Results:
In the year to 31 December 2008 pre tax profit, before share-based payments, increased by 12% to GBP553,836 (2007: GBP494,191). The balance sheet is strong and the year ended with a cash balance of over GBP1.86 million (2007: GBP1.67 million) underlining the cash generative quality of the business.
The board is delighted to announce that, having carefully considered the company’s financial position and prospects; it will commence dividend payments and is declaring a maiden final dividend of 0.04 pence per share. Shareholder approval will be sought at the Annual General Meeting on June 23, 2009 to pay the final dividend on July 31, 2009 to shareholders on the register on July 3, 2009.
In the first part of the year management’s focus was to ensure that the significant raw material price increases experienced by the company were passed on as quickly as possible through selling prices. This action has proved effective and enabled the agricultural business to protect its gross margins. The rate of raw material price rises has since abated somewhat, although some prices continue to rise, driven by the weak pound and the pricing power of some of the major European chemical suppliers.
The Agil business supplies product to over 50 countries where local agricultural markets can be driven by factors including GDP and population growth, legislation, illness, such as avian influenza, and farm economics. Sales in around half company’s overseas markets increased compared with the same period last year, with some strong performances in Australia, Chile, Germany, Korea, Peru, Saudi Arabia and Spain. There has been some encouraging growth of company’s Salkil products in certain European countries where the new EU National Salmonella Control Programme, introduced in February 2008, has been taken seriously by the poultry industry.
Management has continued its programme to revitalize the company’s distribution arrangements; distributors have been appointed in a number of new territories and distributors have been changed in some underperforming territories. Start up sales from recently appointed distributors in Belarus, Egypt, Indonesia and Vietnam have been encouraging and a distributor has recently been appointed in South Africa. A wholly owned subsidiary is being established in Shanghai, to launch company’s agricultural interests in China, which has a vast agricultural industry and presents many opportunities for company’s products. However, the company is at an early stage in its development in that country and it must register its products before sales can commence.
New product development is the key to driving organic growth and the technical team has focused on a number of new lines which the company plan to trial and launch later this year. Further products are in the pipeline, which will take time to develop and then will have to meet the efficacy standards as part of individual country registration. Agil’s gut acidifier, pHorce, is demonstrating good results in the pig and poultry sectors where trials show the investment return to the farmer can be at least five times the cost of the product. pHorce is also being used in fishmeal to eliminate enteropathogens such as Salmonella and sales continue to build, month on month.
Operations of Aquaculture:
At the interim results in September 2008, the company advised that additional environmental risk endorsements would be required for company’s patented Aquatice fish feeding attractant. These environmental considerations are particularly relevant because, unlike feed additives, Aquatice is simply sprayed on the water.
Following the year-end, Department for Environment Food and Rural Affairs (DEFRA) reviewed and approved a full environmental risk assessment of the Aquatice range. This risk assessment followed the UK Government’s and European Commission’s Directives relating to the aquatic environment and confirms that Aquatice products pose no unacceptable risk to the aquatic environment when used within the limits identified and diluted as the manufacturer instructs.
Now that these important endorsements have been received, management can focus on obtaining local country registrations and the first commercial sales with company’s partner distributors. These endorsements, along with the Certificate of Manufacture and Free Sale, form the basis of company’s submission for international registration of Aquatice as a water additive. Registration in each national market is an essential component of the product development process before sales can commence. The company will be working with Bayer HealthCare to bring the Aquatice technology to market as soon as possible, initially in key Asian territories.
The trials programme had some notable success with catfish in Thailand, which will support the marketing of Aquatice in that region. Extensive tank trials were undertaken in China with Pacific eel, which is a high priced delicacy in the Asia Pacific region; eel feed is double the price of other fish feed, which makes the cost benefits of Aquatice even more important. The eels in the Aquatice treated tanks had a significantly greater mean weight than those in the control tanks.
Sports Fishing:
Kiotech announced in January 2009 that its global distributor, Rapala VMC Corporation, had commenced shipping its biodegradable lure range (Trigger-X), incorporating its Ultrabite pheromones, to American sports fishing dealers. This launch led to an increase in Ultrabite sales towards the end of last year, and the company now awaits further feedback on the adoption of Rapala’s lures by the American sports fishing market. Rapala plans a European launch later this year.
Further product and territory launches throughout the year are expected to build on company’s sales of Ultrabite. The company is also working with a number of other bait manufacturers to develop ground baits incorporating Ultrabite for the sports and leisure fishing market. The company has improved its margins on Ultrabite through a price increase which now gives us an acceptable return for its unique technology.
Outlook:
Kiotech has made a strong start to the current year with sales well ahead of the same period last year. The company’s key priority remains the local registration and launch of Aquatice and management is working with its partners to bring this product to market as soon as possible. The registration timetable and customer adoption will govern the performance of company’s aquaculture division. The company has a strong balance sheet and significant cash resources with which to develop both the product and market opportunities. The company continues to seek to acquire businesses, which fit strategically and will deliver value to shareholders.
