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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Kiotech Intl | LSE:KIO | London | Ordinary Share | GB00B3NWT178 | ORD 23P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 79.00 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
0 | 0 | N/A | 0 |
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
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