TIDMKIO
KIOTECH INTERNATIONAL PLC (AIM: KIO)
("Kiotech" or "the Company")
Unaudited preliminary announcement of results for the year ended
31 December 2010
Kiotech International plc, the international supplier of natural
high performance feed additives to enhance growth, health and
sustainability in agriculture and aquaculture, is pleased to
announce its preliminary results for the year ended 31 December
2010. The Group significantly increased its sales, profit and
underlying earnings per share 2 over the previous year and also
largely completed the integration of the Optivite Group, whose
results are included for the full year.
Key points: Financial
-- 146% increase in underlying profit before tax and exceptional items1
of GBP1.9m (2009: GBP0.8m).
-- 58% increase in underlying earnings per share 2 to 7.27p
(2009: 4.60p).
-- Sales advanced to GBP21.6m (2009: GBP11.0m).
-- Cash balance of GBP3.5m at 31 December 2010 (2009: GBP5.0m).
-- 74% increase in the proposed final dividend to 2.00 pence per share
(2009: 1.15 pence).
Key points: Operational
-- Integration of Optivite largely complete with planned benefits being
realised earlier than anticipated.
-- Good performance from our international agriculture division.
-- Purchase of Manton Wood production and head office site completed for
GBP1.5m.
Richard Rose, Chairman, commented:
"This has been a very successful year during which the
management team has worked hard to integrate the Optivite
acquisition of September 2009. The benefits are being realised
earlier than anticipated at the time of the acquisition. The
success of the Optivite deal gives us the confidence to pursue
similar opportunities in addition to developing and promoting our
existing trading brands in global markets."
Enquiries:
Kiotech International plc
Richard Edwards, Executive Vice-Chairman +44 (0)7776 417129
Karen Prior, Group Finance Director +44 (0)1909 537380
FinnCap +44 (0)20 7600 1658
Matthew Robinson / Henrik Persson - Corporate Finance
Stephen Norcross - Corporate Broking
Chairman's statement
I am pleased to report a very successful year for the Group,
enhanced by the completion of the majority of the integration
projects following the acquisition of Optivite in September 2009.
The Group is now well placed to build on its trading brands,
supplying natural animal feed additives for global agricultural
markets with specialty products, which improve the health and
output of animals, thereby increasing profits for the farmer.
The balance sheet remains strong with good cash generation and
management's focus is to develop the business in international
markets through organic growth and suitable acquisitions which fit
well with our strategy.
Financial review
Total underlying profit before tax and exceptional items1 more
than doubled to GBP1.877 million (2009: GBP0.764 million) from
total revenues of GBP21.565 million (2009: GBP10.955 million). This
outturn was boosted by a maiden full year contribution from
Optivite coupled with organic growth (2009: 3 months
contribution).
Profit before tax of GBP1.517 million (2009: GBP1.409 million)
includes exceptional costs of GBP0.261 million relating to the
restructuring of the Group and site closures. The previous year's
result was boosted by an exceptional profit of GBP0.675 million
arising from the sale of the Ultrabite sports fishing brand.
Underlying earnings per share 2 increased 58% to 7.27 pence per
share (2009: 4.60 pence per share) and diluted underlying earnings
per share rose 59% to 7.20 pence per share (2009: 4.53 pence per
share).
The Board is delighted to declare a final dividend of 2.00 pence
per share, an increase of 74% over the previous year's final
dividend of 1.15 pence. Shareholder approval will be sought at the
Annual General Meeting, to be held on 30 June 2011, to pay the
final dividend on 29 July 2011 to shareholders on the register on 8
July 2011.
In October 2010 we completed the acquisition of a long leasehold
interest in Optivite's Manton Wood production and head office site
for GBP1.532 million including costs. The premises comprise the
main production facilities for the group's feed additive business
and its administrative and finance functions have been
substantially centralised on the site. The acquisition provides
security of tenure on which to make long term investment decisions
and is earnings enhancing. Further expenditure of GBP0.125 million
has been incurred in the latter part of 2010 and early 2011 on
extending the premises and new production facilities costing
GBP0.190 million will be completed in 2011.
The balance sheet remains strong and debt free with a year-end
cash balance of GBP3.531 million (2009: GBP5.015 million). It is
expected that these funds will be used to invest in the expansion
of the business through appropriate acquisitions.
On 1 October 2010 the Company consolidated its share capital on
the basis of one ordinary share for every 23 ordinary shares. The
Directors believe that the consolidation was desirable with a view
to achieving a higher market price per share and reducing the
significance of the current bid-offer spread. Accordingly all
relevant prior year numbers have been restated.
Optivite integration
As previously reported, production of our feed additive products
has now been consolidated at Manton Wood. This plant has almost
trebled its production throughput, with the additional Agil volume
and growth from our international operations. We have also recently
commissioned a third production line at Manton Wood, which has
enabled us to transfer our omega-3 supplements from Optivite's
North Scarle site, as well as providing additional capacity for our
acid product range. The North Scarle site has just been closed
leaving the Group operating from two production sites: Manton Wood
for the functional feed additive business and Boroughbridge, in
North Yorkshire, where Vitrition, our organic feed business is
located.
The office extension was completed in November, when the
Optivite International team transferred from their leased offices.
We continue to occupy Agil's offices at Aldermaston in Berkshire,
where a number of administrators continue to support the Agil
export business. It is our intention to transfer these functions to
Manton Wood in the coming months and in due course close and sell
the office.
Optivite's UK business has a high proportion of low margin
products which were either sold on a resale basis or manufactured
at the North Scarle plant and supplied to price sensitive markets.
The value-added products manufactured at this site have now been
transferred to Manton Wood, where consolidation will help to
improve their margins. The manufacture of some low margin commodity
products has been outsourced and we have exited from others.
Following the sales and production consolidation, overall UK
sales have declined but profitability is expected to improve as the
sales team focus on selling higher margin products to customers who
value our more sophisticated and in-house designed ranges, which
improve both the health and output of animals.
Operations - International agriculture
The Agil core business delivered another solid performance. The
international division, operating under the Optivite and
Kiotechagil brands, continued to make progress during the year. Of
the 61 countries supplied, there were particularly strong
performances in Argentina, Bangladesh, Japan, Korea, Malaysia,
Mexico and Turkey. In 2009 a major Chilean integrator bought
significant volumes of Salkil, Kiotechagil's leading acidifier
product. Sales were disrupted by the earthquake in early 2010,
however, we have recently won back some of this business with
Optivite's Salgard brand, which demonstrates the value of operating
more than one trading brand.
The main focus of the international sales team is to continue to
introduce a number of new products to our distributors around the
world. Malaysia demonstrated the potential of Agil's Neutox, our
new feed safety product, which achieved significant sales growth in
that country. Other new products being launched include a new range
of enzymes and omega-3 supplements; the latter enhancing fertility,
viability of young animals, growth rate and also increase the
omega-3 content of meat and eggs. Our omega-3 supplements range is
creating considerable interest in developing countries such as
China where human health, especially in children, is a key factor
in household purchasing decisions.
In China and Brazil we are starting to make inroads into the
larger meat producers. The Chinese agricultural market was weak in
the first half of the year, owing to a number of infectious disease
outbreaks and a downturn in consumption, which led to lower pig
prices. However, the second half saw an improvement, which has
continued into 2011.
Genex®, an Optivite registered performance enhancing acid and
essential oil combination, is currently under trial with a number
of major pig producers in China. We are also supplying a number of
smaller customers in that country through our local distribution
channel with a range of products. In Brazil, we are now selling our
acidifier products to some of the major integrators and we
anticipate volumes to grow as our products gain wider use.
Operations - UK agriculture
Our UK agriculture business was re-structured during the year
resulting in the formation of a new sales team. Sales are now
focused on our higher margin feed additive products to the major
integrators, vitamin and mineral premixers, and the pig and poultry
home-mix segment. It is still early days in raising the
profitability of our UK division as customers tend to spend time
assessing and trialling our products before incorporating them into
their feeding regime. However, the team has been making progress
and we are confident we have the products and the people to improve
our performance in the UK.
Vitrition, our organic feed brand, had a solid year with the
focus on widening margins rather than chasing volume. Vitrition
accounts for around 17 per cent of total group turnover, and the
key to improving profitability in its market is to ensure raw
materials are bought well and that any price increases are quickly
passed on through selling prices. The well publicised grain price
inflation experienced at the end of 2010 and running into 2011 has
meant the Vitrition team is focused on ensuring our margins are
maintained. We anticipate that more stringent EU legislation,
relating to the proportion of use of solely organic raw materials
in feed, coming into force over the next 12 months, will favour
Vitrition, owing to its dedicated organic feed content, mill and
formulations. We wait to see how this legislation will influence
the decisions of our competitors in their commitment to this niche
market.
Operations - Aquaculture
Our Head of Aquaculture, based in Thailand, has been working
with a number of farmers and hatcheries in the region on Shrimp,
Tilapia and Asian Sea Bass species. The product technology has been
well received although, as expected, trial data is mixed,
reflecting the inherent nature of trialling at fish farm level,
where disease and events such as flooding can undermine results. In
addition there is a learning curve for local farmers as they
understand how to use Aquatice® effectively. This process is
continuing and we are about to start trials with one of South East
Asia's largest feed mill and farm groups. Furthermore, we are
continuing to work with a major multi-national whose aquaculture
team understands the potential of Aquatice®, and are continuing to
test the product to assess its scope. Aquatice® is a unique
technology and requires focused sales support in order for it to
gain acceptance in the aquaculture industry. We are conscious that
it may be some time before we generate significant sales from this
technology but we will continue to work with key partners to
achieve this.
Board roles and responsibilities
Our strategy is to position the Company to benefit from the
increasing demand for meat protein across both the developed and
developing world economies by supplying meat producers with
innovative natural feed additive solutions. Management believe the
best way to achieve this, is to build a group which goes to market
through a series of individual trading brands supported by a
central finance, production and research and development
infrastructure. Following the success of the Optivite acquisition
and subsequent integration we now consider it appropriate to speed
up our acquisition process by redefining roles and responsibilities
at board level.
Richard Edwards, who has been Chief Executive since November
2006, becomes Executive Vice-Chairman and will be responsible for
implementing our acquisition strategy. He will also retain
responsibility for Aquatice® to ensure continuity of its commercial
development.
David Bullen, currently Chief Operating Officer, will become
Chief Executive, responsible for executive management of the
Kiotech Group. David has played a key role in managing the
successful integration of Optivite, and has a clear understanding
of the combined business.
These appointments take effect immediately.
People
I would like to thank all staff for their hard work and
commitment during 2010. A significant amount was achieved in
integrating the two companies ahead of the acquisition timetable,
which is commendable and reflects the teamwork and quality of our
people.
Outlook
The group has made a solid start to the year, with further sales
growth in our international division. Management's focus is to
capture the cross-selling opportunities between the Optivite and
Kiotechagil brands as well as launch a number of new product ideas
across the group. Our territory expansion initiatives will
concentrate on China and Brazil which between them account for over
40 per cent of world pig and poultry meat production.
We are continuing our search to identify suitable acquisitions,
at the right price, which offer both strategic and commercial
benefits to the group.
Richard S RoseChairman12 April 2011
1 Underlying profit before tax and exceptional items comprises
profit before tax of GBP1.5m (2009: GBP1.4m) adjusted for closure
and restructuring costs of GBP0.3m (2009: GBPnil), gains on sale of
intellectual property of GBPnil (2009: GBP0.7m) and share-based
payment expense of GBP0.1m (2009: GBP0.03m).
2 Underlying earnings per share represents profit for the year
before exceptional items divided by the weighted average number of
shares in issue.
Kiotech International plc
Unaudited consolidated income statement
For the year ended 31 December 2010
2010 2009
Notes GBP000 GBP000
Revenue 3 21,565 10,955
Cost of sales (15,618) (7,823)
Gross profit 5,947 3,132
Administrative expenses (4,225) (2,429)
Closure and restructuring costs 5 (261) -
Gains on sale of intellectual property 6 - 675
Operating profit 1,461 1,378
Finance income 9 56 31
Profit before income tax 1,517 1,409
Income tax expense 12 (229) (194)
Profit for the year from continuing operations 1,288 1,215
Profit for the year attributable to :
Owners of the parent 1,282 1,211
Non-controlling interest 6 4
1,288 1,215
The Consolidated income statement has been prepared on the basis that all operations are continuing operations.
As restated
Basic earnings per share (pence) 10 7.01 9.52
Diluted earnings per share (pence) 10 6.94 9.37
The Company has elected to take the exemption under section 408 of the Companies Act 2006 to not present the Parent Company profit and loss account. The profit for the Parent Company for the year was GBP1,334,000 (2009: GBP1,148,000).
Unaudited consolidated statement of comprehensive income
For the year ended 31 December 2010
2010 2009
GBP000 GBP000
Profit for the year 1,288 1,215
Currency translation difference 5 1
Total comprehensive income for the year 1,293 1,216
Attributable to owners of the parent 1,287 1,212
Non-controlling interest 6 4
Total comprehensive income for the year 1,293 1,216
Unaudited consolidated and parent company balance sheets
As at 31 December 2010
Group Company
2010 2009 2010 2009
Notes GBP000 GBP000 GBP000 GBP000
Non current assets
Intangible assets 13 7,007 6,772 7,007 6,772
Property, plant and equipment 14 2,619 663 2,609 652
Investments in subsidiaries 15 - - 233 2,624
Deferred income tax assets 21 289 - 289 -
9,915 7,435 10,138 10,048
Current assets
Inventories 16 1,200 1,291 1,042 1,230
Trade and other receivables 17 5,284 4,911 5,297 4,847
Cash and cash equivalents 18 3,531 5,015 3,357 4,901
10,015 11,217 9,696 10,978
Total assets 19,930 18,652 19,834 21,026
Equity and liabilities
Called up share capital 25 4,209 4,209 4,209 4,209
Share premium account 2,957 2,957 2,957 2,957
Other reserves 27 613 508 607 507
Special reserve 4,441 4,441 4,441 4,441
Retained earnings 26 2,517 1,445 2,602 1,478
14,737 13,560 14,816 13,592
Non-controlling interest 51 45 - -
Total equity 14,788 13,605 14,816 13,592
Non-current liabilities
Borrowings 20 3 30 3 30
Deferred income tax liabilities 21 944 493 944 493
947 523 947 523
Current liabilities
Trade and other payables 19 3,907 4,109 3,789 6,487
Corporation tax 288 415 282 424
4,195 4,524 4,071 6,911
Total liabilities 5,142 5,047 5,018 7,434
Total equity and liabilities 19,930 18,652 19,834 21,026
Unaudited
consolidated
and parent
company
statements
of changes
in equity
For the
year
ended
31
December
2010
Group Share Share Special Other Retained Non-controlling Total
capital premium reserve reserves earnings interest equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Balance 2,511 - 4,441 249 335 - 7,536
at 1
January
2009
Profit - - - - 1,211 4 1,215
Currency - - - 1 - - 1
translation
differences
Total - - - 1 1,211 4 1,216
comprehensive
income
for the
year
Transactions
with
owners
Issue of 1,698 2,957 - 228 - - 4,883
shares
Share - - - 30 - - 30
based
payment
adjustments
Dividends - - - - (101) - (101)
relating
to 2008
Transactions 1,698 2,957 - 258 (101) - 4,812
with
owners
Non-controlling
interests
arising
on
acquisition
of - - - - - 41 41
subsidiary
Balance 4,209 2,957 4,441 508 1,445 45 13,605
at 31
December
2009
Profit - - - - 1,282 6 1,288
Currency - - - 5 - - 5
translation
differences
Total - - - 5 1,282 6 1,293
comprehensive
income
for the
year
Transactions
with
owners
Share - - - 100 - - 100
based
payment
adjustments
Dividends - - - - (210) - (210)
relating
to 2009
Transactions - - - 100 (210) - (110)
with
owners
Balance 4,209 2,957 4,441 613 2,517 51 14,788
at 31
December
2010
Company Share Share Special Other Retained Total
capital premium reserve reserves earnings equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Balance 2,511 - 4,441 249 335 7,536
at 1
January
2009
Profit - - - - 1,148 1,148
Total - - - - 1,148 1,148
comprehensive
income
for the
year
Transactions
with
owners
Issue of 1,698 2,957 - 228 - 4,883
shares
Share - - - 30 - 30
based
payment
adjustments
Dividends - - - - (101) (101)
relating
to 2008
Arising on - - - - 96 96
hive up
of
subsidiaries
Transactions 1,698 2,957 - 258 (5) 4,908
with
owners
Balance 4,209 2,957 4,441 507 1,478 13,592
at 31
December
2009
Profit - - - - 1,334 1,334
Total - - - - 1,334 1,334
comprehensive
income
for the
year
Transactions
with
owners
Share - - - 100 - 100
based
payment
adjustments
Dividends - - - - (210) (210)
relating
to 2009
Transactions - - - 100 (210) (110)
with
owners
Balance 4,209 2,957 4,441 607 2,602 14,816
at 31
December
2010
Unaudited consolidated and parent
company statements of cashflows
For the year ended 31 December 2010
Group Company
2010 2009 2010 2009
GBP000 GBP000 GBP000 GBP000
Cash generated from operating 1,211 2,421 (1,236) 2,379
activities
Interest paid - (1) - -
Income tax paid (197) (340) (203) (121)
Net cash generated from 1,014 2,080 (1,439) 2,258
operating activities
Cash flows generated from
investing activities
Acquisition of subsidiary - (3,127) - (3,972)
net of cash acquired
Cash acquired from subsidiaries - - - 517
hived up
Purchases of property, (2,071) (44) (2,069) (14)
plant and equipment
Proceeds from disposal of property, 10 - 10 -
plant and equipment
Payments to acquire intangible (256) (226) (256) (226)
fixed assets
Interest received 56 31 56 31
Dividends received - - 2,391 -
Net cash used in investing activities (2,261) (3,366) 132 (3,664)
Cashflows from financing activities
Proceeds from issuance of shares - 4,541 - 4,541
Dividend paid to Company's (210) (101) (210) (101)
shareholders
Repayment of borrowings (27) (7) (27) -
Net cash used in financing activities (237) 4,433 (237) 4,440
Net (decrease)/increase in (1,484) 3,147 (1,544) 3,034
cash and cash equivalents
Cash and cash equivalents at 5,015 1,868 4,901 1,867
the beginning of the year
Cash and cash equivalents 3,531 5,015 3,357 4,901
at the end of the year
Cash generated from operations
Group Company
2010 2009 2010 2009
GBP000 GBP000 GBP000 GBP000
Profit before income tax 1,517 1,409 1,556 1,294
Adjustments for:
Finance income (56) (31) (2,447) (31)
Depreciation and amortisation 137 82 134 14
Profit on disposal of (10) - (10) -
plant and equipment
Share based payments 100 30 100 30
Provision against investment - - 2,391 -
in subsidiaries
Changes in working capital:
Inventories 91 (183) 188 (9)
Trade and other receivables (373) 350 (450) 713
Trade and other payables (195) 764 (2,698) 368
Cash generated from operations 1,211 2,421 (1,236) 2,379
Notes to the unaudited preliminary results
For the year ended 31 December 2010
1 General Information
On 30 September 2009 the company acquired the Optivite group of
companies and the results for these entities are included in these
financial statements from 1 October 2009.
On 1 October 2010 the Company undertook a 1 for 23 share
consolidation. Accordingly, all relevant prior year numbers have
been restated.
2 Basis of preparation
The consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards
("IFRS") as adopted by the European Union.
The same accounting policies and methods of computation are
followed as in the latest published audited accounts for the year
ended 31 December 2009, which are available on the Company's
website at www.kiotech.com.
Of the new standards, amendments and interpretations that are in
issue and mandatory for the financial year ended 31 December 2010,
there is no financial impact on these preliminary results.
The preliminary results for the year ended 31 December 2010 are
unaudited. The financial information set out in the announcement
does not constitute the Group's statutory accounts for the years
ended 31 December 2010 or 31 December 2009 as defined by Section
434 of the Companies Act 2006.
The financial information for the year ended 31 December 2009 is
derived from the statutory accounts for that year which have been
delivered to the Registrar of Companies. The auditors have reported
on those accounts and their report was unqualified, did not contain
an emphasis of matter paragraph and did not contain any statement
under section 498(2) or (3) of the Companies Act 2006.
The statutory accounts for the year ended 31 December 2010 will
be finalised on the basis of the financial information presented by
the Directors in this preliminary announcement and will be
delivered to the Registrar of Companies following the Company's
Annual General Meeting.
3 Segment information
All revenues from external customers are derived from the sale of goods in the ordinary course of business to the agricultural and aquacultural markets and are measured in a manner consistent with that in the income statement.
Management has determined the operating segments based on the reports reviewed by the Board that are used to make strategic decisions. The Board considers the business from a geographic perspective.
Management considers adjusted EBITDA, which comprises Earnings before interest, tax , depreciation and amortisation adjusted for share-based payments and exceptional items.
Inter-segment revenue is charged at prevailing market prices.
UK and Eire International Total
GBP000 GBP000 GBP000
Year ended 31 December 2010
Total segmental revenue 9,300 12,686 21,986
Inter-segment revenue - (421) (421)
Revenue from external customers 9,300 12,265 21,565
Adjusted EBITDA 243 1,716 1,959
Depreciation and amortisation (99) (38) (137)
Income tax expense (68) (161) (229)
Total assets 8,624 11,306 19,930
Total liabilities (1,614) (3,528) (5,142)
Year ended 31 December 2009
Total segmental revenue 3,762 7,644 11,406
Inter-segment revenue (439) (12) (451)
Revenue from external customers 3,323 7,632 10,955
Adjusted EBITDA 95 720 815
Depreciation and amortisation 59 23 82
Income tax expense (12) (181) (193)
Total assets 3,665 14,987 18,652
Total liabilities (2,438) (2,609) (5,047)
A reconciliation of adjusted EBITDA to profit before tax is provided as follows:
2010 2009
GBP000 GBP000
Adjusted EBITDA for reportable segments 1,959 815
Depreciation, amortisation and impairment provisions (137) (82)
Share-based payment charges (100) (30)
Finance income 56 31
Closure and restructuring costs (261) -
Gains on sale of intellectual property - 675
Profit before tax 1,517 1,409
4 Expenses by nature
2010 2009
GBP000 GBP000
Changes in inventories of finished goods (72) 392
Raw materials and consumables used 15,155 7,283
Employee expenses (note 8) 3,349 1,498
Research and development expenditure 51 75
Transportation expenses 1,194 679
Operating lease payments 297 103
Depreciation, amortisation and impairment charges 137 82
Bad debt provision 49 -
Share based payment charges 100 30
(Profit)/loss on foreign exchange transactions (156) 110
Total cost of sales, distribution and administative expenses 20,104 10,252
5 Closure and restructuring costs
During 2010 the Group closed a number of administrative and production sites which resulted in costs associated with staff redundancies, removal costs, early termination costs and asset disposals.
6 Gain on sale of intellectual property
In 2009 the Company sold its intellectual property relating to the Ultrabite® sports fishing pheromone attractant brand and the associated rights under its license agreement with Cefas (Centre for the Environment, Fisheries and Aquaculture Science) whilst retaining its licensing rights for the technology to the global aquaculture and commercial fishing markets under the Aquatice® brand. This generated a gain after directly attributable expenses of GBP675,000.
7 Auditor remuneration
During the year the Group obtained the following services from the Company's auditor:
2010 2009
GBP000 GBP000
Group
Fees payable to the Company's auditor for the audit of Parent Company and Consolidated financial statements 23 16
Fees payable to the Company's auditor for other services:
The audit of the Company's subsidiaries pursuant to legislation - 8
Tax services 26 5
Other advisory - 3
49 32
8 Employees
Number of employees
The average monthly number of employees including directors during the year was:
2010 2009
Number Number
Group
Production 28 6
Administration 21 12
Sales and Technical 23 6
Total average headcount 72 24
Company
Production 28 -
Administration 20 8
Sales and Technical 17 4
Total average headcount 65 12
2010 2009
GBP000 GBP000
Employment costs
Group
Wages and salaries 2,910 1,305
Social security costs 297 126
Other pension costs 142 67
3,349 1,498
9 Finance income
2010 2009
GBP000 GBP000
Interest receivable on short-term bank deposits 56 31
10 Earnings per share 2010 2009
As restated
Weighted average number of shares in issue (000's) 18,300 12,762
Adjusted for effects of dilutive potential ordinary shares (000's) 173 196
Weighted average number for diluted earnings per share (000's) 18,473 12,958
Profit attributable to equity holders of the company (GBP000's) 1,282 1,211
Basic earnings per share (pence) 7.01 9.52
Diluted earnings per share (pence) 6.94 9.37
2010 2009
GBP000 GBP000
Underlying profit attributable to equity owners:
Profit attributable to equity owners 1,282 1,211
Closure and restructuring costs (net of tax) 187 -
Gains on sale of intellectual property (net of tax) - (628)
Prior year tax benefits (138) -
Underlying profit 1,331 583
Underlying earnings per share (pence) 7.27 4.60
Diluted underlying earnings per share (pence) 7.20 4.53
Earnings per share has been restated to take account of the 1 for 23 ordinary share consolidation.
11 Dividend payable
2010 2009
GBP000 GBP000
2008 final dividend paid: 0.92p per 23p share (as restated) - 101
2009 final dividend paid: 1.15p per 23p share (as restated) 210 -
210 101
Dividends per share have been restated to take account of the 1 for 23 ordinary share consolidation.
12 Taxation
2010 2009
GBP000 GBP000
Current tax
Current tax on profits for the year 288 180
Adjustment for prior years (221) -
Total current tax 67 180
Deferred tax
Origination and reversal of temporary differences 79 14
Adjustment for prior years 83 -
Total deferred tax 162 14
Income tax expense 229 194
2010 2009
GBP000 GBP000
Factors affecting the tax charge for the year
Profit before tax 1,517 1,409
Tax at domestic rates applicable to profits in the respective countries 425 397
Tax effects of:
Non deductible expenses 27 35
Capital allowances 2 (10)
Research and development tax credits (119) (142)
Exceptional gain of intellectual property not subject to tax - (83)
Prior year tax adjustments (138) -
Other tax adjustments 32 (3)
Tax charge 229 194
During the year the company reached agreement with HMRC in relation to the deductability of capitalised development costs and acquired goodwill, resulting in prior year tax adjustments.
13 Intangible fixed assets
Goodwill Brands Customer relationships Patents Development costs Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Group and Company
Cost
As at 1 January 2009 3,552 - - 46 811 4,409
Additions - - - - 226 226
Acquisition of subsidiaries 592 1,501 176 - - 2,269
As at 1 January 2010 4,144 1,501 176 46 1,037 6,904
Additions - - - 13 243 256
As at 31 December 2010 4,144 1,501 176 59 1,280 7,160
Accumulated amortisation/impairment
As at 1 January 2009 - - - 3 126 129
Charge for the year - - - 2 - 2
As at 1 January 2010 - - - 5 126 131
Charge for the year - - 18 4 - 22
As at 31 December 2010 - - 18 9 126 153
Net book value
As at 31 December 2010 4,144 1,501 158 50 1,154 7,007
As at 31 December 2009 4,144 1,501 176 40 911 6,772
As at 1 January 2009 3,552 - - 43 685 4,280
Goodwill is allocated to the Group's cash-generating units (CGU's) identified according to trading brand. The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use pre-tax cash flow projections based on financial budgets approved by management covering a five-year period. Cash flows beyond a five-year period are extrapolated using estimated growth rates of 1% per annum (2009: 1%).
The discount rate used of 12% (2009: 12%) is pre-tax and reflects specific risks relating to the operating segments.
Goodwill is allocated as follows:
At 31 December 2009 and 2010 GBP000
Acquisition of Kiotechagil operations 3,552
Acquisition of Optivite operations 592
Total goodwill 4,144
Brands relate to the fair value of the Optivite brands acquired in the year ended 31 December 2009. These are deemed to have an indefinite useful life due to the inherent intellectual property contained in the products, the longevity of the product lives and global market opportunities.
Amortisation of customer relationships and patents totalling GBP22,000 (2009: GBP2,000) is included in administrative expenses.
The carrying amount of development costs was reduced to its recoverable amount in previous years through recognition of an impairment provision. This provision was based on management forecasts of the remaining development costs and expected future economic benefits arising to the Group. Costs capitalised in the current year are in line with management forecasts of the expected remaining development costs hence no further impairment has been recognised.
14 Property, plant and equipment
Land & buildings Plant and machinery Fixtures, fittings and equipment Total
GBP000 GBP000 GBP000 GBP000
Group
Cost
As at 1 January 2009 325 31 39 395
Additions - 26 18 44
Acquisition of subsidiaries 5 234 100 339
As at 1 January 2010 330 291 157 778
Additions 1,532 223 316 2,071
As at 31 December 2010 1,862 514 473 2,849
Depreciation
As at 1 January 2009 7 12 16 35
Charge for the year 1 60 19 80
As at 1 January 2010 8 72 35 115
Charge for the year 1 48 66 115
As at 31 December 2010 9 120 101 230
Net book value
As at 31 December 2010 1,853 394 372 2,619
As at 31 December 2009 322 219 122 663
As at 1 January 2009 318 19 23 360
Held within land and buildings is an amount of GBP1,200,000
(2009: GBP200,000) in respect of non- depreciable land.
Plant and machinery includes the following amounts
held under hire purchase contracts
2010 2009
GBP000 GBP000
Cost-capitalised hire 11 80
purchase contracts
Accumulated depreciation (3) (35)
Net book value 8 45
Land & buildings Plant and machinery Fixtures, fittings and equipment Total
GBP000 GBP000 GBP000 GBP000
Company
Cost
As at 1 January 2009 325 31 39 395
Additions - 11 2 13
Acquisition of subsidiaries 5 187 98 290
As at 1 January 2010 330 229 139 698
Additions 1,532 223 314 2,069
As at 31 December 2010 1,862 452 453 2,767
Depreciation
As at 1 January 2009 7 12 16 35
Charge for the year 1 5 5 11
As at 1 January 2010 8 17 21 46
Charge for the year 1 46 65 112
As at 31 December 2010 9 63 86 158
Net book value
As at 31 December 2010 1,853 389 367 2,609
As at 31 December 2009 322 212 118 652
As at 1 January 2009 318 19 23 360
Held within land and buildings is an amount of GBP1,200,000
(2009: GBP200,000) in respect of non- depreciable land.
15 Fixed asset investment
Unlisted Investments
GBP000
Company
Cost
As at 1 January 2009 1
Additions 4,314
Arising on hive up of subsidiary (1,690)
operations
As at 1 January 2010 and 2,625
at 31 December 2010
Provisions for diminution in value
As at 1 January 2009 1
Charge for the year -
As at 1 January 2010 1
Charge for the year 2,391
As at 31 December 2010 2,392
Net book value
As at 31 December 2010 233
As at 31 December 2009 2,624
As at 1 January 2009 -
Holdings of more than 20 per cent
The Company holds more than 20 percent of the
share capital of the following companies:
Company Country of registration or incorporation Principal activity per cent Shares held Class
Subsidiary undertakings
Kiotech Limited England and Wales Dormant 100 Ordinary
Aquatice Limited England and Wales Dormant 100 Ordinary
Agil Limited England and Wales Dormant 100 Ordinary
Kiotechagil Limited England and Wales Dormant 100 Ordinary
Optivite Limited England and Wales Dormant 100 Ordinary
Optivite International Limited England and Wales Dormant 100 Ordinary
Kiotechagil (Shanghai) Agriculture
Science and Technology Limited China Technology services 100 Ordinary
Optivite Animal Nutrition India Technology services 100 Ordinary
Private Limited
Optivite Latinoamericana SA de CV Mexico Technology services 98 Ordinary
Optivite SA (Proprietary) Limited South Africa Technology services 60 Ordinary
16 Inventories
Group Company
2010 2009 2010 2009
GBP000 GBP000 GBP000 GBP000
Raw materials and consumables 799 818 799 818
Finished goods and goods for resale 401 473 243 412
1,200 1,291 1,042 1,230
The cost of inventories recognised as expense and included in "cost of sales" amounted to GBP13,265,000 (2009: GBP8,207,000) for the Group and GBP12,793,000 (2009: GBP4,529,000) for the Company.
17 Trade and other receivables
Group Company
2010 2009 2010 2009
GBP000 GBP000 GBP000 GBP000
Trade receivables 5,224 4,786 4,820 4,593
Less: provision for impairment of trade receivables (244) (252) (230) (252)
Trade receivables- net 4,980 4,534 4,590 4,341
Receivables from subsidiary undertakings - - 487 153
VAT recoverable 165 - 99 -
Other receivables - 184 - 173
Prepayments and accrued income 139 193 121 180
5,284 4,911 5,297 4,847
All receivables are stated at fair value and are due within five years from the end of the reporting period.
The ageing analysis of net trade receivables is as follows:
Group Company
2010 2009 2010 2009
GBP000 GBP000 GBP000 GBP000
Up to 3 months 3,500 2,836 3,139 2,659
3 to 6 months 1,317 1,422 1,295 1,422
Over 6 months 163 276 156 260
Trade receivables- net 4,980 4,534 4,590 4,341
As of 31 December 2010 trade receivables of GBP1,049,000 (2009: GBP1,000,000) for the Group and GBP1,042,000 (2009: GBP965,000) for the Company were past due but not impaired. These relate to longstanding customers for who there are no recent history of default. The aging analysis of these receivables is as follows:
Group Company
2010 2009 2010 2009
GBP000 GBP000 GBP000 GBP000
Up to 3 months 244 552 244 528
3 to 6 months 711 445 711 436
Over 6 months 94 3 87 1
1,049 1,000 1,042 965
As of 31 December 2010 trade receivables of GBP244,000 (2009: GBP252,000) for the group and GBP230,000 (2009: GBP252,000) for the Company were impaired and fully provided for. The individually impaired receivables mainly relate to historic debt for which recovery is still being sought. The Group mitigates its exposure to credit risk by extensive use of credit insurance and letters of credit to remit amounts due. The aging of these trade receivables is as follows:
Group Company
2010 2009 2010 2009
GBP000 GBP000 GBP000 GBP000
3 to 6 months 18 46 18 46
Over 6 months 226 206 212 206
244 252 230 252
Movement on the group provision for impairment of trade receivables is as follows:
Group Company
GBP000 GBP000
At 1 January 2010 252 252
Provisions for receivables created 56 42
Amounts recovered during the year (64) (64)
At 31 December 2010 244 230
The carrying amounts of trade and other receivables are denominated in the following currencies:
Group Company
2010 2009 2010 2009
GBP000 GBP000 GBP000 GBP000
Pounds sterling 2,775 2,888 2,776 2,888
Euros 1,183 805 1,183 805
US Dollar 651 664 631 648
Other currencies 371 177 - -
4,980 4,534 4,590 4,341
18 Cash and cash equivalents
Cash and cash equivalents comprise cash and short-term deposits held by Group companies. The carrying amount of these assets approximates to their fair value.
19 Trade and other payables
Group Company
2010 2009 2010 2009
GBP000 GBP000 GBP000 GBP000
Trade payables 2,724 3,223 2,538 3,125
Amounts due to subsidiary undertakings - - 114 2,490
Other payables - 301 - 289
Taxes and social security costs 80 67 80 67
Accruals and deferred income 1,103 518 1,057 516
3,907 4,109 3,789 6,487
20 Borrowings
The total amount due within one year at 31 December 2010 under hire purchase agreements is as follows:
Group and Company
2010 2009
GBP000 GBP000
Due within one year 3 27
Due within two to five years - 3
3 30
21 Deferred income tax
2010 2009
Group GBP000 GBP000
At 1 January 493 -
Acquisition of subsidiairies - 479
Income statement charge 162 14
At 31 December 655 493
Deferred tax liabilities/ (assets)
Accelerated tax allowances Fair value gains Losses Total
GBP000 GBP000 GBP000 GBP000
At 1 January 2009 - - - -
Income statement charge 14 - - 14
Acquisition of subsidiaries 9 470 - 479
At 1 January 2010 23 470 - 493
Income statement charge 473 (22) (289) 162
At 31 December 2010 496 448 (289) 655
2010 2009
Company GBP000 GBP000
At 1 January 493 -
Hive up of subsidiaries - 479
Income statement charge 162 14
At 31 December 655 493
Deferred tax liabilities/ (assets)
Accelerated tax allowances Fair value gains Losses Total
GBP000 GBP000 GBP000 GBP000
At 1 January 2009 - - - -
Hive up of subsidiaries 23 470 - 493
At 1 January 2010 23 470 - 493
Income statement charge 473 (22) (289) 162
At 31 December 2010 496 448 (289) 655
Losses
In addition to the losses noted above the Group and Company have not recognised deferred tax assets of GBP530,000 in respect of unutilised tax losses totalling GBP1,963,000.
22 Contingent liabilities
On the acquisition of Agil, part of the consideration was deferred pending receipt of trade receivables outstanding at November 2006. Management is of the opinion that GBP157,000 (2009: GBP193,000) of these trade receivables will not prove to be recoverable and these have been written off in the financial statements.
In the event that these receivables are collected then these balances will be due to the vendor of the business, ECO Animal Health Group plc.
In view of the uncertainty surrounding the recovery of these receivables the directors do not consider it appropriate to provide for the deferred consideration in these accounts, as this will only be paid on recovery of the receivables.
23 Financial commitments
At 31 December 2010 the Group has future aggregate minimum lease payments under non-cancellable operating leases as follows:
Vehicles, plant and equipment Land and buildings
2010 2009 2010 2009
GBP000 GBP000 GBP000 GBP000
Less than one year 73 74 14 107
Between one and five years 67 143 - -
The Group leased properties under non-cancellable operating lease agreements until October 2010, when a long underlease was acquired from the landlord and future obligations ceased.
The Group also leases property under cancellable operating lease agreements requiring 3 months notice.
The lease expenditure charged to the income statement during the year is disclosed in note 4.
24 Capital commitments
The Group had authorised capital commitments as at 31 December 2010 of GBP187,000 (2009: GBP54,000).
25 Share capital
2010 2009
GBP000 GBP000
Authorised
86,956,521 Ordinary shares of 23p each 20,000 -
2,000,000,000 Ordinary shares 1p each - 20,000
1,859,672 'A' shares of 99p each 1,841 1,841
21,841 21,841
Allotted, called up and fully paid
18,299,952 Ordinary shares of 23p each 4,209 -
251,078,696 Ordinary shares 1p each - 2,511
Issue of ordinary shares of 1p each - 1,584
Shares issued on acquisition of subsidiaries - 114
4,209 4,209
On 1 October 2009 the Company undertook a share placement to fund the acquisition of Optivite Group. This resulted in GBP2,957,000 (net of expenses) being credited to the share premium reserve. On the same day consideration shares were issued resulting in GBP228,000 being credited to the merger reserve.
On 1 October 2010 the Company undertook a 1 for 23 ordinary share consolidation.
26 Retained earnings
Group Company
GBP000 GBP000
At 1 January 2009 335 335
Profit for the year 1,211 1,148
Dividends relating to 2008 (101) (101)
Arising on hive up of subsidiaries - 96
At 31 December 2009 1,445 1,478
Profit for the year 1,282 1,334
Dividends relating to 2009 (210) (210)
At 31 December 2010 2,517 2,602
27 Other reserves
Other reserves comprise: 2010 2009
GBP000 GBP000
Merger reserve 228 228
Share based payment reserve 379 279
Translation reserve 6 1
613 508
Movements in other reserves balances are shown in the Consolidated statement of changes in equity.
28 Share-based payments
Movements in the number of share options outstanding have been restated following the share consolidation on 1 October 2010 and are as follows:
Weighted average Shares
exercise price
2010 2009
As restated
(p) 000 000
Outstanding at 1 January 76 1,619 821
Granted during the year 82 392 798
Forfeited or cancelled during the year 95 (185) -
Outstanding at 31 December 76 1,826 1,619
Exercisable at 31 December 479 679
Share options outstanding at the end of the year have the following expiry dates and weighted average exercise prices:
Shares
Expiry date Weighted average
exercise price 2010 2009
(p) As restated
2015 165 44 54
2016 86 397 273
2017 104 65 174
2018 32 163 320
2019 69 765 798
2020 82 392 -
1,826 1,619
On 26 April 2010, 98,000 options were forfeit on the retirement of a director. On 28 May 2010 and 27 August 2010 options totalling 305,000 were awarded under the Company's Enterprise Management Incentive Scheme. On 22 December 2010 87,000 options issued in 2007 were cancelled and replaced by new options awarded under the Company's Enterprise Management Incentive Scheme. The fair value of services received in return for share options granted is measured by reference to the fair value of the share options granted. The estimate of fair value received is calculated based on appropriate valuation models.
The expense is apportioned over the vesting period and is based on the number of financial instruments which are expected to vest and the fair value of those financial instruments at the date of grant. The charge for the year in respect of share options granted amounts to GBP100,000 (2009: GBP30,000).
The weighted average fair value of options granted during the year was determined based on the following assumptions:
Grant date 28-May 27-Aug 22-Dec
Number of options granted (000) 283 22 87
Grant price (p) 86.25 88.21 88.00
Exercise price (p) 86.25 86.25 69.00
Vesting period (years) 2 2 0.1
Option expiry (years) 10 10 10
Expected volatility of the share price 37% 37% 37%
Dividends expected on the shares 1.33% 1.30% 1.31%
Risk-free rate 2.41% 1.80% 2.42%
Fair value (p) 27.06 27.52 34.80
Pricing model Black-Scholes Black-Scholes Black-Scholes
Kiotech (LSE:KIO)
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