Kiotech Intl plc - Final Results

RNS Number:3393R
Kiotech International plc
02 April 2008

2 April 2008

KIOTECH INTERNATIONAL plc
Preliminary results for year to 31 December 2007

Kiotech International plc, which supplies high-performance natural feed
additives to enhance health, growth and sustainability in aquaculture and
agriculture, is pleased to announce its preliminary results for the twelve
months to 31 December 2007. The Company moved into profit for the first time,
since becoming a public company in 1997. These results include a maiden twelve
months contribution from Agil, which was purchased in November 2006.

Key points: Financial

• Profit before tax and share-based payments of £494,191 (2006: loss
£287,268).

• Sales of £5,352,224 (2006: £421,636)

• Cash balance of £1,665,709 at 31 December 2007.

Key points: Operations

• Integration of Agil completed.

• Profitability improvement at Agil.

• New Agil agricultural products undergoing farm trials and showing
promising results.

• Approval granted by Department of Environment, Food and Rural Affairs
(DEFRA) for sale of aquaculture products (Aquatice(R)) in the European
Union.

• Aquatice(R) continues to prove its efficacy in new trials in the Far East.

• Enhanced management focus on the commercialisation of aquaculture
products.

Richard Rose, Chairman, commented:

"The Company is now profitable with a strong balance sheet and significant cash
resources. We are well placed to finance our major product and market
development programmes. Product and sales development in Agil, combined with
exciting developments in establishing our aquaculture range, offer the Company a
significant number of profit opportunities which the team is working hard to
capitalise on."

Enquiries:

Richard Rose, Chairman Kiotech International plc

07836 250464

Matthew Robinson / Charles Cunningham, JMFinn Capital Markets Ltd

020 7600 1660

A copy of Kiotech International plc's full audited financial results for the
year to 31 December 2007 will be available at www.kiotech.com

KIOTECH INTERNATIONAL plc
Preliminary results for year to 31 December 2007

Chairman's statement

I am delighted to report that the Company has achieved its first profitable full
year result since becoming a public company 10 years ago. This encouraging
performance reflects good progress in both our product divisions supplying
high-performance natural feed additives to enhance health, growth and
sustainability in aquaculture and agriculture.

Management has completed the integration of Agil, following its acquisition in
November 2006. The focus at Agil has been on improving profitability, developing
new products and strengthening its team, which supports our international
network of distributors and agents. Kiotech continues to make good progress with
its aquaculture development programme. The granting by DEFRA of the Manufacture
and Free Sale Certificate for Aquatice(R) is a very important step in the
commercialisation of the product. This approval enables Kiotech to market
Aquatice(R) throughout the member states of the European Union and will also
facilitate the registration process in many other countries. Discussions are
already underway with various distributors and feed producers about the right to
distribute the Aquatice(R) range of products. We have also been encouraged by
this year's trial programme, which has confirmed the efficacy of the product in
terms of growth rate and feed conversion and also improved water quality within
the ponds.

Results

Trading for the twelve months to 31 December 2007 saw sales of £5,352,224;
compared with £421,636 in the equivalent period last year. The pre-tax profit
before share-based payments was £494,191 compared to last year's loss of
£287,268. The significant increase in sales and profitability was driven by the
maiden full year contribution from Agil. Agil performed well improving margins
in a very competitive market where the weakness of the US dollar and raw
material price increases were significant burdens. Cash generation was strong,
the year ended with a positive cash balance of over £1.6 million. This was due
to a combination of working capital improvements and the cash generative quality
of the Agil business.

Operations - Agriculture

Agil's management focus has been on increasing profitability through better
supply deals, tighter cost control and raising management quality and
efficiency. A new management structure was introduced in the second half of the
year to place more emphasis on new product development and more effective
management of our distributor network. We have changed distributors in a number
of territories and appointed distributors in new territories where registration
of our products is currently underway.

In the UK and Ireland we reorganised our sales structure where there are good
opportunities for our enlarged technical sales support team. With a stronger
account management process implemented in the first half of the year, we are
better understanding the requirements of our distributors worldwide and the
individual characteristics of their diverse local markets. Agil has been
rebranded to Kiotechagil to ensure that our marketing communications reflect
equally our agriculture and aquaculture interests.

Agil's technical team has developed a new acidifier product targeted at the
early growth stage for pigs and poultry, which for the first time can also be
incorporated into premixes. This development opens a new market segment for
Agil. Early indications from the farm trials have been encouraging with
improvements in feed conversion and the health of the animals. We have already
had some early sales of the product and expect these to build during the current
year. Overseas interest has been good with registration work commencing in a
number of territories. Further trials are planned in order to strengthen our
marketing proposition for this innovative new range.

Agil has experienced an increase in demand for Mastercube its animal feed pellet
binder. As feed producers switch to lower quality grains to counter rising
prices this has adversely affected pellet quality. Mastercube counters this
quality issue and through its chemical binding attributes helps lower the amount
of energy consumed in pellet production.

In July 2007 flooding seriously disrupted Agil's warehouse and production site
in the Thames Valley. I am pleased to report that although we experienced some
business interruption and loss of sales, our insurers covered almost all of the
loss and costs associated with the damaged raw materials and finished products.

Operations - Aquaculture

After the year-end DEFRA granted Kiotech a Manufacture and Free Sale Certificate
for its Aquatice(R) fish feeding attractant product range. This very
significant approval allows Kiotech to market Aquatice(R) throughout the member
states of the European Union and the company has already established contact
with potential distributors. The granting of the Certificate in the UK should
significantly accelerate the registration process in other countries, especially
in the important Asian and Latin America markets, which account for around 80
per cent of world aquaculture production.

The Certificate legitimises the product for potential overseas customers some of
whom export their fish to Europe. It is also a key document required by the
registration departments of many countries when considering local registration.

Kiotech's initial targets for product registration and sales are to the major
producers of farmed fish in the Asia Pacific region, namely China, Thailand and
Vietnam. Kiotech has established a representative office in China, which
currently accounts for nearly 70% of world aquaculture production by quantity
and 50% by value. The office will enable the company to manage product
registration and product development in association with the regional Government
fisheries institute and marine universities.

Vietnam is the third largest aquaculture producer accounting for 2.6% of total
world production and is one of the fastest growing producers. Kiotech has signed
an agreement to work with Bayer HealthCare, which is carrying out a series of
Aquatice(R) trials in that country under the direction of Cefas which, if
successful, will lead to both companies signing a distribution agreement for the
Vietnamese aquaculture market. In Thailand, which accounts for 2.5% of world
aquaculture production, we have appointed a local aquaculture specialist company
to manage our trials programme and product registration, and also assist Kiotech
with the selection of suitable distributors. Early discussions are underway
with a potential distributor.

In our 2007 trial programme, Aquatice(R) continued to prove its efficacy not
only for growth rate and feed conversion, but also in terms of improving water
quality. The product is also proving to have additional benefits in what are
termed 'life-cycle bottlenecks' such as survival rate during first feeding,
weaning and when transferring from the hatchery to the pond. These
environmental safety aspects are of significant importance to government bodies
wishing to ensure their aquaculture products are both safe for consumption and
export and that intensive fish farming is sustainable in the surrounding
environment.

Kiotech has agreed an ambitious research and development programme with Cefas
for 2008/2009. The programme will support the registration process, which
requires data to authenticate the efficacy and safety of the product and develop
products for a range of new species. Unlike in previous years where this
development work was restricted to South East Asia, trials have also been agreed
and will shortly commence in Europe and Latin America. Commercial farmers who
are significant producers in their respective markets are carrying out these
trials.

We are delighted with the strong results from further trials undertaken with
Aquatice(R). These results and the additional new benefits Aquatice(R) can
bring to the aquaculture industry, combined with the discussions we have had
with commercial companies, reinforce our confidence that a significant
commercial global opportunity exists for our technology.

Sports Fishing

Our Ultrabite fish attractant is supplied exclusively to Rapala VMC Corporation,
for incorporation into its new range of baits, sprays, gels and soft lures,
which are under development. This development programme has taken longer than
anticipated and sales have been disappointing to date. However, Rapala has
recently launched a new range, in Europe and plans to launch a range of products
for the American sports fishing season, which starts in the spring. We do not
expect a significant increase in orders from Rapala in the short term, but
following the American product launch and other product developments, Kiotech
expects an improved performance from its sports and leisure fishing distributor.

Outlook

The Company is now profitable with a strong balance sheet and significant cash
resources. We are well placed to finance our major product and market
development programmes. Product and sales development in Agil, combined with
exciting developments in establishing our aquaculture range, offer the Company a
significant number of profit opportunities which the team is working hard to
capitalise on.

Richard S Rose
Chairman
2 April 2008

CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2007

2007 2006
£ £

Revenue 5,352,224 421,636

Cost of sales (3,598,425) (306,901)
__________ ________

Gross profit 1,753,799 114,735

Administrative expenses (1,347,840) (472,942)
Other operating income 10,327 -
__________ ________
Operating 416,286 (358,207)
profit/(loss)

Interest 48,127 71,122
receivable
Interest payable (8) -
__________ ________

Profit/(loss) 464,405 (287,085)
for the year
before taxation

Taxation (128,553) -

Profit/(loss) 335,852 (287,085)
for the year after taxation ========== =========

The consolidated income statement has been
prepared on the basis that all operations are
continuing operations.

Basic earnings/(loss) per 0.13 (0.34)
share (pence)

Diluted earnings/(loss) 0.13 (0.32)
per share (pence)

STATEMENT OF TOTAL RECOGNISED INCOME AND EXPENSE
FOR THE YEAR ENDED 31 DECEMBER 2007

2007 2006
£ £

Profit/(loss)for the financial 335,852 (287,085)
year ========== =========

BALANCE SHEETS
AS AT 31 DECEMBER 2007

Group
2007 2006

£ £
ASSETS
Non current assets
Intangible assets 4,076,591 3,742,419
Property, plant and 362,464 367,904
equipment
Investments - -
_________ __________
4,439,055 4,110,323
_________ __________
Current assets
Inventories 394,045 444,241
Trade and other receivables 2,447,515 2,576,172
Corporation tax - 1,977
Cash and cash equivalents 1,665,709 1,346,758
_________ __________
4,507,269 4,369,148
_________ __________
Total Assets 8,946,324 8,479,471
========= ==========
Equity and liabilities
Called up share capital 4,351,862 4,351,862
Share premium account 9,844,198 9,844,198
Other reserves 177,103 147,317
Retained earnings (7,244,830) (7,580,682)
_________ __________
Total equity 7,128,333 6,762,695

Current liabilities
Trade and other payables 1,691,415 1,716,776
Corporation tax 126,576 -
_________ __________
Total Equity and Liabilities 8,946,324 8,479,471
========= ==========

CONSOLIDATED CASH FLOW STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2007

2007 2006
£ £ £ £

Net cash from/(used in) 650,995 (1,667,157)
operating activities

Investing activities
and servicing of finance
Interest received 48,127 71,121
Interest paid (8) -
Payments to acquire (369,905) (3,659,850)
intangible assets
Payments to acquire (10,258) (370,502)
property, plant & equipment ________ __________

Net cash used in (332,044) (3,959,231)
investing activities

Financing activities
Issue of shares (net of - 5,187,856
expenses)

Net cash inflow from - 5,187,856
financing activities __________ ___________

Net increase/(decrease )in cash 318,951 (438,532)
and cash equivalents

Net cash and cash equivalents at 1,346,758 1,785,290
beginning of period __________ ___________

Net cash and cash equivalents at 1,665,709 1,346,758
the end of period ========== ===========

NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2007

1 Reconciliation of operating profit/(loss)
to net cash from/(used in) operating activities 2007 2006
£ £

Operating profit/(loss) 416,286 (358,207)
Depreciation of property, 15,698 4,735
plant & equipment
Amortisation of intangible assets 35,733 12,606
Share-based payments 29,786 (183)
Decrease/(increase) in inventories 50,196 (413,340)
Decrease/(increase) in trade and other 128,658 (2,483,603)
receivables
(Decrease)/increase in trade and other payables (25,362) 1,570,835
__________ __________
Net cash from/(used in) operating activities 650,995 (1,667,157)
========== ==========

2 Analysis of net funds 1 January 31 December
2007 Cash flow 2007
£ £ £
Net funds:
Cash and cash equivalents 1,346,758 318,951 1,665,709
========== ======== ==========

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