The most important milestones during the period were the ﬁrst two major partnership
agreements signed for our natural technologies. In January, Bayer CropScience agreed to
develop and commercialise Myconate seed treatment applications for corn, cotton,
soybean and sunﬂowers, while, in December, Monsanto entered into an agreement with
us to evaluate, develop and commercialise certain applications of our Harpin-based
technology suite.
The latter agreement was made possible by our acquisition in February 2007 of certain
assets and the Harpin intellectual property from Eden Bioscience, another highlight
of our year.
In 2007, we continued our pursuit of sales growth. Our performance was pleasing, with
record revenue in almost all business units; in particular, in its ﬁrst full year of operation, our
US Agriculture division successfully introduced Plant Health Care into what will be an
important market for the future.
Shareholder support for the Company was demonstrated when, in September, we raised
$10 million of new equity, which has left us in a strong cash position with no foreseeable
need for further capital or borrowings to fulﬁl our present plans.
Financial results Revenue for the year was $18.3 million, an increase of 34% over 2006 ($13.7 million).
The gross margin was 45.6% (2006: 44.7%), although increased expenses associated
with the development and testing of our Myconate and Harpin technologies, together with Plant Health Care plc
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Chairman’s statement
continued
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the costs of our ﬁrst full year of operation in the US agriculture market, led to an operating
loss, before exceptional costs and the costs of equity share-based payments, of
$4.4 million (2006: loss of $2.5 million). After exceptional costs, the costs of equity
share-based payments, interest and a small taxation charge on certain overseas
operations, the net loss for the year was $5.4 million (2006: loss of $3.0 million).
At 31 December 2007, net cash was $9.8 million (2006: $3.7 million).
Board changes I am pleased to announce that Steve Weaver was appointed to the Board on 28 March
2008. Steve joined us as Chief Financial Ofﬁcer in May 2007 and has made invaluable
contributions in improving our ﬁnancial controls, analysis and reporting to meet our needs
as we grow. He has also proven himself a strong contributor in strategic discussions and
we look forward to his input as a Board member in the coming years.
Today we are also announcing that our two longest serving Board members, Don Marx
and Robert Chanson, are both standing down at the forthcoming annual general meeting.
Each has served thirteen years as a director of Plant Health Care plc and its predecessor
companies, during which time they have each contributed a great deal to the development
of the Company and its business.
Don, a co-founder of Plant Health Care, provided us with a wealth of knowledge,
experience and contacts after a highly successful and prestigious career with the USDA
Forestry Service. After a period as Chief Executive of the Group, he has since deployed his
skills as our Chief Scientist and as a member of the Board. Although standing down from
the Board, Don will continue as Chief Scientist and we look forward to his continued
contribution in that role.
Robert has made many contributions to the Company in his role as non-executive director.
Before our AIM listing, he was instrumental in helping to secure investment in the Company
and his wider business knowledge has enabled him to contribute greatly to the strategy of
the Company.
I would like to take this opportunity to thank both Don and Robert for their contributions to
the Company and to the Board over the past thirteen years.
Outlook Plant Health Care’s ability to fulﬁl the need for higher yields on existing land has been
validated by the transactions with Bayer CropScience and Monsanto. With our stable of
effective natural technologies, we are extremely well positioned to offer further solutions to
help meet this global challenge and, as such, the macro environment remains favourable.
As a consequence of our progress in 2007 and the positive global drivers for the business,
the Board looks forward to the coming year with conﬁdence. I would like to thank all of the
Plant Health Care team for their contribution to the success of our Company and look
forward to working with them to achieve our shared goals.
Dr Albert Fischer
Non-executive Chairman
28 March 2008 Plant Health Care plc
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Chief Executive’s report
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Introduction and
summary of operating
results
2007 was another successful year for Plant Health Care, with our ﬁrst two major
partnership deals with Bayer CropScience and Monsanto for Myconate and Harpin,
respectively, and turnover up 34% to a record $18.3 million (2006: $13.7 million). I am
delighted to report that this growth was led by our US Agriculture division (established in
2006) which generated $4.0 million of sales in 2007 and from fee income from partners,
which contributed some 5% of turnover.
Gross proﬁt was up 37% to $8.4 million (2006: $6.1 million). The improvement in our
gross margin to 45.6% (2006: 44.7%) is attributable to fee income from our partners
and to our entry into the higher margin Harpin business, which contributed sales
of $2.6 million.
We continued to develop and test new applications of our natural technologies, and we
expanded our sales team to achieve the above-mentioned sales growth in US Agriculture.
This resulted in increased operating costs of $13.6 million (2006: $9.0 million).
The operating loss for the year was $5.2 million (2006: loss of $2.9 million), slightly
higher than expected due to a delay on another Harpin deal, which is expected to be
completed in the ﬁrst half of the current year. Net cash at 31 December 2007 was
$9.8 million, boosted by a successful $10 million equity fundraising in September 2007.
Our natural
technologies
partnerships
Myconate
 Myconate increases the rate of plant root colonisation by beneﬁcial fungi, which extract
nutrients from the soil for the beneﬁt of the plant. This allows the plant to grow more quickly
and with more strength to resist pathogens and disease. The result is healthier plants and,
in the context of agriculture, signiﬁcantly improved yields. Myconate is particularly
effective when applied in the earliest stages of a plant’s growth, and can be applied as a
seed coating or side dressing at time of planting.
In January 2007, the ﬁrst manufacture and supply agreement for Myconate was signed
with Bayer CropScience, covering seed treatment of corn, cotton, soybean and
sunﬂower, and a year on Bayer conﬁrmed that they are continuing to pursue their planned
programme to introduce Myconate to their market. As a result, we have now received our
ﬁrst milestone payment and our relationship with Bayer remains strong.
Bayer is the worldwide leader in seed coatings for corn, and is also strongly represented in
seed coatings for the other crops in which we are partnered with them. They have
indicated their intention to launch their ﬁrst Myconate-based product in 2010, and we
expect that such products will, following a period of market rollout, address a signiﬁcant
proportion of the markets in which Bayer is currently represented.
In 2007, we also continued our independent programme of Myconate testing in other
applications, the results of which reafﬁrm signiﬁcant yield enhancement when it is applied
to grains and high-value vegetables. Plant Health Care plc
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Chief Executive’s report
continued
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For example:
➢ on grain and straw in winter wheat, tested using a variety of application methods,
there were particularly pleasing yield improvements. When applied as a seed
treatment, yield increased as much as 5.4% and, when applied as a ground spray,
the improvement was up to 7.4%. Additionally, Myconate’s application as both a
seed treatment and a ground spray delivered yield increases of up to 9.4%;
➢ when applied to carrots in furrow application at seeding, Myconate produced a
yield improvement in excess of 30% in two separate trials;
➢ celery trials demonstrated a 14% harvestable yield increase when Myconate was
applied as a pre-plant, transplant spray. Against the control, tests showed a 12%
increase in total weight and 12% increase in top weight; and
➢ a 13% yield increase was achieved in trials on onions; as with celery, application
was by pre-plant, transplant spray. Additionally, a 13% increase in bulb weight and
11% increase in diameter were recorded.
We have reached non-exclusive agreements with several multi-national agriculture
companies to allow them to run their own tests and consider the commercialisation of
Myconate for application on small grain cereals, such as wheat and barley.
We will continue discussions with prospective partners regarding the use of Myconate on
vegetables, although we will also consider the option of addressing this market, which is
characterised in the USA by a small number of large, specialised growers for each of the
main crops, by means of direct sales.
Finally, we continue to explore the potential for Myconate in the emerging market of
energy crops. We have evidence that Myconate is highly effective on crops such as
switchgrass, which are anticipated to be the coming crops of choice to fuel the growing
demand for biofuels, and we will address that market with a properly structured
development, testing and commercialisation model.
Harpin
The acquisition of certain assets from Eden Bioscience was completed in February 2007.
The assets included the patent-protected rights to Harpin technology and, additionally,
provided Plant Health Care with Harpin-based products aiding the development of our
US Agriculture business.
Harpin is a protein which, while itself harmless to a plant, causes the plant to believe it is
under attack from pathogens. Accordingly, the plant triggers its natural defences, which
typically involve stronger growth and pathogen resistance. Plant Health Care plc
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Chief Executive’s report
continued
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Amongst the proven applications of this technology to date are:
➢ to defend against cyst nematodes, particularly in soybeans; cyst nematodes are
estimated to cause approximately $1.0 billion of damage to the annual soybean
crop in the USA, and there is no other effective treatment available today;
➢ to generate extended shelf life in leaf and other salad crops, of real economic
beneﬁt to supermarkets and other retailers; and
➢ to improve yield in crops treated with glyphosate, an industry-standard herbicide.
At the interim stage, the Board stated its belief that “−following an evaluation of the
technology, the commercial prospects for Harpin were signiﬁcantly greater than initially
thought. In light of this, Plant Health Care has actively pursued opportunities to further
demonstrate the efﬁcacy of Harpin and has undertaken trials in conjunction with the
American Soybean Association and the University of Illinois”.
These ﬁeld trials of Harpin-based N-Hibit and ProAct delivered very encouraging results.
Yield improvements in cotton were between 6% and 12% when used in combination with
nematicides and both products consistently demonstrated their efﬁcacy in improving crop
yields by reducing harmful nematodes.
The acquisition of Eden Bioscience’s assets provided us with ﬁve years of trial data
demonstrating signiﬁcant yield increases for plants treated with a combination of
glyphosate and Harpin. Additionally, we continued to pursue registration of Pre-Tect,
our shelf-life extension product.
Our ﬁrst partnership agreement to develop, evaluate and commercialise Harpin was
signed with Monsanto Company in December 2007. This agreement grants Monsanto
exclusive rights to certain applications of Harpin in return for undisclosed upfront fees,
milestone payments, which are dependent on the progress of the development
programme, and ongoing royalty payments based on the acreage to which the product is
applied. The Board believes that, once evaluations are complete, products could begin to
be available to growers by 2009.
Product sales Agriculture
We continue to believe that agriculture represents the market of greatest potential for Plant
Health Care. As well as through the partnerships described above, we see signiﬁcant
potential in our product sales operations. In 2007, we saw strong growth in our agriculture
businesses in the USA, Mexico and in various European markets. Only in the UK was there
a slight slowdown.
Our growth is derived from a number of products which meet particular needs of
growers and their customers. For example, our natural liquid plant foods are proving
popular with growers with a need for a high nitrogen input but a desire also for natural
inputs, PreTect offers extended shelf life in-store for a wide variety of leaf and salad
plants, while Harpin-based N-Hibit offers soybean farmers a means of addressing their
nematode problem.
It is through these and other similar innovative products, and a strategy of progressively
introducing these products into new territories (as registrations and marketing resources
allow), that we anticipate continued strong growth in our direct sales to the world’s
agriculture markets. Plant Health Care plc
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Chief Executive’s report
continued
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Horticulture and Turf
Our US horticulture and turf business reached a major milestone in 2007 by delivering a
positive ﬁnancial contribution for the ﬁrst time on the back of record sales of $6.3 million
(2006: $6.0 million). We had recognised that the growth potential for Plant Health Care
in this market in the near term does not match that available in agriculture, and had set our
sights, therefore, on achieving a positive return from what we could conservatively
anticipate in sales, rather than on major promotional spending to chase growth, which
might prove difﬁcult to secure. Our focused work with major distributors, combined with
stringent cost control, resulted in the shift into proﬁtability for this operating unit.
Outlook A number of important milestones were met during the period and we made signiﬁcant
progress towards achieving our objectives.
Our work with Bayer CropScience and Monsanto continues to take us closer to
realising signiﬁcant revenue and ﬁnancial returns from the widespread exploitation of
our natural technologies.
Our product sales activities provide a powerful platform from which to promote our
technologies, and also generate revenue and contribution from higher value, smaller
volume products and crops.
We continue to invest heavily into the development and testing of our technologies to
ensure that we maximise our potential from their exploitation, and we remain alert to the
possibilities of securing further innovative natural technologies, which can be effectively
deployed in our target markets.
We remain focused on building Plant Health Care into the leading global provider of
natural technologies and products which promote plant growth, health and yield, and
thereby building value for our shareholders. The macro drivers and market conditions
remain extremely favourable and the prospects for our Company remain strong. As a
result, we look forward to reporting further progress during the current year.
John Brady
Chief Executive
28 March 2008 Plant Health Care plc
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Directors
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Dr. Albert Fischer
Non-executive Chairman
Age 50
Dr. Fischer is a citizen of the Netherlands. He joined the Group as Non-executive
Chairman in 2001. Dr. Fischer is managing partner and co-founder of Planet Capital, an
independent advisory ﬁrm to entrepreneurs, management teams and investors in clean
technology; it is also an active investor in companies with key intellectual property in clean
technology. Previously, he was a partner with Green Partners and PYMWYMIC, an
investment ﬁrm focused on businesses that integrate the values of a socially and
environmentally sustainable society into their day-to-day business practices. Prior to that,
Dr. Fischer served in various senior functions at Reed Elsevier Science plc, one of the
world’s largest providers of scientiﬁc and technical information products. Dr. Fischer
served at Elsevier for nine years; his last function was Head of Development.
Dr. Fischer is a director of Social Venture Network Europe, a network of European
enterprises and organisations dedicated to working according to sustainable business
practices.
John Brady
Chief Executive
Age 53
Mr. Brady is a US national and joined the Group as Chief Executive in 2001. Mr. Brady
is responsible for implementing the Group’s strategy and for management of the
Group’s operations.
Prior to joining the Group, Mr. Brady was President and CEO of Alaska Seafood
International, a seafood product manufacturing company. Prior to that, Mr. Brady served
as Executive Vice President, Operations, for Anderson Clayton Corp, one of the world’s
largest vertically-integrated cotton companies. Mr. Brady served at Anderson Clayton
for 19 years.
Mr. Brady is also a non-executive director of Organic Bouquet Inc. and Organic Style
Limited.
Mr. Brady holds an MBA degree with an emphasis in Finance from Arizona State
University and a BA degree in Political Science from the University of Connecticut.
Dr. Donald Marx
Executive Director and
Chief Scientist
Age 71
Dr. Marx is a US national and was a founding director of the Group in 1995, following
37 years with the USDA Forest Service. As Chief Scientist, Dr. Marx oversees the
Group’s research programmes and works with the Group’s partners and customers to
explain and demonstrate to them the beneﬁts of Plant Health Care’s approach to plant
management. He also manages the university and ﬁeld-testing of Plant Health Care
products, and chairs the Company’s Scientiﬁc Advisory Board.
Dr. Marx lectures extensively throughout the USA and abroad on soil ecology, plant
physiology, mycorrhizal fungi and bacteria. He has authored more than 250 scientiﬁc
papers in forest microbiology, has presented more than 400 invitational lectures
in 28 countries, as well as at most major universities in the USA, and has carried out
research in 25 countries. As a result of his accomplishments Dr. Marx has received
numerous awards, including the Marcus Wallenberg Prize (awarded by the King
of Sweden), the Barrington Moore Award from the Society of American Foresters, the
USDA Distinguished Science Award, the Superior Achievement Award from the
US Department of Energy and the Congress Medal for Outstanding Achievement in
Plant Protection from the International Congress of Plant Protection. Plant Health Care plc
..............................................
..............................................
15
Directors
continued
.................................................................................................................................................................
Stephen Weaver
Finance Director
Age 54
Mr. Weaver is a US national and joined the Group as Chief Financial Ofﬁcer in 2007.
He was appointed to the Board on 28 March 2008. He is responsible for managing the
accounting, ﬁnance, human resource and information technology functions for the Group.
Prior to joining the Group, Mr. Weaver was Chief Financial Ofﬁcer of Xaloy, Inc., an
international manufacturing business serving the global plastics industry. Prior to that,
Mr. Weaver served consecutively as Vice President and Chief Financial Ofﬁcer and
Senior Vice President and General Manager of Carbide/Graphite Group, Inc., a
manufacturing company serving the global steel industry. He served at Carbide/Graphite
Group, Inc., a NASDAQ-listed company, for 11 years.
Mr. Weaver holds an MBA degree from Indiana University and a BA degree in economics
from DePauw University.
Thomas Isler
Senior Independent
Director
Age 63
Mr. Isler is a Swiss national and joined the Board of the Group in 2001. Mr. Isler has
extensive experience in industry, international marketing and private and international
banking. He is currently CEO of a privately-owned Swiss textile company, and is a
director of several other Swiss companies, including Desco von Schulthess AG, an
international trading house. From 1987 to 2005, Mr. Isler served as a Member of
Parliament of the Canton of Zurich.
Dr. Robert Chanson
Non-executive Director
Age 58
Dr. Chanson is a Swiss national. He joined the Board of the Group in 1995. He is
a lawyer, politician and ecoinvestment consultant. In 1991, he founded Eco-Rating
International Limited in Switzerland and, since its inception, has been Executive
Chairman. He is also Chairman and CEO of Ambiocare Holdings Limited in Switzerland.
Dr. Chanson acts as a member of various advisory boards and committees in academic
research, commerce and environmental conservation in Europe and the USA.
Samuel Wauchope
Non-executive Director
Age 56
Mr. Wauchope is a UK citizen and joined the Group as a non-executive director in
June 2004. A chartered accountant, Mr. Wauchope’s executive career has involved
CEO and Executive Chairman positions in a number of UK listed companies, including
Acorn Computer Group plc, Oceonics Group plc and Ultrasis plc. He has also
served as a non-executive director on the boards of other fast-growing UK quoted
companies, including Waste Recycling Group plc and Gall Thomson Environmental
plc. Mr. Wauchope is currently advisor to a number of private companies and a
non-executive director of Property Recycling Group plc. Plant Health Care plc
...............................................
...............................................
16
Board committees
.................................................................................................................................................................
The principal standing committees appointed by the Board are as follows:
Audit Committee
The Audit Committee is chaired by Sam Wauchope. Thomas Isler is also a member. The
Committee provides a forum for reporting by the Group’s auditors and reviews the Group’s
budget and its interim and ﬁnal ﬁnancial statements before their submission to the Board.
The Committee also monitors the Company’s internal control and risk management
practices and reports to the Board on these. The Committee advises the Board on the
appointment of external auditors and on their remuneration, both for audit and non-audit
work. It also discusses the nature and scope of the audit with the auditors.
Remuneration Committee
The Remuneration Committee is chaired by Thomas Isler and includes Albert Fischer,
Robert Chanson and Sam Wauchope as members. The Committee is responsible for
determining the contract terms, remuneration and other beneﬁts for executive directors and
senior management. Its policy is to ensure that, through a process of regular review, the
Group’s remuneration arrangements attract and incentivise the quality of executive
management that the Company needs to achieve its goals and grow shareholder value,
and are in line with best practice. The Committee may take independent specialist advice
to assist it in its work. When required, the Committee is also involved in the selection
process for executive directors and approves remuneration before a ﬁnal offer is made.
The Remuneration Committee report is set out on pages 20 to 25. Plant Health Care plc
..............................................
..............................................
17
Corporate governance statement
.................................................................................................................................................................
In July 2003, the Financial Reporting Council published the Principles of Good
Governance and the Code of Best Practice (“the Combined Code”). This code was
updated in July 2006.
Since admission to AIM, Plant Health Care plc has taken note of the Combined
Code and has applied its principles of corporate governance commensurate with the
Company’s size, notwithstanding that the rules of the London Stock Exchange do
not require companies that have securities traded on AIM to formally comply with the
Combined Code.
The Board is accountable to the Company’s shareholders for good governance and the
statement set out below describes how the principles identiﬁed in the Combined Code
are applied.
Board composition The Board currently comprises a non-executive chairman, three executive directors and
three other non-executive directors.
Biographies of the Board members appear on pages 14 and 15. These indicate the high
levels and range of business experience which is essential to oversee effectively a business
of the size, complexity and geographical spread of the Group.
The Board considers all of the non-executives to be independent in judgment and
character, while acknowledging the following departures from the Combined Code’s
anticipated criteria for independence:
(i) While serving as non-executive directors of Plant Health Care, Inc., Albert Fischer,
Robert Chanson and Thomas Isler were granted options for their services to that
company. At ﬂotation, these options were exchanged for options in Plant Health
Care plc. The Company will not make any further awards of options to
non-executive directors.
(ii) Robert Chanson was ﬁrst appointed to the Board of the Group in 1995. He has,
therefore, now served as a director of the Group for over the recommended
maximum of nine years.
Robert Chanson and Donald Marx have informed the Board that they will not be seeking
re-election at the forthcoming Annual General Meeting on 6 June 2008, and will stand
down from the Board as of that date.
Board committees The Board has established audit and remuneration committees, as described on
page 16. No separate nominations committee has been established; the full Board acts
as such a committee when changes to the Board of directors are proposed.
Workings of the Board The Board meets on a pre-scheduled basis nine times each year and more frequently when
required. The Board has a schedule of matters reserved to it for decision and the
requirement for Board approval on these matters is communicated widely throughout the
senior management of the Group. The schedule includes matters such as: approval of the
Group’s strategic plan; extension of the Group’s activities into new business or
geographic areas; any decision to cease to operate all or any material part of the Group’s
business; changes relating to the Group’s capital structure; major (over $1 million) bids by Plant Health Care plc
...............................................
...............................................
18
Corporate governance statement
continued
.................................................................................................................................................................
PHC Reclamation; contracts that are material strategically or by reason of size; investments
including the acquisition or disposal of interests in the voting shares of any company or the
making of any takeover offer; and the prosecution, defence, or settlement of litigation
material to the Group.
There is an agreed procedure for directors to take independent professional advice if
necessary at the Company’s expense. This is in addition to the access which every director
has to the Company Secretary. The Secretary is charged by the Board with ensuring that
Board procedures are followed.
The differing roles of Chairman and Chief Executive are acknowledged and deﬁned in
separate statements approved by the Board. The key functions of the Chairman are to
conduct Board meetings and meetings of shareholders and to ensure that all directors are
properly briefed in order to take a full and constructive part in Board discussions. The Chief
Executive is required to develop and execute business strategies and processes to enable
the Group’s business to meet the requirements of its shareholders.
The Senior Independent Director acts as a point of contact for shareholders and other
stakeholders with concerns which have failed to be resolved or would not be appropriate
through the normal channels of the Chairman, Chief Executive or Finance Director and can
be contacted in conﬁdence through the Company Secretary. The Senior Independent
Director also meets with the other members of the Board, without the Chairman present, on
at least an annual basis in order to evaluate and appraise the performance of the
Chairman.
To enable the Board to function effectively and allow directors to discharge their
responsibilities, full and timely access is given to all relevant information. In the case of
Board meetings, this consists of a comprehensive set of papers, including regular business
progress reports and discussion documents regarding speciﬁc matters.
The Board conducts an annual Board Performance Evaluation in line with the requirements
of the Combined Code.
Re-election of directors Any director appointed during the year is required under the provisions of the Company’s
articles of association to retire and seek election by shareholders at the next annual general
meeting. The articles also require that one-third of the directors retire by rotation each year
and seek re-election at the annual general meeting. The directors required to retire will be
those in ofﬁce longest since their previous re-election.
Remuneration of
directors
A statement of the Company’s remuneration policy and full details of directors’
remuneration are set out in the Remuneration Committee report on pages 20 to 25.
Executive directors abstain from any discussion or voting at full Board meetings on
Remuneration Committee recommendations where the recommendations have a direct
bearing on their own remuneration package. Plant Health Care plc
..............................................
..............................................
19
Corporate governance statement
continued
.................................................................................................................................................................
Communication The Company places a great deal of importance on communication with its shareholders.
The Company publishes an interim statement, as well as its full-year report and accounts.
Both are mailed to all shareholders and upon request to other parties who have an interest
in the Group’s performance. Regular communication with shareholders also takes place
via the Company website www.planthealthcare.com/investor.
There is regular dialogue with major shareholders, as well as general presentations after
the interim and ﬁnal results. From time to time, these meetings involve the non-executive
chairman or other non-executive directors. All shareholders have the opportunity to ask
questions at the Company’s annual general meeting.
Internal controls and
risk management
The directors are responsible for the Group’s system of internal control and for reviewing its
effectiveness. However, such a system can provide only reasonable, but not absolute,
assurance against material misstatement or loss.
The directors recognise that the Group is ambitious and seeking signiﬁcant growth. There
is an on-going process in place to review regularly the control systems across the Group to
ensure that they develop in anticipation of this growth. Twice a year, prior to the
announcement of the Group’s interim and ﬁnal ﬁnancial results, the Finance Director
presents to the Board for discussion and approval a summary of the key internal controls in
place during the prior period and proposals for enhancements to these controls in the
forthcoming period. Based on this process, the directors believe that the Group has
internal control systems in place appropriate to its size and nature.
The Board also has in place a formal ongoing process for identifying, evaluating
and managing the signiﬁcant risks faced by the Group, which complies with the
guidance provided by the document: Internal Control: Guidance for Directors on the
Combined Code.
The Company does not maintain an internal audit function. The directors do not believe
such a function is justiﬁed in terms of the scale of the Group or the costs involved.
Auditor independence The Audit Committee has sole responsibility for assessing the independence of the external
auditors, BDO Stoy Hayward LLP. The Committee has had due regard to the document
published in May 2003 by the Institute of Chartered Accountants in England and
Wales: Reviewing Auditor Independence: Guidance for Audit Committees. Each year
the Committee:
➢ seeks reassurance that the external auditors and their staff have no family, ﬁnancial,
employment, investment or business relationship with the Company. To this end, the
Committee requires the external auditors and their associates to conﬁrm this in
writing, and detail the procedures which the auditors have carried out in order to
make this conﬁrmation;
➢ checks that all partners engaged in the audit process are rotated at least every
ﬁve years;
➢ assesses the likely impact on the auditors’ independence and objectivity before
awarding them any contract for additional services. It is Company policy to require
Audit Committee approval for all non-audit services provided by the independent
auditors; and
➢ has as a standing agenda item at each Audit Committee meeting the consideration
of auditor independence. Plant Health Care plc
...............................................
...............................................
20
Remuneration Committee report
.................................................................................................................................................................
The Remuneration Committee is chaired by Thomas Isler and includes Albert Fischer,
Robert Chanson and Sam Wauchope as members. All are non-executive directors. The
Committee is responsible for determining the contract terms, remuneration and other
beneﬁts of the executive directors and of the Chairman, and for monitoring the
remuneration of ﬁrst-line executive management. The Committee may also call on outside
compensation experts as required.
Remuneration policy It is Group policy to set directors’ remuneration levels to attract, incentivise and retain the
quality of individuals that the Group requires to succeed in its chosen objectives.
It is also Group policy to ensure that there is a strong link between the level of executive
directors’ remuneration and the performance of the Group in achieving its goals.
At the forthcoming annual general meeting, shareholders will be given the opportunity to
ask the chairman of the Remuneration Committee questions on any aspect of the Group’s
remuneration policy.
Elements of
remuneration –
executive directors
The following comprise the principal elements of executive directors’ remuneration:
➢ basic salary and beneﬁts;
➢ annual bonus;
➢ long-term share-based incentives;
➢ pension contributions; and
➢ post-employment health beneﬁts.
Basic salary and beneﬁts
Salaries are reviewed (but not necessarily increased) annually by the Committee. As the
level of each individual director’s remuneration can be signiﬁcantly augmented through
performance-related bonuses, only in exceptional circumstances will the Committee
consider an increase in excess of the general rate of wage inﬂation for the United States.
Where such an increase has been awarded, the Committee will publish the reasons
behind its decision in the Remuneration Committee report.
In addition to basic salary, each executive director is entitled to the following main
beneﬁts:
➢ up to 20 days holiday per annum;
➢ coverage under the Company’s health insurance plans or a cash payment to cover
the director’s cost of acquiring medical insurance; and
➢ coverage under the Company’s long-term and short-term disability and group term
life insurance plans.
Annual bonus
Annual bonuses are payable to each executive director based on achievement of
ﬁnancial, strategic and sustainability objectives, both corporate and personal. For 2007,
the directors had bonus potential of between 25% and 67% of their basic salaries: for
2008, the ﬁgures are between 40% and 62%. This ensures that there is a signiﬁcant
element of “at risk” pay, which is only available when good results are achieved. Plant Health Care plc
..............................................
..............................................
21
Remuneration Committee report
continued
.................................................................................................................................................................
Long-term share-based incentives
Each of the executive directors is eligible to participate in the Company’s share option
schemes and long-term incentive stock award plan. The Company may award options
and shares under these plans up to the greater of 3% of its issued share capital or such
number as, when aggregated with any outstanding options converted from the Plant
Health Care, Inc. option plans described below, amounts to no more than 10% of the
issued share capital of the Company. The main features of these plans are:
(a) Share option schemes
Prior to the formation of Plant Health Care plc, the then executive directors participated in
the Plant Health Care, Inc. Incentive Stock Option plans. Under these plans, options were
periodically awarded at the discretion of the board of directors of that company. These
plans were effectively frozen at the time of admission to AIM. Outstanding options in Plant
Health Care, Inc. were converted into options in Plant Health Care plc bearing the same
rights mutatis mutandis as under the Plant Health Care, Inc. scheme. No further awards of
options will be made under the Plant Health Care, Inc. plans.
In July 2004, the Board of directors adopted the Plant Health Care plc Unapproved Share
Option Scheme 2004. Under this scheme, the Board may grant options at an exercise
price of not less than the market value of a share on the date of award. Options may
normally be exercised between three and ten years from grant. In most cases, vesting is
also dependent upon the Company’s total shareholder return exceeding that of the AIM
All-Share Index for the period from grant to vesting.
(b) Long-term incentive stock award plan
On 8 June 2007, the Company adopted the Plant Health Care plc 2007 Long Term
Incentive Plan (the “LTIP”). The main features of the plan are:
➢ all employees of the Company and its subsidiaries are eligible to participate in the
LTIP. The Remuneration Committee shall select the employees to receive awards and
shall determine the number of ordinary shares subject to a particular award;
➢ the grantee must pay at least the nominal value per share to receive the stock award;
➢ the Remuneration Committee will determine the period of vesting for any given stock
award. Vesting of any stock award will be contingent on the fulﬁlment of
challenging performance criteria set by the Committee. The Committee may
accelerate the vesting or amend or relax performance conditions, to the extent that
conditions which are amended or relaxed will be no more or less difﬁcult to satisfy
than when they were originally imposed;
➢ if a grantee terminates employment for any reason prior to vesting of all or a portion
of a stock award, the unvested portion must be returned to the Company; and
➢ the LTIP automatically terminates ten years from its effective date of 8 June 2007,
unless terminated earlier by the Company or extended by the Company with the
approval of the shareholders. Plant Health Care plc
...............................................
...............................................
22
Remuneration Committee report
continued
.................................................................................................................................................................
Pension contributions
Each of the executive directors is entitled to participate in the Plant Health Care, Inc. 401(k)
Plan. This is a deﬁned contribution pension plan approved by the US Internal Revenue
Service. The main features of the plan are:
➢ participation is open to all US-based employees who have completed a
probationary period after initial employment;
➢ employees may contribute a percentage of salary to the plan through a payroll
withholding scheme;
➢ the Company contributes an amount up to 3% of compensation, at the discretion of
the Board, for all employees eligible to participate;
➢ vesting of Company contributions is 20% after two years of service, with further
vesting in 20% annual increments until vesting is complete; and
➢ the plan is subject to various statutory non-discrimination tests to ensure that it does
not favour highly-compensated employees.
Post-employment health beneﬁts
John Brady’s service contract includes a beneﬁt for payment of health beneﬁts during his
lifetime, unless he is terminated by the Company for cause, subject to limitations on the
annual cost as set forth in the contract.
Elements of
remuneration –
non-executive directors
The remuneration for non-executive directors consists solely of fees for their services in
connection with the Board and Board committees. Sam Wauchope receives 100% of his
fees in cash. The other non-executive directors, including the Chairman, have to
31 December 2007 received 50% of their fees in cash and 50% in the form of the
Company’s ordinary shares. Commencing 1 January 2008, Robert Chanson will also
receive 100% of his fees in cash.
Prior to the creation of Plant Health Care plc, the then non-executive directors participated
in the Plant Health Care, Inc. Incentive Stock Option plans described above. Albert
Fischer, Robert Chanson and Thomas Isler hold such options (now converted to options
over shares in Plant Health Care plc). No options have been granted to non-executives
since the formation of Plant Health Care plc and no further options will be granted
to non-executives.
Service contracts The Company has service contracts with all executive and non-executive directors.
Provisions included in the service contracts include:
For executive directors:
➢ termination may be initiated by either party with a notice period of 12 months;
➢ if the Company terminates other than for cause, the individual is entitled to a
payment equal to 12 months’ monthly base salary plus a payment equal to salary to
the effective date of termination, payment for accrued but unused vacation, and
pro rata cash bonus for the year to date (if targets are being met); and Plant Health Care plc
..............................................
..............................................
23
Remuneration Committee report
continued
.................................................................................................................................................................
➢ in the event of termination for cause, the individual would receive only base salary
through the date of termination and accrued vacation pay. “For cause” includes
fraud or felonious conduct; embezzlement or misappropriation of Company funds
or property; refusal, misconduct in or disregard of the performance of the
individual’s duties and obligations; abandonment or voluntary resignation; death,
retirement or permanent disability.
For non-executive directors:
➢ termination is on not less than one month’s written notice; and
➢ directors may be terminated with immediate effect for serious breach or repeated or
continued material breach of any obligations to the Company; any act of dishonest
or serious misconduct or conduct which tends to bring the director or the Company
into disrepute; or a declaration of bankruptcy.
In addition to the above, the Company’s articles of association require that at least
one-third of the directors retire by rotation at each annual general meeting. Such retiring
directors are eligible for re-election.
Outside appointments The committee believes that there are signiﬁcant beneﬁts, to both the Company and the
individual, from executive directors accepting non-executive directorships of outside
companies. The committee will consider up to one external appointment, for which a
director may retain some or all of the fee. John Brady is a non-executive director of Organic
Bouquet Inc. and Organic Style Limited (two connected companies regarded by the
Committee as a single appointment for this purpose), and is permitted to retain a maximum
of $25,000 of the fee received, the balance (if any) being remitted to the Company.
Directors’
remuneration
The remuneration of the individual directors who served during the year, for the period for
which they were directors, was as follows:
Base salary
and fees
Performance-
related
bonus
Other
short-term
beneﬁts
Compensation
for loss
of ofﬁce
Total
2007
Total
2006
$’000s $’000s $’000s $’000s $’000s $’000s
Executive:
J Brady 281 200 5 — 486 252
W Bratkowski* 63 15 10 145 233 130
D Marx 142 30 7 — 179 153
Non-executive:
A Fischer 76 — — — 76 65
R Chanson 55 — — — 55 56
T Isler 55 — — — 55 51
S Wauchope 70 — — — 70 60
742 245 22 145 1,154 767
* Appointed 3 March 2006; resigned 16 May 2007
In 2007, the Company accrued a contribution to the 401(k) Plan of 1.5% of eligible
compensation. In 2007, pension expense for the executive directors was $8,000 (2006:
nil) and post-employment health beneﬁts for John Brady were $23,000 (2006: nil). Plant Health Care plc
...............................................
...............................................
24
Remuneration Committee report
continued
.................................................................................................................................................................
With effect from 1 April 2007, the Committee recommended and the Board approved an
increase in the base salary of John Brady to $300,000, and increased his bonus potential
to an annual $200,000. This exceptional increase reﬂects the Board’s view of the
outstanding performance of John Brady in developing the Company to its current position,
and acknowledges also the value that the market would place on those achievements.
Stephen Weaver joined the Board as Finance Director on 28 March 2008. He has a
base salary of $200,000 and annual bonus potential of up to 40% of base salary.
Directors’ share-based
incentives
Movements in year
On 30 January 2007, John Brady exercised 300,000 options at 37 pence from options
exercisable until 20 August 2011. On the same date, Don Marx exercised all of his
options, comprising 715,761 options at 37 pence and 34,237 options at 71 pence.
The share price at the close of the day on which the options were exercised was
233.5 pence.
Upon the resignation of Walter Bratkowski on 16 May 2007, 200,000 options
granted to him, which had not vested, were forfeited.
On 1 July 2007, John Brady was awarded 300,000 ordinary shares under the LTIP. The
stock award will vest, subject to certain performance and service conditions, in three equal
tranches following the announcement of the Company’s ﬁnal results for the years ended
31 December 2007, 2008 and 2009.
With regard to the 100,000 shares, the vesting of which was dependent upon the
achievement of 2007 performance targets, the Committee has determined that 20,000
of such shares will vest, the balance being forfeited. These shares will be allotted to
John Brady after the announcement of the Company’s ﬁnal results for 2007.
On 20 July 2007, Don Marx, as personal representative of the Estate of Selina Marx,
exercised options over 3,470 shares at 73.5 pence. The share price at the close of the
day on which the options were exercised was 281 pence.
On 4 October 2007, Stephen Weaver (then Chief Financial Ofﬁcer) was awarded
100,000 ordinary shares under the LTIP. The stock award will vest, subject to certain
performance and service conditions, following the announcement of the Company’s ﬁnal
results for the year ended 31 December 2009.
There were no movements in the directors’ share-based incentives in 2006.
Further information related to shares issued to directors during the year is detailed in
note 21 to the ﬁnancial statements. Plant Health Care plc
..............................................
..............................................
25
Remuneration Committee report
continued
.................................................................................................................................................................
Interests in share-based incentives
(a) Options
The interests of the directors in share options over the ordinary shares of the Company at
31 December 2007, all of which are exercisable now, are set out in the following table.
No of
options
Exercise
price
£ Expiry date
A Fischer 37,500 0.37 18 November 2011
37,500 0.37 18 November 2012
37,500 0.37 1 March 2014
75,000 0.74 23 March 2014
37,500 0.37 15 June 2014
J Brady 225,000 0.37 20 August 2011
918,975 0.37 4 March 2014
56,025 0.71 4 March 2014
R Chanson 37,500 0.37 18 November 2011
37,500 0.37 18 November 2012
37,500 0.37 1 March 2014
60,000 0.74 23 March 2014
37,500 0.37 15 June 2014
T Isler 37,500 0.37 18 November 2011
37,500 0.37 18 November 2012
37,500 0.37 1 March 2014
52,500 0.74 23 March 2014
37,500 0.37 15 June 2014
1,837,500
There were no movements in the above holdings from 1 January 2008 to the date
of this report.
(b) LTIP
As described above, on 1 July 2007 John Brady was awarded 300,000 shares
under the LTIP and on 4 October 2007 Stephen Weaver was awarded 100,000 shares
under the LTIP.
As described above, following the announcement of the Company’s ﬁnal results for
2007, 20,000 share awards will vest and 80,000 share awards will be forfeited,
from the ﬁrst tranche of LTIP awards granted to John Brady.
(c) Other information
During the year, the Company’s share price on AIM ranged between 169.5 pence
and 289 pence. At 31 December 2007, the share price was 271 pence, and at
27 March 2008, the last working day prior to the approval of this Annual Report, the
share price was 247.5 pence. Plant Health Care plc
...............................................
...............................................
26
Report of the directors
for the year ended 31 December 2007
.................................................................................................................................................................
The directors present their report together with the audited ﬁnancial statements for the
year ended 31 December 2007.
Results and dividends The results of the Group for the year are set out on page 33 and show a loss for the year
of $5,413,000 (2006: loss of $2,998,000).
The directors recommend that no dividend be paid at this time.
Principal activities,
review of business and
future developments
Details of the Group’s principal activities and a review of business and future
developments are included in the Chairman’s statement and Chief Executive’s report
on pages 8 to 13.
Directors The directors of the Company at the end of the year and their beneﬁcial interests in the
ordinary share capital of the Company, options to purchase ordinary shares of the
Company and LTIP share awards were as follows.
At 31 December 2007 At 1 January 2007
Shares Options LTIP Shares Options
A Fischer 151,092 225,000 — 138,628 225,000
J Brady — 1,200,000 300,000 — 1,500,000
D Marx 432,283 — — 578,815 753,468
R Chanson 135,166 210,000 — 135,166 210,000
T Isler 406,654 202,500 — 397,777 202,500
S Wauchope 52,232 — — 50,000 —
Walter Bratkowski resigned as a director on 16 May 2007.
On 28 March 2008, Stephen Weaver was appointed to the Board of Directors as
Finance Director. On the same date, Donald Marx and Robert Chanson announced
that they will not be seeking re-election at the forthcoming annual general meeting on
6 June 2008 and will leave the Board as of that date.
Further details of the directors’ share options are shown in the Remuneration Committee
report on pages 24 and 25.
None of the directors has any holding in any subsidiary company, nor any material interest
in the transactions of the Group.
Substantial
shareholders
On 27 March 2008, the Company had been notiﬁed of the following holdings
representing in excess of 3% of the Company’s ordinary shares:
Name
Shares
held
Percentage of
issued share
capital
Pictet Asset Management S.A. 4,350,900 10.34
Gartmore Investment Limited 3,983,820 9.47
Universities Superannuation Scheme Limited 2,552,500 6.08
Aviva plc and its subsidiaries 2,328,481 5.27
Branco Weiss 2,196,954 5.24
Funds managed by AXA SA for Framlington HSBC 2,125,995 5.05
Credit Suisse 1,377,432 3.11 Plant Health Care plc
..............................................
..............................................
27
Report of the directors
for the year ended 31 December 2007
.................................................................................................................................................................
Research and
development
The Group continues to invest in research and development activities with an emphasis on
the commercialisation of existing technologies and formulation of products to meet speciﬁc
customer needs.
Business review For a discussion of the Group’s 2007 performance against its key performance indicators,
see the Chairman’s statement and Chief Executive’s report on pages 8 to 13.
Key performance indicators (“KPIs”):
The Group uses a range of performance measures to monitor and manage the business
effectively. The most signiﬁcant of these relate to ﬁnancial performance and to the Group’s
progress in proving and exploiting its key natural technologies.
KPIs for ﬁnancial performance include turnover, gross proﬁt margin, and earnings before
interest and tax. These KPIs indicate the volume of work the Group has undertaken, as well
as the efﬁciency and proﬁtability with which this work has been delivered.
KPIs for the Group’s natural technologies include the number and nature of contracts
realised with partners, and progress along the mutually agreed paths to commercial
launch of products.
Principal risks and uncertainties
There are a number of potential risks and uncertainties which have been identiﬁed within
the business which could have a material impact on the Group’s longer-term performance.
These can be summarised as:
➢ the Group is dependent on a small management team;
➢ technology and commercialisation risks associated with the Group’s proprietary
products and its technology partners must be monitored, developed and modiﬁed
as conditions require; and
➢ the Group does not currently generate sufﬁcient cash from operations to meet its
annual funding needs. In the past, this has required the Group to raise cash from its
shareholders. Over the longer term, this requires the Group to become proﬁtable
and cash generating.
Financial instruments:
The Group uses various ﬁnancial instruments, including loans, equity offerings, cash and
items such as trade debtors and trade creditors that arise directly from its operations. The
main purpose of these ﬁnancial instruments is to raise ﬁnance for the Group’s operations.
The existence of these ﬁnancial instruments exposes the Group to a number of ﬁnancial
risks, which are described in more detail below. The main risks arising from the Group’s
ﬁnancial instruments are currency risk, credit risk, interest rate risk and liquidity risk. The
directors review and agree policies for managing each of these risks and they are
summarised below. These policies have remained unchanged from previous years.
Currency risk
The Group has a minimal exposure to translation and transaction foreign exchange risk.
This is achieved by maintaining the vast majority of the Group’s cash in US dollars, which is
the Group’s functional currency. Plant Health Care plc
...............................................
...............................................
28
Report of the directors
for the year ended 31 December 2007
.................................................................................................................................................................
Credit risk
The Group’s principal credit risk relates to the recovery of amounts owed by trade debtors.
In order to manage credit risk, the Group sets limits for customers based on a combination
of payment history and third-party credit references. Credit limits are reviewed on a regular
basis in conjunction with debt ageing and collection history. Balances that are beyond
agreed upon terms are actively followed up to ensure collection.
Interest rate risk
The Group’s external borrowings bear interest at a rate which may be a combination of
ﬁxed and variable elements. The Group seeks the lowest market rate available.
Liquidity risk
Liquidity risk arises from the Group’s management of working capital and, more
particularly, its ability to reach a point where its trading is cash generative, together with
the ﬁnance charges and principal repayments on its debt instruments. It is the risk that the
Group will encounter difﬁculties in meeting its ﬁnancial obligations as they fall due.
Current and projected working capital demand is reviewed in conjunction with existing
ﬁnancing facilities to determine cash requirements on an on-going basis.
Further information related to ﬁnancial instruments is detailed in Note 19 to the
ﬁnancial statements.
Payment of creditors The Company follows the practices customary in the various geographic areas in which it
operates. Terms of payment are established with suppliers when agreeing the terms of
each transaction. As of 31 December 2007, creditor days outstanding stood at 51
(2006: 68).
Charitable and political
contributions
During the year, the Group made the following contributions:
2007
$
2006
$
Charitable 1,000 3,000
Board meetings and
attendance
The following table shows the attendance of directors at meetings of the Board and Audit
and Remuneration Committees held during the 2007 ﬁnancial year.
Board
Audit
Committee
Remuneration
Committee
Number of meetings held 12 4 12
A Fischer 12 — 12
J Brady 12 — —
D Marx 11 — —
R Chanson 11 — 12
T Isler 12 4 12
S Wauchope 11 4 12
W Bratkowski* 4 — —
* Resigned as a director on 16 May 2007 Plant Health Care plc
..............................................
..............................................
29
Report of the directors
for the year ended 31 December 2007
.................................................................................................................................................................
Capital raising On 26 September 2007, the Company raised £4,993,240 (before expenses) by way
of a placing of 2,098,000 new ordinary shares at a price of 238 pence per share.
Post balance sheet
events
There are no post balance sheet events to report.
Auditors All of the current directors have taken all the steps that they ought to have taken to make
themselves aware of any information needed by the Company’s auditors for the purposes
of their audit and to ensure that the auditors are aware of that information. The directors are
not aware of any relevant audit information of which the auditors are unaware.
Annual general
meeting
At the forthcoming annual general meeting of the Company, resolutions will be put
forward to elect Stephen Weaver, who was appointed to the Board since the last annual
general meeting and to re-appoint BDO Stoy Hayward LLP as auditors to the Company.
By Order of the Board
Andrew C. Wood FCIS
Company Secretary
28 March 2008 Plant Health Care plc
...............................................
...............................................
30
Statement of directors’ responsibilities
.................................................................................................................................................................
The directors are responsible for keeping proper accounting records which disclose with
reasonable accuracy at any time the ﬁnancial position of the Group, for safeguarding the
assets of the Company, for taking reasonable steps for the prevention and detection of
fraud and other irregularities and for the preparation of a directors’ report which complies
with the requirements of the Companies Act 1985.
The directors are responsible for preparing the annual report and the ﬁnancial statements
in accordance with the Companies Act 1985. The directors are also required to prepare
ﬁnancial statements for the Group in accordance with International Financial Reporting
Standards as adopted by the European Union (IFRSs) and the rules of the London Stock
Exchange for companies trading securities on the Alternative Investment Market. The
directors have chosen to prepare ﬁnancial statements for the Company in accordance
with UK Generally Accepted Accounting Practice.
Group ﬁnancial
statements
International Accounting Standard 1 requires that ﬁnancial statements present fairly for
each ﬁnancial year the Group’s ﬁnancial position, ﬁnancial performance and cash ﬂows.
This requires the faithful representation of the effects of transactions, other events and
conditions in accordance with the deﬁnitions and recognition criteria for assets, liabilities,
income and expenses set out in the International Accounting Standards Board’s
Framework for the preparation and presentation of ﬁnancial statements. In virtually all
circumstances, a fair presentation will be achieved by compliance with all applicable
IFRSs. A fair presentation also requires the directors to:
➢ consistently select and apply appropriate accounting policies;
➢ present information, including accounting policies, in a manner that provides
relevant, reliable, comparable and understandable information; and
➢ provide additional disclosures when compliance with the speciﬁc requirements in
IFRSs is insufﬁcient to enable users to understand the impact of particular
transactions, other events and conditions on the entity’s ﬁnancial position and
ﬁnancial performance.
Parent company
ﬁnancial statements
Company law requires the directors to prepare ﬁnancial statements for each ﬁnancial year
which give a true and fair view of the state of affairs of the Company and of the proﬁt or loss
of the Company for that period. In preparing these ﬁnancial statements, the directors are
required to:
➢ select suitable accounting policies and then apply them consistently;
➢ prepare the ﬁnancial statements on the going concern basis, unless it is
inappropriate to presume that the Company will continue in business;
➢ make judgments and estimates that are reasonable and prudent; and
➢ state whether applicable accounting standards have been followed, subject to any
material departures disclosed and explained in the ﬁnancial statements.
Financial statements are published on the Group’s website in accordance with legislation
in the United Kingdom governing the preparation and dissemination of ﬁnancial
statements, which may vary from legislation in other jurisdictions. The maintenance
and integrity of the Group’s website is the responsibility of the directors. The
directors’ responsibility also extends to the ongoing integrity of the ﬁnancial statements
contained therein. Plant Health Care plc
..............................................
..............................................
31
Independent auditors’ report
.................................................................................................................................................................
To the shareholders of
Plant Health Care plc
We have audited the Group and parent company ﬁnancial statements (the “ﬁnancial
statements”) of Plant Health Care plc for the year ended 31 December 2007 which
comprise the consolidated income statement, the consolidated statement of recognised
income and expense, the consolidated and individual company balance sheets, the
consolidated cash ﬂow statement and the related notes. These ﬁnancial statements have
been prepared under the accounting policies set out therein.
Respective
responsibilities of
directors and auditors
The directors’ responsibilities for preparing the annual report, the directors’ remuneration
report, the Group ﬁnancial statements in accordance with applicable law and
International Financial Reporting Standards (IFRSs) as adopted by the European Union
and for preparing the parent company ﬁnancial statements in accordance with applicable
law and United Kingdom Accounting Standards (United Kingdom Generally Accepted
Accounting Practice) are set out in the Statement of directors’ responsibilities.
Our responsibility is to audit the ﬁnancial statements in accordance with relevant legal and
regulatory requirements and International Standards on Auditing (UK and Ireland).
We report to you our opinion as to whether the ﬁnancial statements give a true and fair
view and have been properly prepared in accordance with the Companies Act 1985
and whether the information given in the directors’ report is consistent with those ﬁnancial
statements. We also report to you if, in our opinion, the Company has not kept proper
accounting records, if we have not received all the information and explanations we
require for our audit, or if information speciﬁed by law regarding directors’ remuneration
and other transactions is not disclosed.
We read other information contained in the annual report and consider whether it is
consistent with the audited ﬁnancial statements. The other information comprises only the
Highlights, Chairman’s statement, Chief Executive’s report, Directors, Board committees,
Corporate governance statement, Remuneration Committee report and the Report of the
directors. We consider the implications for our report if we become aware of any
apparent misstatements or material inconsistencies with the ﬁnancial statements. Our
responsibilities do not extend to any other information.
Our report has been prepared pursuant to the requirements of the Companies Act 1985
and for no other purpose. No person is entitled to rely on this report unless such a person is
a person entitled to rely upon this report by virtue of and for the purpose of the Companies
Act 1985 or has been expressly authorised to do so by our prior written consent. Save as
above, we do not accept responsibility for this report to any other person or for any other
purpose and we hereby expressly disclaim any and all such liability.
Basis of audit opinion We conducted our audit in accordance with International Standards on Auditing (UK and
Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test
basis, of evidence relevant to the amounts and disclosures in the ﬁnancial statements. It
also includes an assessment of the signiﬁcant estimates and judgments made by the
directors in the preparation of the ﬁnancial statements, and of whether the accounting
policies are appropriate to the Group’s and Company’s circumstances, consistently
applied and adequately disclosed. Plant Health Care plc
...............................................
...............................................
32
Independent auditors’ report
continued
.................................................................................................................................................................
We planned and performed our audit so as to obtain all the information and explanations
which we considered necessary in order to provide us with sufﬁcient evidence to give
reasonable assurance that the ﬁnancial statements are free from material misstatement,
whether caused by fraud or other irregularity or error. In forming our opinion
we also evaluated the overall adequacy of the presentation of information in the
ﬁnancial statements.
Opinion In our opinion:
➢ the Group ﬁnancial statements give a true and fair view, in accordance with IFRSs
as adopted by the European Union, of the state of the Group’s affairs as at
31 December 2007 and of its loss for the year then ended;
➢ the parent company ﬁnancial statements give a true and fair view, in accordance
with United Kingdom Generally Accepted Accounting Practice, of the state of the
parent company’s affairs as at 31 December 2007;
➢ the ﬁnancial statements have been properly prepared in accordance with the
Companies Act 1985; and
➢ the information given in the directors’ report is consistent with the ﬁnancial
statements.
BDO STOY HAYWARD LLP
Chartered Accountants
and Registered Auditors
London
28 March 2008 Plant Health Care plc
..............................................
..............................................
33
Consolidated income statement
for the year ended 31 December 2007
.................................................................................................................................................................
2007 2006
Note $’000s $’000s
Revenue 3 18,295 13,679
Cost of sales (9,944) (7,565)
Gross proﬁt 8,351 6,114
Distribution costs (4,660) (3,143)
Research and development expenses (771) (306)
Administrative expenses (8,161) (5,531)
Operating loss 4 (5,241) (2,866)
Finance revenue 9 177 275
Finance costs 9 (302) (335)
Loss before tax (5,366) (2,926)
Tax expense 10 (47) (72)
Loss for the year (5,413) (2,998)
Attributable to:
Equity holders of the parent (5,424) (3,028)
Minority interest 11 30
(5,413) (2,998)
Basic and diluted loss per share 11 (12.8¢) (8.2¢)
In 2007 and 2006 all results derived from continuing operations.
The notes on pages 37 to 68 form part of these ﬁnancial statements. Plant Health Care plc
...............................................
...............................................
34
Consolidated statement of recognised income
and expense for the year ended 31 December 2007
.................................................................................................................................................................
2007 2006
$’000s $’000s
Net income recognised directly in equity:
Exchange differences on translation of
foreign operations 130 219
Loss for the year (5,413) (2,998)
Total recognised income and expense for the year (5,283) (2,779)
Attributable to:
Equity holders of the parent (5,294) (2,809)
Minority interest 11 30
(5,283) (2,779)
The notes on pages 37 to 68 form part of these ﬁnancial statements. Plant Health Care plc
..............................................
..............................................
35
Consolidated balance sheet
at 31 December 2007
.................................................................................................................................................................
2007 2006
Note $’000s $’000s
Assets
Non-current assets
Intangible assets 12 4,282 2,737
Property, plant and equipment 13 928 1,008
Total non-current assets 5,210 3,745
Current assets
Inventories 14 2,872 2,468
Trade and other receivables 15 6,751 6,942
Short-term investments 19 559 436
Cash and cash equivalents 10,254 4,446
Total current assets 20,436 14,292
Total assets 25,646 18,037
Liabilities
Current liabilities
Trade and other payables 16 3,648 3,108
Short-term borrowings 17 205 314
Provisions 18 546 396
Total current liabilities 4,399 3,818
Non-current liabilities
Long-term borrowings 17 278 414
Provisions 18 440 —
Total non-current liabilities 718 414
Total liabilities 5,117 4,232
Total net assets 20,529 13,805
Capital and reserves attributable to equity
holders of the Company
Share capital 21 809 731
Share premium 22 33,451 21,826
Reverse acquisition reserve 22 11,016 11,174
Share-based payment reserve 22 580 118
Foreign exchange reserve 22 121 (9)
Retained earnings 22 (25,679) (20,255)
20,298 13,585
Minority interests 22 231 220
Total equity 20,529 13,805
The ﬁnancial statements were approved and authorised for issue by the Board on
28 March 2008.
J Brady
Director
The notes on pages 37 to 68 form part of these ﬁnancial statements. Plant Health Care plc
...............................................
...............................................
36
Consolidated cash flow statement
for the year ended 31 December 2007
.................................................................................................................................................................
2007 2006
Note $’000s $’000s
Cash ﬂows from operating activities
Loss before tax (5,366) (2,926)
Adjustments for:
Depreciation 12 262 248
Amortisation of intangibles 13 242 2
Impairment charge — 30
Finance revenue (177) (275)
Finance costs 302 335
Share-based payment expense 462 68
(Gain)/loss on sale of ﬁxed assets (5) 10
Cash used in operating activities before
changes in working capital and provisions (4,280) (2,508)
Decrease/(increase) in trade and other
receivables 208 (3,952)
Decrease/(increase) in inventories 436 (887)
Increase in trade and other payables 836 387
(Decrease)/increase in provisions (121) 396
Cash used in operations (2,921) (6,564)
Interest paid (287) (322)
Income taxes paid (74) (79)
Net cash ﬂows used in operating activities (3,282) (6,965)
Investing activities
Purchase of business net assets 25 (2,446) —
Purchase of tangible ﬁxed assets (136) (396)
Expenditure on internally-developed intangible assets 12 (53) —
Proceeds on sale of assets held for sale 675 —
Proceeds on sale of ﬁxed assets 21 20
Interest received 177 275
Purchase of short-term investments (123) (184)
Net cash used in investing activities (1,885) (285)
Financing activities
Issuing of ordinary share capital 10,182 11,053
Exercise of options and warrants 1,365 64
Repayment of borrowings (367) (180)
Repurchase of minority interest’s shares by
subsidiary (160) (119)
Net cash generated from ﬁnancing activities 11,020 10,818
Effects of exchange rate changes on cash and
cash equivalents (45) (16)
Net increase in cash and cash equivalents 5,808 3,552
Cash and cash equivalents at beginning of period 4,446 894
Cash and cash equivalents at end of period 10,254 4,446
The notes on pages 37 to 68 form part of these ﬁnancial statements. Plant Health Care plc
..............................................
..............................................
37
Notes forming part of the Group financial statements
for the year ended 31 December 2007
.................................................................................................................................................................
1. Accounting policies Reporting currency
The ﬁnancial statements are reported in US dollars. The directors believe that it is
appropriate to use US dollars as a currency for reporting, given that the majority of the
Group’s operations are denominated in that currency.
Basis of preparation
This is the ﬁrst time the Group has prepared its ﬁnancial statements in accordance with
International Financial Reporting Standards (IFRS) as adopted by the European Union,
having previously prepared its ﬁnancial statements in accordance with UK GAAP
accounting standards. Details of how the transition from UK accounting standards to
EU-adopted IFRS has affected the Group’s reported ﬁnancial position, ﬁnancial
performance and cash ﬂows are given in note 28.
Changes in accounting policies – First-time adoption of International Financial Reporting
Standards
In preparing these ﬁnancial statements, the Group has elected to apply the following
transitional arrangements permitted by IFRS 1 ‘First-time Adoption of International Financial
Reporting Standards’:
➢ business combinations effected before 1 January 2006 have not been restated;
➢ the carrying amount of capitalised goodwill at 31 December 2005 that arose on
business combinations accounted for using the acquisition method under UK GAAP
was frozen at this amount and tested for impairment at 1 January 2006; and
➢ IFRS 2 ‘Share-based payment’ has been applied to employee options granted after
7 November 2002 that had not vested by 1 January 2006.
The Group has made estimates under IFRSs at the date of transition; these were consistent
with those estimates made at the same date under UK GAAP, there being no objective
evidence that those estimates were in error; that is, the Group has not reﬂected any new
information in its opening IFRS balance sheet, but reﬂected that new information, if any,
in its income statement for subsequent periods.
Basis of consolidation
On 6 July 2004, Plant Health Care plc became the legal parent company of Plant Health
Care, Inc. in a share-for-share transaction. The former shareholders of Plant Health Care,
Inc. became the majority shareholders of Plant Health Care plc. Further, the continuing
operations and executive management of Plant Health Care plc were those of Plant Health
Care, Inc. Accordingly, the substance of the combination was that Plant Health Care, Inc.
acquired Plant Health Care plc in a reverse acquisition. In order to present a true and
fair view, the directors have adopted reverse acquisition accounting as the basis
of consolidation.
Business combinations
The consolidated ﬁnancial statements incorporate the results of business combinations
using the purchase method. In the consolidated balance sheet, the acquiree’s identiﬁable
assets, liabilities and contingent liabilities are initially recognised at their fair values at the
acquisition date. The results of acquired operations are included in the consolidated
income statement from the date on which control is obtained. Plant Health Care plc
...............................................
...............................................
38
Notes forming part of the Group financial statements
for the year ended 31 December 2007 continued
.................................................................................................................................................................
1. Accounting policies
continued
Revenue
Revenue is comprised of sales of goods to external customers, revenues from service
contracts and fee income. Sales of goods to external customers are at invoiced amount
less value added tax or local taxes on sales and are recognised at the point that the
customer takes legal title to the goods sold. Revenue from service contracts is recognised
as the services are performed and revenue is earned and billed over the term of the
contract. Fee income is recognised when the Company has no remaining obligations to
perform under a non-cancellable contract which permits the user to act freely under the
terms of the agreement.
Exceptional items
Exceptional items are those that in management’s judgment need to be disclosed by virtue
of their size or incidence. Such items are included within the income statement caption to
which they relate, and are separately disclosed either in the notes to the consolidated
ﬁnancial statements or on the face of the consolidated income statement.
Goodwill
Goodwill is measured as the excess of the cost of the acquisition over the net fair value
of the identiﬁable assets, liabilities and contingent liabilities, plus any direct costs
of acquisition.
Goodwill is capitalised as an intangible asset with any impairment in carrying value being
charged to the consolidated income statement. Where the fair value of identiﬁable assets,
liabilities and contingent liabilities exceeds the fair value of consideration paid, the excess
is credited in full to the consolidated income statement on the acquisition date.
At the date of transition to IFRS, 1 January 2006, the goodwill carrying amount under UK
GAAP was tested for impairment and, based on the conditions existing at the transition
date, no impairment was identiﬁed. Thus, the carrying amount of goodwill in the
Company’s IFRS opening balance sheet was equal to the goodwill carrying amount under
UK GAAP. From the date of transition to IFRS, the Company discontinued the amortisation
of goodwill and implemented annual impairment tests for goodwill.
Other intangible assets
Externally-acquired intangible assets are initially recognised at cost and subsequently
amortised on a straight-line basis over their useful economic lives. The amortisation
expense is included within the administrative expenses line in the consolidated
income statement.
Intangible assets are recognised on business combinations if they are separable from the
acquired entity or give rise to other contractual or legal rights. The amounts ascribed to
such intangibles are arrived at by using appropriate valuation techniques.
Expenditures on internally-developed intangible assets (research and development costs)
are capitalised if it can be demonstrated that: Plant Health Care plc
..............................................
..............................................
39
Notes forming part of the Group financial statements
for the year ended 31 December 2007 continued
.................................................................................................................................................................
1. Accounting policies
continued
➢ it is technically feasible to develop the product for it to be sold;
➢ adequate resources are available to complete the development;
➢ there is an intention to complete and sell the product;
➢ the Group is able to sell the product;
➢ sale of the product will generate future economic beneﬁts; and
➢ expenditure on the project can be measured reliably.
Capitalised development costs are amortised over the periods of the future economic
beneﬁt attributable to the asset. The amortisation expense is included within administrative
expenses in the consolidated income statement.
Development expenditure not satisfying the above criteria and expenditure on the
research phase of internal projects are recognised in the consolidated income statement
as incurred.
The signiﬁcant intangibles recognised by the Group and their estimated useful economic
lives are as follows:
Licenses – 12 years
Developed technology – 15 years
Trade name and customer relationships – 15 years
Registrations – 5-10 years
Impairment of goodwill and other intangible assets
Impairment tests on goodwill and other intangible assets with indeﬁnite useful economic
lives are undertaken annually at the ﬁnancial year end. Other non-ﬁnancial assets are
subject to impairment tests whenever events or changes in circumstances indicate that their
carrying amount may not be recoverable. Where the carrying value of an asset exceeds its
recoverable amount (that is the higher of value in use and fair value less costs to sell), the
asset is written down accordingly.
Impairment charges are included in the administrative expenses line item in the
consolidated income statement, except to the extent they reverse gains previously
recognised in the consolidated statement of recognised income and expense. An
impairment loss recognised for goodwill is not reversed.
Foreign currency
Foreign currency transactions of individual companies are translated at the rates ruling
when they occurred. Foreign currency monetary assets and liabilities are translated at the
rate of exchange ruling at the balance sheet date. Any differences are taken to
the consolidated income statement.
On consolidation, the results of non-US operations are translated into US dollars at rates
approximating to those ruling when the transactions took place. Balance sheets are
translated at the rate ruling at the balance sheet date. Exchange differences arising on
translating the opening net assets at opening rate and the results of non-US operations at
actual rate are recognised directly in equity (the ‘foreign exchange reserve’). Plant Health Care plc
...............................................
...............................................
40
Notes forming part of the Group financial statements
for the year ended 31 December 2007 continued
.................................................................................................................................................................
1. Accounting policies
continued
Financial instruments
Trade receivables are initially recognised at fair value, and are subsequently carried at
amortised cost using the effective interest rate method, less provision for impairment.
Short-term investments comprise interest bearing cash held on deposit and short-term
investments maturing in less than one year at ﬁxed rates of interest.
Cash and cash equivalents comprise cash on hand and demand deposits, and other
short-term highly liquid investments that are readily convertible to a known amount of cash
and are subject to insigniﬁcant risk of changes in value.
Bank borrowings are initially recognised at fair value net of any transaction costs directly
attributable to the instrument. Borrowings are subsequently measured at amortised cost
using the effective interest rate method, which ensures that interest expense over the
period to repayment is at a constant rate on the balance of the liability carried in the
balance sheet.
Trade and other payables are initially recognised at fair value and subsequently carried at
amortised cost using the effective interest method.
The Group does not trade in derivative ﬁnancial instruments.
Equity instruments issued by the Company are recorded at the proceeds received, net of
direct issue costs.
Employee beneﬁts
The Group maintains a number of deﬁned contribution pension schemes for certain
of its employees; the Group does not contribute to any deﬁned beneﬁt pension schemes.
The amount charged to the consolidated income statement represents the employer
contributions payable to the schemes for the ﬁnancial period.
The expected costs of all short-term employee beneﬁts, including short-term compensated
absences, are recognised during the period the employee service is rendered.
Equity share-based payments
Share-based payments issued to employees include share options and stock awards
under a long-term incentive plan. Equity-settled share-based payments are measured at fair
value (excluding the effect of non-market-based vesting conditions) at the date of grant. The
fair value determined at the date of grant is recognised as an expense with a
corresponding increase in equity on a straight-line basis over the vesting period, based on
the Company’s estimate of the shares that will eventually vest and adjusted for the effect of
non-market-based vesting conditions.
Where equity instruments are granted to persons other than employees, the consolidated
income statement is charged with the fair value of goods and services received.
The fair value of equity instruments is calculated using the binomial option pricing model.
Leased assets
Where assets are ﬁnanced by leasing agreements that give rights approximating to
ownership (ﬁnance leases), the assets are treated as if they had been purchased outright.
The amount capitalised is the present value of the minimum lease payments payable over
the term of the lease. The corresponding lease commitments are shown as amounts
payable to the lessor. Depreciation on the relevant assets is charged to the consolidated
income statement.  Plant Health Care plc
..............................................
..............................................
41
Notes forming part of the Group financial statements
for the year ended 31 December 2007 continued
.................................................................................................................................................................
1. Accounting policies
continued
Lease payments are analysed between capital and interest components. The interest
element of the payment is charged to the consolidated income statement over the period of
the lease and is calculated so that it represents a constant proportion of the balances of
capital repayments outstanding. The capital element reduces the amounts payable to the
lessor.
All other leases are treated as operating leases. Their annual rentals are charged to the
consolidated income statement.
Property, plant and equipment
Items of property, plant and equipment are initially recognised at cost. Cost includes the
purchase price and costs directly attributable to bringing the asset into operation.
Depreciation is provided to write off the cost, less estimated residual values, of all tangible
ﬁxed assets over their expected useful lives. It is calculated at the following rates:
Leasehold improvements – over length of lease
Production machinery – 10 – 20% per annum
Ofﬁce equipment – 20 – 33% per annum
Vehicles – 20% per annum
Inventories
Inventories are initially recognised at cost, and subsequently at the lower of cost and net
realisable value. Cost comprises all costs of purchase, costs of conversion and other costs
incurred in bringing inventories to their present location and condition.
Deferred tax
Deferred tax assets and liabilities are recognised where the carrying amount of an asset or
liability in the balance sheet differs from its tax base, except for differences on:
➢ the initial recognition of goodwill;
➢ the initial recognition of an asset or liability in a transaction which is not a business
combination and at the time of the transaction affects neither accounting or taxable
proﬁt; and
➢ investments in subsidiaries and jointly controlled entities where the Group is able to
control the timing of the reversal of the difference and it is probable that the
difference will not reverse in the foreseeable future.
Recognition of deferred tax assets is restricted to those instances where it is probable that
taxable proﬁt will be available against which the difference can be utilised.
The amount of the asset or liability is determined using tax rates that have been enacted or
substantively enacted by the balance sheet date and are expected to apply when the
deferred tax liabilities/(assets) are settled/(recovered).
Deferred tax assets and liabilities are offset when the Group has a legally enforceable right
to offset current tax assets and liabilities and when they relate to income taxes levied by the
same tax authority and the Group intends to settle its current tax assets and liabilities on
a net basis. Plant Health Care plc
...............................................
...............................................
42
Notes forming part of the Group financial statements
for the year ended 31 December 2007 continued
.................................................................................................................................................................
1. Accounting policies
continued
Provisions
Provisions are recognised for liabilities of uncertain timing or amount that have arisen as a
result of past transactions and are discounted at a pre-tax rate reﬂecting current market
assessments of the time value of money and the risks speciﬁc to the liability.
Standards and interpretations not yet applied
At the date of authorisation of these ﬁnancial statements, the following Standards and
Interpretations, which have not been applied in these ﬁnancial statements, were in issue
but not yet effective:
IFRS 8 Operating Segments
IFRIC 11 IFRS 2 – Group and Treasury Share Transactions
IFRIC 12 Service Concession Arrangements
IFRIC 13 Customer Loyalty Programmes
IFRIC 14 IAS 19 – The Limit on a Deﬁned Beneﬁt Asset, Minimum Funding
Requirements and their Interaction
IFRIC 11 requires share-based payment transactions in which an entity receives services as
consideration for its own equity instruments to be accounted for as equity settled. In
addition, equity instruments accounted for as equity settled share-based payment
transactions that are granted by a parent to the employees of its subsidiary, are to be
accounted for in the separate ﬁnancial statements of each group entity. The Company
currently accounts for share-based payment transactions in which it receives services as
consideration for its own equity instruments as equity settled at the Group level. The
standard will only impact how that transaction is recorded by each group entity and,
therefore, it is not anticipated that IFRIC 11 will have a material impact on the ﬁnancial
statements of the Group.
IFRS 8 affects only disclosures and, therefore, is anticipated to have no material impact on
the Group ﬁnancial statements. It is anticipated that the adoption of IFRIC 12, IFRIC 13
and IFRIC 14 will have no impact on the ﬁnancial statements of the Group.
As of the date of authorisation of these ﬁnancial statements, the following amendments to
published standards, which have not been applied in these ﬁnancial statements, were in
issue but not yet effective. Management is currently assessing the impact of these
amendments on the accounts.
IFRS 2 Share-based Payment (Amendment)
IAS 1 Presentation of Financial Statements (Amendment)
IAS 1 Presentation of Financial Statements-Puttable Financial Instruments
and Obligations Arising on Liquidation (Amendment)
IAS 23 Borrowing Costs (Amendment)
IAS 32 Financial Instruments: Presentation (Amendment)
IFRS 3 Business Combinations (Amendment)
IAS 27 Consolidated and Separate Financial Statements (Amendment)
2. Critical accounting
estimates and
judgments
In preparing its ﬁnancial statements, the Group makes certain estimates and assumptions
regarding the future. Estimates and judgments are continually evaluated based on
historical experience and other factors, including expectations of future events that are Plant Health Care plc
..............................................
..............................................
43
Notes forming part of the Group financial statements
for the year ended 31 December 2007 continued
.................................................................................................................................................................
2. Critical accounting
estimates and
judgments
continued
believed to be reasonable under the circumstances. In the future, actual experience may
differ from estimates and assumptions. The estimates and assumptions 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.
Impairment of goodwill
The Group is required to test, on an annual basis, whether goodwill has suffered any
impairment. The recoverable amount is determined based on value-in-use calculations.
The use of this method requires the estimation of future cash ﬂows and the choice of a
discount rate in order to calculate the present value of the cash ﬂows. Actual outcomes may
vary. More information including carrying values is included in note 12.
Useful lives of intangible assets and property, plant and equipment
Intangible assets and property, plant and equipment are amortised or depreciated over
their useful lives. Useful lives are based on management’s estimates of the period that
theassets will generate revenue, which are periodically reviewed for continued
appropriateness. Changes to estimates can result in signiﬁcant variations in the carrying
value and amounts charged to the consolidated income statement in speciﬁc periods.
More details including carrying values are included in notes 12 and 13.
Inventory
The Company reviews the net realisable value of, and demand for, its inventory on a
periodic basis to provide assurance that recorded inventory is stated at the lower of cost or
net realisable value. Factors that could impact estimated demand and selling prices
include timing and success of future technological innovations, competitor actions,
supplier prices and economic trends. Changes in these factors that differ from
management’s estimates can result in adjustment to the carrying value and amounts
charged to the consolidated income statement in speciﬁc periods. More details on
carrying amounts and write down of inventories to fair value less costs to sell are included
in note 14.
Share-based payments
The Group has two types of equity-settled share-based remuneration schemes for
employees. Employee services received, and the corresponding increase in equity, are
measured by reference to the fair value of the equity instruments at the date of grant,
excluding the impact of any non-market vesting conditions. The fair value of share-based
payments is estimated using the binomial pricing model on the date of grant based on
certain assumptions as described in note 7. Changes to estimates of non-market based
vesting conditions can result in adjustment to the carrying value and amounts charged to
the consolidated income statement in speciﬁc periods. More details including carrying
values are disclosed in note 21.
Warranty claims
The Group offers a three-year warranty on certain of its products in the USA. The Group
estimates the amount and cost of future warranty claims for its current period sales. These
estimates are used to record accrued warranty provisions for current period product Plant Health Care plc
...............................................
...............................................
44
Notes forming part of the Group financial statements
for the year ended 31 December 2007 continued
.................................................................................................................................................................
2. Critical accounting
estimates and
judgments
continued
shipments. The Company uses historical warranty claim information, as well as recent
trends that might suggest that past cost information may differ from future claims. Factors
that could impact the estimated claim information include the successful growth rate of
plant material to which the Company’s product is applied and the cost of the plant material
covered under the claim. More details including carrying values are disclosed in note18.
Determination of fair values of intangible assets acquired in business combinations
The fair value of intangible assets acquired in business combinations is based on the
discounted cash ﬂows expected to be derived from the use of the asset.
3. Revenue Revenue arises from:
2007 2006
$’000s $’000s
Sale of goods 15,523 12,359
Service contracts and fee income 2,772 1,320
18,295 13,679
4. Operating loss 2007 2006
$’000s $’000s
Operating loss is arrived at after charging:
Staff costs (see note 5) 7,831 5,040
Research and development costs 771 306
Depreciation 262 248
Amortisation 242 2
Equity share-based payment expense 462 67
Write-down of inventory to net realisable value 114 33
Operating lease expense 543 468
Auditors’ remuneration:
For the audit of the Company’s annual accounts 127 97
For other services:
Audit of the Company’s subsidiaries 143 106
Tax services 5 25
Other services* 18 36
Total fees for other services 166 167
Total auditors’ remuneration 293 264
Exceptional costs – Plant relocation 175 250
Staff reorganisation 171 —
Placement costs — 63
346 313
* The “other services” provided related to the Company’s transition to International Financial Reporting
Standards. In 2006, the auditors were also paid $87,000 in relation to the Company’s secondary placement
and a business acquisition; these fees were capitalised. Plant Health Care plc
..............................................
..............................................
45
Notes forming part of the Group financial statements
for the year ended 31 December 2007 continued
.................................................................................................................................................................
4. Operating loss
continued
Plant relocation expenses comprise a provision for the relocation of the Pittsburgh,
Pennsylvania manufacturing facility.
Write-down of inventory to net realisable value recognised as an expense during 2007
and 2006 relates primarily to changes in market conditions impacting the expected
demand for speciﬁc products.
5. Staff costs Staff costs for all employees, including executive directors, comprise:
2007 2006
$’000s $’000s
Wages and salaries 5,984 4,166
Social security and payroll taxes 750 448
Deﬁned contribution pension costs 64 —
Medical and other beneﬁt plans 403 359
Equity-settled share-based payment expense 462 67
Other long-term employee beneﬁts 23 —
Compensation for loss of ofﬁce 145 —
7,831 5,040
The average number of employees of the Group during the year, including executive
directors, was as follows:
2007 2006
Management 10 9
Sales 37 27
Production and technical services 12 14
Administration 23 19
82 69
6. Directors’ and key
management
personnel
remuneration
Key management personnel are those persons having authority and responsibility for
planning, directing and controlling activities of the Group, including directors of the
Company and the Chief Financial Ofﬁcer of the Company. Further disclosures
on the remuneration of each individual director are included in the Remuneration
Committee report.
2007 2006
$’000s $’000s
Base salary and fees 842 679
Bonuses 289 72
Other short-term employee beneﬁts 153 16
Equity-settled share-based payments 380 —
Pensions and other post-retirement beneﬁts 31 —
Compensation for loss of ofﬁce 145 —
1,840 767
The three executive directors who served during the year were eligible to participate
in the Group’s 401(k) retirement plan. Plant Health Care plc
...............................................
...............................................
46
Notes forming part of the Group financial statements
for the year ended 31 December 2007 continued
.................................................................................................................................................................
7. Share-based
payment
The Company operates two equity-settled share-based remuneration schemes for
employees: a share option scheme and a long-term incentive stock award plan, as
described in the Remuneration Committee report on pages 20 to 25.
Valuation of the share options granted during the period was as follows:
2007 2006
26 September 17 January 3 November 22 June 11 April
Share options
granted 16,500 175,000 3,000 50,000 131,470
Weighted average
fair value 134p 90p 39p 47p 34p
Assumptions used
in measuring fair
value:
Weighted average
share price 240p 165p 128p 106p 74p
Exercise price 245p 224p 128p 123p 74p
Expected volatility 53% 60% 57% 57% 57%
Option life 10 years 10 years 10 years 10 years 10 years
Expected vesting
period 4.5 years 4.5 years 4.5 years 4.5 years 4.5 years
Expected dividend
yield Nil Nil Nil Nil Nil
Risk-free interest
rate 5.04% 5.09% 4.77% 4.77% 4.42 %
Valuation of the stock awards under the long-term incentive plan adopted in 2007
was as follows:
4 October 1 July
2007 2007
Shares awarded 100,000 300,000
Weighted average fair value 216p 237p
Assumptions used in measuring fair value:
Expected volatility 58% 58%
Expected vesting period 3 years 2.5 years
Expected dividend yield Nil Nil
Risk-free interest rate 4.93% 5.59%
For valuation of both the share options granted and LTIP shares awarded:
➢ in 2007, the expected volatility was determined by reference to the historical share
price of Plant Health Care plc for a three-year period;
➢ in 2006, the expected volatility was determined by reference to the historic share
price of three comparable companies for a three-year period;
➢ the expected vesting period reﬂects market-based performance conditions for these
options and share awards; and
➢ fair values were calculated using the binomial option pricing model.
Further information on share-based payments is given in sections (d) and (e) of note 21. Plant Health Care plc
..............................................
..............................................
47
Notes forming part of the Group financial statements
for the year ended 31 December 2007 continued
.................................................................................................................................................................
7. Share-based
payment
continued
The Company pays a portion of non-executive directors’ fees, as described in the
Remuneration Committee report on pages 20 to 25, and a portion of the Company
Secretary’s fees in the form of the Company’s ordinary shares at a total value equal
to the fair value of the services rendered. In 2007, the Company issued 33,789 shares
(2006: 29,760) with an aggregate value of $156,000 (2006: $38,000) for the
payment of fees.
8. Segment
information
The Group’s primary reporting format for reporting segment information is based on the
geographical location of the Group’s operations: USA, Mexico and Europe. The
secondary segment format is based on customer markets: Agriculture, Horticulture and
Turf, and Other.
Primary segment information
By location of operations
USA Mexico Europe Elimination Total
2007 $’000s $’000s $’000s $’000s $’000s
Revenue
External sales 12,996 3,295 2,004 — 18,295
Inter-segment sales 543 — 878 (1,421) —
Total revenue 13,539 3,295 2,882 (1,421) 18,295
Segment operating (loss)/proﬁt (1,903) 273 (366) — (1,996)
Unallocated corporate expenses (3,245)
Operating loss (5,241)
Finance revenue 177
Finance costs (302)
Tax expense (47)
Loss for the year (5,413)
Other segment information:
Unallocated/
USA Mexico Europe Elimination Total
$’000s $’000s $’000s $’000s $’000s
Segment assets 13,259 1,982 3,422 6,983 25,646
Segment liabilities 4,012 469 2,064 (1,428) 5,117
Capital expenditure 78 45 15 49 187
Depreciation 164 68 24 6 262
Amortisation 242 — — — 242
Other non-cash expenses:
Share-based payment — — — 462 462 Plant Health Care plc
...............................................
...............................................
48
Notes forming part of the Group financial statements
for the year ended 31 December 2007 continued
.................................................................................................................................................................
8. Segment
information
continued
Primary segment information
By location of operations
USA Mexico Europe Elimination Total
2006 $’000s $’000s $’000s $’000s $’000s
Revenue
External sales 8,791 2,536 2,352 — 13,679
Inter-segment sales 717 — 742 (1,459) —
Total revenue 9,508 2,536 3,094 (1,459) 13,679
Segment operating (loss) proﬁt (1,462) 256 (12) — (1,218)
Unallocated corporate expenses (1,648)
Operating loss (2,866)
Finance revenue 275
Finance costs (335)
Tax expense (72)
Loss for the year (2,998)
Other segment information: Unallocated/
USA Mexico Europe Elimination Total
$’000s $’000s $’000s $’000s $’000s
Segment assets 9,749 2,436 3,183 2,669 18,037
Segment liabilities 2,074 364 2,023 (229) 4,232
Capital expenditure 223 142 49 83 497
Depreciation 165 46 36 1 248
Amortisation — — — 2 2
Other non-cash expenses:
Share-based payment — — — 68 68
Other — — — 30 30
Inter-segment transfers are priced at competitive market prices charged to external
customers for similar goods. This policy was applied consistently throughout the current
and prior period.
Unallocated corporate expenses include ﬁnance, human resources, legal and employee
costs that are not directly allocated to the geographical operating units.
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.
Unallocated assets and liabilities include assets and liabilities attributable to the general
entity, including cash and short-term investments, property plant and equipment, income
tax accounts, borrowings and trade payables and accrued expenses. Plant Health Care plc
..............................................
..............................................
49
Notes forming part of the Group financial statements
for the year ended 31 December 2007 continued
.................................................................................................................................................................
8. Segment
information
continued
Secondary segment information
By customer market
External revenue
2007 2006
$’000s $’000s
Agriculture 8,025 4,866
Horticulture and Turf 7,898 7,026
Other 2,372 1,787
18,295 13,679
Assets, liabilities and capital expenditures are common across all secondary segments
and therefore cannot be allocated on a reasonable basis. This segment information has
therefore not been disclosed.
9. Finance revenue
and costs
2007 2006
$’000s $’000s
Finance revenue
Bank deposits 177 275
Finance costs
Finance leases 43 22
Revolving credit agreement 139 225
Notes payable 53 72
Unwinding of discount on provisions 22 —
Total interest expense 257 319
Exchange rate losses 45 16
302 335
10. Tax expense The tax charge for the year comprises:
2007 2006
$’000s $’000s
Current tax expense
Corporation tax and income tax on proﬁts for the year 77 81
Utilisation of previously unrecognised tax losses (30) —
47 81
Deferred tax expense:
Origination and reversal of temporary differences — (9)
47 72 Plant Health Care plc
...............................................
...............................................
50
Notes forming part of the Group financial statements
for the year ended 31 December 2007 continued
.................................................................................................................................................................
10. Tax expense
continued
The reasons for the difference between the actual tax charge for the year and the standard
rate of corporation tax in the UK applied to proﬁts for the year are as follows:
2007 2006
$’000s $’000s
Loss for the period (5,366) (2,926)
Expected tax charge based on the standard rate of
corporation tax in the UK of 30% (2006: 30%) (1,610) (878)
Expenses not deductible for tax purposes 477 —
Utilisation of previously unrecognised tax losses (30) —
Financial statement share-based payment expense 139 —
Tax returns share-based payment expense (2,089) —
Losses in year not relieved against current tax 3,398 950
Amortisation of intangibles 3 —
Different tax rates applied in overseas jurisdictions (241) —
47 72
At 31 December 2007, the Group has a potential deferred tax asset of $15,156,000,
which includes tax losses available to carry forward of $10,812,000 arising from historic
losses incurred, anticipated tax relief on share-based payments of $4,037,000 and other
timing differences of $307,000.
11. Loss per share Basic loss per ordinary share has been calculated on the basis of the loss attributable to
equity holders of the parent of $5,424,000 (loss for 2006: $3,028,000) and the
weighted average number of shares in issue during the relevant ﬁnancial periods. For
2007, the weighted average number of equity shares in issue is 42,408,798 (2006:
36,838,918). Instruments (share options, warrants and share awards – see note 21) that
could potentially dilute basic earnings per share in the future have been considered, but
were not included in the calculation of diluted earnings per share because they are
anti-dilutive for the periods presented. Plant Health Care plc
..............................................
..............................................
51
Notes forming part of the Group financial statements
for the year ended 31 December 2007 continued
.................................................................................................................................................................
12. Intangible assets
Goodwill
$’000s
Licenses and
registrations
$’000s
Developed
technology
$’000s
Trade name
and customer
relationships
$’000s
Total
$’000s
Cost
Balance at 1 January 2006 and
1 January 2007 536 2,586 — — 3,122
Additions – internally developed — 53 — — 53
Acquired through business
combinations 1,432 — 143 159 1,734
Balance at 31 December 2007 1,968 2,639 143 159 4,909
Accumulated amortisation
Balance at 1 January 2006 348 5 — — 353
Impairment charge — 30 — — 30
Amortisation charge for the year — 2 — — 2
Balance at 1 January 2007 348 37 — — 385
Amortisation charge for the year — 217 12 13 242
Balance at 31 December 2007 348 254 12 13 627
Net book value
At 1 January 2006 188 2,581 — — 2,769
At 31 December 2006 188 2,549 — — 2,737
At 31 December 2007 1,620 2,385 131 146 4,282
Included in the balance sheet at year end is goodwill with a net book value of $188,000
with respect to a previous year acquisition, and $1,432,000 related to the 2007
acquisition of the Eden Bioscience assets as disclosed in note 25. The directors
considered the following assumptions appropriate in performing the annual impairment
test on goodwill for these balances:
➢ the recoverable amount of goodwill is based on value in use;
➢ forecast cash ﬂows are based on approved budgets and plans for the next
ﬁve years;
➢ the underlying assumptions of these cash ﬂows are based on management’s
experience and probability ratios for new business generation;
➢ subsequent cash ﬂows have been increased at a terminal growth rate of 0%; and
➢ the cash ﬂows have been discounted using a pre-tax discount rate of 15%, based on
the Group’s estimated incremental borrowing rate adjusted for risks associated with
the estimated cash ﬂows. Plant Health Care plc
...............................................
...............................................
52
Notes forming part of the Group financial statements
for the year ended 31 December 2007 continued
.................................................................................................................................................................
13. Property, plant
and equipment
Leasehold
improvements
$’000s
Production
machinery
$’000s
Ofﬁce
equipment
$’000s
Vehicles
$’000s
Total
$’000s
Cost
Balance at 1 January 2006 185 748 840 311 2,084
Additions — 108 153 236 497
Disposals — — (1) (82) (83)
Balance at 1 January 2007 185 856 992 465 2,498
Additions 3 5 121 58 187
Acquired through business
combinations — — 11 — 11
Disposals — — (46) (50) (96)
Balance at 31 December 2007 188 861 1,078 473 2,600
Accumulated depreciation
Balance at 1 January 2006 136 490 530 138 1,294
Depreciation charge for the year 5 63 103 77 248
Disposals — — (1) (51) (52)
Balance at 1 January 2007 141 553 632 164 1,490
Depreciation charge for the year 5 61 99 97 262
Disposals — — (39) (41) (80)
Balance at 31 December 2007 146 614 692 220 1,672
Net book value
At 1 January 2006 49 258 310 173 790
At 31 December 2006 44 303 360 301 1,008
At 31 December 2007 42 247 386 253 928
The net book value of property, plant and equipment includes an amount of $207,000
(2006: $236,000) in respect of assets held under ﬁnance leases. Depreciation
expense includes an amount of $62,000 (2006: $54,000) in respect of assets held
under ﬁnance leases.
14. Inventories 2007 2006
$’000s $’000s
Raw materials 1,407 1,089
Work in progress 24 53
Finished goods and goods for resale 1,441 1,326
2,872 2,468 Plant Health Care plc
..............................................
..............................................
53
Notes forming part of the Group financial statements
for the year ended 31 December 2007 continued
.................................................................................................................................................................
15. Trade and other
receivables
2007 2006
$’000s $’000s
Trade receivables 6,914 6,194
Less: provision for impairment (775) (312)
Trade receivables – net 6,139 5,882
Other receivables 57 57
Prepayments 529 996
Prepaid corporation tax 26 7
6,751 6,942
All amounts fall due for payment within one year.
Movements on the Group provision for impairment of trade receivables are as follows:
2007 2006
$’000s $’000s
Balance at the beginning of the year 312 218
Provided 516 113
Receivables written off as uncollectable (45) (19)
Unused amounts reversed (8) —
Balance at the end of the year 775 312
The gross value of trade receivables for which a provision for impairment has been made is
$1,216,000 (2006: $360,000).
The maximum exposure to credit risk at the reporting date is the fair value of each class of
receivables set out above.
The directors consider that the carrying amount of trade and other receivables
approximates to their fair value.
The following is an analysis of the Group’s trade receivables identifying the totals of trade
receivables which are current and those which are past due but not impaired.
2007 2006
$’000s $’000s
Current 5,215 4,944
Past due:
Up to 3 months 457 755
3 to 6 months 79 160
6 to 12 months 388 23
Total 6,139 5,882
The main factors used in assessing the impairment of trade receivables are the age of the
balances and the circumstances of the individual customer. The Group has not provided
for these receivables as these relate to customers with no default history and there has not
been a signiﬁcant change in credit quality. Plant Health Care plc
...............................................
...............................................
54
Notes forming part of the Group financial statements
for the year ended 31 December 2007 continued
.................................................................................................................................................................
16. Trade and other
payables
2007 2006
$’000s $’000s
Trade creditors 1,276 1,513
Accruals 2,185 1,481
Taxation and social security 187 114
3,648 3,108
17. Borrowings (a) Amounts falling due within one year
2007 2006
$’000s $’000s
Notes payable 139 131
Finance leases 66 69
Revolving credit facility — 114
205 314
(b) Amounts falling due after more than one year 2007 2006
$’000s $’000s
Notes payable 218 286
Finance leases 60 128
278 414
Notes payable are unsecured.
Finance lease obligations are secured by retention of title to the relevant equipment
and vehicles.
(c) Due date for payment
The following table illustrates the contractual maturity of the Group’s ﬁnancial liabilities
on a gross basis:
Notes payable Finance leases
Revolving credit
facility
2007 2006 2007 2006 2007 2006
$’000s $’000s $’000s $’000s $’000s $’000s
In less than one year 155 155 87 88 — 114
In more than one year,
but less than two years 185 155 47 83 — —
In more than two years,
but less than ﬁve years 60 155 37 69 — —
400 465 171 240 — 114
(d) Other ﬁnancial commitments
The Group had $520,000 of letters of credit outstanding at 31 December 2007 (2006:
$250,000); $250,000 expiring September 2008 and $270,000 expiring December
2009. Short-term investments in the amount of $559,000 (2006: $275,000) are
pledged as security for these letters of credit. Plant Health Care plc
..............................................
..............................................
55
Notes forming part of the Group financial statements
for the year ended 31 December 2007 continued
.................................................................................................................................................................
18. Provisions
Onerous
contracts
$’000s
Warranty
$’000s
Post-
employment
insurance
beneﬁts
$’000s
Total
$’000s
Balance at 1 January 2007 282 114 — 396
Provided 175 346 23 544
On acquisition 711 — — 711
Utilised in year (462) (225) — (687)
Unwinding of discount 11 11 — 22
Balance at 31 December 2007 717 246 23 986
Due within one year or less 344 202 — 546
Due after more than one year 373 44 23 440
717 246 23 986
Onerous contracts relate to the excess of rents payable over rents receivable on two idle
leased facilities. The lease term of both of these facilities expires in December 2009.
Warranty claims are expected to be paid out over the warranty period of up to three years.
Post-employment insurance beneﬁts are payable upon termination of employment, unless
termination is for cause, and continue for the employee’s lifetime.
19. Financial
instruments
(a) Interest rate and currency of borrowings
The Group’s borrowings comprise notes payable, ﬁnance leases and a short-term
revolving credit facility.
Non-interest-bearing subordinated notes payable of $357,000 (2006: $417,000) are
accounted for at net present value using market discount rates of 5.61% to 10% per
annum. Amortisation of this discount is charged to interest expense over the life of the notes.
$126,000 (2006: $197,000) of the Group’s borrowings are ﬁnance leases; $80,000
is denominated in US dollars (2006: $156,000), $21,000 in Euros (2006: $41,000)
and $25,000 in Pesos (2006: nil), all at ﬁxed interest rates. The weighted average ﬁxed
interest rate is 17.5% and the weighted average period for which it is ﬁxed is 27 months.
There is no interest rate risk related to the notes payable and ﬁnance leases as the
agreements are at ﬁxed rates of interest.
The Group had $114,000 in short-term ﬁnancing through a revolving credit facility in the
USA at 31 December 2006. Borrowings under this facility were repaid in 2007. Interest
was at LIBOR plus 2.375%, adjusted weekly. At the year end, no amounts have been
drawn down on this facility, therefore there is no interest rate risk on this instrument. Plant Health Care plc
...............................................
...............................................
56
Notes forming part of the Group financial statements
for the year ended 31 December 2007 continued
.................................................................................................................................................................
19. Financial
instruments
continued
(b) Interest rate and currency of cash balances
The Group invests its surplus cash in bank deposits denominated in US dollars and British
pounds which earn interest at money market rates. In doing so, the Group exposes itself to
ﬂuctuations in money market interest rates. These cash balances are held with one
international bank.
Floating rate ﬁnancial assets comprise $9,551,000 (2006: $3,940,000) of deposits
on money market deposit at call, seven-day and monthly ﬂoating rates; $8,101,000 is
denominated in US dollars (2006: $3,517,000) and $1,450,000 in British pounds
(2006: $423,000). The annualised effect of a movement of 0.5% in the average interest
rate received on the Group’s bank deposits at the balance sheet date would result in an
increase or decrease in the Group’s income statement of $48,000 (2006: $20,000).
Short-term investments include $559,000 (2006: $436,000) held on deposit at
31 December 2007. These deposits are pledged as collateral for the Company’s letters
of credit and the revolving credit facility in 2006.
The maximum exposure to credit risk on cash balances at the reporting date is the carrying
value of the cash balances.
(c) Currency exposure
The following table show the effects, all other things being equal, of changes to exchange
rates on the Group’s loss after tax and on the exchange differences on retranslation of
the assets and liabilities of foreign operations which are recognised directly in equity.
It illustrates the effects if the exchange rates for the British Pound, Euro and Mexican
Peso had been higher or lower than those which actually applied during the year and
at year end.
(Increase)/decrease
in loss after tax
Effect of exchange rates
on translation of assets and
liabilities of foreign entities
2007 2006 2007 2006
$’000s $’000s $’000s $’000s
Strengthening of GBP by 5% 19 (2) 13 (4)
Weakening of GBP by 5% (21) 2 (15) 5
Strengthening of Euro by 5% (1) 5 18 23
Weakening of Euro by 5% 1 (5) (20) (25)
Strengthening of Peso by 5% (3) (7) (46) (44)
Weakening of Peso by 5% 3 8 51 49
(d) Fair values of ﬁnancial instruments
At 31 December 2007 and 2006, the current values of all of the Group’s ﬁnancial
instruments are not materially different from the book values.
(e) Undrawn bank facilities
On 12 April 2007, the Company entered into a revolving credit agreement that
provides for $2,000,000 in borrowings. The agreement matures one year from the
date it was entered into. Interest is at prime plus 8%. An undrawn facility fee is charged Plant Health Care plc
..............................................
..............................................
57
Notes forming part of the Group financial statements
for the year ended 31 December 2007 continued
.................................................................................................................................................................
19. Financial
instruments
continued
at 2.5% per annum on the undrawn loan balance, calculated monthly. A facility fee
of 4% was payable upon closing. As of 31 December 2007 and the date of this
report, no borrowings were outstanding under the agreement. Borrowings available
under the agreement are based on the eligible accounts receivable and inventory of
certain of the Group’s US subsidiaries. They are secured by substantially all of the
assets of those subsidiaries and are guaranteed by Plant Health Care, Inc. At the year
end, no amounts were drawn down on this facility. Therefore, there is no interest risk
on this instrument.
(f) Categories of ﬁnancial assets and ﬁnancial liabilities
Loans and receivables
2007 2006
$’000s $’000s
Current ﬁnancial assets
Trade and other receivables 6,751 6,942
Short-term investments 559 436
Cash and cash equivalents 10,254 4,446
17,564 11,824
Financial liabilities measured
at amortised cost
2007 2006
$’000s $’000s
Current ﬁnancial liabilities
Trade and other payables 3,648 3,108
Loans and borrowings 205 314
Total current ﬁnancial liabilities 3,853 3,422
Non-current ﬁnancial liabilities
Loans and borrowings 278 414
Total non-current ﬁnancial liabilities 278 414
4,131 3,836
The amounts disclosed for all of the above ﬁnancial assets and ﬁnancial liabilities are
the book values. The directors consider that these are not materially different to their
fair values.
(g) Credit risk
The Group’s principal credit risk relates to the recovery of amounts owed by trade debtors.
In order to manage credit risk, the Group sets limits for customers based on a combination
of payment history and third-party credit references. Credit limits are reviewed on a regular
basis in conjunction with debt ageing and collection history. Balances that are beyond
agreed upon terms are actively followed up to ensure collection.
The Group sells to a large number of customers across each of its geographic segments in
the USA, Europe and Mexico. There is no dependence on any one customer or any
customer representing more than 10% of the Group’s total sales. Plant Health Care plc
...............................................
...............................................
58
Notes forming part of the Group financial statements
for the year ended 31 December 2007 continued
.................................................................................................................................................................
19. Financial
instruments
continued
(h) Capital
As described in notes 21 and 22, the Group considers its capital to comprise its ordinary
share capital, share premium and accumulated retained earnings. The Group is not
subject to any externally-imposed capital requirements. The Group’s primary objective in
managing its capital is to support the development of the Group’s activities through to the
point where they are cash generative on a sustained basis.
20. Subsidiary
undertakings
The following were subsidiary undertakings of the Company at the end of the year.
Name
Country of
incorporation or
registration
Proportion of
voting rights
and
ordinary share
capital held Nature of business
Plant Health Care, Inc USA (Nevada) 97.5% Holding company
Plant Health Care, Inc USA (Pennsylvania) 97.5%* Manufacturing
and sales
PHC Reclamation, Inc USA (Nevada) 97.5%* Contracting and
consulting
Plant Health Care de
Mexico S. de R.L. de C.V. Mexico 78.0%* Sales
Plant Health Care
(UK) Limited United Kingdom 97.5%* Sales
Plant Health Care BV Netherlands 97.5%* Sales
Plant Health Care Espan ˜a Spain 97.5%* Sales
VAMTech, LLC USA (Delaware) 97.5%* Manufacturing
PHC Royalty Corporation USA (Nevada) 97.5%* Intellectual property
* Held indirectly
For all undertakings listed above, the country of operation is the same as its country of
incorporation or registration.
During the year ended 31 December 2007, Plant Health Care, Inc. (Nevada) purchased
six of its outstanding shares from minority shareholders for $180,000. As a result of this
transaction, the Company’s percentage ownership of Plant Health Care, Inc. (Nevada)
increased to 97.5% at 31 December 2007 (2006: 96.9%).
Subsequent to the year end, the Company issued 495,000 new ordinary shares in
exchange for Plant Health Care, Inc. (Nevada) minority shares, increasing the Company’s
percentage ownership of Plant Health Care, Inc. (Nevada) from 97.5% to 99.4% as of the
date of this report. Plant Health Care plc
..............................................
..............................................
59
Notes forming part of the Group financial statements
for the year ended 31 December 2007 continued
.................................................................................................................................................................
21. Share capital (a) Authorised and issued share capital
2007 2006
$’000s $’000s
Authorised share capital:
500,000,000 ordinary shares at £0.01 each 8,984 8,984
Allotted, called up and fully-paid share capital:
44,214,229 (2006: 40,333,972) ordinary
shares at £0.01 each 809 731
(b) Movement in share capital
The movements on issued share capital are as follows:
Ordinary shares of
Plant Health Care plc
Number $’000s
In issue at 1 January 2006 30,150,462 542
Secondary placement 10,000,000 186
Shares exchanged 7,500 —
Shares issued for services received 29,760 —
Share options exercised 90,000 2
Warrants exercised 56,250 1
In issue at 31 December 2006 40,333,972 731
Secondary placement 2,098,000 43
Shares issued for services received 33,789 1
Share options exercised 1,748,468 34
In issue at 31 December 2007 44,214,229 809
Shares exchanged 495,000 10
In issue at the date of this report 44,709,229 819
During the year ended 31 December 2006, the following fully-paid 1 pence ordinary
shares in the Company were issued:
(i) 10,000,000 shares, with an aggregate value of $12,066,000, were issued by
way of a placing at 65 pence per share on 5 May 2006.
(ii) 7,500 shares, with an aggregate value of $14,000, were issued in exchange for
Plant Health Care Inc. shares in accordance with the circular dated 30 June 2004.
(iii) 29,760 shares, with an aggregate value of $38,000, were issued to certain
non-executive directors in payment of fees.
(iv) 90,000 shares, with an aggregate value of $62,000, were issued for the exercise
of share options at an exercise price of 37 pence per share
(v) 56,250 shares, with an aggregate value of $1,000, were issued for the exercise
of share warrants, in accordance with the circular dated 30 June 2004. Plant Health Care plc
...............................................
...............................................
60
Notes forming part of the Group financial statements
for the year ended 31 December 2007 continued
.................................................................................................................................................................
21. Share capital
continued
During the year ended 31 December 2007, the following fully-paid 1 pence ordinary
shares in the Company were issued:
(i) 2,098,000 shares, with an aggregate value of $10,163,000, were issued by
way of a placing at 238 pence per share on 26 September 2007.
(ii) 33,789 shares, with an aggregate value of $156,000, were issued to certain
non-executive directors and the Company Secretary in payment of fees.
(iii) 1,748,468 shares, with an aggregate value of $1,365,000, were issued for the
exercise of share options, at exercise prices ranging from 37 pence per share to
110 pence per share.
During the period from 1 January 2008 to the date of this report, the following additional
shares of 1 pence each were issued:
(i) 495,000 new ordinary shares, with an aggregate value of $2,491,000, were
issued pursuant to the acceptance of an exchange offer for minority shares in
Plant Health Care, Inc.
(c) Warrants
The company had 176,704 warrants outstanding at 31 December 2007. There were
no movements in warrants during the year ended 31 December 2007 or to the date
of this report.
The warrants are exercisable at 52 pence per warrant on or before 5 July 2014.
(d) Share options
As described in the Remuneration Committee report on pages 20 to 25, the Company
issues share options to certain employees under the Plant Health Care plc Unapproved
Share Option Scheme 2004. At the time of its admission to AIM, the Company also
agreed to honour outstanding options under the Plant Health Care, Inc 2001 Equity
Incentive Plan. No further options have been or will be issued under that Plan. Plant Health Care plc
..............................................
..............................................
61
Notes forming part of the Group financial statements
for the year ended 31 December 2007 continued
.................................................................................................................................................................
21. Share capital
continued
The movements on share options are as follows:
Options over ordinary shares
Directors Other Total
Weighted
average
exercise
price
(pence)
Outstanding at
1 January 2006 2,887,498 1,923,498 4,810,996 43
Appointment of CFO
as director 100,000 (100,000) — —
Awarded 103,470 81,000 184,470 88
Exercised — (90,000) (90,000) 37
Forfeited — (104,500) (104,500) 62
Outstanding at
31 December 2006 3,090,968 1,709,998 4,800,966 45
Awarded — 191,500 191,500 226
Exercised (1,053,468) (695,000) (1,748,468) 40
Forfeited (200,000) (26,500) (226,500) 67
Outstanding at
31 December 2007 1,837,500 1,179,998 3,017,498 57
Of the total number of options outstanding at 31 December 2007, 2,471,248
(2006: 4,029,371) had vested and were exercisable. The weighted average exercise
price was 42 pence (2006: 40 pence).
The weighted average share price at the dates of exercise for the share options exercised
during 2007 was 235 pence (2006: 119 pence).
The options outstanding at 31 December 2007 have a weighted average remaining
life of 5.7 years (2006: 6.3 years) and the range of the exercise prices is 37 pence
to 245 pence (2006: 37 pence to 128 pence).
There were no further movements in options from 1 January 2008 to the date of this report.
(e) Share awards under long-term incentive plan
As described in the Remuneration Committee report on pages 20 to 25, the Company
awards shares to certain employees under the Plant Health Care plc 2007 Long Term
Incentive Plan. Plant Health Care plc
...............................................
...............................................
62
Notes forming part of the Group financial statements
for the year ended 31 December 2007 continued
.................................................................................................................................................................
21. Share capital
continued
The movements on share awards during the year ended 31 December 2007 and to the
date of this report are as follows:
Share awards
Directors Other Total
Outstanding at 1 January 2007 ———
Awarded 300,000 100,000 400,000
Outstanding at
31 December 2007 300,000 100,000 400,000
Appointment of Stephen Weaver
as Finance Director 100,000 (100,000) —
Outstanding at date of this report 400,000 — 400,000
None of the shares awarded had vested at 31 December 2007.
The share awards granted vest, subject to certain performance and service conditions,
over the period from 2008 to 2010.
22. Reserves
Share
premium
$’000s
Reverse
acqui-
sition
reserve
$’000s
Share-
based
payment
reserve
$’000s
Foreign
exchange
reserve
$’000s
Retained
earnings
$’000s
Total
$’000s
Minority
interest
$’000s
Total
equity
$’000s
Balance at 1 January 2006 10,847 11,195 51 (228) (17,227) 4,638 190 4,828
Share issues 11,918 ————11,918 —11,918
Plant Health Care, Inc.
shares exchanged 13 (21) — — — (8) — (8)
Share-based payments — — 67 — — 67 — 67
Options exercised 61 ———— 61 — 61
Placement costs (1,013) ————(1,013) — (1,013)
Movement in exchange rates — — — 219 — 219 — 219
Loss in the year ————(3,028) (3,028) 30 (2,998)
Balance at 31 December 2006 21,826 11,174 118 (9) (20,255) 12,854 220 13,074
Share issues 10,627 ————10,627 —10,627
Repurchase of minority interest’s
shares by subsidiary — (158) — — — (158) — (158)
Share-based payments — — 462 — — 462 — 462
Options exercised 1,331 ————1,331 —1,331
Placement costs (333) ———— (333) — (333)
Movement in exchange rates — — — 130 — 130 — 130
Loss in the year ————(5,424) (5,424) 11 (5,413)
Balance at 31 December 2007 33,451 11,016 580 121 (25,679) 19,489 231 19,720 Plant Health Care plc
..............................................
..............................................
63
Notes forming part of the Group financial statements
for the year ended 31 December 2007 continued
.................................................................................................................................................................
22. Reserves
continued
The following describes the nature and purpose of each reserve within owners’ equity:
Reserve Description and purpose
Share capital Amount subscribed for share capital at nominal value.
Share premium Amount subscribed for share capital in excess of
nominal value.
Reverse acquisition reserve Reserve recognised in the share-for-share exchange
transaction accounted for as a reverse acquisition by
the Group.
Share-based payment reserve Cumulative net cost of equity-settled share-based
payment transactions.
Foreign exchange reserve Gains/losses on retranslating the net assets of overseas
operations.
Retained earnings Cumulative net gains and losses recognised in the
consolidated income statement.
Minority interest Cumulative net proﬁt or loss attributable to minority
shareholders.
23. Pensions The Group does not maintain any deﬁned beneﬁt pension plans. The Group does
maintain a retirement plan qualiﬁed under Section 401(k) of the United States Internal
Revenue Code. This plan covers substantially all US employees. In 2007, the Company’s
pension expense under the scheme was $64,000 (2006: Nil).
24. Leases Finance leases
The Group leases vehicles, production equipment and ofﬁce equipment classiﬁed as
ﬁnance leases.
Future lease payments are due as follows:
2007: Minimum
lease
payments
$’000s
Interest
$’000s
Present
value
$’000s
Not later than one year 87 21 66
Later than one year and not later than
ﬁve years 84 24 60
171 45 126
2006: Minimum
lease
payments
$’000s
Interest
$’000s
Present
value
$’000s
Not later than one year 88 19 69
Later than one year and not later than
ﬁve years 152 24 128
240 43 197 Plant Health Care plc
...............................................
...............................................
64
Notes forming part of the Group financial statements
for the year ended 31 December 2007 continued
.................................................................................................................................................................
24. Leases
continued
Operating leases
The Group leases all of its properties, as well as ofﬁce equipment and vehicles. The terms
of property leases vary from country to country and tend to have rent reviews at the end of
the lease term for renewal purposes. Vehicle operating leases are for a ﬁxed term with a
fair value buy-out option at the end of the lease term.
The total value of minimum lease payments are due as follows:
2007 2006
$’000s $’000s
Not later than one year 326 407
Later than one year and not later than ﬁve years 327 554
653 961
25. Asset purchase On 28 February 2007, the Company acquired certain of the assets of Eden Bioscience
Corporation for a total consideration of $2,200,000, plus the assumption of certain
liabilities associated with these assets. $1,500,000 was paid at closing and $700,000
was paid during the year under a secured promissory note bearing interest at a rate of
5% per annum. Costs attributable to the purchase were $246,000.
Details of the fair value of the assets acquired and liabilities assumed were as follows:
$’000s
Inventories 839
Tangible assets 686
Intangible assets 302
Accrued expenses (102)
Onerous lease provision (711)
1,014
Goodwill 1,432
Cost of acquisition 2,446
The main factors leading to the recognition of goodwill are:
➢ the presence of certain intangible assets which do not qualify for separate
recognition; and
➢ synergistic cost savings which result in the Group being prepared to pay a premium.
The Company acquired certain equipment under the asset purchase agreement that
would not be used in the Company’s operations. The Company sold all of this equipment
during the year for an amount equal to its fair value.
The Company assumed the obligations under an Exclusive License Agreement relating to
the licensing of technology from Cornell University. Payments due under the agreement
with Cornell are the greater of 2% of sales or $200,000 per annum.
Following the acquisition of the assets of Eden Bioscience Corporation, the assets were
fully integrated into the Group, therefore it is not possible to disclose a separate proﬁt or
loss applicable to this acquisition for the period since the date of acquisition. Plant Health Care plc
..............................................
..............................................
65
Notes forming part of the Group financial statements
for the year ended 31 December 2007 continued
.................................................................................................................................................................
26. Notes supporting
cash ﬂow
statement
Signiﬁcant non-cash transactions are as follows:
2007 2006
$’000s $’000s
Operating activities
Equity consideration for services rendered 156 38
Financing activities
Assets acquired under ﬁnance leases 52 101
Notes issued for the repurchase of minority interest’s shares
by subsidiary 68 —
120 101
27. Commitments
and contingencies
On 1 November 2007, the Company committed to purchase $880,000 of goods from
a third party supplier. During 2007, $85,000 of goods were purchased from the
supplier. From 1 January 2008 to the date of this report, the Company purchased
$423,000 of goods. The remainder of the goods are due for delivery during 2008.
28. First-time
adoption of
International
Financial
Reporting
Standards (IFRS)
Reconciliations and explanatory notes on how the transition to IFRS has affected proﬁt and
net assets previously reported under UK Generally Accepted Accounting Principles (UK
GAAP) are given below:
Income statement reconciliation for the year ended 31 December 2006
Note UK GAAP Adjustments IFRS
$’000s $’000s $’000s
Revenue 13,679 — 13,679
Cost of sales (7,565) — (7,565)
Gross proﬁt 6,114 — 6,114
Goodwill amortisation (i) (36) 36 —
Administrative expenses (ii) (8,976) (4) (8,980)
Operating loss (2,898) 32 (2,866)
Finance revenue 275 — 275
Finance costs (335) — (335)
Loss before tax (2,958) 32 (2,926)
Tax expense (72) — (72)
Loss for the year (3,030) 32 (2,998)
Attributable to:
Equity holders of the parent (3,060) 32 (3,028)
Minority interest 30 — 30
(3,030) 32 (2,998)
All amounts relate to continuing operations. Plant Health Care plc
...............................................
...............................................
66
Notes forming part of the Group financial statements
for the year ended 31 December 2007 continued
.................................................................................................................................................................
28. First-time
adoption of
International
Financial
Reporting
Standards (IFRS)
continued
Balance sheet reconciliation at 1 January 2006
Note UK GAAP Adjustments IFRS
$’000s $’000s $’000s
Assets
Non-current assets
Intangible assets 2,769 — 2,769
Property, plant and equipment 790 — 790
Total non-current assets 3,559 — 3,559
Current assets
Inventories 1,582 — 1,582
Trade and other receivables 2,989 — 2,989
Short-term investments 252 — 252
Cash and cash equivalents 894 — 894
Total current assets 5,717 — 5,717
Total assets 9,276 — 9,276
Liabilities
Current liabilities
Trade and other payables (ii) 2,813 51 2,864
Short-term borrowings 285 — 285
Provisions 234 — 234
Total current liabilities 3,332 51 3,383
Non-current liabilities
Long-term borrowings 523 — 523
Provisions — —
Total non-current liabilities 523 — 523
Total liabilities 3,855 51 3,906
Total net assets 5,421 (51) 5,370
Capital and reserves attributable to
equity holders of the Company
Share capital 542 — 542
Share premium 10,847 — 10,847
Reverse acquisition reserve 11,195 — 11,195
Share-based payment reserve 51 51
Foreign exchange reserve (iii) — (228) (228)
Retained earnings (17,404) 177 (17,227)
5,231 (51) 5,180
Minority interest 190 — 190
Total equity 5,421 (51) 5,370 Plant Health Care plc
..............................................
..............................................
67
Notes forming part of the Group financial statements
for the year ended 31 December 2007 continued
.................................................................................................................................................................
28. First-time
adoption of
International
Financial
Reporting
Standards (IFRS)
continued
Balance sheet reconciliation at 31 December 2006
Note UK GAAP Adjustments IFRS
$’000s $’000s $’000s
Assets
Non-current assets
Intangible assets (i) 2,701 36 2,737
Property, plant and equipment 1,008 — 1,008
Total non-current assets 3,709 36 3,745
Current assets
Inventories 2,468 — 2,468
Trade and other receivables 6,942 — 6,942
Short-term investments 436 — 436
Cash and cash equivalents 4,446 — 4,446
Total current assets 14,292 — 14,292
Total assets 18,001 36 18,037
Liabilities
Current liabilities
Trade and other payables (ii) 3,052 56 3,108
Short-term borrowings 314 — 314
Provisions 396 — 396
Total current liabilities 3,762 56 3,818
Non-current liabilities
Long-term borrowings 414 — 414
Provisions — — —
Total non-current liabilities 414 — 414
Total liabilities 4,176 56 4,232
Total net assets 13,825 (20) 13,805
Capital and reserves attributable to
equity holders of the Company
Share capital 731 — 731
Share premium 21,826 — 21,826
Reverse acquisition reserve 11,174 — 11,174
Share-based payment reserve 118 — 118
Foreign exchange reserve (iii) — (9) (9)
Retained earnings (20,244) (11) (20,255)
13,605 (20) 13,585
Minority interest 220 — 220
Total equity 13,825 (20) 13,805 Plant Health Care plc
...............................................
...............................................
68
Notes forming part of the Group financial statements
for the year ended 31 December 2007 continued
.................................................................................................................................................................
28. First-time
adoption of
International
Financial
Reporting
Standards (IFRS)
continued
Adjustments
Explanations of the adjustments made to the UK GAAP income statement and balance
sheets are as follows:
Note
(i) IFRS 3 ‘Business Combinations” has been applied to acquisitions completed after
the date of transition, 1 January 2006. As a result, the carrying value of goodwill in
the UK GAAP balance sheet at 31 December 2005 is brought forward to the IFRS
opening balance sheet. The effect of IFRS has been to reverse the goodwill
amortisation charge for the June 2006 and December 2006 reporting periods.
(ii) In accordance with IAS 19, administrative expenses have been adjusted to reﬂect
accrued entitlement to short-term compensated absences.
(iii) In accordance with IAS 21, the foreign exchange reserve is classiﬁed as a separate
component of equity.
There were no material changes to the cash ﬂow for the year ended 31 December 2006;
the only changes are presentational. Plant Health Care plc
..............................................
..............................................
69
Company balance sheet
at 31 December 2007
.................................................................................................................................................................
Note 2007 2006
$’000s $’000s
Fixed assets
Fixed asset investments 33 34,839 30,636
Current assets
Debtors 35 29 21
Cash at bank and in hand 8,995 3,599
9,024 3,620
Creditors: amounts falling due within one year 36 (482) (333)
Net current assets 8,542 3,287
Net assets 43,381 33,923
Capital and reserves
Called-up share capital 21 809 731
Share premium 38 33,451 21,826
Reverse acquisition reserve 38 14,455 14,455
Option reserve 38 580 118
Proﬁt and loss account 38 (5,914) (3,207)
Shareholders’ funds 43,381 33,923
The ﬁnancial statements were approved and authorised for issue by the Board on
28 March 2008.
J Brady
Director
The notes on pages 70 to 72 form part of these ﬁnancial statements. Plant Health Care plc
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70
Notes forming part of the Company financial statements
for the year ended 31 December 2007
.................................................................................................................................................................
29. Accounting
policies
Basis of preparation
The ﬁnancial statements have been prepared under the historical cost convention and are
in accordance with the applicable United Kingdom Accounting Standards. The principal
accounting policies, which have been applied consistently, are set out below:
Investments
Fixed asset investments comprise investments by the Company in the shares of subsidiary
undertakings and loans to Group undertakings. They are stated at cost less any provision
where, in the opinion of the directors, there has been an impairment.
Equity share-based payments
Share-based payments issued to employees include share options and stock awards
under a long-term incentive plan. Equity-settled share-based payments are measured at fair
value (excluding the effect of non-market-based vesting conditions) at the date of grant. The
fair value determined at the date of grant is recognised as an expense with a
corresponding increase in equity on a straight-line basis over the vesting period, based on
the Company’s estimate of the shares that will eventually vest and adjusted for the effect of
non-market-based vesting conditions. Where equity instruments are granted to persons
other than employees, the proﬁt and loss account is charged with the fair value of goods
and services received. The fair value of equity instruments is calculated using the binomial
option pricing model.
Deferred taxation
Deferred tax balances are recognised in respect of timing differences that have originated
but not reversed by the balance sheet date. However, where there is uncertainty over the
timing of their realisation, deferred tax assets are not recognised.
30. Loss for the
ﬁnancial year
The Company has taken advantage of the exemption allowed under section 230 of the
Companies Act 1985 and has not presented its own proﬁt and loss account in these
ﬁnancial statements. The Group loss for the year includes a loss after tax of $2,707,000
(2006: loss of $1,012,000), which is dealt with in the ﬁnancial statements of the
parent company.
31. Employees Staff costs for all employees, including executive directors, comprise:
2007 2006
$’000s $’000s
Wages and salaries 694 257
Social security and payroll taxes 137 17
Deﬁned contribution pension costs 5 —
Medical and other beneﬁt plans 32 13
Other long-term employee beneﬁts 23 —
Compensation for loss of ofﬁce 145 —
1,036 287
The average number of employees of the Company during the year, including executive
directors, was as follows:
2007 2006
Management 4 4 Plant Health Care plc
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71
Notes forming part of the Company financial statements
for the year ended 31 December 2007 continued
.................................................................................................................................................................
32. Directors’
remuneration
2007 2006
$’000s $’000s
Directors’ emoluments 1,009 767
Pension contributions 8 —
Post-employment health beneﬁts 23 —
Compensation for loss of ofﬁce 145 —
1,185 767
Further disclosures on the remuneration of each individual director are included in the
Remuneration Committee report.
Total emoluments paid to the highest paid director were $486,000 (2006: $252,000).
The three executive directors who served during the year were eligible to participate in the
Group’s 401(k) retirement plan. The contribution to the plan accrued for the highest paid
director was $3,000 (2006: Nil).
33. Fixed asset
investments
Shares in
Group
undertakings
Loans to
Group
undertakings Total
$’000s $’000s $’000s
Cost
At 1 January 2006 15,293 8,498 23,791
Additions 14 6,831 6,845
At 1 January 2007 15,307 15,329 30,636
Additions — 4,203 4,203
At 31 December 2007 15,307 19,532 34,839
The directors do not consider that any provision is required against the cost of
these investments.
34. Subsidiary
undertakings
The subsidiary undertakings of the Company are disclosed in note 20 of the Group
ﬁnancial statements.
35. Debtors 2007 2006
$’000s $’000s
Prepayments 29 21
All amounts fall due within one year.
36. Creditors 2007 2006
$’000s $’000s
Trade creditors 40 107
Accruals 442 226
482 333
All amounts fall due for payment within one year. Plant Health Care plc
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72
Notes forming part of the Company financial statements
for the year ended 31 December 2007 continued
.................................................................................................................................................................
37. Share capital The share capital of the Company is disclosed in Note 21 of the Group ﬁnancial
statements.
38. Reconciliation of
movements in
shareholders’
funds
Share
premium
$’000s
Reverse
acquisition
reserve
$’000s
Share-
based
payment
reserve
$’000s
Retained
earnings
$’000s
Balance at 1 January 2006 10,847 14,453 51 (2,195)
Plant Health Care, Inc. shares
exchanged 13 2 — —
Share issues 11,880 — — —
Share-based payments 38 — 67 —
Options exercised 61———
Placement costs (1,013) — — —
Loss in the year — — — (1,012)
Balance at 31 December 2006 21,826 14,455 118 (3,207)
Share issues 10,627 — — —
Share-based payments — — 462 —
Options exercised 1,331 — — —
Placement costs (333) — — —
Loss in the year — — — (2,707)
Balance at 31 December 2007 33,451 14,455 580 (5,914)
39. Cash ﬂow
statement
The Company has taken advantage of the exemption conferred by FRS 1 not to prepare a
cash ﬂow statement on the basis that the Company’s results are included in the Group
ﬁnancial statements.
Produced by Portman Lodge Limited