Plant Health Care Annual Report 2013

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FY2013 Annual Report · Plant Health Care

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Annual Report and Accounts 2013

Contents

Plant Health Care plc

Directors and advisers

Chairman’s letter

Strategic report

Directors

Board committees

Corporate governance

Remuneration Committee report

Report of the directors

Statement of directors’ responsibilities

Independent auditor’s report

Consolidated statement of comprehensive income

Consolidated statement of financial position

Consolidated statement of changes in equity

Consolidated statement of cash flows

Notes forming part of the Group financial statements

Company balance sheet

Notes forming part of the Company financial statements

Plant Health Care was established in 1995 in Pittsburgh (Pennsylvania) in the United
States. Its products are aimed at the agriculture industry, through supply and distribution
agreements with industry partners. Plant Health Care’s products deliver both environmental
and economic benefits for our customers and capitalise upon long-term trends towards
natural systems and biological products to promote plant health and growth.

Plant Health Care plc

Directors and advisers

Annual Report and Accounts 2013

Directors

Secretary

Registered office

Dr. Christopher Richards Non-executive Chairman
Paul M. Schmidt
Michael J. Higgins
James L. Ede-Golightly
Dr. Richard H. Webb

Chief Executive
Senior Independent Director
Non-executive Director
Non-executive Director

Andrew C. Wood FCIS

The Broadgate Tower
20 Primrose Street
London EC2A 2RS

Company number

05116780

Broker and nominated adviser

Auditor

Company solicitor

Registrar

Liberum Capital Limited
Ropemaker Place
25 Ropemaker Street
London EC2Y 9LY

BDO LLP
55 Baker Street
London W1U 7EU

Reed Smith LLP
The Broadgate Tower
20 Primrose Street
London EC2A 2RS

Neville Registrars Limited
Neville House
18 Laurel Lane
Halesowen
West Midlands B63 3DA

Trademarks:
Myconate, Harpin and N-Hibit are trademarks or trade names which Plant Health Care owns or which others
own and license to Plant Health Care for use. All other third party trade mark rights are acknowledged.

Annual Report and Accounts 2013

Chairman’s letter

Plant Health Care plc

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
substantially improved.

to improve crop yields has

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.

in November 2013 of

Plant Health Care has improved its operational focus
by exiting all non-core activities in Europe, with the
successful divestment
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

the 2013 field trials confirmed the
In research,
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
the future with third-generation
excited about
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.

Plant Health Care plc

Chairman’s letter
continued

Annual Report and Accounts 2013

Board changes
The past year has seen a 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.

The relevant experience and background of each
member of the Board is set out on pages 10 and 11.

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

Annual Report and Accounts 2013

Strategic report

Plant Health Care plc

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:

(cid:2)

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.

Revenue ($’000)
Gross profit ($’000)
Gross profit margin (%)
Operating loss ($’000)

2013
7,455
5,163
69.3
(6,946)

2012
6,199
3,609
58.2
(6,514)

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

USA
Mexico
Europe
Total

2013
$’000
2,169
579
1,009
3,757

2012
$’000
528
498
1,521
2,547

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
the
project develops.

for R&D as

Plant Health Care plc

Strategic report
continued

Annual Report and Accounts 2013

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 12 months
to 31 December 2013, with comparatives for the
previous financial year, is set out below:

As restated
(Note 13)
2012
$’000

2013
$’000

7,455
5,163

6,199
3,609

Revenue
Gross profit

Operating loss from continuing

operations

(6,946)

(6,514)

(Loss)/profit on disposal of
discontinued operations

Finance income (net)
Net loss for the year

Cash/liquid short-term

investments at
31 December

(89)
37
(6,881)

7
57
(6,505)

20,549

7,705

in 2013
from continuing operations
Revenues
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
Inc. (“DEI”).

liquidated by Direct Enterprises

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.

this

Operating expenses increased to $12.1m from
$10.1m. Of
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 10 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

Annual Report and Accounts 2013

Strategic report
continued

Plant Health Care plc

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
this type with other companies
agreements of
over time.

to seed treatment,

With respect
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
it previously
process, consuming inventory that
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

Plant Health Care plc

Strategic report
continued

the third
increased confidence that
given us
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.

this,

general. Recognising

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
important
in
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

Annual Report and Accounts 2013

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
have
decided to retain and continue to operate this
profitable subsidiary.

Plant Health Care Mexico, we

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
risks and
There are a number of potential
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.

Plant Health Care plc

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.

Information on the risks associated with the Group’s
involvement in financial instruments is given in Note 22
to the financial statements.

On behalf of the Board

Paul Schmidt
Chief Executive

24 March 2014

Annual Report and Accounts 2013

Strategic report
continued

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.

Plant Health Care plc

Directors

Dr. Christopher G. J. Richards
(Non-executive Chairman)
Dr. Richards is a British citizen and joined the Group
as non-executive Chairman on 1 August 2012. He
has had a distinguished career
in the global
agrochemical industry and is non-executive chairman
of Arysta LifeScience Corporation, one of
the
agrochemical
world’s
companies. Dr. Richards joined Arysta LifeScience as
Chief Operating Officer in 2003 and was Chief
Executive Officer from 2004 to 2010. Under his
leadership, Arysta LifeScience became one of the
fastest-growing companies in the agrochemical
industry. Arysta LifeScience was acquired by Permira
Funds in 2008.

privately-held

largest

Dr. Richards previously worked in international
management roles at Syngenta Crop Protection and
its predecessor companies, Zeneca and ICI. He
began his career at the UK Ministry of Agriculture,
Fisheries and Food, having been awarded a doctorate
in animal ecology from St. John’s College, Oxford.

other

directorships

His
include Dechra
Pharmaceuticals plc, an international veterinary
pharmaceuticals group listed in London. He is also
non-executive chairman of Oxitec Ltd, a biotech
company that is tackling dengue fever and agricultural
pests, and a non-executive director of Cibus Global,
Inc, a seed biotechnology company.

Paul M. Schmidt
(Chief Executive)
Paul Schmidt, who has dual US/Canadian nationality,
was appointed Chief Executive Officer on 2 April
2013. He has extensive operational experience in the
agriculture industry, having served in senior roles in
the USA, Germany and Canada during 25 years with
Bayer CropScience and its predecessor companies.
As President of Merck/EMD Crop Bioscience, a
leading developer of natural plant health products,
Mr. Schmidt led a turnaround which resulted in
substantially increased sales and profit. In February

Annual Report and Accounts 2013

the business to
2011, he oversaw the sale of
Novozymes for $275 million. Mr. Schmidt graduated
from the University of Saskatchewan with a BSA in
Agronomy in 1980.

He is a member of
Alberta
Alberta corporation).

Innovates BioSolutions

the board of directors of
(Province of

Michael J. Higgins
(Senior Independent Director)
Michael Higgins is a British citizen and joined the
Company as Senior Independent Director and Chair
of the Audit Committee on 9 May 2013.

Mr. Higgins is currently non-executive Chairman of
Ebiquity PLC and a non-executive director of Arria
NLG plc, both AIM-listed companies, and Chairman
of the Quoted Companies Alliance. He also works
with, and invests in, a number of early-stage
businesses. Mr. Higgins was a senior adviser at
KPMG, following 10 years as a partner. Prior to
KPMG, he was a director at Charterhouse Bank,
worked at Saudi International Bank and qualified as
an accountant with Price Waterhouse (now
PricewaterhouseCoopers).

James L. Ede-Golightly
(Non-executive Director)
James Ede-Golightly is a British citizen and joined the
Company as a non-executive director on 7 June
2013. Mr. Ede-Golightly is chairman of East Balkan
Properties Plc and Quoram Plc and has extensive
experience as a non-executive on the boards
of AIM-quoted companies with international
business interests.

Mr. Ede-Golightly was a founder in 2006 of ORA
Capital Partners, where he remains a non-executive
director, having previously worked as an analyst
and
at Merrill
Commerzbank. He is a CFA Charterholder and
Chartered Director.

Investment Managers

Lynch

Plant Health Care plc

Annual Report and Accounts 2013

Directors
continued

Dr. Richard H. Webb
(Non-executive Director)
Dr. Webb is a British citizen and joined the Company
on 16 September 2013 as a non-executive director.
He was previously engaged by the Group as a
consultant, and was instrumental in the development
of its new business strategy and its current research
and development programme.

Dr. Webb is director of StepOut Ltd., a consultancy
business he founded in 1995. Prior to that he held
various posts in the former ICI, including a period
managing laboratory discovery and field development
programmes for its public health business. His
doctorate, in pest biology, was from the London
School of Hygiene and Tropical Medicine.

Dr. Webb has many years’ experience as a strategy
and innovation consultant working mostly in the food,
health and agriculture sectors. He has had particularly
broad exposure to the international agrochemical
industry, which he has advised across a full spectrum
of activities, from research targeting to post-patent
brand management.

Annual Report and Accounts 2013

Remuneration Committee
The Remuneration Committee is chaired by James
Ede-Golightly, who succeeded David Buckeridge in
September 2013. Michael Higgins is also a member,
having replaced Sam Wauchope in May 2013.

The Committee is responsible for determining the
contract terms, remuneration and other benefits for
executive directors and senior management. Its policy
is to ensure that, through a process of regular review,
the Group’s remuneration arrangements attract and
incentivise the quality of executive management that
the Group needs to achieve its goals and grow
shareholder value, and are in line with best practice.
The Committee may take independent specialist
advice to assist it in its work. When required, the
Committee is also involved in the selection process
for executive directors and approves remuneration
before a final offer is made. The Remuneration
Committee report is set out on pages 16 to 22.

Plant Health Care plc

Board committees

The principal standing committees appointed by the
Board are as follows:

Audit Committee
The Audit Committee is chaired by Michael Higgins,
who succeeded Sam Wauchope in May 2013.
Richard Webb replaced David Buckeridge as a
member of the Committee in September 2013.

The Committee provides a forum for reporting by
the Group’s auditor and reviews the Group’s budget
and its interim and final financial statements before
their submission to the Board. The Committee also
monitors the Group’s risk management and internal
control practices and reports to the Board on these.
the Board on the
The Committee advises
appointment of
the external auditor and on its
remuneration, both for audit and non-audit work. It
also discusses the nature and scope of the audit with
the auditor.

The Audit Committee has sole responsibility for
assessing the independence of the external auditor,
BDO LLP. Each year,
the Committee seeks
reassurance that the external auditor and its staff have
no family,
investment or
financial, employment,
relationship with the Group. The
business
Committee requires the external auditor and its
associates to confirm this in writing, and detail the
procedures which the auditor has carried out in order
to make this confirmation. The Committee also
ensures that all partners engaged in the audit process
are rotated at least every five years, and assesses the
likely impact on the auditor’s independence and
objectivity before awarding it any contract
for
additional services. It is Group policy to require Audit
Committee approval
for all non-audit services
provided by the independent auditor.

The consideration of auditor independence is a
standing agenda item at each Audit Committee
meeting.

Annual Report and Accounts 2013

Plant Health Care plc

Corporate governance

Plant Health Care plc has taken note of the UK
Corporate Governance Code (“the UK Code”,
formerly “the Combined Code”) published in
September 2012. The UK Code and associated
guidance can be found on the Financial Reporting
Council website at www.frc.org.uk/corporate/
ukcgcode.cfm. The rules of
the London Stock
Exchange do not require companies that have
securities traded on AIM to formally comply with the
UK Code and the Company does not seek to
formally comply nor give a statement of compliance.
accountable to the
However,
Company’s shareholders for good governance and
has sought to apply those principles of corporate
governance commensurate with the Company’s size.
Its approach is set out below:

the Board is

Board composition
The Board currently comprises a non-executive
chairman, one executive director and three other
non-executive directors. The Board considers all of
the non-executives to be independent in judgment
James
and character. On joining the Board,
Ede-Golightly was considered to be non-independent
on account of his business relationship with a
the
shareholder. However,
substantial
distribution of substantially all of ORA Capital’s interest
in the Company to its shareholders, James can now
be considered independent.

given

Biographies of the Board members appear on pages
10 and 11 These indicate the high levels and range of
business experience which is essential to oversee
effectively a business of the size, complexity and
geographical spread of the Group. Concerns relating
to the executive management of
the Group
or
the directors can be
raised in confidence by contacting the Senior
Independent Director, Michael Higgins,
through
the Company Secretary.

the performance of

Board committees
The Board has established audit and remuneration
committees, as described on page 12. No separate
nominations committee has been established. A
Nominations Working Group comprised of non-
executive directors provides advice and guidance on
the selection of candidates; the full Board acts as a
nominations committee when changes to the Board
of directors are proposed.

Workings of the Board
The Board meets on a pre-scheduled basis at least
six times each year and more frequently when
required. The Board has a schedule of matters
reserved to it for decision and the requirement for
Board approval on these matters is communicated
widely throughout the senior management of the
Group. The schedule includes matters such as:
approval of the Group’s strategic plan; extension of
the Group’s activities into new business or geographic
areas; any decision to cease to operate all or any
material part of the Group’s business; changes relating
to the Group’s capital structure; contracts that are
material
size;
investments, including the acquisition or disposal of
interests in the voting shares of any company or the
making of any takeover offer; and the prosecution,
defence or settlement of
to
the Group.

strategically or by

litigation material

reason of

There is an agreed procedure for directors to take
independent professional advice, if necessary, at the
Company’s expense. This is in addition to the access
which every director has to the Company Secretary,
who is charged by the Board with ensuring that Board
procedures are followed.

The differing roles of Chairman and Chief Executive
are acknowledged and defined in separate statements
approved by the Board. The key functions of the

Annual Report and Accounts 2013

association to retire and seek election by
shareholders at the next annual general meeting. The
articles also require that one-third of the directors
retire by rotation each year and seek re-election at
the annual general meeting. The directors required
to retire will be those in office longest since their
previous re-election. In any event, each director must
retire at the third annual general meeting following
his appointment or re-appointment in a general
meeting. Retiring directors are eligible for re-election
by shareholders.

Remuneration of directors
A statement of the Company’s remuneration policy
and full details of directors’ remuneration are set out
in the Remuneration Committee report on pages 16
to 22. Executive directors abstain from any discussion
or voting at full Board meetings on Remuneration
the
recommendations
Committee
recommendations have a direct bearing on their own
remuneration package.

where

Communication
The Company places a great deal of importance on
communication with its shareholders. The Company
publishes online both an interim statement and its
full-year report and accounts. The annual report is
mailed to all shareholders and, upon request, to other
parties who have an interest
in the Group’s
performance. Regular communication with shareholders
also takes place via
the Company’s website
www.planthealthcare.com/investor-relations.

There is regular dialogue with major shareholders, as
well as general presentations after the release of the
interim and final results. From time to time, these
meetings involve the non-executive chairman or
other non-executive directors. All shareholders have
the opportunity to ask questions at the Company’s
annual general meeting.

Plant Health Care plc

Corporate governance
continued

Chairman are to conduct Board meetings and
meetings of shareholders and to ensure that all
directors are properly briefed in order to take a full
and constructive part in Board discussions. The Chief
Executive is required to develop and execute
business strategies and processes to enable the
Group’s business to meet
the requirements of
its shareholders.

The Senior Independent Director acts as a point of
contact for shareholders and other stakeholders with
concerns which have failed to be resolved, or would
not be appropriate to be addressed, through the
normal channels of the Chairman or Chief Executive.
The Senior Independent Director also meets with
the
the other members of
Chairman present on at least an annual basis in order
to evaluate and appraise the performance of
the Chairman.

the Board without

To enable the Board to function effectively and allow
directors to discharge their responsibilities, full and
timely access is given to all relevant information. In
this consists of a
the case of Board meetings,
comprehensive set of papers,
including regular
business progress reports and discussion documents
regarding specific matters. All Board members engage
actively with management to provide support in their
areas of specific competence; this provides ample
opportunity
to
for
understand the business in depth.

non-executive

directors

In line with the requirements of the UK Code, the
Board conducts an internal Board performance
evaluation on an annual basis. Following the Board
evaluation in 2013, the Chairman reviewed the
performance of each director, and his own
Senior
reviewed
performance was
Independent Director, in one-to-one meetings.

the

Re-election of directors
Any director appointed during the year is required
under the provisions of the Company’s articles of

Annual Report and Accounts 2013

Plant Health Care plc

Corporate governance
continued

Risk management and internal controls
The directors recognise that the Group is ambitious
and seeking significant growth.

The Board has in place a formal process for
identifying, evaluating and managing the significant
risks faced by the Group, which complies with the
Revised Guidance for Directors on the Combined Code
published by the Financial Reporting Council.

The directors are responsible for the Group’s system
of internal control and for reviewing its effectiveness.
However,
system can provide only
reasonable, but not absolute, assurance against
material misstatement or loss.

such a

There is a formal process in place to regularly review
the control systems across the Group to ensure that
they develop to mitigate emerging risks and in
anticipation of expected growth. Twice a year the
Chief Financial Officer presents to the Board for
discussion and approval a summary of the key internal
controls in place during the prior period and
proposals for enhancements to these controls in the
forthcoming period. Based on this process,
the
directors believe that the Group has internal control
systems in place appropriate to its size and nature.

Plant Health Care plc

Remuneration Committee report

Annual Report and Accounts 2013

The Remuneration Committee is currently chaired by James Ede-Golightly. Michael Higgins is also a member.
Both are non-executive directors. The Committee is responsible for determining the contract terms,
remuneration and other benefits of the executive directors and of the Chairman, and for monitoring the
remuneration of first-line executive management. The Committee may call on outside compensation experts
as required.

Remuneration policy
It is Group policy to set directors’ remuneration levels to attract, incentivise and retain the quality of individuals
that the Group requires to succeed in its chosen objectives. It is also Group policy to ensure that there is a
strong link between the level of executive directors’ remuneration and the performance of the Group in
achieving its goals.

Elements of remuneration – executive directors
The following comprise the principal elements of executive directors’ remuneration:

(cid:2)

basic salary and benefits;

annual bonus (performance-related and discretionary);

long-term share-based incentives; and

pension contributions.

Basic salary and benefits
Salaries are reviewed annually by the Committee. As the level of each individual director’s remuneration can
be significantly augmented through performance-related bonuses, only in exceptional circumstances will the
Committee consider an increase in excess of the general rate of wage inflation for the United States of America.
Where such an increase has been awarded, the Committee will publish the reasons behind its decision in the
Remuneration Committee report.

In addition to basic salary, each executive director is entitled to the following main benefits:

(cid:2)

up to 15 days holiday per annum;

coverage under the Company’s health insurance plans; and

coverage under the Company’s long-term and short-term disability and group term life insurance plans.

Annual bonus
Annual bonuses are payable to each executive director based on achievement of financial, strategic and
sustainability objectives, both corporate and personal. For 2013, the directors had bonus potential of between
50% and 100% of their basic salaries; for 2014, the range remains between 50% and 100%. This ensures
that there is a significant element of “at risk” pay, which is only available when good results are achieved.

Annual Report and Accounts 2013

Plant Health Care plc

Remuneration Committee report
continued

Long-term share-based incentives
Each of the executive directors is eligible to participate in the Company’s share option schemes and long-
term incentive stock award plans. The Company may award options and shares under these plans up to the
greater of 3% of its issued share capital or such number as, when aggregated with any outstanding options
converted from the Plant Health Care, Inc. option plans described below, amounts to no more than 12% of
the issued share capital of the Company. The main features of these plans are:

Share option schemes

(a)
Prior to the formation of Plant Health Care plc, the then executive directors participated in the Plant Health
Care, Inc. Incentive Stock Option plans. Under these plans, options were periodically awarded at the discretion
of the board of directors of that company. These plans were effectively frozen at the time of admission to AIM.
Outstanding options in Plant Health Care, Inc. were converted into options in Plant Health Care plc bearing
the same rights mutatis mutandis as under the Plant Health Care, Inc. scheme. No further awards of options
will be made under the Plant Health Care, Inc. plans.

In July 2004, the Board of directors adopted the Plant Health Care plc Unapproved Share Option Scheme
2004. Under this scheme, the Board may grant options at an exercise price of not less than the market value
of a share on the date of award. Options may normally be exercised between three and 10 years from grant.
In most cases, vesting is also dependent upon the Company’s total shareholder return exceeding that of the
AIM All-Share Index for the period from grant to vesting.

Long-term incentive stock award plan

(b)
In June 2007, the Company adopted the Plant Health Care plc 2007 Long Term Incentive Plan (the “LTIP”).
The main features of the plan are:

(cid:2)

all employees of the Company and its subsidiaries are eligible to participate in the LTIP. The
Remuneration Committee selects the employees to receive awards and determines the number of
ordinary shares subject to a particular award;

the grantee must pay at least the nominal value per share to receive the stock award;

the Remuneration Committee determines the period of vesting for any given stock award. Vesting of
any stock award is contingent on the fulfilment of challenging performance criteria set by the Committee.
The Committee may accelerate the vesting or amend or relax performance conditions, to the extent
that conditions which are amended or relaxed will be no more or less difficult to satisfy than when they
were originally imposed;

if a grantee terminates employment for any reason prior to vesting of all or a portion of a stock award,
the unvested portion must be returned to the Company; and

the LTIP automatically terminates 10 years from its effective date of 8 June 2007, unless terminated
earlier by the Company or extended by the Company with the approval of the shareholders.

Plant Health Care plc

Remuneration Committee report
continued

Annual Report and Accounts 2013

No awards have been made under the LTIP since July 2011. As at 31 December 2013, a total of 1,000,000
LTIPs remained outstanding, the vesting of which was dependent upon the achievement of 2013 performance
targets. No shares were deemed earned and all outstanding awards will be forfeited upon announcement of
the 2013 results.

Value creation-based long-term incentive plan

(c)
In July 2013, the Company implemented a value creation-based long-term incentive plan (the “Value Creation
Plan” or “VCP”) in which the Chairman, CEO and key members of the senior executive team participate. The
plan calculates value generated for shareholders from the point of the April 2013 fundraising over a four-year
period, with plan participants receiving in aggregate up to 10% of value generated over an annual hurdle of
8%, paid in shares valued at that end point. The workings of the plan accommodate equity issuances (including
fundraisings) and the payment of dividends during its life. On a change of control, value generated for
shareholders above the hurdle rate is calculated and paid out at that point.

The Board exercises its discretion from time to time to award options to its directors as it sees fit.

Pension contributions
Each of the executive directors is entitled to participate in the Plant Health Care, Inc. 401(k) Plan. This is a
defined contribution plan approved by the US Internal Revenue Service. The main features of the plan are:

(cid:2)

participation is open to all US-based employees who have completed a probationary period after
initial employment;

employees may contribute a percentage of salary to the plan through a payroll withholding scheme;

in past years, the Company has contributed an amount up to 3% of compensation, at the discretion of
the Board, for all employees eligible to participate. From 2014 onwards, the Company has committed
to making a matching contribution of up to 2% of compensation for participating employees;

in past years, vesting of Company contributions was 33% after the first year of service, and 33% and
34% over the next two years of service, respectively. From 2014 onwards, Company contributions vest
immediately; and

the plan is subject to various statutory non-discrimination tests to ensure that it does not favour
highly-compensated employees.

Post-employment health benefits
John Brady’s severance arrangements include a benefit for payment for health insurance for up to 18 months
after his termination of employment.

Annual Report and Accounts 2013

Plant Health Care plc

Remuneration Committee report
continued

Elements of remuneration – non-executive directors
The remuneration for non-executive directors consists solely of fees for their services in connection with the
Board and Board committees. The non-executive directors receive their fees wholly in cash. In addition, certain
of the non-executive directors provide consultancy services to the Company.

Service contracts
The Company has service contracts with all executive and non-executive directors. Provisions in the service
contracts include:

For executive directors:

(cid:2)

termination may be initiated by the Company at any time. Termination by the director is subject to a
notice period ranging from 20 days to six months;

if the Company terminates other than for cause, the individual is entitled to a payment equal to 12
months’ base salary payment, plus payment for accrued but unused vacation and either one year’s full
cash bonus or pro rata cash bonus for the year to date (if targets are being met); and

in the event of termination for cause, the individual would receive only base salary through the date of
termination and accrued vacation pay. “For cause” includes fraud or felonious conduct; embezzlement
or misappropriation of Company funds or property; refusal, misconduct in or disregard of the
performance of the individual’s duties and obligations; abandonment or voluntary resignation; death,
retirement or permanent disability.

For non-executive directors:

(cid:2)

termination is on prior written notice of between one and three months; and

directors may be terminated with immediate effect for serious breach or repeated or continued material
breach of any obligations to the Company; any act of dishonest or serious misconduct or conduct which
tends to bring the director or the Company into disrepute; or a declaration of bankruptcy.

In addition to the above, the Company’s articles of association require that at least one-third of the directors
retire by rotation at each annual general meeting. Such retiring directors are eligible for re-election.

Plant Health Care plc

Remuneration Committee report
continued

Annual Report and Accounts 2013

Directors’ remuneration
The amounts shown are the remuneration of the individual directors who served during the year. The amounts
shown reflect compensation only for the period for which they served as directors.

Base salary,

fees and Performance-
related
bonus
$’000

serverance
payments
$’000

Other
benefits
$’000

Share-
based
payments
$’000

Executive:
J Brady*
S Weaver
P Schmidt

Resigned 16 September 2013
Resigned 16 September 2013
Appointed 2 April 2013

979
444
187

Non-executive:
Resigned 13 April 2012
D Koechlin
Resigned 2 April 2013
S Wauchope
Resigned 16 September 2013
D Buckeridge
Appointed 1 August 2012
C Richards
Appointed 9 May 2013
M Higgins**
J Ede-Golightly Appointed 7 June 2013
R Webb

Appointed 16 September 2013

—
16
47
87
47
23
14

—
—
100

—
—
—
—
—
—
—

1,844

100

(37)
35
20

—
—
—
—
—
—
—

Total
2013
$’000

871
414
391

—
16
47
122
47
23
14

Total
2012
$’000

416
352
—

22
67
67
35
—
—
—

(71)
(65)
84

—
—
—
35
—
—
—

(17)

1,945

959

Negative amount in other benefits is indicative of a decrease in value due to annual reassessment of the value of long-term benefits accrued.

The amount included in the table for Michael Higgins represents fees for services provided as a non-executive director in the amount of
$37,000, as well as remuneration for consultancy services in the amount of $10,000.

Executive salaries
At 1 January 2012, John Brady had a base salary of $340,000 and bonus potential of 100% of base salary.

At 1 January 2012, Stephen Weaver had a base salary of $220,000 and bonus potential of 70%. With effect
from 1 July 2012, his salary was increased to $226,000.

At 31 December 2013, Paul Schmidt had a base salary of $250,000 and bonus potential of 100%.

Share-based payments and other benefits
In 2013, the Company accrued a contribution to the 401(k) Plan of 2% (2012: 3%) of eligible compensation.
In 2013, pension expense for the executive directors was $11,000 (2012: $15,000).

In 2013, post-employment health benefits for John Brady were ($75,000) (2012: ($100,000)). The negative
is indicative of the fact that the value of these benefits is annually reassessed. Any decrease in value is shown
as a negative. During 2013, as part of their severance package, the employee agreed to forfeit any remaining
amount of lifetime insurance benefits after 30 September 2015.

Annual Report and Accounts 2013

Plant Health Care plc

Remuneration Committee report
continued

In 2013, the Company incurred ($17,000) (2012: $33,000) of share-based payment credit. The reversal
of the share-based charges is due to forfeiture of LTIP awards due to the 2013 performance targets not
being met.

In 2013, the Company incurred $14,400 (2012: $17,000) of car allowance expense.

In 2013, the Company incurred $34,600 (2012: $33,000) of medical, dental and life insurance expense.

In 2013, the Company incurred $33,000 (2012: Nil) of costs for disposal of a vehicle.

Directors’ share-based incentives

Movements in 2012
On 23 May 2012, with regard to 66,832 shares previously awarded to Steve Weaver under the LTIP, the
vesting of which was dependent upon the achievement of 2010 performance targets, the shares were deemed
earned, but the entire award was forfeited, due to non-take-up by Steve Weaver.

On 30 June 2012, with regard to 85,000 shares previously awarded to John Brady under the LTIP, the vesting
of which was dependent upon the achievement of 2011 performance targets, no shares were deemed earned,
the entire award being forfeited.

On 30 June 2012, with regard to 58,333 shares previously awarded to Steve Weaver under the LTIP, the
vesting of which was dependent upon the achievement of 2011 performance targets, no shares were deemed
earned, the entire award being forfeited.

Movements in 2013
On 2 July 2013, with regard to 58,000 shares previously awarded to John Brady under the LTIP, the vesting
of which was dependent upon the achievement of 2012 performance targets, no shares were deemed earned,
the entire award being forfeited.

On 2 July 2013, with regard to 55,000 shares previously awarded to Steve Weaver under the LTIP, the vesting
of which was dependent upon the achievement of 2012 performance targets, no shares were deemed earned,
the entire award being forfeited.

Awards under the Value Creation Plan

(a)
During 2013, awards were made under the VCP to directors as under:

Director
C Richards
P Schmidt

Date of award
2 July 2013
2 July 2013

Number of options
862,000 market value options
79,821 incentive stock options

Number of
restricted stock units
—
1,630,000

The maximum number of restricted share units awarded to Paul Schmidt which may vest, subject to the
workings of the performance condition, is 1,630,000.

Plant Health Care plc

Remuneration Committee report
continued

Annual Report and Accounts 2013

Other awards of options

(b)
During the year, the following share option awards were made to non-executive directors:

Director
M Higgins
R Webb

Date of award
10 May 2013
17 September 2013

Number of
options
117,647
128,205

Exercise price
£
0.85
0.78

Expiry date
9 May 2023
16 September 2023

Other information
During the year, the Company’s share price on AIM ranged between 50p and 90p. At 31 December 2013,
the share price was 52.5p. At 21 March 2014, the last working day prior to the approval of this annual report,
the share price was 59p.

Annual Report and Accounts 2013

Report of the directors

Plant Health Care plc

The directors present their annual report together with the audited financial statements for the year ended
31 December 2013.

Results and dividends
The results of the Group for the year are set out on page 29 and show a loss for the year of $6,881,000
(2012: loss of $6,505,000).

The directors recommend that no dividend be paid at this time.

Directors
The directors of the Company at the end of the year and their beneficial interests in the ordinary share capital
of the Company, options to purchase ordinary shares of the Company (including through the value creation
plan) and LTIP share awards were as follows.

Appointed 1 August 2012
C Richards*
Appointed on 2 April 2013
P Schmidt
M Higgins
Appointed on 9 May 2013
J Ede-Golightly Appointed on 7 June 2013
R Webb

Appointed on 16 September 2013

Shares
56,500
57,000
—
430,111
10,000

At 31 December 2013
Options
862,000
1,709,821
117,647
—
128,205

LTIP
—
—
—
—
—

* As at 1 January 2013, Chris Richards, the only current director who was then on the Board, held no interest in the Company.

Sam Wauchope also served as a director of the Company from 1 January 2013 until he resigned on 2 April
2013. Likewise, John Brady, Stephen Weaver and Dr. David Buckeridge all served as directors of the Company
from 1 January 2013 until they resigned on 16 September 2013.

Further details of the directors’ share options and awards under the VCP are shown in the Remuneration
Committee report on pages 16 to 22.

None of the directors has any holding in any subsidiary company, nor any material interest in the transactions
of the Group.

Plant Health Care plc

Report of the directors
continued

Annual Report and Accounts 2013

Substantial shareholders
On 21 March 2014, the directors are aware of the following persons who, directly or indirectly, are interested
in 3% or more of the Company’s existing Ordinary Share capital:

Name
Henderson Global Investors Limited
Richard Griffiths**
Boulder River Capital Corporation and its affiliates
Blake Holdings Limited**
Polar Capital
Antisoma PLC
Seren Capital Management Limited**
Robert Quested

Shares held
17,461,177
11,484,557
7,955,397
7,544,000
3,846,154
3,377,596
3,000,426
2,404,078

Percent of issued
share capital*
24.75
16.21
11.28
10.65
5.45
4.79
4.23
3.41

* The percentages shown are based on the most recent share register analysis or notification.

** Blake Holdings Limited and Seren Capital Management Limited are controlled by Richard Griffiths, hence the interest of Blake Holdings Limited and

Seren Capital Management Limited are also included within that of Richard Griffiths.

Research and development
The Group continues to invest in R&D activities with an emphasis on the improvement of existing technologies,
the formulation of products to meet specific customer needs and the development of new products based on
the Company’s Harpin platform technology. For further details of the Company’s R&D activities, see the
Chairman’s letter and Strategic report on pages 3 to 9.

Business review
For a discussion of the Group’s 2013 performance and future developments, see the Chairman’s letter and
Strategic report on pages 3 to 9.

Board meetings and attendance
The following table shows the attendance of directors at meetings of the Board, Audit Committee and
Remuneration Committee held during the 2013 financial year:

Number of meetings held
C Richards
Appointed on 2 April 2013
P Schmidt
Appointed on 9 May 2013
M Higgins
J Ede-Golightly Appointed on 7 June 2013
R Webb
J Brady
S Weaver
S Wauchope
D Buckeridge

Appointed on 16 September 2013
Resigned on 16 September 2013
Resigned on 16 September 2013
Resigned on 2 April 2013
Resigned on 16 September 2013

Board
13
13
8
8
7
3
9
10
5
10

Audit
Committee
3
—
—
2
—
1
—
—
1
2

Remuneration
Committee
3
—
—
2
1
—
—
—
1
2

Annual Report and Accounts 2013

Report of the directors
continued

Plant Health Care plc

Auditor
All of the directors have taken all the steps that they ought to have taken to make themselves aware of any
information needed by the Company’s auditor for the purposes of its audit and to ensure that the auditor is
aware of that information. The directors are not aware of any relevant audit information of which the auditor
is unaware.

Going concern
In consideration of the Group’s current resources and review of financial forecasts and projections, the directors
have a reasonable expectation that the Group has adequate resources to continue in operational existence for
the foreseeable future. No material uncertainties that may cast significant doubt about the ability of the
Company to continue as a going concern have been identified by the directors. Accordingly, the directors
continue to adopt the going concern basis in preparing the annual report and accounts.

Annual general meeting
At the forthcoming annual general meeting of the Company, resolutions will be put forward to elect James
Ede-Golightly, Michael Higgins and Dr. Richard Webb, each of whom was appointed to the Board since the
last annual general meeting, and to re-appoint BDO LLP as auditor to the Company. Shareholders will also be
asked to approve the delisting of the Company’s shares from the Channel Islands Securities Exchange Authority
Ltd. and the issue of awards made under the Company’s Value Creation Plan.

By Order of the Board

Andrew C. Wood FCIS
Company Secretary

24 March 2014

Plant Health Care plc

Annual Report and Accounts 2013

Statement of directors’ responsibilities

The directors are responsible for preparing the annual report and the financial statements in accordance with
applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law, the
directors have elected to prepare the Group financial statements in accordance with International Financial
Reporting Standards (“IFRSs”), as adopted by the European Union, and the Company financial statements in
accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting
Standards and applicable law). Under company law, the directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Company
and of the profit or loss of the Group for that period. The directors are also required to prepare financial
statements in accordance with the rules of the London Stock Exchange for companies trading securities on the
Alternative Investment Market (“AIM”), and the rules of the Channel Islands Securities Exchange Authority Ltd.

In preparing these financial statements, the directors are required to:

(cid:2)

select suitable accounting policies and then apply them consistently;

make judgments and accounting estimates that are reasonable and prudent;

state whether they have been prepared in accordance with IFRSs, as adopted by the European Union,
subject to any material departures disclosed and explained in the financial statements; and

prepare the financial statements on the going concern basis, unless it is inappropriate to presume that
the Company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain
the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the
Company and enable them to ensure that the financial statements comply with the requirements of the
Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for
taking reasonable steps for the prevention and detection of fraud and other irregularities.

Website publication
The directors are responsible for ensuring the annual report and the financial statements are made available
on a website. Financial statements are published on the Company’s website in accordance with legislation in
the United Kingdom governing the preparation and dissemination of financial statements, which may vary from
legislation in other jurisdictions. The maintenance and integrity of the Company’s website is the responsibility
of the directors. The directors’ responsibility also extends to the ongoing integrity of the financial statements
contained therein.

Annual Report and Accounts 2013

Plant Health Care plc

Independent auditor’s report
To the members of Plant Health Care plc

We have audited the financial statements of Plant Health Care plc for the year ended 31 December 2013
which comprise the consolidated statement of comprehensive income, the consolidated statement of financial
position, the consolidated statement of changes in equity, the consolidated statement of cash flows, the
Company balance sheet, and the related notes. The financial reporting framework that has been applied in the
preparation of the Group financial statements is applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union. The financial reporting framework that has been applied in the
preparation of the parent company financial statements is applicable law and United Kingdom Accounting
Standards (United Kingdom Generally Accepted Accounting Practice).

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of
the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s
members those matters we are required to state to them in an auditor’s report and for no other purpose. To
the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the
Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we
have formed.

Respective responsibilities of directors and auditor
As explained more fully in the statement of directors’ responsibilities, the directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility
is to audit and express an opinion on the financial statements in accordance with applicable law and International
Standards on Auditing (UK and Ireland). Those standards require us to comply with the Financial Reporting
Council’s (FRC’s) Ethical Standards for Auditors.

Scope of the audit of the financial statements
A description of the scope of an audit of
www.frc.org.uk/auditscopeukprivate.

financial statements is provided on the FRC’s website at

Opinion on financial statements
In our opinion:

(cid:2)

the financial statements give a true and fair view of the state of the Group’s and the parent company’s
affairs as at 31 December 2013 and of the Group’s loss for the year then ended;

the Group financial statements have been properly prepared in accordance with IFRSs as adopted by
the European Union;

the parent company’s financial statements have been properly prepared in accordance with United
Kingdom Generally Accepted Accounting Practice; and

the financial statements have been prepared in accordance with the requirements of the Companies
Act 2006.

Plant Health Care plc

Independent auditor’s report
continued

Annual Report and Accounts 2013

Opinion on other matters prescribed by the Companies Act 2006
In our opinion the information given in the strategic report and directors’ report for the financial year for which
the financial statements are prepared is consistent with the financial statements.

Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to
report to you if, in our opinion:

(cid:2)

adequate accounting records have not been kept by the parent company, or returns adequate for our
audit have not been received from branches not visited by us; or

the parent company financial statements are not in agreement with the accounting records and
returns; or

certain disclosures of directors’ remuneration specified by law are not made; or

we have not received all the information and explanations we require for our audit.

Julian Frost
(senior statutory auditor)

For and on behalf of BDO LLP, statutory auditor
55 Baker Street, London
United Kingdom

24 March 2014

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

Annual Report and Accounts 2013

Plant Health Care plc

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

Revenue
Cost of sales

Gross profit
Research and development expenses
Business development expenses
Sales and marketing expenses
Administrative expenses
Restructuring expenses
Total administrative expenses

Operating loss
Finance income
Finance expense

Loss before tax
Income tax expense

Net loss from continuing operations
(Loss)/profit of discontinued operations, net of tax

Loss for the year

Other comprehensive income:
Items which will or may be reclassified to profit or loss:
Exchange difference on translation of foreign operations

Total comprehensive loss for the year

Net loss attributable to:
Owners of the parent
Non-controlling interest

Total comprehensive loss attributable to:

Owners of the parent
Non-controlling interest

Basic and diluted loss per share

Basic and diluted loss per share from continuing operations

The notes on pages 33 to 66 form part of these financial statements.

Note
4

6
11
11

As restated
(Note 13)
2012
$’000
6,199
(2,590)

3,609
(1,024)
(877)
(4,505)
(3,717)
—
(3,717)

(6,514)
61
(4)

(6,457)
(55)

(6,512)
7

(6,505)

140

(6,365)

(6,573)
68

(6,505)

(6,433)
68

(6,365)

$(0.12)

2013
$’000
7,455
(2,292)

5,163
(2,079)
(852)
(3,474)
(3,606)
(2,098)
(5,704)

(6,946)
38
(1)

(6,909)
117

(6,792)
(89)

(6,881)

(2)

(6,883)

(6,900)
19

(6,881)

(6,902)
19

(6,883)

$(0.11)

$(0.12)

Plant Health Care plc

Annual Report and Accounts 2013

Consolidated statement of financial position
at 31 December 2013

Assets
Non-current assets
Intangible assets
Property, plant and equipment
Trade and other receivables

Total non-current assets

Current assets
Inventories
Trade and other receivables
Investments
Cash and cash equivalents

Total current assets

Total assets

Liabilities
Current liabilities
Trade and other payables
Borrowings
Provisions

Total current liabilities

Non-current liabilities
Trade and other payables
Borrowings
Provisions

Total non-current liabilities

Total liabilities

Total net assets

Share capital
Share premium
Reverse acquisition reserve
Share-based payment reserve
Foreign exchange reserve
Retained earnings

Non-controlling interests

Total equity

Note

15
16
18

17
18
22

19
20
21

20
21

24
25
25
25
25
25

2013
$’000

3,004
276
316

3,596

2,510
3,170
11,054
9,495

26,229

29,825

3,034
9
—

3,043

153
34
—

187

3,230

26,595

1,215
70,206
10,548
2,556
(582)
(57,348)
26,595
—

26,595

2012
$’000

3,252
235
156

3,643

1,729
3,477
4,204
3,501

12,911

16,554

2,327
12
—

2,339

—
48
75

123

2,462

14,092

952
50,624
10,548
2,780
(580)
(50,502)
13,822
270

14,092

The financial statements were approved and authorised for issue by the Board on 24 March 2014.
P Schmidt
Director

Registered No: 05116780 (England and Wales)

The notes on pages 33 to 66 form part of these financial statements.

Annual Report and Accounts 2013

Plant Health Care plc

Consolidated statement of changes in equity
at 31 December 2013

Share
capital
$’000

Share
premium
$’000

Reverse
acquisition
reserve
$’000

Share-
based
payment
reserve
$’000

Foreign
exchange
reserve
$’000

Retained
earnings
$’000

Non-
controlling
interests
$’000

Total
$’000

Total
equity
$’000

949

50,476

10,548

2,610

(720)

(43,929)

19,934

202

20,136

—

—
1
—
2

—

—
88
—
60

—

—
—
—
—

—

—
—
170
—

—

(6,573)

(6,505)

140

140
—
—
—

—

140

(6,573)
—
—
—

(6,433)
89
170
62

—

68
—
—
—

140

(6,365)
89
170
62

Balance at

1 January 2012

Loss for year
Exchange difference

arising on translation of
foreign operations

Total comprehensive

income
Shares issued
Share-based payments
Options exercised

Balance at

31 December 2012

952

50,624

10,548

2,780

(580)

(50,502)

13,822

270

14,092

Loss for year
Exchange difference

arising on translation
of foreign operations

Total comprehensive

income
Shares issued
Placement costs
Share-based payments
Options exercised
Purchase of minority

interest

Balance at

—

—
263
—
—
—

—

—
20,207
(641)
—
16

—

—
—
—
—
—

—

—
—
—
(224)
—

—

(6,900)

(6,881)

(2)

(2)
—
—
—
—

—

(2)

(6,900)

(6,902)
— 20,470
(641)
—
(224)
—
16
—

19
(6,883)
— 20,470
(641)
—
(224)
—
16
—

(289)

(235)

31 December 2013

1,215

70,206

10,548

2,556

(582)

(57,348)

26,595

— 26,595

The notes on pages 33 to 66 form part of these financial statements.

Annual Report and Accounts 2013

Note

2013
$’000

2012
$’000

(6,881)

(6,505)

16
15

11
11

16
15
13
11

108
273
(224)
(38)
1
(117)
(117)
—
185
43
(1,166)
1,826
(75)
(69)

(6,251)

(278)
(25)
(252)
38
(24,765)
17,915

(7,367)

(1)
19,829
16
—
(235)
(17)

19,592

5,974
20
3,501

9,495

152
275
170
(84)
4
55
(477)
535
—
—
(9)
(438)
(254)
(131)

(6,707)

(156)
(22)
400
84
(1,980)
2,656

982

(4)
89
62
61
—
(11)

197

(5,528)
123
8,906

3,501

Plant Health Care plc

Consolidated statement of cash flows
for the year ended 31 December 2013

Cash flows from operating activities
Loss for the year
Adjustments for:
Depreciation
Amortisation of intangibles
Share-based payment (credit)/expense
Finance income
Finance expense
Income taxes (credit)/expense
Increase in trade and other receivables
Decrease in finance lease receivables
Loss on sale of discontinued operations, net of tax
Loss on disposal of fixed assets
Increase in inventories
Increase/(decreases) in trade and other payables
Decrease in provisions
Income taxes paid

Net cash used in operating activities

Investing activities
Purchase of property, plant and equipment
Expenditure on externally-acquired intangible assets
Disposal of discontinued operations, net of cash
Finance income
Purchase of investments
Sale of investments

Net cash (used in)/provided by investing activities

Financing activities
Interest paid
Issue of ordinary share capital
Exercise of options
Increase in borrowings
Purchase of minority shares
Repayment of borrowings

Net cash provided by financing activities

Net increase/(decrease) in cash and cash equivalents
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

The notes on pages 33 to 66 form part of these financial statements.

Annual Report and Accounts 2013

Plant Health Care plc

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

General information

1.
Plant Health Care plc (“the Company”) is a public limited company incorporated in England. The address of
its registered office is set out on page 2. The principal markets of the Company and its subsidiaries are described
in Note 10.

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.

A summary of these standards and their probable impact on the Company is given in Note 29 to the
financial statements.

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.

Plant Health Care plc

Annual Report and Accounts 2013

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

Accounting policies continued

2.
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:

(cid:2)

the goods are complete and ready for delivery;

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

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.

Annual Report and Accounts 2013

Plant Health Care plc

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

Accounting policies continued

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
demonstrated that:

it can be

(cid:2)

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

adequate resources are available to complete the development;

there is an intention to complete and sell the product;

the Group is able to sell the product;

sale of the product will generate future economic benefits; and

expenditure on the project can be measured reliably.

Capitalised development costs are amortised over the periods of the future economic benefit attributable to
the asset. The amortisation expense is included within administrative expenses in the consolidated 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.

Plant Health Care plc

Annual Report and Accounts 2013

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

Accounting policies continued

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.

Annual Report and Accounts 2013

Plant Health Care plc

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

Accounting policies continued

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

Plant Health Care plc

Annual Report and Accounts 2013

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

Accounting policies continued

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:

(cid:2)

the initial recognition of goodwill;

the initial recognition of an asset or liability in a transaction which is not a business combination and at
the time of the transaction affects neither accounting nor taxable profit; and

investments in subsidiaries and jointly-controlled entities where the Group is able to control the
timing of the reversal of the difference and it is probable that the difference will not reverse in the
foreseeable future.

Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will
be available against which the difference can be utilised.

The amount of the asset or liability is determined using tax rates that have been enacted or substantively
enacted by the 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.

Critical accounting estimates and judgments

3.
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.

Annual Report and Accounts 2013

Plant Health Care plc

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

Critical accounting estimates and judgments continued

Impairment of intangible assets (excluding goodwill)
At the end of the financial period, the Group reviews the carrying amounts of its 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.

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. More information on carrying values is included in Note 15.

Useful lives of intangible assets
Intangible assets are amortised over their useful lives. Useful lives are based on management’s estimates of the
period over which the assets will generate revenue and are periodically reviewed for continued
appropriateness. Changes to estimates can result in significant variations in the carrying value and amounts
charged to income in specific periods. More details on carrying values are included in Note 15.

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. More details on carrying amounts and write down of inventories to net realisable value are
included in Note 17.

Receivables
The Group reviews the net recoverable value of its accounts receivable on a periodic basis to provide assurance
that recorded accounts receivable are stated net of any required provision for impairment. Factors that could
impact recoverability include the financial propriety of customers and related 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. More details on gross balances and provisions made are included in
Note 18.

Plant Health Care plc

Annual Report and Accounts 2013

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

Critical accounting estimates and judgments continued

Warranty claims
Prior to 1 January 2011, the Group offered a three-year warranty on certain of its products in the USA. The
cost of future warranty claims was estimated during the period the sales were made. As the warranty is no
longer offered, no additional warranty accruals were recorded during the period. The potential for claims
expired on 31 October 2012.

Revenue

Revenue arises from:
Core products
Non-core products

Total

As restated
Note 13
2012
$’000
2,547
3,652

6,199

2013
$’000
4,997
2,458

7,455

Restructuring costs
items

5.
Exceptional
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.

Annual Report and Accounts 2013

Plant Health Care plc

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

Note

7
16
15

Operating loss

Operating loss is arrived at after charging/(crediting):
Share-based payment (credit)/charge
Depreciation
Amortisation of intangibles
Operating lease expense
Loss on disposal of property, plant and equipment
Foreign exchange (gains)/losses

Auditor’s remuneration:

Fees payable to the Company’s auditor and its associates

for the audit of the Company’s annual accounts

Fees payable to the Company’s auditor and its associates

for other services:

Audit of the Company’s subsidiaries

Total auditor’s remuneration

Staff costs

7.
Staff costs for all employees, including executive directors, comprise:

Wages and salaries
Redundancy costs
Social security and payroll taxes
Defined contribution pension costs
Medical and other benefits

Share-based payments (credit)/charge

2013
$’000

(224)
108
273
443
43
(28)

2013
$’000
3,854
1,705
337
107
206

6,209
(224)

5,985

2012
$’000

170
152
275
356
—
15

2012
$’000
5,059
—
354
114
232

5,759
170

5,929

The average number of employees of the Group during the year, including executive directors, was as follows:

Research
Development
Administration
Sales and Marketing

2013
5
2
16
11

2012
3
1
26
13

Plant Health Care plc

Annual Report and Accounts 2013

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

Directors’ and key management personnel remuneration

8.
Key management personnel are those persons having authority and responsibility for planning, directing and
controlling activities of the Group, and includes all directors of the Company. Further disclosures on the
remuneration of each individual director are included in the directors’ remuneration section of the
Remuneration Committee report on page 20.

Base salary, fees and bonuses
Termination benefits
Other short-term employee benefits
Share-based payments
Pensions and other post-retirement benefits

2013
$’000
890
1,054
(26)
(17)
11

1,912

2012
$’000
961
—
(50)
33
15

959

The three executive directors who served during the year were eligible to participate in the Group’s 401(k)
retirement plan (2012: two). The negative is indicative of the fact that the value of these benefits is annually
reassessed. Any decrease in value is shown as a negative.

For the highest-paid director information, refer to page 20.

Annual Report and Accounts 2013

Plant Health Care plc

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

Share-based payments

9.
The Company operates three equity-settled share-based remuneration schemes for employees: a share option
scheme, a long-term incentive stock award plan and a value creation plan, as described in the “Elements of
remuneration” section for executive directors within the Remuneration Committee report on page 16.

Share options

(a)
Valuation of the share options granted during the year ended 31 December 2013 and 2012 was as follows:

16 April
2013
24,000
52p

9 May
2013
117,647
49p

17 September
2013
128,205
34p

20 March
2012
8,000
26p

17 September
2012
9,000
46p

Share options granted
Weighted average fair value

Assumptions used in

measuring fair value:
Weighted average share price
Exercise price
Expected volatility
Option life (years)
Expected vesting period (years)
Expected dividend yield
Risk-free interest rate

90p
90p
49%
10
4.5
Nil
0.75%

85p
85p
49%
10
4.5
Nil
0.75%

64p
78p
49%
10
4.5
Nil
0.75%

54p
57p
49%
10
4.5
Nil
1.26%

95p
96p
49%
10
4.5
Nil
0.86%

For valuation of both the share options granted in 2013 and 2012:

(cid:2)

the expected volatility was determined by reference to the historical share price of Plant Health Care
plc for a three-year period;

the expected vesting period reflects market-based performance conditions for these options and share
awards; and

fair values were calculated using the binomial option pricing model.

Long-term incentive awards

(b)
There were no LTIP awards granted during the years ended 31 December 2013 or 31 December 2012.

Plant Health Care plc

Annual Report and Accounts 2013

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

Share-based payments continued

Value Creation Plan

(c)
The value creation-based long-term incentive plan (VCP), in which the Chairman, CEO and key members of
senior management participate, calculates value generated for shareholders from the point of the April 2013
fundraising over a four-year period, with the plan participants receiving in aggregate up to 10% of value
generated above an annual hurdle of 8%, paid in shares valued at that end point.

Valuation of the share options granted under the VCP during the year ended 31 December 2013 was
as follows:

Share options granted
Weighted average fair value
Market capitalisation
Valuation hurdle

Assumptions used in measuring fair value:

Weighted average share price
Exercise price
Risk-free rate
Expected vesting period
Option life (years)
Expected volatility
Expected dividend rate

For valuation of the VCP in 2013:

2 July
4,091,463
35p
56,051,918
74,898,120

26 November
775,106
11p
40,540,693
74,898,120

80p
106p
0.75%
3.8
10
44.3%
Nil

58p
106p
0.75%
3.4
10
41.3%
Nil

(cid:2)

the expected volatility was determined by reference to the historical share price of Plant Health Care
plc for a four-year period.

the expected vesting period reflects 20 trading days after the announcement of financial results for the
year ending 31 December 2016.

fair values were calculated using the binomial option pricing model; and

the valuation hurdle was calculated as 78p escalated at an 8% hurdle rate to the measurement date.

Annual Report and Accounts 2013

Plant Health Care plc

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

Segment information

10.
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.

Mexico
$’000

579
2,791
—

3,370

—

3,370

—
—
(970)
(292)
—

(33)
—

429

2013

Revenue*
Core product sales
Non-core product sales
Inter-segment sales

Total revenue

Discontinued operations

USA
$’000

2,169
72
1,274

3,515

—

Group consolidated revenue

3,515

Research and development
Business development
Sales and marketing
Administration
Restructuring

Depreciation
Amortisation

(2,079)
(852)
(1,624)
(1,615)
(2,098)

(47)
(255)

Segment operating profit/(loss) (6,046)

Corporate expenses **:
Wages and professional fees
Administration expenses

Operating loss

Finance income
Finance expense

Loss before tax and discontinued operations

Europe
$’000

Elimination
$’000

1,009
2,464
540

4,013

(1,629)

2,384

—
—
(880)
(186)
—

(28)
(18)

(178)

—
—
(1,814)

(1,814)

—

(1,814)

—
—
—
—
—

—
—

Total
$’000

3,757
5,327
—

9,084

(1,629)

7,455

(2,079)
(852)
(3,474)
(2,093)
(2,098)

(108)
(273)

(19)

(5,814)

(877)
(255)

(6,946)

38
(1)

(6,909)

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.

Plant Health Care plc

Annual Report and Accounts 2013

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

Segment information continued

10.
Other segment information:

Segment assets
Segment liabilities
Capital expenditure
Non-cash expenses:

Depreciation
Amortisation
Share-based payment

2012 – as restated (Note 13)

Revenue
Core product sales
Non-core product sales
Inter-segment sales

Total revenue

Discontinued operations

USA
$’000
23,874
2,653
232

45
255
(308)

USA
$’000

528
170
1,230

1,928

—

Group consolidated revenue

1,928

(1,024)
(877)
(2,792)
(839)
(83)
(259)

(5,090)

Research and development
Business development
Sales and marketing
Administration
Depreciation
Amortisation

Segment operating

profit/(loss)

Corporate expenses*:
Wages and professional fees
Administrative expenses

Operating loss
Finance income
Finance expense

Loss before tax and discontinued operations

Mexico
$’000
1,918
207
46

34
—
53

Mexico
$’000

498
2,594
16

3,108

—

3,108

—
—
(900)
(250)
(29)
—

377

Europe
$’000
4,033
370
—

5
18
48

Unallocated/
Eliminations
$’000
—
—
—

24
—
(17)

Europe
$’000

Elimination
$’000

1,521
2,440
—

3,961

(1,552)

2,409

—
—
(813)
(107)
(40)
(16)

285

—
—
(1,246)

(1,246)

—

(1,246)

—
—
—
—
—
—

Total
$’000
29,825
3,230
278

108
273
(224)

Total
$’000

2,547
5,204
—

7,751

(1,552)

6,199

(1,024)
(877)
(4,505)
(1,196)
(152)
(275)

(4,420)

(1,716)
(378)

(6,514)
61
(4)

(6,457)

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

Annual Report and Accounts 2013

Plant Health Care plc

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

10.

Segment information continued

Other segment information:

Segment assets
Segment liabilities
Capital expenditure
Non-cash expenses:

Depreciation
Amortisation
Share-based payment

USA
$’000
11,362
1,540
67

83
258
72

Mexico
$’000
1,700
388
1

29
—
25

Europe
$’000
3,492
534
88

40
17
12

Unallocated/
Eliminations
$’000
—
—
—

—
—
61

Total
$’000
16,554
2,462
156

152
275
170

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.

11.

Finance income and expense

Finance income
Interest on deposits and investments

Finance expense
Interest on finance leases

As restated
Note 13
2012
$’000

(4)

2013
$’000

(1)

Plant Health Care plc

Annual Report and Accounts 2013

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

12.

Tax expense

Current tax as profit for the year
Deferred tax – origination and reversal of timing differences

Total 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:

Loss before tax – continuing operations
(Loss)/profit before tax – discontinued operations

Expected tax credit based on the standard rate of corporation tax in the UK

of 23.25% (2012: 24.5%)

Disallowable expenses
Share-based payment expense per accounts
Share-based payment expense per tax returns
Losses available for carryover
Losses utilised in the year
Amortisation of intangibles
Other temporary differences
Movement in deferred tax

Actual tax charge for the year

2013
$’000
43
(160)

(117)

(6,909)
(89)

(6,998)

(1,625)
10
(52)
(2)
1,717
(13)
(73)
81
(160)

(117)

2012
$’000
7
48

(6,457)
7

(6,450)

(1,580)
28
41
(6)
1,507
(2)
14
5
48

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.

Deferred tax liability/(asset)

At 1 January 2013
Credited to the profit and loss account

At 31 December 2013

The deferred tax liability/(asset) comprises sundry timing differences.

Deferred taxation
$’000
137
(160)

(23)

Annual Report and Accounts 2013

Plant Health Care plc

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

13. Discontinued operations
In November 2013, the Group sold the 100% shareholding of its Netherlands business, which represents the
only operation presented as discontinued operations for the year ended 31 December 2013. The consolidated
statement of comprehensive income has been restated for the year ended 31 December 2012 to show the
discontinued operation separately from continuing operations. The results of this business for the year ended
31 December 2013 and 2012 are shown under “Loss of discontinued operations, net of tax” in the
consolidated statement of comprehensive income.

Plant Health Care BV: loss on disposal

(a)
In November 2013, the Group sold the 100% shareholding of its Netherlands business.

The post-tax loss on disposal of discontinued operations was determined as follows:

Cash received

Net assets disposed of:

Cash
Property, plant and equipment
Trade and other receivables
Inventory
Trade and other payables
Notes payable

Loss on disposal of discontinued operations

(b)

The (loss)/profit of discontinued operations, net of tax, was determined as follows:

Year ended 31 December
Revenue
Expense other than finance costs
Loss on disposal of discontinued operations

2013
$’000

1,629
(1,533)
(185)

(89)

2013
$’000

—

252
86
287
385
(252)
(573)

185

2012
$’000

1,552
(1,545)
—

Plant Health Care plc

Annual Report and Accounts 2013

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

13. Discontinued operations continued
Earnings per share from discontinued operations

Basic earnings per share
Diluted earnings per share

2013
$
0.00
0.00

2012
$
0.00
0.00

Cash flows on discontinued operations

(c)
Cash flows attributable to operating, investing and financing activities of the above discontinued operations
were as follows:

Operating inflows/(outflows)
Investing (outflows)/inflows

Year ended
31 December
2013
$’000
270
(252)

As restated
Year ended
31 December
2012
$’000
(96)
400

Loss per share

14.
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 as shown
within Note 24, 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.

Annual Report and Accounts 2013

Plant Health Care plc

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

15.

Intangible assets

Cost
Balance at 1 January 2012
Additions – externally acquired

Balance at 31 December 2012
Additions – externally acquired

Balance at 31 December 2013

Accumulated amortisation
Balance at 1 January 2012
Amortisation charge for the year

Balance at 31 December 2012
Amortisation charge for the year

Balance at 31 December 2013

Net book value
At 31 December 2012

At 31 December 2013

Goodwill
$’000

Licenses and
registrations
$’000

Trade name
and customer
relationships
$’000

1,620
—

1,620

—
—

—

1,620

3,295
22

3,317
25

3,342

1,410
275

1,685
273

1,958

1,632

1,384

159
—

159

159
—

159

—

Total
$’000

5,074
22

5,096
25

5,121

1,569
275

1,844
273

2,117

3,252

3,004

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.

Plant Health Care plc

Annual Report and Accounts 2013

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

16.

Property, plant and equipment

Production
machinery
$’000

Office
equipment
$’000

Vehicles
$’000

Cost
Balance at 1 January 2012
Additions
Disposals

Balance at 31 December 2012
Additions
Disposals

Balance at 31 December 2013

Accumulated depreciation
Balance at 1 January 2012
Depreciation charge for the year
Disposals

Balance at 31 December 2012
Depreciation charge for the year
Disposals

Balance at 31 December 2013

Net book value
At 31 December 2012

At 31 December 2013

16
—
(1)

15
—
(2)

2
4
—

6
5
—

659
18
(33)

644
187
(221)

610

530
88
(36)

582
46
(200)

428

182

396
138
(175)

359
91
(174)

276

259
60
(124)

195
57
(68)

184

164

Total
$’000

1,071
156
(209)

1,018
278
(397)

899

791
152
(160)

783
108
(268)

623

235

276

The net book value of property, plant and equipment includes an amount of $42,800 (2012: $8,000) in respect
of assets held under finance leases. Depreciation expense includes an amount of $1,300 (2012: $18,000) in
respect of assets held under finance leases.

Annual Report and Accounts 2013

Plant Health Care plc

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

17.

Inventories

Raw materials
Finished goods and goods for resale

2013
$’000
28
2,482

2,510

2012
$’000
38
1,691

1,729

The inventory provision amount reversed during the year was ($415,000). The write-down of inventory to
net realisable value recognised as an expense during 2012 was $45,000.

18.

Trade and other receivables

Current:
Trade receivables
Less: provision for impairment

Trade receivables, net
Other receivables and prepayments
Lease receivable

Current trade and other receivables

Non-current:
Trade receivables
Less: provision for impairment

Non-current trade and other receivables

2013
$’000

2,981
(12)

2,969
201
—

3,170

316
—

316

2012
$’000

3,053
(76)

2,977
500
—

3,477

156
—

156

3,486

3,633

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.

Plant Health Care plc

Annual Report and Accounts 2013

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

Trade and other receivables continued

18.
Movements on the provision for impairment of trade receivables are as follows:

Balance at the beginning of the year
Provided
Receivables written off as uncollectible
Unused amounts reversed
Foreign exchange

Balance at the end of the year

2013
$’000
76
—
(34)
(35)
5

2012
$’000
1,537
4
(1,506)
(25)
66

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.

Current

Past due:

Up to 30 days
31 to 60 days
61 to 90 days
Greater than 90 days

Total

2013
$’000
3,322

138
—
—
26

2012
$’000
3,102

151
138
185
57

3,486

3,633

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

Annual Report and Accounts 2013

Plant Health Care plc

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

19.

Trade and other payables

Current:
Trade payables
Accruals
Restructuring costs
Deferred income
Taxation and social security
Income tax liability
Deferred tax liability

Non-current:
Trade and other payables

20.

Borrowings

(a)

Current borrowings

Finance leases

(b)

Non-current borrowings

Finance leases

2013
$’000

425
786
1,651
68
82
22
—

3,034

153

3,187

2013
$’000
9

2013
$’000
34

2012
$’000

685
1,384
—
7
88
26
137

2,327

—

2,327

2012
$’000
12

2012
$’000
48

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

Plant Health Care plc

Annual Report and Accounts 2013

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

20.

Borrowings continued

Due date for payment:

In less than one year
In more than one year, but less than two years

21.

Provisions

Balance at 1 January 2013

Released

Balance at 31 December 2013

Trade and other
payables

Finance leases

2013
$’000
2,862
153

3,015

2012
$’000
2,069
—

2,069

2013
$’000
9
34

2012
$’000
12
48

Post-employment
insurance benefits
$’000
75

(75)

—

Post-employment insurance benefits relate to one employee and are payable in instalments from the date of
termination of employment, unless termination is for cause, and continue for the employee’s lifetime. During
2013, as part of their severance package, the employee agreed to forfeit any remaining amount of lifetime
insurance benefits after 30 September 2015.

Annual Report and Accounts 2013

Plant Health Care plc

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

22.

Financial instruments

Capital risk management

(a)
The Group manages its capital to ensure that all entities in the Group will be able to continue as going concerns,
while maximising shareholder value through the optimisation of its debt and equity structure. The capital
structure of the Group consists of cash and cash equivalents and equity attributable to equity holders of the
parent, comprising issued capital, reserves and retained earnings as disclosed in Notes 24 and 25.

(b)

Categories of financial assets and financial liabilities

Financial assets
Trade and other receivables
Investments
Cash and cash equivalents

Financial liabilities
Trade and other payables
Borrowings due within one year
Borrowings due after one year

Fair value through profit
or loss

2013
$’000

—
11,054
—

11,054

2012
$’000

—
4,204
—

4,204

Loans and receivables
2013
$’000

2012
$’000

3,486
—
9,495

12,981

3,633
—
3,501

7,134

Financial liabilities
measured at
amortised cost
2012
$’000

2013
$’000

3,015
9
34

3,058

2,069
12
48

2,129

The amounts disclosed for all of the above financial assets and financial liabilities approximate fair value in all
material respects.

Plant Health Care plc

Annual Report and Accounts 2013

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

22.

(c)

Financial instruments continued

Investments

Security type
Government
Corporate*
Corporate*
Corporate*

Moody’s rating
AAA
>Aa3
A1 – A3
Baa1 – Baa2

Face
value
$’000
3,850
3,024
2,626
1,495

10,995

Coupon rate
0.3% – 2.3%
0.2% – 1.5%
0.4% – 7.0%
0.7% – 5.7%

Maturity date
15/2/14 – 30/11/16
6/2/14 – 15/1/18
31/1/14 – 15/6/17
1/3/14 – 15/9/16

2013
Value
$’000
3,857
3,027
2,649
1,521

11,054

* Securities within this category have a coupon rate within the range shown or are variable rate securities.

The above instruments are Level 1 in the IFRS 7 fair value measurements hierarchy.

The Group limits its investments into instruments with maturities of less than five years having a rating at or
exceeding investment grade in order to limit credit and liquidity risk. These investments are managed by an
investment adviser and the portfolio’s performance is reviewed by key management personnel. The aim of the
portfolio includes both capital preservation and a rate of return that exceeds the rate available through the
purchase of money market securities.

Liquidity risk

(d)
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.

Financial risk management objectives

(e)
The Group invests its surplus cash in bank deposits denominated in US dollars and British pounds, which earn
interest at money market rates, and in short-term investments comprised of notes and bonds with maturities
of less than five years and having investment grade ratings. In doing so, the Group exposes itself to fluctuations
in money market interest rates and market price fluctuations.

Annual Report and Accounts 2013

Plant Health Care plc

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

22.

Financial instruments continued

Market risk

(f)
The Group is exposed to risk from movements in foreign currency exchange rates, interest rates and market
prices that affect its assets, liabilities, and anticipated future transactions.

The Group is exposed to foreign currency risk from transactions and from translating the monetary net assets
of overseas entities denominated in currencies other than US dollars. Transaction exposure arises because
affiliated companies undertake transactions in foreign currencies. The Group does not use forward foreign
exchange rate contracts to hedge exchange rate risk.

The carrying amounts of the Group’s material foreign currency denominated monetary assets and monetary
liabilities at the reporting date are as follows:

Euro
Pound
Peso

Assets

Liabilities

2013
$’000

99
1,428
1,233

2012
$’000

668
1,445
1,239

2013
$’000

46
124
207

2012
$’000

183
177
388

If the exchange rate on uncovered exposures were to move significantly there would be foreign exchange
differences on the retranslation of financial assets and liabilities and an impact on the Group’s gross profit.
However, this impact would not be material to the Group’s financial statements and, therefore, no analysis of
the sensitivities has been presented.

The Group is exposed to interest rate risk on its cash deposits, which earn interest at a variable rate of interest.

The Group’s borrowings comprise notes payable and finance leases, which are at fixed rates or are
non-interest bearing.

The Group does not utilise any hedging instruments to address interest rate risk.

Price risk

(g)
The Group is exposed to price risk on its investments. To manage the price risk arising from investments in
securities, the Group limits its portfolio to include only investment grade securities on active exchanges having
maturities of less than five years.

Interest rate risk

(h)
The Group is exposed to interest rate risk on its cash and investment balances. To manage the interest rate
risk, the Group limits its portfolio to cash and investment grade securities on active exchanges having maturities
of less than five years.

If interest rates were to move significantly, finance revenues could be affected. However, this impact would
not be material to the Group’s financial statements and, therefore, no analysis of the sensitivities has
been presented.

Plant Health Care plc

Annual Report and Accounts 2013

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

22.

Financial instruments continued

Credit risk management

(i)
The Group’s principal credit risk relates to the recovery of trade receivables. In order to manage credit risk,
the Group sets limits for customers based on a combination of payment history and third-party credit
references. Credit limits are reviewed on a regular basis in conjunction with debt ageing and collection history.
Balances that are beyond agreed upon terms are actively followed up to ensure collection.

The Group sells to a large number of customers across international
and Mexico.

locations within the USA, Europe

Further details on trade receivables, including analysis of bad debts and ageing, are given in Note 18.

The Group manages the credit risk on its investments by limiting investments to notes and bonds with maturities
of less than five years having investment grade ratings.

The Group believes the credit risk on liquid funds, being cash and cash equivalents, is limited because the
counterparties are banks with high-credit ratings assigned by international credit-rating agencies. However, the
concentration of credit risk by counterparty does exceed 10% of the overall cash and cash equivalent balance.

The maximum exposure to credit risk on cash balances at the reporting date is the carrying value of
the cash balances.

Subsidiary undertakings

23.
The following were subsidiary undertakings of the Company at 31 December 2013.

Name
Plant Health Care, Inc.
Plant Health Care, Inc.
Plant Health Care de Mexico
S. de R.L. de C.V.
Plant Health Care (UK) Limited
Plant Health Care España
VAMTech, LLC

* Held indirectly.

Country of
incorporation
or registration
USA (Nevada)
USA (Pennsylvania)

Mexico
United Kingdom
Spain
USA (Delaware)

Proportion of
voting rights
and ordinary
share capital held

Nature of
business
100% Holding company
Sales
100%*

100%*
100%*
100%*
100%*

Sales
Sales
Sales
Sales

For all undertakings listed above, the country of operation is the same as its country of incorporation
or registration.

Annual Report and Accounts 2013

Plant Health Care plc

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

24.
(a)

Share capital
Authorised and issued share capital

Authorised share capital:

500,000,000 ordinary shares at £0.01 each

Allotted, called up and fully-paid share capital:

2013
$’000

8,984

2012
$’000

8,984

70,565,730 (2012: 53,386,127) ordinary shares at £0.01 each

1,215

952

(b) Movement in share capital
The movements on issued share capital are as follows:

In issue at 1 January 2012
Shares issued for services received
Share options exercised

In issue at 31 December 2012
Placement of shares
Shares issued for services received
Share options exercised

In issue at 31 December 2013

Ordinary shares of
Plant Health Care plc
Number
53,196,036
85,091
105,000

$’000
949
1
2

53,386,127
17,119,444
37,659
22,500

70,565,730

952
262
1
—

1,215

During the year ended 31 December 2012, the following fully-paid £0.01 ordinary shares in the Company
were issued:

ii.

85,091 shares with an aggregate value of $89,000 were issued to the non-executive directors in lieu
of cash payments for fees.

105,000 shares with an aggregate value of $62,000 were issued for the exercise of share options at an
exercise price of £0.37 per share.

During the year ended 31 December 2013, the following fully-paid £0.01 ordinary shares in the Company
were issued:

ii.

iii.

17,119,444 new ordinary shares with an aggregate value of $20,423,000 were issued pursuant to an
equity placing at £0.78 per share.

22,500 shares with an aggregate value of $16,400 were issued for the exercise of share options at an
exercise price of £0.46 per share.

37,659 shares with an aggregate value of $47,000 were issued to the non-executive directors in lieu
of cash payments for fees.

Plant Health Care plc

Annual Report and Accounts 2013

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

24.

Share capital continued

Other equity instruments

Share awards under the Value Creation Plan
Share options
Share awards under the Long Term Incentive Plan

2013
No
4,866,569
2,307,852
1,000,000

2012
No
—
2,101,500
1,333,000

8,174,421

3,434,500

Share options

(d)
The Company issues share options to certain employees under the Plant Health Care plc Unapproved Share
Option Scheme 2004. At the time of its admission to AIM, the Company also agreed to honour outstanding
options under the Plant Health Care, Inc. 2001 Equity Incentive Plan. No further options have been or will
be issued under that Plan.

The movements on share options are as follows:

Options over ordinary shares

Outstanding at 1 January 2012
Awarded
Exercised
Forfeited

Directors
1,150,000
—
—
(175,000)

Other
1,228,000
17,000
(105,000)
(13,500)

Total
2,378,000
17,000
(105,000)
(188,500)

Outstanding at 31 December 2012

975,000

1,126,500

2,101,500

Awarded
Exercised
Forfeited

245,852
—
—

24,000
(22,500)
(41,000)

269,852
(22,500)
(41,000)

Outstanding at 31 December 2013

1,220,852

1,087,000

2,307,852

Weighted
average
exercise price
81p
77p
37p
49p

87p

82p
46p
39p

84p

Of the total number of options outstanding at 31 December 2013, 1,996,500 (2012: 1,791,500) had vested
and were exercisable. The weighted average exercise price was 89p (2012: 64p).

The weighted average share price at the dates of exercise for the share options exercised during 2013 was
46p (2012: 93p).

The options outstanding at 31 December 2013 have a weighted average remaining life of 2.29 years (2012:
2.3 years) and the range of exercise prices is 37p to 325p (2012: 37p to 325p).

Annual Report and Accounts 2013

Plant Health Care plc

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

24.

Share capital continued

Long-term incentive plan

(e)
The Company awards shares to certain employees under the Plant Health Care plc 2007 Long Term Incentive
Plan (LTIP). Upon the vesting of these LTIPs, they are immediately exercised at an exercise price of 1p.

The movements on LTIP share awards are as follows:

Outstanding at 1 January 2012
Forfeited

Outstanding at 31 December 2012
Forfeited

Share awards

Directors and
former directors
643,165
(210,165)

433,000
(113,000)

Other
1,100,000
(200,000)

900,000
(220,000)

Total
1,743,165
(410,165)

1,333,000
(333,000)

Outstanding at 31 December 2013

320,000

680,000

1,000,000

Value creation plan

(f)
The Chairman, CEO and key members of senior management participate in a value creation-based long-term
incentive plan (VCP).

The movements on VCP share awards are as follows:

Outstanding at 31 December 2012
Awarded

Directors
—
2,571,821

Other
—
2,294,748

Total
—
4,866,569

Weighted
average
exercise price
—
106p

Outstanding at 31 December 2013

2,571,821

2,294,748

4,866,569

106p

Plant Health Care plc

Annual Report and Accounts 2013

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

Reserves

25.
The following describes the nature and purpose of each reserve within owners’ equity:

Reserve
Share capital

Description and purpose
Amount subscribed for share capital at nominal value.

Share premium

Amount subscribed for share capital in excess of nominal value.

Reverse acquisition reserve

Reserve recognised in the share-for-share exchange transaction accounted
for as a reverse acquisition by the Group.

Share-based payment reserve

Cumulative net cost of equity-settled share-based payment transactions.

Foreign exchange reserve

Gains/losses on retranslating the net assets of overseas operations.

Retained earnings

Cumulative net gains and losses recognised in the consolidated income
statement.

Non-controlling interest

Cumulative net profit or loss attributable to minority shareholders.

Pensions

26.
The Group does not maintain any defined benefit pension plans. The Group does maintain a retirement plan
qualified under Section 401(k) of the United States Internal Revenue Code. This plan covers all US employees.
In 2013, the Group’s pension expense under the scheme was $86,700 (2012: $70,500). Mexico has a
government-run pension plan to which our operations there must contribute. In 2013, the expense for this
plan was nil (2012: nil). Several United Kingdom employees receive contributions to their pension plans. The
expense for this was $20,200 (2012: $14,000). The total pension liability at the end of the year was $107,000
(2012: $88,000).

Annual Report and Accounts 2013

Plant Health Care plc

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

27.

Leases

Finance leases- as lessee
The Group leases vehicles, production equipment and office equipment on leases classified as finance leases.

Future lease payments are due as follows:

2013

Not later than one year
Later than one year and not later than five years

2012

Not later than one year
Later than one year and not later than five years

Minimum
lease payments
$’000
12
38

Minimum
lease payments
$’000
14
52

Interest
$’000
3
4

Interest
$’000
2
4

Present
value
$’000
9
34

Present
value
$’000
12
48

Operating leases
The Group leases all of its properties, as well as office equipment. The terms of property leases vary from
country to country and tend to have rent reviews at the end of the lease term for renewal purposes.

The total present values of minimum lease payments are due as follows:

Not later than one year
Later than one year and not later than five years

2013
$’000
107
441

548

2012
$’000
203
192

395

Plant Health Care plc

Annual Report and Accounts 2013

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

Transactions with non-controlling interests

28.
On 22 April 2013, the Group acquired the remaining 20% of the issued shares of Plant Health Care Mexico
for consideration of $235,000. The Group now holds 100% of the equity share capital of Plant Health Care
Mexico. The carrying amount of the non-controlling interests in Plant Health Care Mexico on the date of
acquisition was $289,000.

Standards, amendments and interpretations to published standards not yet effective

29.
Certain new standards, amendments and interpretations to existing standards have been published that are
mandatory for the Group’s accounting periods beginning on or after 1 January 2014 and which the Group has
decided not to adopt early.

Those likely to affect the Group include:

IFRS 9 Financial Instruments (Replacement of IAS 39) (effective for periods beginning on or after 1 January
2015). This standard will eventually replace IAS 39 in its entirety. Management are still assessing the impact of
this revision.

IFRS 10 Consolidated Financial Statements (effective for periods beginning on or after 1 January 2014). This
standard establishes principles for the presentation and preparation of consolidated financial statements when
an entity controls one or more other entities. Management are still assessing the impact of this revision.

IFRS 12 Disclosure of Interests in Other Entities (effective for periods beginning on or after 1 January 2014).
This standard includes the disclosure requirements for all forms of interests in other entities, including
subsidiaries, joint arrangements and unconsolidated structured entities. Management are still assessing the
impact of this revision.

Amendment to IAS 32 (effective 1 January 2014) seeks to clarify rather than to change the off-setting
requirements previously set out in IAS 32. The changes clarify the meaning of “currently has a legally enforceable
right of set-off” and that some gross settlement systems may be considered equivalent to net settlement.
Management are assessing the impact of this revision.

No other standards or amendments are considered likely to have an effect on the financial statements
going forward.

Annual Report and Accounts 2013

Company balance sheet
at 31 December 2013

Fixed assets
Fixed asset investments

Current assets
Debtors
Cash at bank and in hand

Creditors: amounts falling due within one year

Net current assets
Provision for liabilities

Net assets

Capital and reserves
Called-up share capital
Share premium
Reverse acquisition reserve
Share-based payment reserve
Retained earnings

Shareholders’ funds

Plant Health Care plc

Note

2013
$’000

2012
$’000

39
40
40
40
40

33,022

35,954

29
2,127

2,156

200

1,956
—

35
519

554

455
75

34,978

36,334

1,215
70,206
14,455
2,256
(53,154)

34,978

952
50,624
14,455
2,480
(32,177)

36,334

The financial statements were approved and authorised for issue by the Board on 24 March 2014.

P Schmidt
Director

Registered No: 05116780 (England and Wales)

The notes on pages 68 to 71 form part of these financial statements.

Plant Health Care plc

Annual Report and Accounts 2013

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

30.

Accounting policies

Basis of preparation
The financial statements have been prepared under the historical cost convention and are in accordance with
the applicable United Kingdom Accounting Standards. The principal accounting policies, which have been
applied consistently, are set out below.

Investments
Fixed asset investments comprise investments by the Company in the shares of subsidiary undertakings and
loans to Group undertakings. At the end of each financial period, the directors review the carrying amount of
the Company’s investments with reference to forecast discounted future cash flows and related estimates and
judgments to determine whether there is any indication that those assets have suffered an impairment loss.
They are stated at cost less any provision where, in the opinion of the directors, there has been impairment.

Share-based payments
Share options, share awards under the Long Term Incentive Plan and the Value Creation Plan are classified as
equity-settled share-based payments and, as such, 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. Where equity instruments are granted to persons other than
employees, the profit and loss account is charged with the fair value of goods and services received. The fair
value of equity instruments is calculated using the binomial option pricing model.

The Company grants share options and shares under its long-term incentive plan directly to employees of its
subsidiaries. In accordance with the provisions of the Plan, the cost of the share-based payments will be
recorded by each subsidiary as an expense, with a corresponding increase in equity as a contribution from
the parent.

The Company, over whose shares options are issued, recognises an increase in the investment in the related
subsidiary and a credit to reserves.

Deferred taxation
Deferred tax balances are recognised in respect of timing differences that have originated but not reversed by
the balance sheet date. However, where there is uncertainty over the timing of their realisation, deferred tax
assets are not recognised.

Loss for the financial year

31.
The Company has taken advantage of the exemption allowed under section 408 of the Companies Act 2006
and has not presented its own profit and loss account in these financial statements. The Group loss for the year
includes a loss after tax of $20,977,000 (2012: loss of $19,279,000), which is dealt with in the financial
statements of the parent company.

Annual Report and Accounts 2013

Plant Health Care plc

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

Share-based payments

32.
See Note 24 of the Group financial statements.

33. Directors’ remuneration
The directors’ remuneration for the Company is disclosed in Note 8 of the Group financial statements.

34.

Fixed asset investments

Cost
At 1 January 2012
Additions
Net repayments
Impairment

At 31 December 2012
Additions, net of repayments
Impairment

At 31 December 2013

Shares in
Group
undertakings
$’000

Loans to
Group
undertakings
$’000

16,778
137
—
(16,915)

—
—
—

—

37,779
—
(597)
(1,228)

35,954
17,304
(20,236)

33,022

Total
$’000

54,557
137
(597)
(18,143)

35,954
17,304
(20,236)

33,022

The fixed asset investment 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. The calculated net
present value in this review is $33,022,000 (2012: net present value $35,954,000), which caused an
impairment of $20,236,000 in 2013 (2012: impairment of $18,143,000).

Additions relate to the portion of the share-based payment charge relating to options and value creation plan
awards to employees of subsidiary companies, as well as $17 million of cash received which was provided to
the subsidiary companies to support their research and development operations.

Subsidiary undertakings

35.
The subsidiary undertakings of the Company are disclosed in Note 23 of the Group financial statements.

Plant Health Care plc

Annual Report and Accounts 2013

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

36. Debtors

Prepayments

All amounts fall due within one year.

37. Creditors

Trade creditors
Accruals

38.

Provision

Balance at 1 January 2013

Released in the year

Balance at 31 December 2013

Due after more than one year

2013
$’000
29

2013
$’000
83
117

200

2012
$’000
35

2012
$’000
15
84

Post-employment
insurance benefits
$’000
75

(75)

—

The provision relates to post-employment insurance benefits relating to one employee and are payable in
instalments from the date of termination of employment, unless termination is for cause, and continue for the
employee’s lifetime. During 2013, as part of their severance package, the employee agreed to forfeit any
remaining amount of lifetime insurance benefits after 30 September 2015.

Share capital

39.
The share capital of the Company is disclosed in Note 24 of the Group financial statements.

Annual Report and Accounts 2013

Plant Health Care plc

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

40.

Reserves

Balance at 1 January 2012
Shares issued
Share-based payments
Exercise of share options
Loss in the year

Balance at 31 December 2012
Shares issued
Placement costs
Share-based payments
Exercise of share options
Loss in the year

Balance at 31 December 2013

Share
premium
$’000
50,476
88
—
60
—

50,624
20,207
(641)
—
16
—

70,206

Reverse
acquisition
reserve
$’000
14,455
—
—
—
—

14,455
—

—
—
—

14,455

41. Company reconciliation of movements in shareholders’ funds

Total recognised loss relating to the year
Shares issued
Exercise of share options
Share-based payment charge

Net decrease in shareholders’ funds
Opening shareholders’ funds

Closing shareholders’ funds

Share-based
payment
reserve
$’000
2,310
—
170
—
—

2,480
—

(224)
—
—

2,256

2013
$’000
(20,977)
19,829
16
(224)

(1,356)
36,334

34,978

Retained
earnings
$’000
(12,898)
—
—
—
(19,279)

(32,177)
—

—
—
(20,977)

(53,154)

2012
$’000
(19,279)
89
62
170

(18,958)
55,292

36,334

Related party transactions

42.
The Company has taken advantage of the exemption allowed by Financial Reporting Standard 8, ‘Related Party
Transactions’, not to disclose any transactions with its wholly-owned subsidiary companies as these are included
within the consolidated financial statements of the Group.

Plant Health Care plc

For your notes

Annual Report and Accounts 2013

Produced by Portman Lodge Limited