Plant Health Regulatory News (PHC)

24th March 2014

 PLANT HEALTH CARE PLC

PRELIMINARY RESULTS 2013

Plant Health Care (AIM / CISX: PHC.L), 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 2013.

Financial Highlights

- Revenues from continuing operations increased by 21% to $7.5m (2012: $6.2m)

- 52% growth in Harpin and Myconate sales to $3.8m (2012: $2.5m)

- 50% of sales derived from Harpin and Myconate (2012: 41%)

- Gross profit increased 44% to $5.2m (2012: $3.6m)

- Gross profit margin increased to 69.3% (2012: 58.2%)

Operational Highlights

- Completion of $20.3m fundraising in April 2013 to invest in the R&D function

- Discontinuation of exclusive Monsanto agreement, freeing us to enter agreements with other potential licencees

- Agreement with Arysta LifeScience in April 2013 to sell Harpin αβ in combination with certain Arysta products

- Positive indications and increased confidence in the potential of third-generation Harpins

- Cumulative Harpin αβ treated area exceeded 10m acres around the world

- Divestment of Netherlands subsidiary in November 2013

- Following a strategic review, we have retained Plant Health Care Mexico and will continue to operate this profitable subsidiary

- New, streamlined head office in North Carolina

Paul Schmidt, CEO, commented:

"2013 was a year of significant change for Plant Health Care. Following the successful completion of a $20.3m fundraising in April, the Board undertook a strategic review, which resulted in a streamlining and enhanced focus of the business with a substantial increase in R&D investment. Our head office was downsized and relocated to Raleigh, North Carolina, and we divested our Netherlands subsidiary. Our R&D efforts have produced very positive early indicators, particularly for third-generation Harpins, and we are receiving renewed interest from third parties in the possibilities of Myconate. With the creation of a Business Development function, we have enhanced our ability to take existing and future products to market and are starting to deliver new distribution and license agreements, which will drive increased sales. Our R&D team has a world-class level of competence and capabilities in Harpins, as well as in the broader field of plant response elicitors.

When I joined Plant Health Care a year ago, the business faced a number of strategic challenges. We have worked hard to overcome those and are now in a very strong position to increase our R&D and commercial efforts in 2014. The potential for Plant Health Care remains very exciting and the Board remains confident of the Company's core technology and the prospects for the business."

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 / Tom Bective Tel: +44 (0) 20 3100 2000

Powerscourt

Nick Dibden / Sophie Moate / Tessa Berry Tel: +44 (0) 20 7250 1446

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 toward natural systems and biological products for plant care and soil and water management.

Chairman's letter

Introduction

This has been a transformative year for Plant Health Care, as a new management team has moved forward rapidly with the implementation of the Group strategy announced last year; progress has been very encouraging. The Board is increasingly confident about the value of the Group's existing products and of its research portfolio. At the same time, historic issues have been encountered which, while now largely resolved, have hindered the rate of progress. However, I have been enormously impressed by the way the team has come together under the leadership of Paul Schmidt and huge strides have been made in turning Plant Health Care into a highly successful technology licensing business. Your Board considers that Plant Health Care is now a stable company, set for exciting growth over the coming years.

Market environment

Plant Health Care continues to enjoy a positive market environment. The agriculture sector as a whole has been buoyant now for several years and investor appetite is unabated to invest in the challenges of feeding a more populous and prosperous world in a sustainable manner. The imbalance of supply and demand for food continues to drive the search for increasing yields and we anticipate no change in this situation in the coming years.

Within the agriculture sector, the recent trend of increasing investment in 'biological products', the area in which Plant Health Care operates, continued in 2013. The major agrochemical companies are now devoting more resources to biological products and seeking partnerships with companies such as Plant Health Care in order to build their product pipelines. Moreover, as these companies improve their own ability to evaluate biological products, the quality of the dialogue we have with them about the potential of our products to improve crop yields has substantially improved.

Over the past year, we have continued to build confidence in our core technologies. Harpin αβ has now been applied on more than 10 million acres of crops around the world, with demand continuing to build in the field. We are finding additional uses for Harpin αβ, especially in mixtures with agrochemical products, such as in the recent agreement with Arysta LifeScience. These uses are set to drive increased sales in the coming years. The pipeline of potential distribution and/or license deals for Harpin αβ is substantially stronger than a year ago.

We are also excited about the potential for Myconate, which has had a very positive year in trials with several potential licensees.

Plant Health Care has improved its operational focus by exiting all non-core activities in Europe, with the successful divestment in November 2013 of its Netherlands subsidiary, together with all non-core activities from our other European operations. This leaves the Group with a European presence in the UK and Spain focused entirely on Harpin and Myconate-related activities.

Innovation

In research, the 2013 field trials confirmed the promise of several third-generation Harpin products. Substantial progress has been made in establishing laboratory and greenhouse screening techniques, although much remains to be done. With the size and activities of our research team building, we are very excited about the future with third-generation Harpins and with additional innovations from our new PREtec (Plant Response Elicitor technology) platform. Renewed interest in our research from major agrochemical players is also encouraging.

Board changes

The past year has seen significant change in the Board. As announced in last year's annual report, Sam Wauchope resigned in April 2013. John Brady stepped down as Chief Executive, also in April 2013, and subsequently left the Board in September. Also in September 2013, Steve Weaver, formerly Finance Director, stepped down from the Board and subsequently left the Group at the end of December. Dr. David Buckeridge, who had been a non-executive director since 2008, stepped down in September 2013.

Also as announced in last year's annual report, Paul Schmidt joined the Company as Chief Executive in April 2013 and Michael Higgins became a non-executive director in May 2013. Subsequently, James Ede-Golightly and Dr. Richard Webb joined the Board as non-executive directors in June and September 2013, respectively.

I am grateful for the contributions made by those directors who have left and I am very enthused by the range of skills that we have now assembled. The combination of corporate and investment experience with scientific research and business development skills is not only impressive in itself, but also essential to the Group achieving its objectives.

Future prospects

Paul Schmidt's new executive team is now largely in place. With the hiring of Jeff Hovey as Chief Financial Officer and the move of various operations from Pittsburgh to Raleigh, North Carolina, the new headquarters has been completed; this has also delivered a substantial reduction in costs. Business Development has been strengthened with the addition of Glen Donald, while Sales & Marketing activities have been consolidated under the leadership of Mike Cloutier. Resources devoted to research and development ("R&D"), under Dr. Zhongmin Wei in Seattle, have been doubled, in line with our plan. The new management team is a small but tightly-knit unit, focused on implementing a clear strategy.

An important step in 2013 was the launch of a 'Value Creation Plan', under which key managers are incentivised to maximise shareholder value over the coming years. Of particular note is that this plan only becomes of value to management once the share price exceeds 106p from April 2017.

Plant Health Care's new Board is now in place, with a good balance of industry and capital market skills. The Board is functioning well as a team and engaging actively to support management. Progress has also been made in reducing our central corporate costs, so that resources can be better devoted to generating shareholder value.

In April 2013, $20.3m was raised through a Placing and Subscription (the "fundraising") to support the strategic redirection of the Group. Following the fundraising, current forecasts indicate that cash reserves are sufficient to implement our strategy. Restructuring costs were higher than we had anticipated, but the issues of the past are now behind us.

Finally, I would like to thank my fellow directors and our advisers, our shareholders and our employees (both past and present) for their contributions and continuing support over the past year during a period of substantial change.

Dr. Christopher Richards

Chairman

24 March 2014

Strategic report

Business overview

Plant Health Care's products are aimed at the agriculture industry, through supply and distribution agreements with industry partners. These products deliver both environmental and economic benefits for the Group's customers and capitalise upon long-term trends towards natural systems and biological products to promote plant health and growth.

Our long-term vision remains to establish Plant Health Care as a highly profitable technology licensing business, embedded in the global agrochemical industry. This will be achieved by continuing to exploit the existing product platform, based on Harpin αβ and Myconate, whilst investing substantially in the creation of the next generation of Harpins.

As mentioned in the Chairman's letter, in April 2013, $20.3m was raised through a Placing and Subscription and a refocused strategy was adopted. Following the fundraising, there were also a number of operational issues which had to be addressed. These took more time and resources than had been anticipated. However, the Board is confident that the Group now has the people, technology and processes largely in place to deliver on our plan.

Most importantly, we have remained focused on the priorities set out at the time of the fundraising, which were to:

· invest in momentum;

· develop the Harpin platform; and

· build our licensing capability.

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 proving and exploiting its key technologies.

The KPIs for financial performance 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 2013, with comparatives for the year ended 31 December 2012, are set out below; these figures exclude sales attributable to the EU non-core business divested in November 2013.

In addition, an important KPI is the increase in revenue achieved from the sale or exploitation of our core products and technology (the Harpin family of products and Myconate).

Core product sales

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 expenditure. 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 the project develops.

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

Financial summary

A summary of the financial results for the twelve months to 31 December 2013, with comparatives for the previous financial year, is set out below:

Revenues from continuing operations in 2013 increased by 21% to $7.5m (2012: $6.2m). Sales were $3.8m, compared with $2.5m in 2012, for Harpin and Myconate, the balance being generated by our distribution businesses. The geographic distribution of sales was similar to the year before, with 32 per cent ("%") (2012: 39%) of sales originating from our European sales offices and 68% (2012: 61%) coming from Mexico and the United States.

Sales of Harpin and Myconate have increased as a percentage of total sales in the past year to 50% (2012: 41%). This trend is expected to continue in 2014 and accelerate as the Monsanto inventory overhang is liquidated by Direct Enterprises Inc. ("DEI").

The gross margin increased to 69% of sales in 2013, an improvement from 58% in 2012, as a result of an increased contribution from Harpin in the sales mix, as well as license/milestone payments.

Operating expenses increased to $12.1m from $10.1m. Of this increase, $2.1m related to restructuring costs. These costs relate principally to the severance costs of directors, the cost of closing the Pittsburgh office and associated staff severance costs, and the set-up of the new administrative head office in Raleigh.

Expenditure on R&D increased materially from $1.0m to $2.1m and this relates directly to the stated strategy of focused research on the next generation of Harpin products. In addition, we have set out in Note 6 the separate category of expenditure relating to Business Development, which was broadly flat year-on-year at $852,000 in 2013 (2012: $877,000). This relates to expenditures for field trials with customers and other costs relating to customer support, market research and the negotiation of commercial agreements. Unallocated corporate expenses have been reduced to $1.1m and the Board will continue to find ways of keeping these costs as low as practicable.

Review of 2013

Income from sales of Harpin and Myconate, including license/milestone payments, in 2013 hit a new high of $3.8m (2012: $2.5m), an increase of 52%. Growth of core product revenue in the USA was particularly encouraging, increasing to $2.17m from $0.53m in 2012. Cumulative Harpin αβ treated area has exceeded 10 million acres around the world, which is testimony to the value of the product to our customers. We have enhanced our ability to take existing and future products to market, with the creation of a Business Development function and by focusing our development and commercial resources on those projects which show most promise of earnings over the next three years. As a result, our pipeline of commercial opportunities has been reinforced and we are starting to deliver new distribution and license agreements which will drive increased sales.

In April 2013, we announced an agreement with Arysta LifeScience Corporation to sell Harpin αβ in combination with certain Arysta products for foliar applications in the USA and elsewhere. We are confident that this important agreement will lead to significant sales in 2014 and beyond. We are excited about the benefits of Harpin αβ in combination with certain agrochemical products for foliar applications and are seeing significant enhancements in yield from such combinations. We anticipate concluding further agreements of this type with other companies over time.

With respect to seed treatment, it became increasingly evident that an exclusive agreement signed with Monsanto in 2008 was serving as an impediment to the further development of Harpin αβ for this use. In July 2013, we concluded an agreement with Monsanto to terminate this contract and are now free to enter into agreements with other potential licensees. A number of companies have identified substantial yield increases from the inclusion of Harpin αβ in their seed treatment products and we expect to conclude an agreement with at least one of these over the coming months.

DEI continues to sell N-Hibit (Harpin αβ) for seed treatment in the USA, satisfying its customers' needs for an effective defence against nematodes and, in the process, consuming inventory that it previously purchased from Monsanto.

An encouraging development during the past year has been a renewed interest on the part of several companies in Myconate. The benefits of the product have been demonstrated in several crops over some years, but commercial exploitation on a large scale has remained elusive. We now believe that there is a reasonable prospect of concluding one or more commercial agreements for Myconate within the next 12 months.

Whilst, in the US, revenues derived from our core products increased to $2.17m from $0.53m in 2012, including license/milestone payments, there was a decline from $1.5m to $1.0m in core product sales through our European operations. This was largely due to lower than anticipated sales into South Africa, which we hope to recover in 2014. Our Mexican activities grew by almost 10% over 2012, with core product sales, which account for only approximately 15% of the total, growing by 16% to $580,000.

Also encouraging has been the continued interest and growth in sales of our core products outside of the USA. Notwithstanding a dip in 2013 sales in our European region, which was primarily due to unfavourable market conditions in South Africa, we are expanding our western European footprint into central and eastern Europe and have established a strong following for our products in certain markets in South Africa. Our business in Mexico continues to operate profitably with solid top and bottom line growth. A clear focus of our Business Development efforts is to establish a presence in the important markets of Brazil and Argentina.

Research and development

At the time of our fundraising in April 2013, we set out a plan to invest the majority of the proceeds in R&D to discover, evaluate and develop third-generation Harpin products. Over the past year, we have expanded the team under the leadership of our Chief Science Officer, Dr. Zhongmin Wei, based in Seattle. We are deploying in-house resources, as well as making extensive use of out-sourced activities where we cannot justify establishing our own facilities. The first year of this more intensive approach has given us increased confidence that the third generation of Harpins holds substantial promise. Field trials in 2013 were very encouraging and indicated that several of our candidate new products are likely to result in yield increases significantly greater than those we observe with Harpin αβ. We continue to synthesise and test further third-generation Harpin products and to develop additional and alternative screening methodologies which will, we believe, result in an accelerated and more effective screening process.

Plant Health Care has established a world-class level of competence and capability, not only with respect to Harpins, but in the field of plant response elicitors in general. Recognising this, an important development in 2013 was the introduction of the 'PREtec' platform, which comprises the entire Plant Response Elicitor technology platform of Plant Health Care. It is clear that we have the innovative ability to continue to develop this platform beyond the third-generation Harpin products and, as such, we have initiated activities in this area.

One of the targets for research has been to develop a commercially suitable liquid formulation of Harpin αβ, as this form of product is desired by certain segments of the market. However, the technical challenges are proving to be substantial. These formulation constraints are caused primarily by the structure of the Harpin αβ molecule and are not expected to apply to the new generation of Harpins under development. We continue to explore various novel approaches to developing a liquid formulation of Harpin αβ and will take decisions on this research area during 2014.

Transformation

As part of our transformation to a more streamlined and focused business, we divested our Netherlands subsidiary to local management in November 2013. As part of this divestment, we retained all rights to our core products (Harpin and Myconate) and continue to invest in developing and distributing these products in Europe from locations in the UK and Spain. After pursuing various options for divestiture of Plant Health Care Mexico, we have decided to retain and continue to operate this profitable subsidiary.

In 2013, we created a new headquarters for Plant Health Care in Raleigh, North Carolina, where a smaller but more effective team has been assembled. We have established tighter business processes and controls in line with best industry practices. We have taken steps to integrate and support those parts of the Plant Health Care organisation that previously operated in a rather isolated and autonomous manner.

The Board remains confident of Plant Health Care's core technology and the prospects for the business.

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. The key areas of risk identified by the Board are summarised below:

Liquidity risk

The Group manages liquidity risk by maintaining adequate reserves and banking facilities, by reference to continuously monitored forecast and actual cash flows. As part of its monitoring, the Group ensures that the financial liabilities due to be paid can be met by existing cash and cash equivalents. Cash equivalents are composed of short-term investment grade securities and are readily marketable and convertible to cash. The Group does not currently generate sufficient cash from its operations to meet its annual funding needs. However, the Company is well funded due to an equity placement in April 2013 and is able to meet its obligations.

Technology and commercialisation risk

There are technology and commercialisation risks associated with the Group's proprietary products and its partners. If the Group's key technologies do not perform as well as anticipated or are not received as favourably as forecasted in the marketplace, the Group's financial results would be adversely affected. To mitigate this risk, the Group has prioritised its strategic focus on a select group of partnerships and has worked closely with key existing and potential partners to continue to review, evaluate and improve its technologies to ensure continued innovation and commercial viability.

Credit risk

Inability to collect on the Group's trade receivables would result in bad debt expense or legal costs, which would adversely affect the Group's financial results. The Group has addressed this risk by utilising a formal credit policy, monitoring and restricting further shipments to customers with overdue payments, and holding monthly credit review meetings.

Group oversight

The Group is dependent on a small management team. The result is a risk that the departure of key members of the management team may result in the Group's inability to adequately perform against its strategic plan. This could adversely impact the Group's financial performance. To address this, the Group has an active Board of directors, which meets a minimum of six times each year to discuss all aspects of the Group's performance and strategy.

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

24 March 2014

Consolidated statement of comprehensive income for the year ended 31 December 2013

Consolidated statement of financial position at 31 December 2013

Consolidated Statement of Changes in Equity at 31 December 2013

Consolidated Statement of Cash Flows for the year ended 31 December 2013

Notes forming part of the Group financial statements for the year ended 31 December 2013

1. Annual Report

The financial information set out in this document does not constitute the Company's statutory accounts for 2012 or 2013. Statutory accounts for the years ended 31 December 2012 and 31 December 2013 have been reported on by the Independent Auditor. The Independent Auditor's Reports on the Annual Report and Financial Statements for each of 2012 and 2013 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 2012 have been filed with the Registrar of Companies. The statutory accounts for the year ended 31 December 2013 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 The Broadgate Tower, 20 Primrose Street, London EC2A 2RS 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 2013. The principal accounting policies adopted are unchanged from those used in the preparation of the statutory accounts for the period ended 31 December 2012. 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 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 rate used to convert British Pounds to US Dollars at 31 December 2013 was 1.6488 and the average exchange rate for the year was 1.6321.

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") as adopted by the European Union and those parts of the Companies Act 2006 which apply to companies preparing their financial statements under IFRSs.

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 2013 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 are expected to 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 Company 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.

Where the Company has the power, either directly or indirectly, to govern the financial and operating policies of another entity or business so as to obtain benefits from its activities, it is classified as a subsidiary. The consolidated financial statements present the results of the Company and its subsidiaries ("the Group") as if they formed a single entity. Intercompany transactions and balances between Group companies are therefore eliminated in full.

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.

From 1 January 2010, the total comprehensive income of non-wholly-owned subsidiaries is attributed to owners of the parent and to the non-controlling interests in proportion to their relative ownership interests. Before this date, unfunded losses in such subsidiaries were attributed entirely to the Group. In accordance with the transitional requirements of IAS 27 (2008), the carrying value of non-controlling interests at the effective date of the amendment has not been restated.

Revenue

Revenue comprises sales of goods to external customers and revenues generated through the commercialisation of the Group's technology (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. For sales of goods that are subject to bill and hold arrangements this means:

Ø the goods are complete and ready for delivery;

Ø the goods are separately identified from the Group's other inventory and are not used to fulfil any other orders; and

Ø the customer has requested that the goods not be delivered.

Non-refundable license (fee) 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.

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.

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.

Expenditures 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.

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.

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

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.

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.

Exchange differences recognised in profit or loss in Group entities' separate financial statements on the translation of long-term monetary items forming part of the Group's net investment in the overseas operation concerned are reclassified to other comprehensive income and accumulated in the foreign exchange reserve on consolidation.

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. These assets are actively managed and evaluated by key management personnel on a fair value basis in accordance with a documented investment strategy. They 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

Share-based payments issued to employees include share options and stock awards under a long-term incentive plan and value creation 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 be adjusted for the effect of non-market-based vesting conditions.

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 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.

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 comprises all costs of purchase and all other costs of conversion.

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:

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 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 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.

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.

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.

3. Revenue

4. Restructuring Costs

Exceptional items in the year ended 31 December 2013 were $2,098,000. These expenses represented severance payments, relocation costs and other expenses of $1,705,000, $282,000 and $111,000, respectively.

During 2013, the Group rearranged its expense categories to better align with the Group's objectives going forward. In particular, the Research and Development and Business Development functions were separated into two distinct expense classifications. This was done to create a more focused effort to perform critical functions in order to go from research to commercialisation of a product in the most efficient manner.

5. Operating Loss

6. Segment information

The Group views, manages and operates its business according to geographical segments. Revenue is generated from the sale of agricultural products across all geographic segments.

* Revenue from one customer totals $1,200,000 or 16.1%, of the Group's revenue. This license revenue is included in Core product sales within the US segment.

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

Other segment information:

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

Other segment information:

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 USA.

7. Finance information 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 2013, the Group had a potential deferred tax asset of $19,649,000, which includes tax losses available to carry forward of $18,318,000 (being actual federal, foreign and state losses of $65,836,000) arising from historical losses incurred and other timing differences of $1,331,000.

The deferred tax liability / (asset) comprises 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 $6,881,000 (2012: loss of $6,505,000) and the weighted average number of shares in issue during the period of 65,598,377 (2012: 53,261,442). Basic loss per share from continuing operations has been calculated with a numerator of $6,792,000 loss (2012: $6,512,000 loss) and basic earnings per share from discontinued operations has been calculated with a numerator of $(89,000) loss for 2013 (2012: profit of $7,000). The weighted average number of shares used in the above calculation is the same as for total basic loss per ordinary share. Equity instruments of 8,174,421 (2012: 3,434,500), which includes share options, LTIPs and the Value Creation 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, a pre-tax discount rate of 18% (2012:18%) and performance projections over five years with residual growth assumed at 0%.

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 USA 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 five 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 $53,000 (2012: $130,788).

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

13. Borrowings

(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: