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Plant Impact shares revive, as fund backs cash raise

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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 on Monday.

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.

By Mike Verdin

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