Plant Health Care (PHC ) has delivered year-on-year revenue growth to FY20 with the Group's commercial business turning profitable and cashflow positive for the first time.
In its results for the full year ended 31 December 2020, the Group, which provides patent-protected biological products to the global agriculture markets, reported revenue at $6.6m (FY19: $6.4m) while adjusted losses came in at $3.3m compared to $3.8m in 2019.
On a constant currency basis revenue rose by 10% or $0.6m, largely driven by strong growth in the sugar cane and citrus markets in Brazil and Spain, respectively. Margins remained steady at 56% (2019: 56%) despite a cost increase in Harpin due to the US tariffs with China.
In-market sales of Harpin αβ in PHC’s three core growth markets in the US and Brazil doubled during the period while the Group added that it has formed close relationships with major distributors as partners in order to drive customer adoption of the product.
Cash used in operations reduced to $2.5m from $4.4m in FY19 while the Company reported that its cash balance at the end of the year stood at $4.1m in comparison to $2.4m in 2019.
‘Due to inventory management, revenue of $6.6m doesn’t reflect the doubling of in-market sales in US and Brazilian Commercial businesses and increasing product adoption “on the ground” implies a strong position for 2021,’ noted Arden Partners in a research note today.
Looking ahead, Plant Health Care said it is ‘well-positioned’ for growth in 2021 with Harpin αβ ‘gaining traction’ together with very strong distributor partners, it told investors.
‘Current high agricultural commodity prices are very supportive of grower investments in crops and new products, and the Group’s operations in the US through key distribution partners appear to have had a strong start to the year, continuing the trends from 2020,’ Arden wrote.
The Company also highlighted that its PREtec product pipeline is ‘looking stronger’ after PH279, which is now known and branded as Saori™, became the first product from the the PREtec platform to be commercialised to receive federal approval for sale in Brazil.
According to data presented in today’s statement, Brazilian soybean farmers spent $2.85 bn on disease control in the 2019/20 season, around 90% of which was for ASR control.
PHC said it is set on ‘a highly ambitious plan’ with its current pipeline of PREtec products targeting markets with a value of more than $5bn. ‘With outstanding grower benefits and an excellent sustainability profile, we are confident of a bright future for PREtec products,’ it said.
‘With regulatory submissions in the USA and in South America, the schedule of product launches is taking shape, with profitable sales building from there,’ the Company added.
The Group raised £3.6m in March 2020 as well as a further £6.6m in March 2021. PHC said this move will allow it to invest, to accelerate this growth, not only in the Americas but also to enter Europe, the largest market in the world for sustainable agriculture.
Analysts at Arden say they expect to see “increased yet well targeted expenditure” through 2021 to support the trials and launch of Saori in Brazil while PHC will likely methodically introduce further investment in product development and European registrations as well.
“I am proud to report that Plant Health Care rose to the challenge in this most challenging of years. Our staff adapted swiftly and creatively to find effective ways to work around the global restrictions caused by Covid-19,” said Richard Webb, Chairman of Plant Health Care.
“The outcome was that our commercial operations were EBITDA and cash positive for the first time. In a year when revenues grew and our development programme accelerated, PHC still reduced cash burn by more than expected. We ended the year with over $4 million of cash equivalents and investments in hand. This is a great credit not only to the Executive leadership, but also to our loyal and hard-working staff in five countries,” Webb added.
“Our success in getting registrations in Brazil ahead of expectation shows that international regulatory authorities recognise the benefits and benign profile of our new products.
PREtec registrations are advancing in Brazil and North America - it is our ambition to address Europe next, as the largest biologicals market in the world,” Webb highlighted to investors.
View from Vox
Analysts at Arden remain positive on the stock with their research confirming a “huge market opportunity'' for PREtec, which it believes is only partly reflected in the current share price.
Research from Arden also points to the opportunity for the Group’s earnings upgrades in FY21 as the Company demonstrates commercial traction and their sustainable credentials.
‘With continuing investment in the PREtec platform, the launch of Saori in Q4 2021 and new products being prepared for registration, the Group’s 2021 activities look to be moving along well and we anticipate good news flow over the coming quarter,’ the research firm noted.
Shares in Plant Health Care have increased by over 30% since the beginning of 2021. The stock was trading 1.22% higher this morning at 16.55p following the announcement.
Reasons to PHC
London-listed Plant Health Care is a leading provider of proprietary agricultural biological products and technology solutions focused on improving crop performance.
Its commercial business is driven by sales of Harpin αß, a recombinant protein which acts as a powerful biostimulant, promoting the yield and quality of crops. PHC sells the proprietary soil treatment Myconate in selected countries and sells both Harpin αß and Myconate through specialist distributors globally. In Mexico, PHC distributes third-party biological products.
PHC utilises its PREtec platform to generate numerous products and it is focusing on three products targeting very large market opportunities with a value of more than $5bn.
The Group said these products are currently under evaluation with six potential commercial partners. Meanwhile, PHC also continues to evaluate further candidate products from its robust pipeline of development candidates for additional crops and indications.
In a trading update released in January 2021, the Group reported robust in-market sales growth of Harpin αβ with in-market sales in Brazilfor sugarcane coming in at three times those of 2019, while in-market sales to corn came in at 1.8 times higher than the prior year.
Meanwhile, the Group hailed its progress in bringing the first products from the PREtec platform to market. It highlighted it is planning for initial commercial launch in Brazil during the second half of 2021.
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