PHC.L Regulatory News (PHC)

7 Mar 2005 07:02

Plant Health Care PLC07 March 2005 Press Release For immediate release: 7 March 2005 Plant Health Care plc Trading Statement Plant Health Care plc ("PHC" or the "Company"), the leading supplier of naturalproducts for plants and soil, provides an update on current trading. Sales for the year ended 31 December 2004 for the US, PHC Mexico, PHCNetherlands and PHC Reclamation were in line with expectations. We had expectedthe UK operation to be achieving further sales into the Spanish market, whichwas already penetrated through sales of PHC's Liquid Organic Plant Food, and theopening of a Spanish office. However, the UK division was unable to accelerateits Spanish sales due to the slow response of the Spanish government in issuingthe business registration permit. Additionally, a key supplier was late ondelivery of products because of labeling issues during the key part of theseason and sales were missed. As a consequence, sales for this business unitwill be below target. The Spanish company has now been formed and awarded itstax number and labeling issues have been resolved. We also accelerated our distributor early order programme from the first quarterof 2005 into the fourth quarter of 2004. This change, which aligned the companywith standard industry practices in the US landscape market, neverthelesscontributed to a deterioration of percentage margins because of the pricing onlarge orders. It is anticipated that margins in 2005 will return to previouslevels due to already implemented price increases combined with the operatingefficiencies that will be realized by the new manufacturing plant. The Company has been evaluating the prospect of relocating its Pittsburghmanufacturing plant for some time. The Directors recently received notificationthat a potential tenant is willing to lease a significant portion of the spacewhich would allow PHC an economical exit from the property. The proceedsreceived from the AIM IPO allow PHC to sublet the current plant and take a onetime charge in 2004. Accordingly, the Board has decided to take advantage ofthis opportunity and relocate the Pittsburgh manufacturing plant to a newsignificantly lower cost site. Whilst there will be a one off restructuring andrelocation charge, the new manufacturing facility is expected to reduce rentalcosts by approximately 50% and realise operating efficiencies through bettermachinery layout and more advanced equipment. We estimate that payback on theinvestment by way of cost savings will be achieved in less then 2 years. The Company has decided to accelerate the entry of its Myconate seed coatingproduct, acquired from VAMTech in October 2004, into the European market and asa consequence incurred costs that were originally budgeted for 2005. On thestrength of the Myconate test results announced in early December, and theinterest for the product by some key European distributors, management electedto commission a study of key European corn and wheat growing regions to targetthe markets which will provide optimal entry points for the product's Europeanlaunch. This combined with the earlier than expected recruitment costs for aseed coating General Manager moved expenses into the fourth quarter of 2004rather than in 2005 as anticipated. The management also decided to accelerate the hiring of several other keyindividuals to drive the growth of the Company. A General Manager for the USoperation was added along with several sales people to extend coverage moreuniformly across the US. Whilst the Directors believe the relocation of the manufacturing facility andthe acceleration of the move of the seed coating business into Europe willgreatly benefit the business these moves, together with the other mattersreferred to above, will cause the losses in 2004 to be some $1,100,000 greaterthan previously expected. The underlying trends for the business are stronger than ever and, coupled withthe added coverage by the new sales hires, the Directors expect current growthto continue in the coming months and into the future. For further information please contact: Plant Health Care plc Tavistock CommunicationsJohn Brady, CEO Jeremy Carey/Katy PrattTel: 001 603 525 3702 Tel: 020 7920 3150Steve Whitcomb Email: kpratt@tavistock.co.ukTel: 001 412 826 5488 Notes to Editors About PHC Plant Health Care plc ("PHC") is a leading provider of natural products forplants and soil. Established in 1995 in Pittsburgh (Pennsylvania) in the UnitedStates, PHC currently has approximately 60 employees and has operations in theUS, Mexico, UK and the Netherlands with technical support in Austria. The Grouphas two principal operating subsidiaries in the US - PHC Inc (PA) and PHCReclamation. The Company listed on the AIM market of the London Stock Exchangein July 2004. PHC's products are aimed at the horticulture, agriculture, turf grass,commercial landscaping, forestry and land reclamation industries and are bothenvironmentally beneficial and on the whole more cost effective than syntheticchemical alternatives. Through the commercialisation of these products, PHC iscapitalising on current long-term trends toward natural systems and biologicalproducts for plant care and soil and water management uses. PHC Reclamation is an environmental and reclamation engineering consulting firmproviding cost effective, biologically based solutions for the reclamation andrestoration of lands disturbed by mining, construction and other activities. PHCReclamation was established in 1997 to exploit PHC's products and technology. This information is provided by RNS The company news service from the London Stock Exchange