6th Jun 2006 07:01
Kiotech International plc06 June 2006 KIOTECH INTERNATIONAL PLC RESULTS FOR THE YEAR ENDED 31 DECEMBER 2005 Chairman and executive director's statement. Introduction We are pleased to report that the year to 31 December 2005 has seen Kiotech makecontinued progress with encouraging results from early stage aquaculture trials.Its innovative biotechnology products are currently being supplied to the sportsfishing industries worldwide and the technology is being further developed tosuit the much larger aquaculture and commercial markets. In June 2005 Kiotech moved up from Ofex to AIM, a market operated by the LondonStock Exchange. At that time we raised £1.82 million net of expenses through theplacing of 31.657 million new ordinary shares at seven pence each principallywith financial institutions. The AIM quotation reflected the Board's confidencein the progress Kiotech had made in its development programme coupled with thebelief that the time was now right to move to a larger exchange, which wouldoffer the company enhanced investor and commercial visibility. The proceeds ofthe placing enable the company to continue its research and developmentprogramme while also meeting general working capital needs. Results The loss for the year was broadly in line with expectations. In the short termKiotech will continue to generate net losses, mainly due to the planned ongoingresearch and development expenditure attributable to its aquaculture products. Sales of Ultrabite for the year were lower than originally planned due to thedecision taken by the board to change our distribution arrangements midwaythrough the year by granting Rapala VMC Corporation an exclusive worldwidedistribution contract for the sports fishing market. Whilst this will be mostbeneficial in the future, there was inevitably some disruption to sales as thehandover took place. All sales are currently attributable to Ultrabite, which ismaking a profitable contribution. Administration costs for the first half of the year, were high as reported inthe Interim Statement. Firm action has since been taken with the closure of theCompany's office and the decision to appoint Lawrence Plc to handle alladministration on a sub-contract basis. This is already delivering considerablecost savings and allows us to redirect additional cash towards productdevelopment. Kiotech currently has a cash burn rate (excluding research anddevelopment costs) of approximately £300,000 per annum and at the end of May2006 had cash reserves of approximately £1.6 million. CEFAS Kiotech works in partnership with the UK Government Agency CEFAS (The Centre forEnvironment, Fisheries & Aquaculture Science) to develop and market innovativepheromone technology to the global sports fishing and aquaculture markets. Theagreement with CEFAS, which commenced in October 2002, gives Kiotech anexclusive global license to commercially exploit the results of CEFAS' researchinto certain formulations that influence fish behaviour. Sports Fishing Ultrabite, launched in 2001, is a pheromone based fishing product and is aimedat the global sports and leisure market. Angling is a huge industry; it isestimated that in the UK alone there are over 3.5million participants. In orderto maximize the sales potential of Ultrabite, in September we were delighted toappoint Rapala VMC Corporation as Kiotech's exclusive worldwide distributor ofUltrabite to the sports fishing market. Rapala, which has its headquarters inFinland, is the leading distributor of sports fishing related products with aglobal network and is an ideal partner. In October Kiotech's Chief Executive,John Loftus, left our board and joined Rapala with responsibility for marketingUltrabite. John's experience and specialist product knowledge should help toaccelerate the sales opportunity for Ultrabite through Rapala's well-establishedglobal distribution network. It is premature to assess the progress of Rapala's sales campaign but we areconfident that the inclusion of Ultrabite in Rapala's next catalogue should leadto a significant uplift in sales of Ultrabite. Strategy -Aquaculture Worldwide demand for seafood and fish products is increasing. United Nations,projections show that there will be world demand for a further 90 million metrictonnes per annum of edible seafood by 2040; this would require a doubling of thecurrent supply of edible fish and shellfish. Statistics indicate that currently25 per cent. of wild fish stocks are over harvested and another 30 to 40 percent. are fully exploited. Kiotech believes that additional demand can only besatisfied through increased aquaculture. Kiotech and CEFAS have created a research and marketing strategy to furtherdevelop the pheromone technology to permit more sustainable forms of feed to beutilized throughout the aquaculture industry and to reduce the production offeed waste so helping to conserve wild fish populations and the aquaticenvironment. It is from this research that the basis of a new range of pheromone stimulantsis being developed for the aquaculture market. The cod trials completed lastyear in Norway and reported in our interim statement dated 30 September 2005gave further support to our belief in this technology. We are now focussing onother species where we believe there to be greater commercial potential. Thetrials that were taking place at Mahidol University in Thailand with regard totilapia and prawns were concluded earlier this year. The tilapia trialsindicated an approximate 10 per cent. increase in growth rates where pheromonebased attractants were used. While this was not itself considered statisticallysignificant, visual observations were sufficiently encouraging for Kiotech toset up commercial scale pond trials. Similar trials are being undertaken withregard to carp where we believe product development is most advanced among allthe species we are testing. The prawn trials in Thailand were less conclusive;however, we believe that pond conditions are more suitable for prawn and shrimpdevelopment and intend to start larger scale pond trials later this year.Currently, small scale tank trials are being carried out with ornamental koi andcatfish. Should these trials be successful, larger scale trials will beundertaken in respect of these two species. We are encouraged by the technologyand progress being made by our partnership with CEFAS and will report ourprogress as the various trials are completed. It is too early to be precise regarding the commercial viability of theseproducts but it is possible that marketing could commence within the next twoyears. The development of pheromone-based technology has two principal objectives: In the short-term the application of pheromone formulations will attempt toincrease the feeding activity of farmed fish and therefore the uptake ofexisting fish-based feeds within the aquaculture industry with the aim ofreducing the amount of waste from uneaten feed, which results in significantenvironmental damage. In the longer term the pheromone-based technology will aim to permit the use ofmore sustainable forms of proteins within feeds, which are not based on fishoils or proteins which it is intended to protect wild fish populations fromfurther depletion to satisfy the increased demands expected from the aquaculturesector. The aquaculture industry is estimated to be worth in the region of $60 billionand has had an average annual compound growth of close to nine per cent since1970. Currently aquaculture accounts for 30 per cent of fin fish, crustacean andshellfish supplied to the market and this is set to rise to 50 per cent by 2030.There is a brake on this accelerating growth as a large proportion of the makeup of the feed for farmed fish is fish oil and meal derived from wild fishstocks. The supply of this raw material is unsustainable and the industry isfocused upon providing feed stimuli that will mask the taste of terrestrial cropbased feeds and make them palatable to marine fin fish. Kiotech's novel productrange is being developed with CEFAS to fill this void in the industry's productrange. Management Richard Rose joined the Board as a non-executive director in March 2005, justprior to the flotation on AIM. In August the Board was strengthened further withthe appointment of Peter Lawrence as a non-executive director. Peter is Chairmanof Lawrence Plc, a company with experience in the fish and aquaculture markets.In February 2006, Richard Rose was appointed non-executive Chairman of theCompany succeeding Nicholas Scott who assumed the position of executive Directorwith responsibility for business development. Following John Loftus's move to Rapala, Nicholas Scott is Kiotech's soleexecutive director. Nicholas is a founder of Kiotech. Outlook Rapala is committing considerable resource to marketing the Ultrabite productand we are confident that once its network has full access to the productsduring the latter part of 2006 we should see the benefit in sales. The exciting potential of our technology will be in the commercial andaquaculture markets and we are encouraged by the results of early stage trialsbeing conducted under the management and supervision of CEFAS. Whilst much workremains to be done we, together with CEFAS, are confident of the long-termcommercial value of the technology. Richard Rose Nick ScottChairman Executive Director KIOTECH INTERNATIONAL PLCCONSOLIDATED PROFIT AND LOSS ACCOUNTFor the year ended 31 December 2005 2005 2004 £ £ TURNOVER 159,050 217,368 Cost of sales (114,358) (148,840)Provision for slow moving stock write -off (215,376) GROSS (LOSS)/PROFIT (170,684) 68,528 Administrative expenses (565,664) (446,674) OPERATING LOSS (736,348) (378,146) Net interest 39,177 5,581 LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION (697,171) (372,565) Tax on loss on ordinary activities - 26,488 Loss retained and transferred from reserves (697,171) (346,077) Basic loss per share(pence) (1.38) (1.07)Diluted loss per share (pence) (1.33) - All transactions arise from continuing operationsThere were no recognised gains or losses other than the loss for the year. The accompanying accounting policies and notes form an integral part of these financial statements. KIOTECH INTERNATIONAL PLCCONSOLIDATED BALANCE SHEET For the year ended 31 December 2005 As at 31 December 2005 Group Group Company Company 2005 2004 2005 2004 £ £ £ £ FIXED ASSETSTangible assets 2,140 3,760 - -Investments - - 1,054 1,054 2140 3,760 1054 1,054 CURRENT ASSETSStocks 30,901 303,952 - -Debtors 94,545 75,815 2,100 23,272Cash at bank and in hand 1,785,290 476,952 1,729,271 452,979 1,910,736 856,719 1,731,371 476,251 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR (145,941) (241,967) (3,468) (6,559) NET CURRENT ASSETS 1,764,795 614,752 1,727,903 469,692 TOTAL ASSETS LESS CURRENT LIABILITIES 1,766,935 618,512 1,728,957 470,746 CAPITAL AND RESERVESCalled up share capital 2,503,529 2,186,958 2,503,529 2,186,958Share premium account 6,504,675 5,010,652 6,504,675 5,010,652Other reserves 147,500 112,500 147,500 112,500Profit and loss account (7,388,769) (6,691,598) (7,426,747) (6,839,364) EQUITY SHAREHOLDERS' FUNDS 1,766,935 618,512 1,728,957 470,746 . KIOTECH INTERNATIONAL PLCCONSOLIDATED CASHFLOW STATEMENTFor the year ended 31 December 2005 2005 2004 £ £ NET CASH OUTFLOW FROM OPERATING ACTIVITIES (541,433) (479,225) RETURNS ON INVESTMENTS AND SERVICING OF FINANCEInterest received 39,247 7,417Interest paid (70) (1,836) 39,177 5,581 CAPITAL EXPENDITURE AND FINANCIAL INVESTMENTPurchase of tangible fixed assets - (3,826) FINANCINGIssue of shares 2,215,991 933,741Expenses paid in connection with share issues (405,397) (20,707) 1,810,594 913,034 Increase in cash 1,308,338 435,564 NET CASH OUTFLOW FROM OPERATING ACTIVITIES 2005 2004 £ £Operating loss (736,348) (378,146)Depreciation 1,620 4,416Loss on fixed asset investment - 110Issue of share options 35,000 112,500Decrease in stocks 273,051 14,028(Increase)/decrease in debtors (18,730) 25,320(Decrease) in creditors (96,026) (257,453) Net cash outflow from operating activities (541,433) (479,225) RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT 2005 2004 £ £ Increase in cash in the year 1,308,338 435,564 Movement in net funds in the year 1,308,338 435,564Net funds at 1 January 2005 476,952 41,388 Net funds at 31 December 2005 1,785,290 476,952 ANALYSIS OF CHANGES IN NET FUNDS At 1 January At 31 December 2005 Cashflow 2005 £ £ £ Cash at bank and in hand 476,952 1,308,338 1,785,290 NOTES TO THE ACCOUNTS FINANCIAL INFORMATION The financial information set out above does not constitute the company'sstatutory accounts within the meaning of section 240 of the Companies Act 1985. BASIS OF PREPARATION The financial statements have been prepared under the historical cost conventionand in accordance with applicable United Kingdom accounting standards. The principal accounting policies of the group have remained unchanged from theprevious year and have been applied consistently in dealing with items which areconsidered material in relation to the group's financial statements. LOSS PER SHARE The calculation of the basic loss per share is based on the loss for the yearbeing £697,171(2004: £346,077) divided by the weighted average number of sharesin issue during the year, being 50,546,959 (2004: 32,230,037) shares. Thecalculation of diluted earnings per share is based on the basic earnings pershare, adjusted to allow for the issue of shares, on the assumed conversion ofall dilutive options and other dilutive potential ordinary shares. AVAILABILITY OF ACCOUNTS Copies of the report and accounts for the year ended 31 December 2005, whichwillshortly be posted to shareholders, will be available at the offices of J.M.Finn& Co., Salisbury House, London Wall, London EC2M 5TA or at the Company'sregistered office, 78 Coombe Road, New Malden, Surrey KT3 4QS. CONTACTS For further information, please contact: Richard Rose, Chairman Nick Scott, Executive Director07836 250474 07785 908353 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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