Plant Impact shares bounced from two-year lows, despite it
unveiling revenue forecasts below market expectations, as the crop enhancement
group revealed backing from a major shareholder for a capital raise.
Shares in Plant Impact, which in the last session touched
28.5p their lowest since October 2014, jumped 6.0% to 30.16p in morning deals
The recovery followed the announcement by the group - whose
products are aimed at promoting crops' own ability undertake functions such as
fighting diseases or taking up nutrients – that it was mulling a fund-raise of
£2.0m, for which it has already received "indicative commitment" from an
institutional investor, at a price of 31.0p per share.
"When you have someone already committed to a fund raise,
that is always helpful to market sentiment," a person familiar with the
situation told Agrimoney.com.
Plant Impact said it would consider a fund raise of a
further £2.0m, also at 31.0p per share, and will be meeting "existing and
prospective" shareholders to gauge interest.
Need for cash
The extra cash would be used to support the company's research
and development work, to help it build on sales based largely on its Veritas
product, which boosts soybean yields.
"The company now has a significant number of product
development projects in the final stages of pre-commercial testing, and the board
has determined that it is in the best interest of shareholders to sustain the
momentum of the R&D supporting these projects," Plant Impact said.
While the group forecasts "good cash flow generation" for
its next financial year, which begins next month, the quest for funds comes as its
takings from Veritas are expected to fall short of some initial hopes.
Plant Impact estimated revenues of £8.5m-9.0m for the year
ending this month, and £13m for next year, compared with expectation s from
broker Peel Hunt of £11.4m and £18.4m respectively.
Bayer deal reworked
The group's estimate of a, relatively, low rate of revenue
growth from last year's £7.3m reflects expectations of the outcome of a revamp
of its sales agreement for Veritas with Bayer, with which Plant Impact has an
exclusive marketing agreement in Brazil.
Plant Impact warned last month that "challenging
industry-wide trading conditions" in Brazil had led to a shortfall in Veritas
sales, and a build-up in Veritas inventories.
The companies are working on a deal which will give Bayer
more flexibility over inventories, but Plant Impact "more predictable income
and earnings visibility".
"Bayer remains fully committed to the commercial development
of Veritas, which during its first four years of sales has grown to be the
leading biostimulant in the Brazilian soybean market," Monday's statement added.