Plant Health Regulatory News (PHC)

RNS

8 April 2016

PRELIMINARY RESULTS 2015

Plant Health Care (AIM: PHC), a leading provider of novel patent-protected biological products to the global agriculture markets, announces its preliminary results for the full year ended 31 December 2015.

2015 Highlights

- Signed agreements with four of the six major agrochemical companies to evaluate Innatus™ 3G, the first family of peptides generated from PHC's PREtec (Plant Response Elicitor) platform

- Increased R&D spending by 101% to $4.1m and significantly expanded our laboratory space

- Revenue increased by 15% in constant currency, 9% in USD to $7.5m ($6.9m in 2014)

- Harpin revenue rose 22% to $3.9m; Harpin sales increased by 35% CAGR 2013-2015

- Derived 60% of total revenue from proprietary sales of Harpin and Myconate

- Gross profit increased by 34% to $4.7m ($3.5m in 2014); Gross margin increased to 62% (51% in 2014)

- Received first product registration in Brazil

- Expanded distribution agreement with Sym-Agro

- Signed distribution agreement with TH Agri-Chemicals

Paul Schmidt, CEO, commented:

"2015 was a year of significant achievement for us in both our New Technology and Commercial business lines. With respect to New Technology, which is focused on the discovery and early development of novel proprietary biological solutions using the Group's PREtec platform (PREtec signifies Plant Response Elicitor technology), the four evaluation agreements we signed with major players for our Innatus™ 3G family of peptides indicate the potential benefits this technology can provide. We look forward to working with our partners to further develop and commercialise these peptides. On the Commercial side, sales of Harpin have now increased at a 35% CAGR since 2013. The substantial 34% increase in Gross Profit reflected improved margins, largely driven by the increasing proportion of Harpin in our total sales. The achievement of a key registration approval in Brazil, the world's largest agricultural market, together with new and expanded distribution agreements signed in 2015 in the USA and EU will continue to drive sales growth in the future.

Biologicals remain at the forefront of agricultural evolution and Plant Health Care continues to be well positioned to capitalise on this trend. We are increasingly confident that our PREtec platform technologies have block-buster potential and expect to present further families of peptides to potential partners beginning in 2016. With the extensive experience and proven track record of our executive and management teams we look forward to advancing our strategic initiatives as we build upon our position as a leader in the agricultural biological marketplace."

For further information, please contact:

Plant Health Care plc

Paul Schmidt, Chief Executive Officer Tel: +1 919 926 1600

Liberum Capital Limited (NOMAD)

Clayton Bush Tel: +44 (0) 20 3100 2000

LHA

Ed McGregor/Jody Burfening Tel: +1 212 838 3777

About Plant Health Care plc: Plant Health Care plc ("Plant Health Care") is a leading provider of patent-protected biological products aimed at the agriculture industry that are environmentally beneficial. Through the commercialisation of these products, Plant Health Care is capitalising on current long-term trends towards natural systems and biological products for plant care and soil and water management.

Chairman's letter

Overview

Plant Health Care is a leading provider of proprietary agricultural biological products and technology solutions focused on improving crop performance.

This has been a year of strong commercial sales growth in a difficult market as well as accelerated progress in the Company's innovation. We report here separately the two areas of focus for the business: 1. New Technology (renamed from Bio-stimulant Discovery and Development); and 2. Commercial. We are now organised in these two lines of business and report our Commercial business in three geographic segments - Americas, Mexico and Rest of World. We report our New Technology business in a single segment.

We have also included this year a much more detailed explanation in the Strategic report of our products, the areas we are focusing on in New Technology and also our industry. We hope this will help our shareholders better understand the exciting opportunities available to us.

New Technology

New Technology is focused on the discovery and early development of novel proprietary biological solutions using the Group's PREtec platform (PREtec signifies Plant Response Elicitor technology). Our Group continues to invent and seek patent protection for new technologies developed using its PREtec platform; these new technologies will mainly be developed into final products in partnership with major industry players, who will be responsible for commercialising them while we plan to preserve the ability to develop and commercialise these peptides in specialty crops ourselves.

New Technology made remarkable progress during the year, under the leadership of our Chief Science Officer ("CSO"), Dr. Zhongmin Wei. Our first family of PREtec peptides, Innatus 3G, was presented to six potential major industry partners in the latter part of 2014. We expect that Innatus 3G will permit the development of customisable products that will be compatible with agrochemicals and complementary to existing agricultural practices. During 2015, we were delighted to report that four of those six companies signed agreements to evaluate the technology. We are now intensively engaged with these partners, who are showing increasing excitement about the potential of the Innatus 3G family.

In parallel, we are presenting our evaluation partners with further data on products derived from Innatus 3G. We completed our third year of field trials in corn with Innatus 3G. This included one peptide variant with three years of field trial data delivering an average yield increase of 9.6 bushels per acre when applied as a seed treatment compared with industry standard treatments alone, with a win rate of 79%, with data from 19 of 20 sites analysed to date. This investment in our own data is helping to stimulate our partners to investigate the potential of Innatus 3G.

Our laboratory in Seattle has also made great strides in revealing a pipeline of PREtec technology beyond Innatus 3G. During 2016, further trial data will be generated and assessed. Assuming positive results, during the 2017 to 2018 time period, we intend to proceed with out-licensing Innatus 3G on a crop and geographic basis. In addition to Innatus 3G, we have identified other peptide families using PREtec with very promising early results that we intend to continue to evaluate internally, aiming to advance additional peptide families to the advanced development stage over the next several years.

Reflecting the speed of progress in New Technology, we have increased substantially our investment in research and development ("R&D"). In 2015, we invested $4.1 million in R&D, an increase of 101% over 2014. The New Technology team in Seattle now numbers 14 and we moved into larger, customised laboratory premises during the year. We have devoted considerable resources to our intellectual property ("IP") and are confident that we are building effective protection around our technology.

Commercial

Our Commercial business sells our proprietary products worldwide through distributors and distributes complementary third-party products in Mexico. Commercial continues to expand the registration of commercial products and management of channels to market. Commercial is currently focused on driving sales of Harpin and Myconate around the world, both directly and with value chain partners. We believe that our achievement of a product registration in Brazil will result in traction for Harpin in the largest agricultural market in the world from 2016 onwards. The Commercial team has been strengthened during 2015, to drive further growth as we continue to expand our geographical focus in key markets by identifying capable distribution partners to extend our reach.

Overall total sales grew by 9% (15% in constant currency) despite headwinds in the agricultural market. Sales in the Americas were strong and grew by 24%. Mexico represented some 47% of the Group's sales. Sales denominated in the Mexican peso increased by 7.2 million, but due to the continued devaluation of the peso, sales in USD showed a slight decrease. Our proprietary products now represent 60% of our sales, which has helped to increase gross margin further, to 62%. Careful control of costs and of working capital ensured that we finished the year with a net loss and cash balances broadly in line with expectations.

Strong momentum is now building in the sales of Harpin-based products, which experienced a compound annual growth rate ("CAGR") of 35% from 2013 to 2015, excluding up-front payments. This steady growth is now under-pinned by a growing network of strong distribution partners, committed to the market development efforts which are required for sustained sales growth of Harpin products.

Board changes

Given the exciting expectations for the Group, the Board requested me to take a more active role in developing strategy and in investor relations. I, therefore, became Executive Chairman with effect from 1 April 2015. My role is to support Paul Schmidt and the management team, who are responsible for all aspects of implementation.

In January 2015, Dr. Richard H. Webb, formerly a non-executive director, became an Executive Director. Dr. Webb is responsible for supporting our CSO, Dr. Zhongmin Wei, as we continue to expand our investment in our New Technology programme.

James Ede-Golightly joined the Audit Committee on 16 January 2015 and in conjunction with taking on the role of Executive Director, Dr. Webb stepped down from the Audit Committee after last year's AGM.

With effect from 1 April 2015, William ("Bill") M. Lewis joined the Company as a non-executive director.

Outlook

Agriculture markets in general are much less buoyant than in previous years, driven by lower commodity prices. However, we believe that growers in key markets will continue to adopt agricultural biological products which increase their productivity. Based on various reports, we believe the global biologicals market in 2015 was over $2.5 billion, with an expected compound annual growth rate of approximately 10% from 2015 to 2020. We are optimistic with respect to the growth prospects for Harpin 𝜶β. The positive response of our evaluation partners to early results with Innatus 3G is an enormously encouraging signal of the potential of PREtec.

Plant Health Care is now well established on the new direction which Paul Schmidt and I set out for the Group in 2013. The progress in advancing our PREtec platform and commercialising our proprietary products during 2015 was strong, and we confidently expect further progress during 2016 as we build upon our position as a leader in the agricultural biologicals marketplace.

In closing, I would like to thank the entire Plant Health Care team for all their hard work during the year. Strong results come from great people, working towards shared goals. Paul Schmidt has built an impressive team, in which I have the greatest confidence. 

Dr. Christopher Richards

Executive Chairman

8 April 2016

Strategic report

We are a leading provider of proprietary agricultural biological products and technology solutions focused on improving crop performance by activating a growth response and bolstering plant defence mechanisms against both abiotic stresses, such as drought and extreme temperatures, and biotic stresses, such as weed encroachment or pest infestation. We are now organised in two lines of business: New Technology and Commercial.

Our New Technology business focuses on the advancement of our proprietary Plant Response Elicitor technology platform, or PREtec, to develop and provide more rapid commercialisation of small strands of amino acids, or peptides, which we intend to out-license. We are currently focused on commercialising this technology by partnering with leading agriculture companies to accelerate its adoption in key geographic and crop markets. PREtec enables the custom design and creation of peptides to achieve targeted responses in specific crops. These include improving a plant's ability to grow efficiently, increasing its yield, bolstering its responses to stresses such as drought and enhancing its resistance to external factors, such as diseases and certain pests in both row and specialty crops. Currently, four of the six largest global agriculture companies are evaluating Innatus 3G, our first peptide family developed from PREtec. We report our New Technology business in a single segment.

Our Commercial business focuses on selling proprietary biological products that are applied to soil, seeds or plants to improve the plant's health and yield by enhancing its physiological processes. Our proprietary products are primarily categorised as biofertilisers and biostimulants, which we believe are the most rapidly growing segments in the biological industry. Our current product portfolio is mainly based on our proprietary Harpin technology, which is proven to trigger growth and self-defence mechanisms within plants to drive better performance. Through field trials we have commissioned or through those conducted by our distributors, we have demonstrated results in a number of crops: our second generation Harpin αβ products have created yield increases of approximately 3% to 5% in U.S. corn and soybeans while improving plant growth, resistance to abiotic stress and protection against certain pathogens. Our products are complementary to and compatible with existing crop protection products and methods, promoting further adoption.

Our Commercial business sells our proprietary products worldwide through distributors (which accounted for 60% of our revenues in 2015) and distributes complementary third-party products (which accounted for 40% of our revenues in 2015) in Mexico. Our proprietary products have treated millions of acres to date across multiple significant, global agricultural markets, including the United States of America ("United States" or "U.S."), Mexico and Europe. We report our Commercial business in three geographic segments - Americas (which accounted for 35% of our revenues in 2015), Mexico (which accounted for 47% of our revenues in 2015) and Rest of World (which accounted for 18% of our revenues in 2015).

The Board believes that our innovative and value-added line of biological products helps satisfy the growing global demand for efficient, effective and environmentally-responsible products to increase crop yields and overall plant health. We have screened, identified and developed our novel biological products and technologies and validated their efficacy in improving plant health leading to higher yields. Through our significant investment in research and development, we have a scientific-based understanding of our products' mode of action (the functional change that occurs at the cellular level), which enables us to design and produce a diverse range of protein-based biologicals to provide significant value for growers.

Our products and technologies

Harpin αβ

Our Harpin αβ products are well established in both the seed and foliar treatment markets and can be used to treat over 40 different types of crops. We currently focus on products that treat row crops as well as high-value specialty crops. We have three principal Harpin αβ products: N-Hibit, a seed treatment application for row crops; ProAct, a foliar application for row crops; and Employ, a foliar application for specialty crops. Each of these products can be applied in conjunction with conventional agrochemicals or seed treatments. During the year ended 31 December 31 2015, we derived 45% of our revenues from our Harpin αβ products, for which we have a number of current patents that expire between 2017 and 2027.

Myconate

Our Myconate product is a soil treatment that increases colonisation of roots by over 50%, aiding early-stage plant growth and important nutrient access. This essentially provides the plant with a larger root system so that it can grow under conditions that normally would inhibit growth, such as drought, nutrient deficiency, chemical residues and soil salinity. Myconate is available in powder and liquid forms and can be applied effectively as a seed coating, an in-furrow application or mixed with fertiliser. During the year ended 31 December 2015, we derived 6% of our revenues from our Myconate products, for which we have a number of current patents that expire between 2018 and 2031.

PREtec

Our PREtec platform identifies families of peptides that provide crop treatment options for growers that are complementary to existing agricultural technologies and practices. Our PREtec peptides may be designed to stimulate specific desired responses in the plant such as improved yield, vigour and resistance to biotic and abiotic stresses. Through our PREtec platform, we have screened hundreds of peptide variants and have engaged in greenhouse and field testing for dozens of promising novel peptides. We currently have three 3G peptide families in various development phases, and 4G platforms are in the early stages of development. We presented our first family of novel peptides, Innatus 3G, to six major participants in the agriculture industry and four of these companies are currently evaluating it internally. We expect that our 3G peptide families will be customised and combined with standard crop protection applications through both seed treatment and foliar applications to improve plant health. We are in the early stages of development of our 4G peptide platforms, the first of which we anticipate enabling the incorporation of peptides into a plant's genome so that the plant will be able to express these peptides internally.

Financial summary

A summary of the financial results for the twelve months to 31 December 2015, with comparatives for the previous financial year, is set out below:

Revenues in 2015 increased by 9% to $7.5m (2014: $6.9m) as a result of a $1.5 million increase in Harpin product sales to two customers, partially offset by decreased Harpin product sales of $1.0 million to a single customer. The gross margin increased to 62% of sales in 2015, compared to 51% in 2014. The increase is attributable to lower unit costs due to more favorable manufacturing costs of our proprietary Harpin products.

Operating expenses increased to $12.5m from $9.6m. Expenditure within R&D increased $2.1m to $4.1m in 2015 (2014: $2.0m). The increase was due to the hiring of additional research and development staff, higher patent expenses and increased contract research costs. The Group expects that our R&D costs will further increase as we continue to invest in the development of our PREtec platform.

In addition, we have set out in Note 6 the separate category of expenditure relating to Business Development, which increased slightly to $1.2m in 2015 (2014: $1.0m). This relates to expenditures for field trials with existing and potential customers and other costs relating to customer support, market research and the negotiation of commercial agreements.

Unallocated corporate expenses increased to $2.0m (2014: $1.4m).

Cash and investments at 31 December 2015 amount to $8.4 million (2014: $16.7 million).

Key performance indicators ("KPIs")

The Group uses a range of performance measures to monitor and manage the business effectively. These are both financial and non-financial. The most significant relate to Group financial performance and to the Group's progress in driving the two pillars of its strategy.

The KPIs for financial performance of the Commercial area and for the Group as a whole include revenue, gross profit and margin, and operating profit/loss. These KPIs indicate the volume of work the Group has undertaken, as well as the efficiency with which this work has been delivered.

The KPIs for financial performance for the year ended 31 December 2015, with comparatives for the year ended 31 December 2014, are set out below;

In addition, an important KPI is the increase in revenue achieved from the sale of our proprietary products. These increases are shown below, separating out the product revenue from the receipt of license/milestone payments and other one-off payments, which are less predictable and tend to distort the product sales growth.

Proprietary sales (excluding licensing revenue)

The KPIs for non-financial performance relate to the Group's technologies and include the number and nature of contracts realised with partners, and progress along the mutually agreed paths to commercial launch of products.

The Board continues to monitor the progress of its R&D activities and expenditures. As each research project advances, specific progress is reported to the Board and costs against budget are monitored. We anticipate refining the KPIs for R&D as each project develops.

In addition, the Business Development activities of the Group are assessed against our success in developing specific evaluation and commercial arrangements with third parties for the exploitation of our proprietary products.

Principal risks and uncertainties

Our business is subject to a number of potential risks and uncertainties, including those listed below. The occurrence of any of these risks may materially and adversely affect our business, financial condition, results of operations and future prospects. We manage and mitigate these risks by executing on the strategy described above.

Financial and liquidity risk

· We have a history of losses since inception, anticipate continuing to incur losses in the future and may not achieve or maintain profitability.

· We expect to require additional financing in the future and may be unable to obtain such financing on favourable terms or at all, which could force us to delay, reduce or eliminate our research, development or commercial activities.

Technology and commercialisation risk

· Our PREtec development and out-licensing strategy is in an early stage and may not be successful.

· We are subject to risks relating to product concentration due to the fact that we derive substantially all of our revenues from our Harpin αβ and Myconate product lines and from the sale of third-party products.

• We may be unable to establish or maintain successful relationships with third-party distributors and retailers, which could materially and adversely affect our sales.

• We have a limited number of sales and marketing personnel and will need to expand our sales and marketing capabilities to grow revenues from our commercial products.

• We may be unable to obtain adequate protection for the intellectual property covering our new technology and product candidates or develop and commercialise these product candidates without infringing on the intellectual property rights of third parties.

Regulatory and legal risk

• If we are unable to obtain regulatory approvals, or to comply with ongoing and changing regulatory requirements, it could delay or prevent sales of our commercial products or impede the development of potential products.

• If we use PREtec in trait development, our technologies and product candidates will face more stringent regulatory regimes. 

• If we are unable to comply with regulations applicable to our facilities and procedures and those of our third-party manufacturers, our research and development or manufacturing activities could be delayed, limited or prevented.

Credit risk

· The majority of our net sales are credit sales that are made primarily to customers whose ability to pay is dependent, in part, upon the economic strength of the industry and geographic areas in which they operate, and the failure to collect or timely collect monies owed from customers could materially and adversely affect our financial condition.

Personnel

· Our future growth and ability to compete depend on retaining our key personnel and recruiting additional qualified personnel.

Financial instruments

The Group uses various financial instruments, including equity, cash, short-term investments of investment grade notes and bonds, and items such as trade receivables and trade payables that arise directly from its operations.

On behalf of the Board

Paul Schmidt

Chief Executive

8 April 2016

Consolidated statement of comprehensive income for the year ended 31 December 2015

Consolidated statement of financial position at 31 December 2015

Consolidated statement of changes in equity for the year ended 31 December 2015

Consolidated statement of cash flows for the year ended 31 December 2015

Notes forming part of the Group financial statements for the year ended 31 December 2015

1. Annual Report

The financial information set out in this document does not constitute the Company's statutory accounts for 2014 or 2015. Statutory accounts for the years ended 31 December 2014 and 31 December 2015 have been reported on by the Independent Auditor. The Independent Auditor's Reports on the Annual Report and Financial Statements for each of 2014 and 2015 were unqualified and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

Statutory accounts for the year ended 31 December 2014 have been filed with the Registrar of Companies. The statutory accounts for the year ended 31 December 2015 will be delivered to the Registrar in due course and will be posted to shareholders shortly, and thereafter will be available from the Company's registered office at 48 Chancery Lane, London, WC2A 1JF and from the Company's website www.planthealthcare.com.

The financial information set out in these preliminary results has been prepared using the recognition and measurement principles of International Accounting Standards, International Financial Reporting Standards and Interpretations adopted for use in the European Union (collectively Adopted IFRSs). The accounting policies adopted in these preliminary results have been consistently applied to all the years presented and are consistent with the policies used in the preparation of the statutory accounts for the period ended 31 December 2015. The principal accounting policies adopted are unchanged from those used in the preparation of the statutory accounts for the period ended 31 December 2014. New standards, amendments and interpretations to existing standards, which have been adopted by the Group have not been listed, since they have no material impact on the financial statements.

2. Accounting policies

Reporting currency

The financial statements are presented in thousands of US dollars. The directors believe that it is appropriate to use US dollars as the presentational currency for reporting, since the majority of the Group's transactions are conducted in that currency. The exchange rates used to convert British Pounds to US Dollars at 31 December 2015 and 2014 were 1.4802 and 1.5532, respectively, and the average exchange rate for the years then ended were 1.5284 and 1.6476, respectively.

Basis of preparation

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards, International Accounting Standards and Interpretations (collectively "IFRSs") issued by the International Accounting Standards Board ("IASB") and as adopted by the European Union and those parts of the Companies Act 2006 which apply to companies preparing their financial statements under IFRSs.

Amounts are rounded to the nearest thousand, unless otherwise stated.

In 2015, the Group changed its operating and reportable segments to align with the way its business is currently managed and to better reflect its evolving research and development activities. Therefore, the Group now discloses New Technology as a separate operating and reportable segment. The 2014 presentation of this data has been reclassified to conform to the 2015 presentation. Additional information about the Group's operating and reportable segments is included in Note 6.

Basis of measurement

The consolidated financial statements have been prepared on a historical cost basis, except for financial instruments designated at fair value through the profit and loss.

The principal accounting policies are set out below. The policies have been applied consistently to all the years presented and on a going concern basis.

Standards, amendments and interpretations to published standards effective in 2015 adopted by the Group

A number of new and amended standards have become effective since the beginning of the year. None of the new amendments materially affect the Group.

Standards, amendments and interpretations to published standards not yet effective

There are a number of new standards and amendments to and interpretations of existing standards which have been published and are not yet mandatory and which the Group has decided not to adopt early.

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.

This combination was accounted for as a reverse acquisition with Plant Health Care, Inc., the legal acquiree, being treated as the acquirer. Under this method, the assets and results of Plant Health Care plc were combined with the assets, liabilities and results of Plant Health Care, Inc. from the date of combination. There was no adjustment to the carrying values of the assets and liabilities in Plant Health Care, Inc. to reflect their fair value at the date of combination. No goodwill arose on this combination.

These consolidated financial statements incorporate the financial statements of the Group and the entities controlled by the Group. Control exists when the Group has (i) power over the investee, (ii) exposure, or rights, to variable returns from its involvement with the investee, and (iii) the ability to use its power over the investee to affect the amount of the investor's returns. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. All significant intercompany transactions, balances, revenues and expenses have been eliminated.

The consolidated financial statements incorporate the results of business combinations using the purchase method. In the consolidated statement of financial position, 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 statement of comprehensive income from the date on which control is obtained. They are deconsolidated from the date control ceases.

Revenue

The Group recognises revenue at the fair value of consideration received or receivable. Sales of goods to external customers are at invoiced amounts less value added tax or local tax on sales. The Group currently generates revenue solely within its Commercial business through the sale of its proprietary and third-party products, as well as from granting certain licenses for the use of its intellectual property. Revenue from the sale of goods is recognised when all the following conditions have been satisfied:

Ø the significant risks and rewards of ownership of the goods have been transferred to the buyer;

Ø the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;

Ø the amount of revenue can be measured reliably;

Ø it is probable that the economic benefits associated with the transaction will flow to the Group; and

Ø the costs incurred or to be incurred in respect of the transaction can be measured reliably.

The Group typically transfers significant risks of ownership and title in the products upon shipment of goods from one of its locations. After the Group transfers title and ships goods to the customer, it typically does not retain significant involvement nor does it have effective control over the goods sold. Therefore, if all other revenue recognition criteria are met, revenue is recognised upon shipment of the goods to the customer. Payment terms range from 30 to 270 days depending on the local custom.

In the limited situation where the Group offers a product rebate to the customer, it records the fair value of the product rebate as a reduction to product revenue. An accrued liability for these product rebates is estimated and recorded at the time the revenues are recorded.

License/milestone payment income is recognised when the Group has no remaining obligations to perform under a non-cancellable contract which permits the user to act freely under the terms of the agreement and the collection of the resulting receivable is reasonably assured. To date the Group has not achieved the performance obligations for any milestone payments.

Goodwill

Goodwill is measured as the excess of the cost of an acquisition over the net fair value of the identifiable assets, liabilities and contingent liabilities, plus any direct costs of acquisition for acquisitions before 1 January 2010. For business combinations completed on or after 1 January 2010, direct costs of acquisition are recognised immediately as an expense.

Goodwill is capitalised as an intangible asset with any impairment in carrying value being charged to administrative expenses in the consolidated statement of comprehensive income. The Company performs annual impairment tests for goodwill at the financial year-end.

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 administrative expenses in the consolidated statement of comprehensive income.

Intangible assets are recognised on business combinations if they are separable from the acquired entity or give rise to contractual or other legal rights, and are initially recognised at their fair value.

Expenditure on internally-developed intangible assets (development costs) are capitalised if it can be demonstrated that:

Ø it is technically feasible to develop the product for it to be sold;

Ø adequate resources are available to complete the development;

Ø there is an intention to complete and sell the product;

Ø the Group is able to sell the product;

Ø sale of the product will generate future economic benefits; and

Ø expenditure on the project can be measured reliably.

Development expenditure not satisfying the above criteria and expenditure on the research phase of internal projects are recognised in profit or loss.

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 statement of comprehensive income. The Group has not capitalised any development costs to date.

The significant intangibles recognised by the Group and their estimated useful economic lives are as follows:

Licenses - 12 years

Registrations - 5-10 years

Impairment of goodwill and other intangible assets

Impairment tests on goodwill 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 within administrative expenses in the consolidated statement of comprehensive income. An impairment loss recognised for goodwill is not reversed.

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.

Foreign currency

Foreign currency transactions of individual companies are translated into the individual company's functional currency. Any differences are recognised in profit or loss.

On consolidation, the results of operations that have a functional currency other than US dollars are translated into US dollars at rates approximating to those ruling when the transactions took place. Statements of financial position are translated at the rate ruling at the end of the financial period. Exchange differences arising on translating the opening net assets at opening rate and the results of operations that have a functional currency other than US dollars at average rate are included within "other comprehensive income" in the consolidated statement of comprehensive income and taken to the foreign exchange reserve within capital and reserves.

Operating segments

Operating segments are reported in a manner consistent with the internal reporting provided to the Group's chief operating decision maker ("CODM"). The CODM, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Chief Executive Officer.

Financial instruments

Trade receivables collectible within one year from date of invoicing are recognised at invoice value less provision for amounts the collectibility of which is uncertain. Trade receivables collectible after more than one year from date of invoicing are initially recognised at fair value, and subsequently carried at amortised cost using the effective interest rate method, less provision for impairment.

Investments comprise short-term investments in notes and bonds having investment grade ratings. Investments are designated as at fair value through profit and loss upon initial recognition when they form part of a group of financial assets which is actively managed and evaluated by key management personnel on a fair value basis in accordance with the Company's documented investment strategy that seeks to improve the rate of return earned by the Company on its excess cash while providing unrestricted access to the funds. The Company's investments are carried at fair value as determined by quoted prices on active markets, with changes in fair values recognised through profit or loss.

Cash and cash equivalents comprise cash on hand, 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.

Trade and other payables are initially recognised at fair value and subsequently carried at amortised cost using the effective interest method.

Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs. The Group's ordinary shares are classified as equity instruments.

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 profit or loss 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

The Group operates a number of equity-settled, share-based payment plans, under which it receives services from employees and non-employees as consideration for the Company's equity instruments, in the form of options or restricted stock units (''awards''). The fair value of the award is recognised as an expense, measured as of the grant date using a binomial option pricing model. The total amount to be expensed is determined by reference to the fair value of the instruments granted, excluding the impact of any service and non-market performance vesting conditions. Non-market vesting conditions are included in assumptions about the number of options that are expected to vest. The total expense is recognised over the vesting period, which is typically the period over which all of the specified vesting conditions are to be met.

Leased assets: lessee

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 lower of fair value and 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 recognised in profit or loss over the shorter of useful economic life and lease term.

Lease payments are analysed between capital and interest components. The interest element of the payment is charged to income 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 income on a straight-line basis over the lease term.

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 property, plant and equipment over their expected useful lives. It is calculated at the following rates:

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 is based upon a weighted average cost method. The Group compares the cost of inventory to its net realisable value and writes down inventory to its net realisable value, if lower than its cost. Cost comprises all costs of purchase and all other costs of conversion. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses.

Deferred tax

Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the statement of financial position differs from its tax base, except for differences on:

Ø the initial recognition of goodwill;

Ø 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 nor taxable profit; and

Ø investments in subsidiaries and joint arrangements 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 end of the financial period 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.

3. Critical accounting estimates and judgments

In preparing its financial statements, the Group makes certain estimates and judgments regarding the future. Estimates and judgments are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from estimates and assumptions. The estimates and judgments that have a risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Revenue

The Group recognises revenue at the fair value of consideration received or receivable. Sales of goods to external customers are at invoiced amounts less value added tax or local tax on sales. The Group currently generates revenue solely within its Commercial business through the sale of its proprietary and third party products, as well as from granting certain licenses for use of its intellectual property.

Sale of goods

Revenue from the sale of goods is recognised when all of the following conditions have been satisfied:

Ø the significant risks and rewards of ownership of the goods have been transferred to the buyer;

Ø the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;

Ø the amount of revenue can be measured reliably;

Ø it is probable that the economic benefits associated with the transaction will flow to the Group; and

Ø the costs incurred or to be incurred in respect of the transaction can be measured reliably.

The Group typically transfers significant risks of ownership and title in the products upon shipment of goods from one of its locations. After the Group transfers title and ships goods to the customer, it typically does not retain significant involvement nor does it have effective control over the goods sold. Therefore, if all other revenue recognition criteria are met, revenue is recognised upon shipment of the goods to the customer. Payment terms range from 30 to 270 days depending on the local custom.

In the limited situation where the Group offers a product rebate to the customer, it records the fair value of the product rebate as a reduction to product revenue. An accrued liability for these product rebates is estimated and recorded at the time the revenues are recorded.

Licensing arrangements and milestone payments

In addition to the sale of goods, the Group has also granted a limited number of intellectual property licenses to other biotechnology and agricultural companies. The terms of the Group's licensing agreements require delivery of an intellectual property license for use of the Group's intellectual property in either research only, or in research and commercial development of biological products. Payments to the Group under these arrangements may include up-front payments and payments based on the achievement of certain milestones.

Non-refundable upfront payments are generally received upon signing of a licensing agreement. All non-refundable upfront payments received or to be received under these arrangements are recognised when IAS 18 revenue recognition criteria are met, they are receivable; they are non-refundable; and provided they are in substance consideration for a completed separate earnings process.

Milestone payments are recognised as revenue when the performance obligations, as defined in the contracts, are achieved. These milestone payments are generally tied to a specific performance condition and are recognised in full when the performance obligation is met. To date, the Group has not achieved the performance obligations for any milestone payments.

Impairment of goodwill

The Group tests whether goodwill has suffered any impairment on an annual basis. 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. Additional information on carrying values is included in Note 10.

Impairment of intangible assets (excluding goodwill)

At the end of the financial period, the Group reviews the carrying amounts of its definite lived intangible assets to determine whether there is any indication that those assets have suffered any impairment loss. If any such indication exists, the recoverable amount of the asset is estimated to determine the extent of the impairment loss (if any).

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing the value in use, the estimated future cash flows are discounted to their net present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised immediately within administrative expenses in the consolidated statement of comprehensive income. Additional information on carrying values is included in Note 10.

Inventory

The Group 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 income in specific periods.

Provisions

In accordance with IFRS, the Group recognises a provision where there is a present obligation from a past event, a transfer of economic benefits is probable and the amount of costs of the transfer can be estimated reliably. Application of these accounting principles to provisions estimated requires the Group's management to make determinations about various factual and legal matters beyond its control. The Group reviews outstanding events, developments in legal proceedings if any, and other situations that could indicate an obligation at each reporting date, in order to assess the need for provisions and disclosures in its financial statements. Among the factors considered in making decisions on provisions are the nature of the event, including, where applicable, litigation, claim or assessment, potential costs expected to be incurred related to the event, litigation, claim or assessment, the progress of matters in the event (including the progress after the date of the financial statements but before those statements are issued), the opinions of legal advisers or other specialists, where applicable, experience on similar events and any decision of the Group's management as to how it will respond to the event, litigation, claim or assessment.

In instances where the criteria for recognising a provision are not met, a contingent liability may be disclosed in the notes to the financial statements. Obligations arising in respect of contingent liabilities that have been disclosed, or those which are not currently recognised or disclosed in the financial statements, could have a material effect on the Group's financial position.

4. Revenue

5. Operating loss

Of the $427K of other services, $213K fees are within other receivables and prepayments.

6. Segment information

The Group's CODM views, manages and operates the Group's business segments according to its strategic business focuses-Commercial and New Technology. The CODM further analyses the results and operations of the Group's Commercial business on a geographical basis; and therefore the Group has presented separate geographic segments within its Commercial business below: Commercial-Americas (North and South America, other than Mexico); Commercial-Mexico; and Commercial-Rest of World. The Group's Commercial segments are focused on the sale of biological products and are the Group's only revenue generating segments. The Group's New Technology segment is focused on the research and development of the Group's PREtec platform.

The Group has aggregated its United Kingdom and Spain operating segments into its Commercial-Rest of World reportable segment. These two operating segments have been aggregated into the Rest of World reportable segment in accordance with guidance in IFRS 8 as the nature of the products sold, production processes, type of customer, and distribution method are similar. In addition, economic characteristics, including primarily long-term profitability and economic factors in the agricultural industry impacting the pricing of and demand for the Group's products, have been assessed and it has been determined that these operating segments (Spain and the United Kingdom) share similar economic characteristics.

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

* Revenue from one customer within the Americas segment totalled $1,524,000, or 20% of Group revenues.

** These amounts represent public company expenses for which there is no reasonable basis by which to allocate the amounts across the Group's segments.

*** Includes net share-based payment expense of $201,000 attributed to corporate employees who are not affiliated with any of the Commercial or New Technology segments.

* Revenue from two customers within the Americas segment totalled $1,000,000 and $717,500, or 15% and 10% of Group revenues, respectively.

** These amounts represent public company expenses for which there is no reasonable basis by which to allocate the amounts across the Group's segments.

*** Includes net share-based payment expense of $223,000 attributed to corporate employees who are not affiliated with any of the Commercial or New Technology segments.

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.

All material non-current assets are located in the United States.

Geographic Information

The Group operates in three principal countries - the United Kingdom (country of domicile), the United States and Mexico.

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

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

7. Finance income and expense

8. Tax expense

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:

At 31 December 2015, the Group had a potential deferred tax asset of $23,590,000, which includes tax losses available to carry forward of $21,498,000 (being actual federal, foreign and state losses of $80,617,000) arising from historical losses incurred and other timing differences of $2,092,000.

The deferred tax asset comprises of sundry timing differences.

9. Loss per share

Basic loss per ordinary share has been calculated on the basis of the loss for the year of $7,720,000 (2014: loss of $6,130,000) and the weighted average number of shares in issue during the period of 71,737,885 (2014: 71,490,056).

Equity instruments of 8,433,332 (2014: 5,938,921), which includes share options, the Value Creation Plan and the 2015 Employee Share Option Plan, that could potentially dilute basic earnings per share in the future have been considered but not included in the calculation of diluted earnings per share because they are anti-dilutive for the periods presented. This is due to the Group incurring a loss on continuing operations for the year.

10. Intangible assets

The intangible asset balances have been tested for impairment using discounted budgeted cash flows. For the years ended 31 December 2014 and 2015, cash flows are projected over a five-year period with a residual growth rate assumed at 0%. For the years ended 31 December 2014 and 2015, a pre-tax discount factor of 16% and 15% has been used over the forecast period for the years ended 31 December 2014 and 2015, respectively.

Goodwill

Goodwill comprises of a net book value of $1,432,000 related to the 2007 acquisition of the assets of Eden Bioscience and $188,000 related to an acquisition of VAMTech LLC in 2004. The entire amount is allocated to Harpin, a cash generating unit within the Commercial - Americas segment. No impairment charge is considered necessary, and no reasonable possible change in key assumptions used would lead to an impairment in the carrying value of goodwill.

Licenses and registrations

These amounts represent the cost of licenses and registrations acquired in order to market and sell the Group's products internationally across a wide geography. These amounts are amortised evenly according to the straight-line method over the term of the license or registration. Impairment is reviewed and tested according to the method expressed above. Licenses and registrations have a weighted average remaining amortisation period of three years.

11. Trade and other receivables

The trade receivable current balance represents trade receivables with a due date for collection within a one-year period. The trade receivable non-current balance represents the present value of trade receivables with a collection period that exceeds one year.

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

The gross value of trade receivables for which a provision for impairment has been made is $98,000 (2014: $79,000).

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

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

The main factors used in assessing the impairment of trade receivables are the age of the balances and the circumstances of the individual customer.

12. Trade and other payables

The restructuring provision of $309,000 was the remaining severance payment related to the relocation of the corporate office.

13. Finance leases

(a) Current borrowings

(b) Non-current borrowings

Finance lease obligations are secured by retention of title to the relevant equipment and vehicles.

(c) Due date for payment:

The contractual maturity of the Group's financial liabilities on a gross basis is as follows: