Kiotech International plc
AIM : KIO

September 30, 2005 02:40 ET

Kiotech International plc: Interim Results

LONDON, UNITED KINGDOM--(CCNMatthews - Sept. 30, 2005) - Kiotech International plc (AIM:KIO), the provider of pheromone biotechnology for fish farming, commercial and sports fishing, today announces its maiden interim results for the six months ended 30 June 2005.



Highlights

- Raised Pounds Sterling 1.82 million, net of expenses, and moved from
Ofex to AIM in June
- Turnover remained steady at Pounds Sterling 104, 620, compared with
Pounds Sterling 103,343 in the six months to end June 2004
- Appointed Richard Rose, Chairman of Whittards of Chelsea, as a
non-executive director in March

Post period end

- Signed exclusive worldwide distribution agreement for Ultrabite with
Rapala VMC Corporation, the world-leading manufacturer and distributor
of fishing lures and one of the largest distributors of premium
fishing tackle
- John Loftus has stepped down as CEO to join Rapala, in order to
continue promoting Ultrabite
- Peter Lawrence, Chairman of Lawrence plc, a specialist developer,
manufacturer and distributor of pharmaceutical products for the animal
health and farming markets, appointed as a non-executive director
- Positive results achieved from a growth trial in juvenile Atlantic cod


Commenting on the interim results, Nick Scott, Executive Chairman of Kiotech, said: "Kiotech is entering an exciting period in its development. The business has made good progress since its move to AIM in June this year, demonstrated both by the agreement with Rapala for its sports fishing product and positive data from trials to assess the efficacy of products that target the aquaculture and commercial fishing markets. We look forward to announcing further progress in the coming months."



For further information, please contact:

Kiotech www.kiotech.com
Nicholas Scott, Chairman Tel: +44 (0)20 7398 7700

Abchurch Communications
Heather Salmond/Charlie Jack Tel: +44 (0) 20 7398 7700
heather.salmond@abchurch-group.com


Chairman's Statement

INTRODUCTION

This has been an important period in the development of Kiotech. In June we left Ofex after over seven years and moved to AIM, while at the same time raising Pounds Sterling 1.82 million after expenses through the placing of 31,657,000 ordinary shares at 7 pence each. The proceeds of the placing will be used to enable the company to continue its research and development programme and for general working capital needs. We believe that the Company's admission to AIM will bring significant benefits in raising our profile and status with investors, customers and suppliers.

RESULTS

Trading in the six months to 30 June 2005 was broadly in line with expectations. Sales at Pounds Sterling 104,620 were slightly ahead of the same period last year but gross profit increased significantly. Administration expenses rose in the period, even allowing for the one-off costs associated with admission to AIM, and we have taken major steps, after the period end, to bring them more into line with the activity level of the business.

OPERATIONS

Kiotech has developed innovative biotechnology, which we believe can contribute to the sustainability of the worldwide wild fish stocks. This will be achieved by reducing the reliance of aquaculture upon using wild fish as the primary feed for farmed fish. Our focus is on exploiting the effects of our technology to develop commercial applications within sports fishing, commercial fishing and aquaculture.

I am pleased to announce that following lengthy negotiations we today signed two distribution agreements with Rapala VMC Corporation. Kiotech has appointed Rapala as its exclusive worldwide distributor for Ultrabite fish attractant to the sports fishing market, and Rapala has also been appointed as a non-exclusive distributor of Ultrabite for commercial fishing markets. Rapala's head office is in Finland and it employs over 3,000 people worldwide. It is the leading manufacturer and distributor of fishing lures and one of the largest manufacturers and distributors of sports fishing hooks and other sports fishing related products in the world.

The negotiations with Rapala have resulted in a short-term fall in sales, which will impact full-year 2005 sales forecasts. The market has also been further weakened by extraordinary climactic conditions throughout mainland Europe. However, the Board is confident that the agreement with Rapala will produce a marked increase in sales, which is expected to become evident during 2006. In addition, we believe the recently signed agreement with Rapala will enable us to streamline our operations and significantly lower our cost base.

Independent trials have been completed to evaluate the efficacy of Kiotech's biotechnology within the cod, shrimp and tilapia segments of the industry under full-scale commercial production conditions. Three month growth trials with juvenile Atlantic cod were undertaken recently at a commercial on-growing facility in Norway. At the end of the trial the cod exposed to our feed formulation showed a 10 per cent increase in growth over the control groups with a similar percentage reduction in feed quantity. As disclosed in the Company's AIM admission document, Kiotech had agreed in principle arrangements with Lawrence plc relating to field testing, pricing and marketing of commercial fishing and aquaculture products. Negotiations with Lawrence plc in this regard are expected to be concluded and announced within the next month.

I am further delighted to report that the most important bass fishing competition in the world, which takes place in the USA, was won with a bait formulation incorporating Ultrabite.

MANAGEMENT

As announced today, John Loftus, Kiotech's Chief Executive is leaving the Kiotech board and will be joining Rapala with responsibility for marketing Ultrabite worldwide. I will assume the role of Chief Executive pending the appointment of a replacement. The Board would like to thank John for his considerable contribution to the development of Kiotech and we look forward to continuing to work with him in his role at Rapala.

The Board has been strengthened by the appointment of two non-executive directors during 2005. In March, we appointed Richard Rose, Chairman of Whittards of Chelsea, and a previous recipient of the ''Entrepreneur of the year Award'' at the PLC Awards 2003. This was followed in August by the appointment of Peter Lawrence, Chairman of Lawrence plc, a specialist developer, manufacturer and distributor of pharmaceutical products for the animal health and farming markets, who brings a wealth of industry knowledge that will help Kiotech position itself as a leader in the aquaculture market. Our new directors are already making a significant and useful contribution to the deliberations of our board

OUTLOOK

Kiotech is a young company developing and marketing an exciting technology. The recent changes we have made to our distribution arrangements coupled with the significant reduction in our cost base, enable us to look forward with optimism. It is premature to say that we are well established on the road to profitability but we have safely negotiated some significant obstacles and now believe ourselves to be optimally structured to realise our potential.

Nick Scott

Chairman

INDEPENDENT REVIEW REPORT TO KIOTECH INTERNATIONAL PLC

Introduction

We have been instructed by the company to review the financial information for the period ended 30 June 05 which comprises the consolidated profit and loss account, the consolidated balance sheet, the consolidated cash flow statement and the related notes 1 to 8. We have read the other information contained in the interim report which comprises only the Chairman's Statement and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. Our responsibilities do not extend to any other information.

This report is made solely to the company's members, as a body, in accordance with guidance contained in APB Bulletin 1999/4 "Review of Interim Financial Information". Our review work has been undertaken so that we might state to the company's members those matters we are required to state to them in a review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our review work, for this report, or for the conclusion we have formed.

Directors' responsibilities

The interim report, including the financial information contained therein, is the responsibility of, and has been approved by the directors. The directors are responsible for preparing the interim report in accordance with the AIM Rules, which require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed.

Review work performed

We conducted our review in accordance with guidance contained in Bulletin 1999/4 "Review of Interim Financial Information" issued by the Auditing Practices Board for use in the United Kingdom. A review consists principally of making enquiries of management and applying analytical procedures to the financial information and underlying financial data and, based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with United Kingdom auditing standards and therefore provides a lower level of assurance than an audit. Accordingly, we do not express an audit opinion on the financial information.

Review conclusion

On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the period ended 30 June 05.



GRANT THORNTON UK LLP
CHARTERED ACCOUNTANTS
LONDON
2005


KIOTECH INTERNATIONAL plc
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the six months ended JUNE 2005

Note 6 months ended 6 months ended Year ended
30 June 30 June 31 December
2005 2004 2004
(Unaudited) (Unaudited) (Audited)
Pounds Pounds Pounds
Sterling Sterling Sterling

Turnover 2 104,620 103,343 217,368
Cost of sales (62,331) (78,138) (148,840)
------------- --------------- -----------

Gross profit 42,289 25,205 68,528

------------- --------------- -----------
Exceptional
administrative
expenses 3 (284,745) - -
Administrative expenses (313,939) (129,779) (446,674)
------------- --------------- -----------

Administrative
expenses - total (598,684) (129,779) (446,674)
------------- --------------- -----------

Operating loss (556,395) (104,574) (378,146)
------------- --------------- -----------

Net Interest 4,250 227 5,581
------------- --------------- -----------
Loss on ordinary
activities before
taxation (552,145) (104,347) (372,565)
------------- --------------- -----------

Taxation - - 26,488
------------- --------------- -----------

Loss on ordinary
activities after
taxation (552,145) (104,347) (346,077)

------------- --------------- -----------
Loss retained (552,145) (104,347) (346,077)
------------- --------------- -----------
------------- --------------- -----------

Basic Loss per share 5 (1.58) (0.33) (1.07)
------------- --------------- -----------
------------- --------------- -----------


KIOTECH INTERNATIONAL plc
CONSOLIDATED BALANCE SHEET
As at 30 JUNE 2005

6 months ended 6 months ended Year ended
30 June 30 June 31 December
2005 2004 2004
(Unaudited) (Unaudited) (Audited)
Pounds Pounds Pounds
Sterling Sterling Sterling

Fixed assets
Tangible assets 2,919 3,041 3,760
Investments - 110 -

------------- --------------- -----------
2,919 3,151 3,760

Current assets
Stock 265,074 269,567 303,952
Debtors 407,066 90,874 75,815
Cash at bank and in hand 1,955,165 101,059 476,952
------------- --------------- -----------
2,627,305 461,500 856,719

Creditors: amounts falling
due within one year (414,296) (239,005) (241,967)
------------- --------------- -----------

Net current assets 2,213,009 222,495 614,752
------------- --------------- -----------

Total assets less
current liabilities 2,215,928 225,646 618,512
------------- --------------- -----------

Creditors: amounts falling
due after more than one
year - - -
------------- --------------- -----------
Net assets 2,215,928 225,646 618,512
------------- --------------- -----------
------------- --------------- -----------

Capital and reserves
Called up share capital 2,503,529 2,158,205 2,186,958
Share premium account 6,808,642 4,517,309 5,010,652
Other Reserves 147,500 - 112,500
Profit and loss account (7,243,743) (6,449,868) (6,691,598)
------------- --------------- -----------
Equity shareholders' funds 2,215,928 225,646 618,512
------------- --------------- -----------
------------- --------------- -----------

KIOTECH INTERNATIONAL plc
CASH FLOW STATEMENT
For the six months ended 30 JUNE 2005

Note 6 months ended 6 months ended Year ended
30 June 30 June 31 December
2005 2004 2004
(Unaudited) (Unaudited) (Audited)
Pounds Pounds Pounds
Sterling Sterling Sterling

Net cash outflow
from operating
activities 7 (640,598) (330,228) (479,225)

Returns on
investments
and servicing of
finance
Interest received 5,460 1,797 7,417
Interest paid (1,210) (1,570) (1,836)
Net cash inflow
from returns on
investments and
servicing of finance 4,250 227 5,581
------------- --------------- -----------

Capital expenditure
and financial
investment
Payments to acquire
tangible fixed assets - (1,266) (3,826)
------------- --------------- -----------
Cash outflow before
financing and
management of liquid
resources (636,348) (331,267) (477,470)

Financing
Issue of shares 2,215,990 407,585 933,741
Expenses paid in
connection with
share issues (101,429) (16,647) (20,707)
Net cash outflow
from financing 2,114,561 390,938 913,034
------------- --------------- -----------

Increase in cash 8 1,478,213 59,671 435,564
------------- --------------- -----------
------------- --------------- -----------

KIOTECH INTERNATIONAL plc
NOTES TO FINANCIAL STATEMENTS
For the six months ended 30 JUNE 2005


1 BASIS OF PREPARATION

The interim financial statements have been prepared in accordance with applicable accounting standards and under the historical cost convention. The principal accounting policies of the Group have remained unchanged from those set out in the Group's 31 December 2004 annual report and financial statements. The interim financial statements have been reviewed by the Group's auditors. A copy of the auditors' review report is attached to this interim report.

2 SEGMENTAL INFORMATION

Turnover is attributable to the principal activity of the Group.

Turnover by geographical segment, by destination, was as follows:



6 months ended 6 months ended Year ended
30 June 30 June 31 December
2005 2004 2004
(Unaudited) (Unaudited) (Audited)
Pounds Pounds Pounds
Sterling Sterling Sterling

Europe 45,337 70,216 46,456
Rest of World 59,283 33,127 170,912
------------- --------------- -----------
104,620 103,343 217,368
------------- --------------- -----------
------------- --------------- -----------

3 EXCEPTIONAL ADMINSTRATIVE EXPENSES

6 months ended 6 months ended Year ended
30 June 30 June 31 December
2005 2004 2004
(Unaudited) (Unaudited) (Audited)
Pounds Pounds Pounds
Sterling Sterling Sterling

AIM Flotation Costs 284,745 - -
------------- --------------- -----------
------------- --------------- -----------

4 DIVIDENDS

No dividends have been paid or proposed for the period.

5 EARNINGS PER SHARE

6 months ended 6 months ended Year ended
30 June 30 June 31 December
2005 2004 2004
(Unaudited) (Unaudited) (Audited)
Pounds Pounds Pounds
Sterling Sterling Sterling

Loss for the financial
Period (552,145) (104,347) (346,077)
------------- --------------- -----------
------------- --------------- -----------

Weighted average Number Number Number
number of shares of shares of shares of shares


For basic earnings
per share 34,938,163 31,491,406 32,230,037


The calculation of the basic loss per share is based on the loss for the period divided by the weighted average number of shares in issue during the period. Share options outstanding at the period end were anti-dilutive.

6 PUBLICATION OF NON-STATUTORY ACCOUNTS

The financial information set out in this interim report does not constitute statutory accounts as defined in Section 240 of the Companies Act 1985. The figures for the year ended 31 December 2004 have been calculated from the statutory financial statements which have been filed with the Registrar of Companies. The auditors' report on those financial statements was unqualified and did not contain a statement under Section 237(2) of the Companies Act 1985.


7 NET CASH OUTFLOW FROM OPERATING ACTIVITIES



6 months ended 6 months ended Year ended
30 June 30 June 31 December
2005 2004 2004
(Unaudited) (Unaudited) (Audited)
Pounds Pounds Pounds
Sterling Sterling Sterling

Operating loss (556,395) (104,574) (378,146)
Depreciation 841 2,575 4,416
Loss on fixed asset
Investment - - 110
Issue of share options 35,000 - 112,500
Decrease in stocks 38,878 48,413 14,028
(Increase)/decrease
in debtors (331,251) (16,227) 25,320
Increase/(decrease)
in creditors 172,329 (260,415) (257,453)
------------- --------------- -----------
Net cash outflow
from operating activities (640,598) (330,228) (479,225)
------------- --------------- -----------
------------- --------------- -----------

8 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS

6 months ended 6 months ended Year ended
30 June 30 June 31 December
2005 2004 2004
(Unaudited) (Unaudited) (Audited)
Pounds Pounds Pounds
Sterling Sterling Sterling

Increase in cash
in the period 1,478,213 59,671 435,564

------------- --------------- -----------
Movement in net
funds in the year 1,478,213 59,671 435,564
Net funds at the
beginning of the period 476,952 41,388 41,388
------------- --------------- -----------
Net funds at the end
of the period 1,955,165 101,059 476,952
------------- --------------- -----------
------------- --------------- -----------

9 ANALYSIS OF CHANGES IN NET FUNDS

At 1 January Cashflow At 30 June
2005 2005
(Unaudited) (Unaudited) (Audited)
Pounds Pounds Pounds
Sterling Sterling Sterling

Cash at bank and in hand 476,952 1,478,213 1,955,165
------------- --------------- -----------



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