Disposal and Trading Update

RNS Number : 4598Z

Plant Health Care PLC

14 January 2011

 



14 January 2011                                                                                        

Plant Health Care plc ("Plant Health Care" or "the Company")

PLANT HEALTH CARE ANNOUNCES DISPOSAL

OF US LANDSCAPE AND RETAIL BUSINESS

AND

TRADING UPDATE

Plant Health Care (AIM: PHC), a leading provider of naturally-derived products to the agriculture industry, announces that it has completed the disposal of its US  landscape and retail business to Lebanon Seaboard Corporation of Lebanon, Pennsylvania for a cash consideration of approximately $4.65 million.

As a result of the disposal, Plant Health Care will record a net profit of approximately $2.30 million after reorganisation and other related charges of approximately $1 million.

The Company is performing a strategic review of the remainder of its direct sales businesses, in Europe and Mexico, and will make further announcements as appropriate.

The Company's strategy is to develop its licensing business, as was set out in its statement of interim results in August 2010:

To develop and prove naturally-derived products for the worldwide agricultural market, to be exploited commercially through partnerships established with major industry players who have the presence, ambition and resources to maximise the penetration of our technologies across all relevant crops, applications and territories.

The disposal of the US landscape and retail business realises value from an operating unit which is non-core and, as more licensing agreements are entered into, is likely to have an increasingly limited scope to sell Plant Health Care's Myconate and Harpin-based product lines. The Board believes that the Company should focus on developing the licensing activities and it considers that the potential revenue from existing and future partnership agreements is likely to far exceed the profits that are possible from direct sales operations.  Moreover, the Company will be better able to exercise control over both overheads and margins from a licensing business.

The disposed assets made a revenue contribution of approximately $5.7 million and a contribution to operating profit of $0.38 million in the twelve months to 31 December 2010. The Board believes that it has received good value for the US business and the disposal will allow the Company and its management to concentrate on developing partnering opportunities with the world's leading agrichemical companies in order to fully exploit the potential of Plant Health Care's Harpin and Myconate technologies.  The net proceeds of the sale will be used to invest in research and development in a disciplined and focused manner and in the commercialisation of the Company's Harpin and Myconate-brand products.

Trading Update

Plant Health Care provides the following update on trading for the year ended 31 December 2010, ahead of the announcement of its full-year results expected in the last week of February.

Revenues from product sales during the year have been some $3 million below previous expectations as a result of a Board decision that the Company should cease its early order programme, which is common in the industry and has been made available to customers in previous years.  The Board believes that this will enable higher margins for products which, in future, will be sold at the time of customer need.  Furthermore, licensing revenues are some $1 million below previous expectations as a result of the decision to forgo upfront licensing payments in order to preserve options for longer term and more strategic marketing partnerships for Harpin and Myconate, products for which we are seeing sustained and increasing interest.

The Company's cash position of approximately $13 million at the year end will increase to approximately $16.5 million as a result of the disposal of the US landscape and retail business.

The Board continues to believe that licensing deals provide the best opportunity to derive maximum value from Harpin and Myconate. Discussions with other potential licensees for Harpin and Myconate continue to progress well and, whilst predicting licensing revenues for, as yet, unsigned agreements is difficult, the Board remains confident that licensing revenues will build strongly over several years.

Following the disposal of the US landscape and retail business and the reorganisation referred to above, the Company will benefit from a reduction in its administrative overheads. Despite a modest increase in investment in infrastructure to support the licensing business, the Board expects that the administrative overheads will be some 8% below the current level in 2011.

John Brady, CEO of Plant Health Care commented: "We believe the combination of the disposal of this non-core business at a significant multiple of earnings, the elimination of the discount programme and the flexibility to provide Harpin across a wide range of crops and product applications, positions the Company for a strong future. 

 "This disposal is part of Plant Health Care's strategy to become a licensing business to the agriculture industry in order to extract maximum value from our Harpin and Myconate technologies. This will be achieved by developing key commercial partnerships with some of the largest agrichemical and seed companies in the world.  We expect our licensing opportunities to provide a much more significant revenue and earnings stream going forward and more efficient use of our cash and management resources."

- ENDS -

For further information, please contact:

Plant Health Care plc
John Brady, Chief Executive Officer
Tel: [phone]
[e-mail]

Evolution Securities	Tavistock Communications
Tim Worlledge / Tim Redfern	Jeremy Carey/Matt Ridsdale
Tel: [phone]	Tel: [phone]
[e-mail] [e-mail]	[e-mail]  [e-mail]

Notes to Editors:

About Plant Health Care plc: Plant Health Care plc ("PHC") is a leading provider of naturally-derived products for plants and soil. Established in 1995 in Pittsburgh (Pennsylvania) in the United States, PHC currently has approximately 90 employees and has operations in the United States, Mexico, the United Kingdom, Spain and the Netherlands. The Company's ordinary shares have been quoted on the Alternative Investment Market ("AIM") of the London Stock Exchange since July 2004 and listed on the Official List of the Channel Islands Stock Exchange in February 2010 (ticker symbol/ mnemonic: PHC).

PHC's products are aimed at the agriculture industries and are environmentally beneficial. Through the commercialisation of these products, PHC is capitalising on long-term trends toward natural systems and biological products for plant care and soil and water management. Further information is available at: www.planthealthcare.com.

 

END

 

 

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