Kiotech International plc, the international supplier of natural high performance feed additives to enhance growth, health and sustainability in agriculture and aquaculture, has announced its interim results for the 6 months to 30 June 2010.
Key points: Financial
- Optivite, acquired in September 2009, makes a full six months contribution.
- 157% increase in profit before tax to £0.777m (2009: £0.302m).
- Threefold advance in sales to £11.082m (2009: £3.468m).
- Cash balance of £4.554m at 30 June 2010.
Key points: Operational
- Integration of Optivite progressing well with consolidation of operations starting to deliver the planned benefits.
- Good performance from international agriculture division.
- Contracts exchanged to acquire the Manton Wood production and head office site for £1.450m.
- Aquatice® given approval to market for both fin fish and shrimp in the Philippines.
Chief executive Richard Edwards, chief executive, commented:
“We are encouraged by our trading performance to date and remain confident going forward given the good progress in integrating the Optivite acquisition. Management remains focused on consolidating our operations into a single unit to deliver the planned benefits, whilst retaining and promoting separate brands in the marketplace.”
In the six months to 30 June 2010 profit before tax increased significantly to £0.777m (2009: £0.302m). Sales also advanced strongly to £11.082m (2009: £3.468m). This performance reflects continued organic growth and a full six months contribution from the Optivite acquisition.
Income tax expense has benefited from a credit of £0.128m resulting from favourable adjustments to prior year computations. On 3 September 2010 contracts were exchanged to acquire for £1.45m, a long leasehold interest in our head office and main manufacturing site at Manton Wood, Worksop, previously occupied on a short lease.
The balance sheet remains strong with good cash generation and the Company ended the period with a cash balance of £4.554m (30 June 2009: £1.780m; 31 December 2009: £5.015m).
Production activities have been consolidated into Optivite's modern feed additive plant at Manton Wood. This plant has now doubled its production throughput, with additional Agil volume and a strong performance from Optivite International, and improved efficiencies have started. Further investment has been made to increase warehousing capacity, and currently extending the offices to accommodate staff transferred from Optivite's International team, who were located in offices nearby.
Optivite's UK business comprises higher margin functional feed additives but also lower margin fats and concentrates, some of which was unprofitable due to the very competitive nature of the fats business. Consolidating production will go some way to improve margins in this product group. The company has improved sales management structure in the UK by identifying and focusing on key market segments where the company has a strong value proposition for the customer. These changes have also included recruiting a new sales team with responsibility for driving growth in these specific segments.
The integration is progressing well and there is an expectation to have completed all major projects by the end of this year, and although of the benefits of the integration is experienced, it will inevitably be a while before the full impact is felt.
A decision has been taken to close Optivite's North Scarle site at the end of the year, when we will transfer its fats and concentrates business to Manton Wood. These changes mean that operations will now be focused on just two sites: Manton Wood for the functional feed additive business and Boroughbridge, in North Yorkshire, where Vitrition, the organic feed business is located. Manton Wood, which also contains the head office, is a strategic site for the Company hence the decision to buy the land and buildings to give security of tenure on which to make long term investment decisions.
Operations – Agriculture
Agil continued to make progress during the period with some particularly strong performances from Argentina, Bangladesh, Malaysia, Peru and Poland. In Malaysia the company has successfully launched a new mycotoxin binder product, called Neutox, which in addition to removing harmful mycotoxins in the animal feed also prevents future mould growth and consequently new toxin development. The success of this value-add product has encouraged us to market it in other territories around the world.
A number of strong performers last year have struggled to maintain their momentum in the first six months of this year for differing reasons. Chile's poultry integrators have been affected by the earthquake earlier this year, and Vietnam's aquaculture industry, into which the company sold significant volumes of its pellet binder, Aquacube®, suffered a poor market towards the end of 2009. It is a feature of the business that being geographically diverse means short-term poor performance in a territory can be offset by strength elsewhere in the world.
There are now have four acidifier products registered in Brazil, where the company's distributor is focusing on marketing Salkil to some of the world's largest poultry integrators, where feed volumes are significant. In China, we now have a number of products registered, for which we have embryonic sales. The Chinese sales team is focusing on some of the larger meat producers where the volumes are significant but the selling process can be lengthy and sometimes complex.
Vitrition, the organic feed brand, which operates from one of only two dedicated organic feed mills in the UK, and accounts for around 17% of Group turnover, has been focused on improving margins in the business.
The Optivite acquisition brought a range of more nutritionally based products to our portfolio, which complement Agil's strength in products for biosecurity applications. The Agil sales team has started to market a number of these new products such as the omega-3 supplements, which Optivite developed and leads the market. These supplements enhance fertility, viability of young animals, growth rate and also increase the omega-3 content of meat and eggs for human consumption. Human health is an important consideration in household purchasing decisions around the world; especially as developing nations move towards a more meat protein based diet.